Humana 2008 Annual Report Download - page 25

employer’s or group’s exclusive source of health insurance benefits by offering a variety of HMO, PPO, and
specialty products that provide cost-effective quality health care coverage consistent with the needs and
expectations of their employees or members. We also offer commercial health insurance and specialty products
directly to individuals.
At December 31, 2008, we used licensed independent brokers and agents and approximately 1,200 licensed
employees to sell our commercial products. Many of our employer group customers are represented by insurance
brokers and consultants who assist these groups in the design and purchase of health care products. We generally
pay brokers a commission based on premiums, with commissions varying by market and premium volume. In
addition to a commission based directly on premium volume for sales to particular customers, we also have
programs that pay brokers and agents based on other metrics. These include commission bonuses based on sales
that attain certain levels or involve particular products. We also pay additional commissions based on aggregate
volumes of sales involving multiple customers.
Underwriting
Through the use of internally developed underwriting criteria, we determine the risk we are willing to
assume and the amount of premium to charge for our commercial products. In most instances, employer and
other groups must meet our underwriting standards in order to qualify to contract with us for coverage. Small
group laws in some states have imposed regulations which provide for guaranteed issue of certain health
insurance products and prescribe certain limitations on the variation in rates charged based upon assessment of
health conditions.
Underwriting techniques are not employed in connection with our Medicare, military services, or Medicaid
products because government regulations require us to accept all eligible applicants regardless of their health or
prior medical history.
Competition
The health benefits industry is highly competitive. Our competitors vary by local market and include other
managed care companies, national insurance companies, and other HMOs and PPOs, including HMOs and PPOs
owned by Blue Cross/Blue Shield plans. Many of our competitors have larger memberships and/or greater
financial resources than our health plans in the markets in which we compete. Our ability to sell our products and
to retain customers may be influenced by such factors as those described in the section entitled “Risk Factors” in
this report.
Government Regulation
Diverse legislative and regulatory initiatives at both the federal and state levels continue to affect aspects of
the nation’s health care system.
Our management works proactively to ensure compliance with all governmental laws and regulations
affecting our business. We are unable to predict how existing federal or state laws and regulations may be
changed or interpreted, what additional laws or regulations affecting our businesses may be enacted or proposed,
when and which of the proposed laws will be adopted or what effect any such new laws and regulations will have
on our results of operations, financial position, or cash flows.
For a complete description of all of the current activities in the federal and state legislative areas, see the
section entitled “Risk Factors” in this report.
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