Humana 2008 Annual Report Download - page 30

There can be no assurance that our process of improving existing systems, developing new systems to
support our expanding operations, integrating new systems, protecting our proprietary information, and
improving service levels will not be delayed or that additional systems issues will not arise in the future. Failure
to adequately protect and maintain the integrity of our information systems and data may result in a material
adverse effect on our results of operations, financial position, and cash flows.
We are involved in various legal actions, which, if resolved unfavorably to us, could result in substantial
monetary damages.
We are a party to a variety of legal actions that affect our business, including employment and employment
discrimination-related suits, employee benefit claims, breach of contract actions, securities laws claims, and tort
claims.
In addition, because of the nature of the health care business, we are subject to a variety of legal actions
relating to our business operations, including the design, management and offering of products and services.
These include and could include in the future:
• claims relating to the methodologies for calculating premiums;
• claims relating to the denial of health care benefit payments;
• claims relating to the denial or rescission of insurance coverage;
• challenges to the use of some software products used in administering claims;
• claims relating to our administration of our Medicare Part D offerings;
• medical malpractice actions based on our medical necessity decisions or brought against us on the
theory that we are liable for our providers’ alleged malpractice;
• allegations of anti-competitive and unfair business activities;
• provider disputes over compensation and termination of provider contracts;
• disputes related to ASO business, including actions alleging claim administration errors;
• claims related to the failure to disclose some business practices;
• claims relating to customer audits and contract performance; and
• claims relating to dispensing of drugs associated with our in-house mail-order pharmacy.
In some cases, substantial non-economic or punitive damages as well as treble damages under the federal
False Claims Act, Racketeer Influenced and Corrupt Organizations Act and other statutes may be sought. While
we currently have insurance coverage for some of these potential liabilities, other potential liabilities may not be
covered by insurance, insurers may dispute coverage or the amount of our insurance may not be enough to cover
the damages awarded. Additionally, the cost of business insurance coverage has increased significantly. As a
result, we have increased the amount of risk that we self-insure, particularly with respect to matters incidental to
our business. In addition, some types of damages, like punitive damages, may not be covered by insurance. In
some jurisdictions, coverage of punitive damages is prohibited. Insurance coverage for all or some forms of
liability may become unavailable or prohibitively expensive in the future.
The health benefits industry continues to receive significant negative publicity reflecting the public
perception of the industry. This publicity and perception have been accompanied by increased litigation,
including some large jury awards, legislative activity, regulation, and governmental review of industry practices.
These factors may adversely affect our ability to market our products or services, may require us to change our
products or services, may increase the regulatory burdens under which we operate, and may require us to pay
large judgments or fines. Any combination of these factors could further increase our cost of doing business and
adversely affect our results of operations, financial position, and cash flows.
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