Humana 2009 Annual Report Download - page 113

Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
demand, seeking relief on the same grounds as the plaintiffs in the Sacred Heart litigation. The arbitration
plaintiffs are seeking certification of a class consisting of all institutional healthcare service providers who had
contracts with HMHS to provide outpatient non-surgical services and whose agreements provided for dispute
resolution through arbitration. HMHS submitted its response to the demand for arbitration on May 1, 2009.
Humana intends to defend each of these actions vigorously.
Other Lawsuits and Regulatory Matters
Our current and past business practices are subject to review by various state insurance and health care
regulatory authorities and other state and federal regulatory authorities. These authorities regularly scrutinize the
business practices of health insurance and benefits companies. These reviews focus on numerous facets of our
business, including claims payment practices, competitive practices, commission payments, privacy issues,
utilization management practices, and sales practices. Some of these reviews have historically resulted in fines
imposed on us and some have required changes to some of our practices. We continue to be subject to these
reviews, which could result in additional fines or other sanctions being imposed on us or additional changes in
some of our practices. In addition, we have responded and are continuing to respond to requests for information
regarding certain provider-payment practices from various states’ attorneys general and departments of
insurance.
On September 10, 2009, the Office of Inspector General (OIG) of the United States Department of Health
and Human Services issued subpoenas to us and our subsidiary, Humana Pharmacy, Inc., seeking documents
related to our Medicare Part D prescription plans and the operation of RightSourceRxSM, our mail order
pharmacy in Phoenix, Arizona. We are responding to the subpoena.
We also are involved in various other lawsuits that arise, for the most part, in the ordinary course of our
business operations, including employment litigation, claims of medical malpractice, bad faith, nonacceptance or
termination of providers, anticompetitive practices, improper rate setting, failure to disclose network discounts
and various other provider arrangements, general contractual matters, intellectual property matters, and
challenges to subrogation practices. We also are subject to claims relating to performance of contractual
obligations to providers, members, and others, including failure to properly pay claims, improper policy
terminations, challenges to our implementation of the new Medicare prescription drug program and other
litigation.
Personal injury claims and claims for extracontractual damages arising from medical benefit denials are
covered by insurance from our wholly owned captive insurance subsidiary and excess carriers, except to the
extent that claimants seek punitive damages, which may not be covered by insurance in certain states in which
insurance coverage for punitive damages is not permitted. In addition, insurance coverage for all or certain forms
of liability has become increasingly costly and may become unavailable or prohibitively expensive in the future.
The outcome of the securities litigation, provider litigation, and other current or future suits or governmental
investigations cannot be accurately predicted with certainty, and it is reasonably possible that their outcomes may
have a material adverse effect on our results of operations, financial position, and cash flows.
17. SEGMENT INFORMATION
We manage our business with two segments: Government and Commercial. The Government segment
consists of beneficiaries of government benefit programs, and includes three lines of business: Medicare,
Military, and Medicaid. The Commercial segment consists of members enrolled in our medical and specialty
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