Humana 2010 Annual Report Download - page 17

demographic data including gender, age, and disability status was phased out. The phase-in of risk adjusted
payment was completed in 2007. Under the risk-adjustment methodology, all health benefit organizations must
collect and submit the necessary diagnosis code information to CMS within prescribed deadlines.
At December 31, 2010, we provided health insurance coverage under CMS contracts to approximately
1,762,000 Medicare Advantage members for which we received premium and ASO fees revenues of
approximately $19.3 billion, or 58.1%, of our total premiums and ASO fees for the year ended December 31,
2010. Under our Medicare Advantage contracts with CMS in Florida, we provided health insurance coverage to
approximately 378,700 members. These contracts accounted for premium revenues of approximately $5.5
billion, which represented approximately 28.5% of our Medicare Advantage premium revenues, or 16.5% of our
total premiums and ASO fees for the year ended December 31, 2010.
Our HMO, PPO, and PFFS products covered under Medicare Advantage contracts with CMS are renewed
generally for a one-year term each December 31 unless CMS notifies us of its decision not to renew by August 1
of the calendar year in which the contract would end, or we notify CMS of our decision not to renew by the first
Monday in June of the calendar year in which the contract would end. All material contracts between Humana
and CMS relating to our Medicare Advantage business have been renewed for 2011.
Medicare Stand-Alone Prescription Drug Products
We offer stand-alone prescription drug plans, or PDPs, under Medicare Part D. Generally, Medicare-eligible
individuals enroll in one of our plan choices between November 15 and December 31 for coverage that begins
January 1. Beginning in 2011, individuals may enroll in one of our plan choices between October 15 and
December 7 for coverage that begins on January 1, 2012. Our stand-alone PDP offerings consist of plans offering
basic coverage with benefits mandated by Congress, as well as plans providing enhanced coverage with varying
degrees of out-of-pocket costs for premiums, deductibles, and co-insurance. In October 2010, we announced the
lowest premium national stand-alone Medicare Part D prescription drug plan co-branded with Wal-Mart Stores,
Inc., the Humana Walmart-Preferred Rx Plan, to be offered for the 2011 plan year. Our revenues from CMS and
the beneficiary are determined from our bids submitted annually to CMS. These revenues also reflect the health
status of the beneficiary and risk sharing provisions as more fully described beginning on page 68. Our stand-
alone PDP contracts with CMS are renewed generally for a one-year term each December 31 unless CMS
notifies us of its decision not to renew by August 1 of the calendar year in which the contract would end, or we
notify CMS of our decision not to renew by the first Monday in June of the calendar year in which the contract
would end. All material contracts between Humana and CMS relating to our Medicare stand-alone PDP business
have been renewed for 2011.
Medicare stand-alone PDP premium revenues were approximately $2.3 billion, or 7.0% of our total
premiums and ASO fees for the year ended December 31, 2010.
Medicaid Product
Medicaid is a federal program that is state-operated to facilitate the delivery of health care services
primarily to low-income residents. Each electing state develops, through a state-specific regulatory agency, a
Medicaid managed care initiative that must be approved by CMS. CMS requires that Medicaid managed care
plans meet federal standards and cost no more than the amount that would have been spent on a comparable
fee-for-service basis. States currently either use a formal proposal process in which they review many bidders
before selecting one or award individual contracts to qualified bidders who apply for entry to the program. In
either case, the contractual relationship with a state generally is for a one-year period. Under these contracts, we
receive a fixed monthly payment from a government agency for which we are required to provide health
insurance coverage to enrolled members. Due to the increased emphasis on state health care reform and
budgetary constraints, more states are utilizing a managed care product in their Medicaid programs.
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