Humana 2010 Annual Report Download - page 29

If we fail to effectively implement our operational and strategic initiatives, including our Medicare
initiatives, our business may be materially adversely affected, which is of particular importance given the
concentration of our revenues in the Medicare business.
Our future performance depends in large part upon our management team’s ability to execute our strategy to
position us for the future. This strategy includes opportunities created by the expansion of our Medicare
programs, including our HMO and PPO products, as well as our stand-alone PDP products. We have made
substantial investments in the Medicare program to enhance our ability to participate in these programs. Over the
last few years we have increased the size of our Medicare geographic reach through expanded Medicare product
offerings. We are offering both the stand-alone Medicare prescription drug coverage and Medicare Advantage
health plan with prescription drug coverage in addition to our other product offerings. We offer the Medicare
prescription drug plan in 50 states as well as Puerto Rico and the District of Columbia.
The growth of our Medicare business is an important part of our business strategy. Any failure to achieve
this growth may have a material adverse effect on our results of operations, financial position, or cash flows. In
addition, the expansion of our Medicare business in relation to our other businesses may intensify the risks to us
inherent in the Medicare business. There is significant concentration of our revenues in the Medicare business,
with approximately 65% of our total premiums and ASO fees in 2010 generated from our Medicare business.
These expansion efforts may result in less diversification of our revenue stream and increased risks associated
with operating in a highly regulated industry, as discussed further below.
Additionally, our strategy includes the growth of our Commercial segment business, with emphasis on our
ASO and individual products, introduction of new products and benefit designs, expansion of our specialty
products such as dental, vision and other supplemental products, the adoption of new technologies, development
of adjacent businesses, and the integration of acquired businesses and contracts, including the 2010 acquisition of
Concentra Inc.
There can be no assurance that we will be able to successfully implement our operational and strategic
initiatives, including outsourcing certain business functions, that are intended to position us for future growth or
that the products we design will be accepted or adopted in the time periods assumed. Failure to implement this
strategy may result in a material adverse effect on our results of operations, financial position, and cash flows.
If we fail to properly maintain the integrity of our data, to strategically implement new information
systems, or to protect our proprietary rights to our systems, our business may be materially adversely affected.
Our business depends significantly on effective information systems and the integrity and timeliness of the
data we use to run our business. Our business strategy involves providing members and providers with easy to
use products that leverage our information to meet their needs. Our ability to adequately price our products and
services, provide effective and efficient service to our customers, and to timely and accurately report our
financial results depends significantly on the integrity of the data in our information systems. As a result of our
past and on-going acquisition activities, we have acquired additional information systems. We have been taking
steps to reduce the number of systems we operate, have upgraded and expanded our information systems
capabilities, and are gradually migrating existing business to fewer systems. Our information systems require an
ongoing commitment of significant resources to maintain, protect and enhance existing systems and develop new
systems to keep pace with continuing changes in information processing technology, evolving industry and
regulatory standards, and changing customer preferences. If the information we rely upon to run our businesses
was found to be inaccurate or unreliable or if we fail to maintain effectively our information systems and data
integrity, we could have operational disruptions, have problems in determining medical cost estimates and
establishing appropriate pricing, have customer and physician and other health care provider disputes, have
regulatory or other legal problems, have increases in operating expenses, lose existing customers, have difficulty
in attracting new customers, or suffer other adverse consequences.
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