Humana 2010 Annual Report Download - page 30

We depend on independent third parties for significant portions of our systems-related support, equipment,
facilities, and certain data, including data center operations, data network, voice communication services and
pharmacy data processing. This dependence makes our operations vulnerable to such third parties’ failure to
perform adequately under the contract, due to internal or external factors. A change in service providers could
result in a decline in service quality and effectiveness or less favorable contract terms which may adversely affect
our operating results.
We rely on our agreements with customers, confidentiality agreements with employees, and our trade
secrets and copyrights to protect our proprietary rights. These legal protections and precautions may not prevent
misappropriation of our proprietary information. In addition, substantial litigation regarding intellectual property
rights exists in the software industry, including litigation involving end users of software products. We expect
software products to be increasingly subject to third-party infringement claims as the number of products and
competitors in this area grows.
Our business plans also include becoming a quality e-business organization by enhancing interactions with
customers, brokers, agents, providers and other stakeholders through web-enabled technology. Our strategy
includes sales and distribution of health benefit products through the Internet, and implementation of advanced
self-service capabilities, for internal and external stakeholders.
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.
Our business may be materially adversely impacted by CMS’s adoption of the new coding set for
diagnoses.
CMS has adopted a new coding set for diagnoses, commonly known as ICD-10, which significantly expands
the number of codes utilized. The new coding set is currently required to be implemented by October 1, 2013.
We may be required to incur significant expenses in implementing the new coding set. If we do not adequately
implement the new coding set, our results of operations, financial position and cash flows may be materially
adversely affected.
We are involved in various legal actions, which, if resolved unfavorably to us, could result in substantial
monetary damages. Increased litigation and negative publicity could increase our cost of doing business.
We are or may become 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;
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