Humana 2010 Annual Report Download - page 31

• medical malpractice actions based on our medical necessity decisions or brought against us on the
theory that we are liable for providers’ alleged malpractice;
• claims arising from any adverse medical consequences resulting from our recommendations about the
appropriateness of providers’ proposed medical treatment plans for patients;
• 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;
• claims relating to dispensing of drugs associated with our in-house mail-order pharmacy; and
• professional liability claims arising out of the delivery of healthcare and related services to the public,
including urgent care.
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.
See “Legal Proceedings and Certain Regulatory Matters” in Note 16 to the consolidated financial statements
included in Item 8. – Financial Statements and Supplementary Data. We cannot predict the outcome of these
suits with certainty.
As a government contractor, we are exposed to risks that may materially adversely affect our business or
our willingness or ability to participate in government health care programs.
A significant portion of our revenues relates to federal and state government health care coverage programs,
including the Medicare, Military, and Medicaid programs. Our Government segment accounted for
approximately 78% of our total premiums and ASO fees for the year ended December 31, 2010. These programs
involve various risks, as described further below.
• At December 31, 2010, under our contracts with CMS we provided health insurance coverage to
approximately 378,700 Medicare Advantage members in Florida. These contracts accounted for
approximately 17% of our total premiums and ASO fees for the year ended December 31, 2010. The
loss of these and other CMS contracts or significant changes in the Medicare program as a result of
legislative or regulatory action, including reductions in premium payments to us, or increases in
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