Humana 2010 Annual Report Download - page 58

Premium Revenues and Medical Membership
Premium revenues increased $2.8 billion, or 9.3%, to $32.7 billion for 2010, compared to $29.9 billion for
2009. The increase primarily was due to higher premium revenues in the Government segment. Premium
revenues reflect changes in membership and increases in average per member premiums. Items impacting
average per member premiums include changes in premium rates as well as changes in the geographic mix of
membership, the mix of product offerings, and the mix of benefit plans selected by our membership.
Government segment premium revenues increased $3.0 billion, or 13.1%, to $25.8 billion for 2010
compared to $22.8 billion for 2009. The increase primarily was attributable to higher average Medicare
Advantage membership and an increase in per member premiums. Average membership is calculated by
summing the ending membership for each month in a period and dividing the result by the number of months in a
period. Average fully-insured Medicare Advantage membership increased 15.7% in 2010 compared to 2009. Of
the 225,300 increase in fully-insured Medicare Advantage members since December 31, 2009, approximately
109,600 members were associated with a new group Medicare Advantage contract added during the first quarter
of 2010, with sales of our PPO products driving the majority of the increase in individual Medicare Advantage
membership. Total fully-insured group Medicare Advantage membership was 273,100 at December 31, 2010, an
increase of 171,200 members from 101,900 at December 31, 2009. Medicare Advantage per member premiums
increased approximately 1.5% during 2010 compared to 2009. Medicare stand-alone PDP premium revenues
decreased $7.4 million, or 0.3%, during 2010 compared to 2009. The decrease primarily was due to declines in
average PDP membership of 9.4% from December 31, 2009 to December 31, 2010, partially offset by increases
in Medicare stand-alone PDP per member premiums of 10% during 2010 compared to 2009. The decline in
stand-alone PDP membership principally resulted from our competitive positioning as we realigned stand-alone
PDP premium and benefit designs to correspond with our historical prescription drug claims experience.
Commercial segment premium revenues decreased $193.1 million, or 2.7%, to $6.9 billion for 2010. The
decrease primarily was due to a decline in fully-insured membership, partially offset by an increase in per
member premiums. Fully-insured membership decreased 9.6%, or 176,100 members, to 1,663,400 at
December 31, 2010 compared to 1,839,500 at December 31, 2009 primarily due to continued pricing discipline.
Per member premiums for fully-insured group accounts increased 7.6% during 2010 compared to 2009.
Administrative Services Fees
Our administrative services fees were $508.2 million for 2010, an increase of $12.1 million, or 2.4%, from
$496.1 million for 2009, primarily due to a new group Medicare ASO account in 2010 partially offset by a
decline in Commercial ASO membership of 117,700 members from December 31, 2009 to December 31, 2010,
primarily reflecting the loss of a large group account on July 1, 2010.
Investment Income
Investment income totaled $329.3 million for 2010, an increase of $33.0 million from $296.3 million for
2009, primarily reflecting higher average invested balances as a result of the reinvestment of operating cash
flows, partially offset by lower interest rates.
Other Revenue
Other revenue totaled $318.3 million for 2010, an increase of $77.1 million from $241.2 million for 2009.
The increase primarily was attributable to increased revenue from growth related to RightSourceRxSM, our mail-
order pharmacy.
Benefit Expenses
Consolidated benefit expense was $27.1 billion for 2010, an increase of $2.3 billion, or 9.3%, from $24.8
billion for 2009. The increase primarily was driven by an increase in the average number of Medicare Advantage
members.
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