Humana 2011 Annual Report Download - page 25

NCQA performs reviews of our compliance with standards for quality improvement, credentialing,
utilization management, member connections, and member rights and responsibilities. We have achieved and
maintained NCQA accreditation in all of our commercial, Medicare and Medicaid HMO/POS markets with
enough history and membership, except Puerto Rico, and for many of our PPO markets.
Sales and Marketing
We use various methods to market our products, including television, radio, the Internet, telemarketing, and
direct mailings.
At December 31, 2011, we employed approximately 2,000 sales representatives, as well as approximately
900 telemarketing representatives who assisted in the marketing of Medicare products in our Retail segment by
making appointments for sales representatives with prospective members. We also market our Medicare products
via a strategic alliance with Wal-Mart Stores, Inc., or Wal-Mart. This alliance includes stationing Humana
representatives in certain Wal-Mart stores, SAM’S CLUB locations, and Neighborhood Markets across the
country providing an opportunity to enroll Medicare eligible individuals in person. In addition, we market our
Medicare products through licensed independent brokers and agents including strategic alliances with State
Farm®and United Services Automobile Association, or USAA. Commissions paid to employed sales
representatives and independent brokers and agents are based on a per unit commission structure approved by
CMS. For our Retail segment, we also offer commercial health insurance and specialty products directly to
individuals.
In our Employer Group segment, individuals may become members of our commercial HMOs and PPOs
through their employers or other groups, which typically offer employees or members a selection of health
insurance products, pay for all or part of the premiums, and make payroll deductions for any premiums payable
by the employees. We attempt to become an employer’s or group’s exclusive source of health insurance benefits
by offering a variety of HMO, PPO, and specialty products that provide cost-effective quality health care
coverage consistent with the needs and expectations of their employees or members. We also sell group
Medicare Advantage products through large employers.
For both our Retail and Employer Group segments, at December 31, 2011, we used licensed independent
brokers and agents and approximately 1,100 licensed employees to sell our commercial insurance products.
Many of our employer group customers are represented by insurance brokers and consultants who assist these
groups in the design and purchase of health care products. We generally pay brokers a commission based on
premiums, with commissions varying by market and premium volume. In addition to a commission based
directly on premium volume for sales to particular customers, we also have programs that pay brokers and agents
based on other metrics. These include commission bonuses based on sales that attain certain levels or involve
particular products. We also pay additional commissions based on aggregate volumes of sales involving multiple
customers.
Underwriting
Through the use of internally developed underwriting criteria, we determine the risk we are willing to
assume and the amount of premium to charge for our commercial products. In most instances, employer and
other groups must meet our underwriting standards in order to qualify to contract with us for coverage. Small
group laws in some states have imposed regulations which provide for guaranteed issue of certain health
insurance products and prescribe certain limitations on the variation in rates charged based upon assessment of
health conditions. Beginning in 2014, the Health Insurance Reform Legislation requires all individual and group
health plans to guarantee issuance and renew coverage without pre-existing condition exclusions or health-status
rating adjustments.
Underwriting techniques are not employed in connection with our Medicare, military services, or Medicaid
products because government regulations require us to accept all eligible applicants regardless of their health or
prior medical history.
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