Humana 2011 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.
A cybersecurity attack that bypasses our information technology, or IT, security systems causing a security
breach may lead to a material disruption of our information technology business systems and/or the loss of
business information. If a cybersecurity attack were to be successful, we could be adversely affected due to the
theft, destruction, loss, misappropriation or release of confidential data or intellectual property, operational or
business delays resulting from the disruption of our IT systems, or negative publicity resulting in reputation or
brand damage with our customers, brokers, agents, providers, and other stakeholders.
There can be no assurance that our IT process will successfully improve existing systems, develop new
systems to support our expanding operations, integrate new systems, protect our proprietary information, defend
against cybersecurity attacks, or improve service levels. In addition, there can be no assurance that additional
systems issues will not arise in the future. Failure to adequately protect and maintain the integrity of our
information systems and data, or to defend against cybersecurity attacks, 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. 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 and governmental and internal investigations, including, without
limitation, an ongoing internal investigation and litigation and government requests for information related to
certain aspects of our Florida subsidiary operations, any of 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.
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