Humana 2011 Annual Report Download - page 35

this investigation to CMS, the U.S. Department of Justice and the Florida Agency for Health Care
Administration. Matters under review include, without limitation, the relationships between certain of
our Florida-based employees and providers in our Medicaid and/or Medicare networks, practices
related to the financial support of non-profit or provider access centers for Medicaid enrollment and
related enrollment processes, and loans to or other financial support of physician practices. We have
reported to the regulatory authorities noted above on the progress of our investigation to date, and
intend to continue to discuss with these authorities our factual findings as well as any remedial actions
we may take. We may also face litigation or further government inquiry regarding certain aspects of
the Medicare and Medicaid operations of certain of our Florida subsidiaries.
• We are also subject to various other governmental audits and investigations. Under state laws, our HMOs
and health insurance companies are audited by state departments of insurance for financial and
contractual compliance. Our HMOs are audited for compliance with health services by state departments
of health. Audits and investigations are also conducted by state attorneys general, CMS, the Office of the
Inspector General of Health and Human Services, the Office of Personnel Management, the Department
of Justice, the Department of Labor, and the Defense Contract Audit Agency. All of these activities could
result in the loss of licensure or the right to participate in various programs, including a limitation on our
ability to market or sell products, the imposition of fines, penalties and other civil and criminal sanctions,
or changes in our business practices. The outcome of any current or future governmental or internal
investigations, including the matters described above, cannot be accurately predicted, nor can we predict
any resulting penalties, fines or other sanctions that may be imposed at the discretion of federal or state
regulatory authorities. Nevertheless, it is reasonably possible that the outcome of these matters may have
a material adverse effect on our results of operations, financial position, and cash flows. Certain of these
matters could also affect our reputation. In addition, disclosure of any adverse investigation or audit
results or sanctions could negatively affect our industry or our reputation in various markets and make it
more difficult for us to sell our products and services.
Recently enacted health insurance reform, including The Patient Protection and Affordable Care Act and
The Health Care and Education Reconciliation Act of 2010, could have a material adverse effect on our
results of operations, including restricting revenue, enrollment and premium growth in certain products and
market segments, restricting our ability to expand into new markets, increasing our medical and operating
costs by, among other things, requiring a minimum benefit ratio on insured products (and particularly how
the ratio may apply to Medicare plans), lowering our Medicare payment rates and increasing our expenses
associated with a non-deductible federal premium tax and other assessments; financial position, including our
ability to maintain the value of our goodwill; and cash flows. In addition, if the new non-deductible federal
premium tax and other assessments, including a three-year commercial reinsurance fee, were imposed as
enacted, and if we are unable to adjust our business model to address these new taxes and assessments, such
as through the reduction of our operating costs, there can be no assurance that the non-deductible federal
premium tax and other assessments would not have a material adverse effect on our results of operations,
financial position, and cash flows.
In March 2010, the President signed into law The Patient Protection and Affordable Care Act and The
Health Care and Education Reconciliation Act of 2010 (which we collectively refer to as the Health Insurance
Reform Legislation) which enact significant reforms to various aspects of the U.S. health insurance industry.
While regulations and interpretive guidance on some provisions of the Health Insurance Reform Legislation have
been issued to date by the Department of Health and Human Services (HHS), the Department of Labor, the
Treasury Department, and the National Association of Insurance Commissioners, there are many significant
provisions of the legislation that will require additional guidance and clarification in the form of regulations and
interpretations in order to fully understand the impacts of the legislation on our overall business, which we expect
to occur over the next several years.
The provisions of the Health Insurance Reform Legislation include, among others, imposing significant new
non-deductible federal premium taxes and other assessments on health insurers, limiting Medicare Advantage
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