Humana 2011 Annual Report Download - page 53

as well as the net charge of $139 million due to reserve strengthening for our closed block of long-term
care policies as discussed more fully in Note 17 to the consolidated financial statements included in
Item 8. – Financial Statements and Supplementary Data.
Retail Segment
• On February 17, 2012, CMS issued its Advance Notice for methodological changes for 2013 Medicare
Advantage capitation rates and Part C and Part D payment policies. We believe the Advance Notice
indicates our payment rates from CMS will remain relatively unchanged from those for 2012, with the
exception of the impact of any automatic rate reductions that would occur as a result of the Budget
Control Act of 2011. These potential automatic rate reductions were not addressed in the Advance
notice, but we believe they would be primarily passed through as provider payment reductions from
us. (For additional information, please refer to the risk factor entitled, “As a government contractor, we
are exposed to risks that may materially affect our business or our willingness or ability to participate
in government health care programs.”) However, the Advance Notice is subject to comment, and the
final rates will not be published until the first Monday in April 2012. Nevertheless, we believe we can
effectively design Medicare Advantage products based upon this level of rate increase while continuing
to remain competitive compared to both the combination of original Medicare with a supplement
policy as well as other Medicare Advantage competitors within our industry. In addition, we will
continue to pursue our cost-reduction and outcome-enhancing strategies, including care coordination
and disease management, which we believe will mitigate the adverse effects of the rates on our
Medicare Advantage members. Nonetheless, there can be no assurance that we will be able to
successfully execute operational and strategic initiatives with respect to changes in the Medicare
Advantage program. Failure to execute these strategies may result in a material adverse effect on our
results of operations, financial position, and cash flows.
• Individual Medicare Advantage membership of 1,640,300 at December 31, 2011 increased 179,600
members, or 12.3%, from 1,460,700 at December 31, 2010 primarily due to a successful enrollment
season associated with the 2011 plan year. January 2012 individual Medicare Advantage membership
of approximately 1,813,000 increased nearly 173,000 members, or approximately 11%, from
December 31, 2011, reflecting another successful enrollment season.
• Individual Medicare stand-alone PDP membership of 2,540,400 at December 31, 2011 increased
870,100 members, or 52.1%, from 1,670,300 at December 31, 2010 primarily due to sales of our new
lowest premium national stand-alone Medicare Part D prescription drug plan co-branded with
Wal-Mart Stores, Inc., the Humana Walmart-Preferred Rx Plan, that we began offering for the 2011
plan year. January 2012 individual Medicare stand-alone PDP membership grew to approximately
2,825,000, increasing nearly 285,000 members, or approximately 11%, from December 31, 2011, also
reflecting another successful selling season for the co-branded Humana Walmart-Preferred Rx Plan.
• Comparisons to 2010 within the Retail segment are impacted by the $147 million write-down of
deferred acquisition costs associated with our individual commercial medical policies during the year
ended December 31, 2010 as discussed above.
• On December 6, 2011, we acquired Anvita, Inc., or Anvita, a San Diego-based health care analytics
company. The Anvita acquisition provides scalable analytics solutions that produce clinical insights
which we believe will enhance our ability to improve the quality and lower the cost of health care for
our members and customers.
• Effective December 30, 2011, we acquired the California-based Medicare Advantage HMO MD Care,
Inc., or MD Care. This acquisition expanded our Medicare footprint in California and grew our
Medicare enrollment by approximately 12,100 members.
• During the second half of 2011, we entered into a definitive agreement to acquire Arcadian
Management Services, Inc., which serves Medicare Advantage HMO members in 15 U.S. states,
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