Humana 2012 Annual Report Download - page 29

implementation of our integrated care delivery model. We have made substantial investments in the Medicare
program to enhance our ability to participate in these programs. Over the last few years we have increased the
size of our Medicare geographic reach through expanded Medicare product offerings. We are offering both the
stand-alone Medicare prescription drug coverage and Medicare Advantage health plan with prescription drug
coverage in addition to our other product offerings. We offer the Medicare prescription drug plan in 50 states as
well as Puerto Rico and the District of Columbia.
The growth of our Medicare products is an important part of our business strategy. Any failure to achieve
this growth may have a material adverse effect on our results of operations, financial position, or cash flows. In
addition, the expansion of our Medicare products in relation to our other businesses may intensify the risks to us
inherent in Medicare products. There is significant concentration of our revenues in Medicare products, with
approximately 72% of our total premiums and services revenue in 2012 generated from our Medicare products.
These expansion efforts may result in less diversification of our revenue stream and increased risks associated
with operating in a highly regulated industry, as discussed further below.
Recently enacted Health Insurance Reform Legislation created a federal Medicare-Medicaid Coordination
Office to serve dual eligibles. This Medicare-Medicaid Coordination Office has initiated a series of state
demonstration projects to experiment with better coordination of care between Medicare and Medicaid.
Depending upon the results of those demonstration projects, CMS may change the way in which dual eligibles
are serviced. If we are unable to implement our strategic initiatives to address the dual eligibles opportunity, or if
our initiatives are not successful at attracting or retaining dual eligible members, our business may be materially
adversely affected.
Additionally, our strategy includes the growth of our commercial products, such as ASO and individual
products, introduction of new products and benefit designs, including HumanaVitality and other wellness
products, expansion of our specialty products such as dental, vision and other supplemental products, the
adoption of new technologies, development of adjacent businesses, and the integration of acquired businesses
and contracts.
There can be no assurance that we will be able to successfully implement our operational and strategic
initiatives, including outsourcing certain business functions and implementing our integrated care delivery
model, that are intended to position us for future growth or that the products we design will be accepted or
adopted in the time periods assumed. Failure to implement this strategy may result in a material adverse effect on
our results of operations, financial position, and cash flows.
If we fail to properly maintain the integrity of our data, to strategically implement new information
systems, to protect our proprietary rights to our systems, or to defend against cybersecurity attacks, our
business may be materially adversely affected.
Our business depends significantly on effective information systems and the integrity and timeliness of the
data we use to run our business. Our business strategy involves providing members and providers with easy to
use products that leverage our information to meet their needs. Our ability to adequately price our products and
services, provide effective and efficient service to our customers, and to timely and accurately report our
financial results depends significantly on the integrity of the data in our information systems. As a result of our
past and on-going acquisition activities, we have acquired additional information systems. We have reduced the
number of systems we operate, have upgraded and expanded our information systems capabilities, and are
gradually migrating existing business to fewer systems. Our information systems require an ongoing commitment
of significant resources to maintain, protect, and enhance existing systems and develop new systems to keep pace
with continuing changes in information processing technology, evolving industry and regulatory standards, and
changing customer preferences. If the information we rely upon to run our businesses was found to be inaccurate
or unreliable or if we fail to maintain effectively our information systems and data integrity, we could have
operational disruptions, have problems in determining medical cost estimates and establishing appropriate
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