Humana 2012 Annual Report Download - page 30

pricing, have customer and physician and other health care provider disputes, have regulatory or other legal
problems, have increases in operating expenses, lose existing customers, have difficulty in attracting new
customers, or suffer other adverse consequences.
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 IT business systems and/or the loss of business information. If a
cybersecurity attack were to be successful, we could be materially 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 by the current compliance date of October 1, 2014. 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, 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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