Humana 2013 Annual Report Download - page 134

Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Estimated audit settlements are recorded as a reduction of premiums revenue in our consolidated statements
of income, based upon available information. During 2012, we completed internal contract level audits of certain
2011 contracts based on the RADV audit methodology prescribed by CMS. Included in these internal contract
level audits was an audit of our Private Fee-For-Service business which we used to represent a proxy of the
benchmark audit data in the government fee-for-service program which has not yet been released. We based our
accrual of estimated audit settlements for contract years 2011 (the first year that application of extrapolated audit
results is applicable), 2012, and 2013 on the results of these internal contract level audits for contract year 2011.
Estimates derived from these results were not material to our results of operations, financial position, or cash
flows. However, as indicated, we are awaiting additional guidance from CMS regarding the benchmark audit
data in the government fee-for-service program. Accordingly, we cannot determine whether such audits will have
a material adverse effect on our results of operations, financial position, or cash flows.
At December 31, 2013, our military services business, which accounted for approximately 1% of our total
premiums and services revenue for the years ended December 31, 2013, primarily consisted of the TRICARE
South Region contract. On April 1, 2012, we began delivering services under the current TRICARE South
Region contract that the Defense Health Agency, or DHA (formerly known as the TRICARE Management
Activity), awarded to us on February 25, 2011. The current 5-year South Region contract, which expires
March 31, 2017, is subject to annual renewals on April 1 of each year during its term at the government’s option.
On January 27, 2014, we received notice from the DHA of its intent to exercise its option to extend the
TRICARE South Region contract through March 31, 2015.
The loss of any of the contracts above or significant changes in these programs as a result of legislative or
regulatory action, including reductions in premium payments to us, or increases in member benefits without
corresponding increases in premium payments to us, may have a material adverse effect on our results of
operations, financial position, and cash flows.
Our Medicaid business, which accounted for approximately 2% of our total premiums and services revenue for
the year ended December 31, 2013, primarily consisted of contracts in Puerto Rico, Florida, and Kentucky, with the
vast majority in Puerto Rico. On June 26, 2013, the Puerto Rico Health Insurance Administration notified us of its
election not to renew our three-year Medicaid contracts for the East, Southeast, and Southwest regions which ended
June 30, 2013. Contractual transition provisions required the continuation of insurance coverage for beneficiaries
through September 30, 2013 and also require an additional period of time thereafter to process residual claims.
Legal Proceedings and Certain Regulatory Matters
Florida Matters
On December 16, 2010, an individual filed a qui tam suit captioned United States of America ex rel. Marc
Osheroff v. Humana et al. in the Southern District of Florida, against us, several of our health plan subsidiaries,
and certain other companies that operate medical centers in Miami-Dade County, Florida. After the U.S.
government declined to intervene, the Court ordered the complaint unsealed, and the individual plaintiff amended
his complaint and served the Company on December 8, 2011. The amended complaint alleges certain civil
violations by our CAC Medical Centers in Florida, including offering various amenities such as transportation
and meals, to Medicare and dual eligible individuals in our community center settings. The amended complaint
also alleges civil violations by our Medicare Advantage health plans in Florida, arising from the alleged activities
of our CAC Medical Centers and the codefendants in the complaint. The amended complaint seeks damages and
penalties on behalf of the United States under the Anti-Inducement and Anti-Kickback Statutes and the False
Claims Act. On September 28, 2012, the Court dismissed, with prejudice, all causes of action that were asserted
in the suit. On November 19, 2013, the individual plaintiff appealed the dismissal of the complaint, and we are
awaiting the decision of the Court on the appeal.
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