Humana 2013 Annual Report Download - page 84

surplus requirements associated with premium growth. Refer to our parent company financial statements and
accompanying notes in Schedule I – Parent Company Financial Information. Regulatory requirements, including
subsidiary dividends to the parent, are discussed in more detail in the following section. Excluding Puerto Rico
subsidiaries, the amount of ordinary dividends that may be paid to our parent company in 2014 is approximately
$840 million in the aggregate. However, actual dividends paid from the subsidiaries to the parent in 2014 could
be reduced as a result of the proposed statutory accounting for the health insurance industry fee, discussed below,
combined with higher surplus requirements associated with premium growth due to increases in membership.
The NAIC is continuing discussions regarding the statutory accounting for the health insurance industry fee
required by the Health Care Reform Law which in its present form would restrict surplus in the year preceding
payment, beginning in 2014. Accordingly, in addition to requiring recognition of the full-year 2014 assessment in
the first quarter of 2014, we may be required to restrict surplus for the 2015 assessment ratably in 2014. This
proposal does not affect our financial statements prepared in accordance with generally accepted accounting
principles, under which the fee is expensed ratably throughout the payment year. In September 2014, we expect
to pay the federal government in the range of $525 million to $575 million for the annual health insurance
industry fee. In 2015, the health insurance industry fee increases by 41% for the industry taken as a whole.
Accordingly, absent changes in market share, we would expect a similar increase in our fee in 2015.
Regulatory Requirements
For a detailed discussion of our regulatory requirements, including aggregate statutory capital and surplus as
well as dividends paid from the subsidiaries to the parent, please refer to Note 14 to the consolidated financial
statements included in Item 8. – Financial Statements and Supplementary Data.
Contractual Obligations
We are contractually obligated to make payments for years subsequent to December 31, 2013 as follows:
Payments Due by Period
Total
Less than
1 Year 1-3 Years 3-5 Years
More than
5 Years
(in millions)
Debt ........................................ $2,550 0 500 800 1,250
Interest (1) .................................... 1,548 146 277 208 917
Operating leases (2) ............................ 904 228 346 187 143
Purchase obligations (3) ......................... 253 132 91 30 0
Future policy benefits payable and other long-term
liabilities (4) ................................ 2,563 70 356 213 1,924
Total .................................... $7,818 576 1,570 1,438 4,234
(1) Interest includes the estimated contractual interest payments under our debt agreements.
(2) We lease facilities, computer hardware, and other furniture and equipment under long-term operating leases
that are noncancelable and expire on various dates through 2025. We sublease facilities or partial facilities
to third party tenants for space not used in our operations which partially mitigates our operating lease
commitments. An operating lease is a type of off-balance sheet arrangement. Assuming we acquired the
asset, rather than leased such asset, we would have recognized a liability for the financing of these assets.
See also Note 15 to the consolidated financial statements included in Item 8. – Financial Statements and
Supplementary Data.
(3) Purchase obligations include agreements to purchase services, primarily information technology related
services, or to make improvements to real estate, in each case that are enforceable and legally binding on us
and that specify all significant terms, including: fixed or minimum levels of service to be purchased; fixed,
minimum or variable price provisions; and the appropriate timing of the transaction. Purchase obligations
exclude agreements that are cancelable without penalty.
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