Humana 2014 Annual Report Download - page 14

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members in their health care decisions, care management programs, wellness and prevention programs and, in some
instances, a reduced monthly Part B premium. Most Medicare Advantage plans offer the prescription drug benefit under
Part D as part of the basic plan, subject to cost sharing and other limitations. Accordingly, all of the provisions of the
Medicare Part D program described in connection with our stand-alone prescription drug plans in the following section
also are applicable to most of our Medicare Advantage plans. Medicare Advantage plans may charge beneficiaries
monthly premiums and other copayments for Medicare-covered services or for certain extra benefits. Generally,
Medicare-eligible individuals enroll in one of our plan choices between October 15 and December 7 for coverage that
begins on the following January 1.
Our Medicare HMO and PPO plans, which cover Medicare-eligible individuals residing in certain counties, may
eliminate or reduce coinsurance or the level of deductibles on many other medical services while seeking care from
participating in-network providers or in emergency situations. Except in emergency situations or as specified by the
plan, most HMO plans provide no out-of-network benefits. PPO plans carry an out-of network benefit that is subject
to higher member cost-sharing. In some cases, these beneficiaries are required to pay a monthly premium to the HMO
or PPO plan in addition to the monthly Part B premium they are required to pay the Medicare program.
Most of our Medicare PFFS plans are network-based products with in and out of network benefits due to a
requirement that Medicare Advantage organizations establish adequate provider networks, except in geographic areas
that CMS determines have fewer than two network-based Medicare Advantage plans. In these areas, we offer Medicare
PFFS plans that have no preferred network. Individuals in these plans pay us a monthly premium to receive typical
Medicare Advantage benefits along with the freedom to choose any health care provider that accepts individuals at
rates equivalent to Medicare FFS payment rates.
CMS uses monthly rates per person for each county to determine the fixed monthly payments per member to pay
to health benefit plans. These rates are adjusted under CMS’s risk-adjustment model which uses health status indicators,
or risk scores, to improve the accuracy of payment. The risk-adjustment model, which CMS implemented pursuant to
the Balanced Budget Act of 1997 (BBA) and the Benefits and Improvement Protection Act of 2000 (BIPA), generally
pays more for members with predictably higher costs and uses principal hospital inpatient diagnoses as well as diagnosis
data from ambulatory treatment settings (hospital outpatient department and physician visits) to establish the risk-
adjustment payments. Under the risk-adjustment methodology, all health benefit organizations must collect from
providers and submit the necessary diagnosis code information to CMS within prescribed deadlines.
At December 31, 2014, we provided health insurance coverage under CMS contracts to approximately 2,446,200
individual Medicare Advantage members, including approximately 542,400 members in Florida. These Florida
contracts accounted for premiums revenue of approximately $7.2 billion, which represented approximately 27.8% of
our individual Medicare Advantage premiums revenue, or 15.0% of our consolidated premiums and services revenue
for the year ended December 31, 2014.
Our HMO, PPO, and PFFS products covered under Medicare Advantage contracts with CMS are renewed generally
for a calendar year term unless CMS notifies us of its decision not to renew by May 1 of the calendar year in which
the contract would end, or we notify CMS of our decision not to renew by the first Monday in June of the calendar
year in which the contract would end. All material contracts between Humana and CMS relating to our Medicare
Advantage products have been renewed for 2015, and all of our product offerings filed with CMS for 2015 have been
approved.