Humana 2014 Annual Report Download - page 27

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medical cost experience, our results of operations, financial position, and cash flows may be materially adversely
affected.
If we fail to effectively implement our operational and strategic initiatives, including our Medicare initiatives,
our state-based contracts strategy, and our participation in the new health insurance exchanges, our business may
be materially adversely affected, which is of particular importance given the concentration of our revenues in these
products.
Our future performance depends in large part upon our ability to execute our strategy, including opportunities
created by the expansion of our Medicare programs, the successful implementation of our integrated care delivery
model, our strategy with respect to state-based contracts, including those covering members dually eligible for the
Medicare and Medicaid programs, and our participation in health insurance exchanges.
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 offer both stand-alone Medicare prescription drug coverage and Medicare Advantage
health plans with prescription drug coverage in addition to our other product offerings. We offer a 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 for the year
ended December 31, 2014 generated from our Medicare products, in particular our contracts with CMS in Florida.
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.
The recently implemented Health Care Reform Law 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, including our participation in state-based contracts,
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, including participation in the new
health insurance exchanges, introduction of new products and benefit designs, including HumanaVitality and other
wellness products, growth 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 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, or
to protect our proprietary rights to our systems, 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