Humana 2014 Annual Report Download - page 36

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to a total of 11 categories of health services. The professional groups with which we are affiliated provide one or more
of these designated health services. Persons or entities found to be in violation of the Stark Law are subject to denial
of payment for services furnished pursuant to an improper referral, civil monetary penalties, and exclusion from the
Medicare and Medicaid programs.
Many states also have enacted laws similar in scope and purpose to the Anti-Kickback Statute and, in more limited
instances, the Stark Law, that are not limited to services for which Medicare or Medicaid payment is made. In addition,
most states have statutes, regulations, or professional codes that restrict a physician from accepting various kinds of
remuneration in exchange for making referrals. These laws vary from state to state and have seldom been interpreted
by the courts or regulatory agencies. In states that have enacted these statutes, we believe that regulatory authorities
and state courts interpreting these statutes may regard federal law under the Anti-Kickback Statute and the Stark Law
as persuasive.
We believe that our operations comply with the Anti-Kickback Statute, the Stark Law, and similar federal or state
laws addressing fraud and abuse. These laws are subject to modification and changes in interpretation, and are enforced
by authorities vested with broad discretion. We continually monitor developments in this area. If these laws are
interpreted in a manner contrary to our interpretation or are reinterpreted or amended, or if new legislation is enacted
with respect to healthcare fraud and abuse, illegal remuneration, or similar issues, we may be required to restructure
our affected operations to maintain compliance with applicable law. There can be no assurances that any such
restructuring will be possible or, if possible, would not have a material adverse effect on our results of operations,
financial position, or cash flows.
Environmental
We are subject to various federal, state, and local laws and regulations relating to the protection of human health
and the environment. If an environmental regulatory agency finds any of our facilities to be in violation of environmental
laws, penalties and fines may be imposed for each day of violation and the affected facility could be forced to cease
operations. We could also incur other significant costs, such as cleanup costs or claims by third parties, as a result of
violations of, or liabilities under, environmental laws. Although we believe that our environmental practices, including
waste handling and disposal practices, are in material compliance with applicable laws, future claims or violations, or
changes in environmental laws, could have a material adverse effect on our results of operations, financial position or
cash flows.
State Regulation of Insurance-Related Products
Laws in each of the states (and Puerto Rico) in which we operate our HMOs, PPOs and other health insurance-
related services regulate our operations including: licensing requirements, policy language describing benefits,
mandated benefits and processes, entry, withdrawal or re-entry into a state or market, rate increases, delivery systems,
utilization review procedures, quality assurance, complaint systems, enrollment requirements, claim payments,
marketing, and advertising. The HMO, PPO, and other health insurance-related products we offer are sold under licenses
issued by the applicable insurance regulators.
Our licensed insurance subsidiaries are also subject to regulation under state insurance holding company and Puerto
Rico regulations. These regulations generally require, among other things, prior approval and/or notice of new products,
rates, benefit changes, and certain material transactions, including dividend payments, purchases or sales of assets,
intercompany agreements, and the filing of various financial and operational reports.
Any failure by us to manage acquisitions, divestitures and other significant transactions successfully may have
a material adverse effect on our results of operations, financial position, and cash flows.
As part of our business strategy, we frequently engage in discussions with third parties regarding possible
investments, acquisitions, divestitures, strategic alliances, joint ventures, and outsourcing transactions and often enter
into agreements relating to such transactions in order to further our business objectives. In order to pursue our acquisition