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TRICARE Management Activity Notifies Humana Military Healthcare Services of Action Regarding South Region Contract

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LOUISVILLE, Ky. — May 5, 2010 —
Humana Inc.’s (NYSE: HUM) wholly owned subsidiary, Humana Military Healthcare Services, received today from the Department of Defense’s TRICARE Management Activity (TMA) an amendment to its Request for Proposal allowing the original offerors to submit a Final Proposal Revision (FPR) for the next TRICARE South Region contract. 

This amendment follows a recommendation from the Government Accountability Office (GAO) in late 2009 to re-evaluate existing proposals and is intended to resolve any ambiguities specifically identified within the GAO’s decision.  Offerors’ FPRs are due to the government within 14 calendar days.

“We are eager to move forward with this process and intend to submit our best offer to the government,” said Dave Baker, president and CEO of Humana Military. “Meanwhile, our Humana Military associates remain passionate about supporting the men, women and children in the military communities we serve.”

In connection with today’s announcement by TMA, Humana has reiterated its guidance for diluted earnings per common share for the year ending December 31, 2010 of between $5.55 and $5.65.  Humana Military’s current South Region TRICARE contract runs through March 31, 2011.

Humana Military was first selected in 1995 as the contractor for TRICARE Regions 3 (Southeast) and 4 (GulfSouth). In May 2001, a Humana Military affiliate acquired Regions 2 (Mid-Atlantic) and 5 (Heartland) and nearly doubled the number of beneficiaries served. Subsequently, in 2004, Humana Military began administering the current South Region contract (including approximately three million beneficiaries) for the next generation of TRICARE contracts.

Cautionary Statement
This news release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in investor presentations, press releases, Securities and Exchange Commission (SEC) filings, and in oral statements made by or with the approval of one of Humana's executive officers, the words or phrases like "expects," "anticipates," "intends," "likely will result," "estimates," "projects" or variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and assumptions, including, among other things, information set forth in the "Risk Factors" section of the company's SEC filings, a summary of which includes but is not limited to the following:
  • Recently enacted health care reform, including The Patient Protection and Affordable Care Act and The Health Care and Education Reconciliation Act of 2010, could have a material adverse effect on Humana's results of operations, including lowering the company's Medicare payment rates and increasing the company's expenses associated with a non-deductible federal premium tax; financial position, including goodwill recoverability; and cash flows. In addition, if the new non-deductible federal premium tax is imposed as enacted, and if Humana is unable to adjust its business model to address this new tax, there can be no assurance that the non-deductible federal premium tax would not have a material adverse effect on the company's results of operations, financial position, and cash flows.
  • If Humana does not design and price its products properly and competitively, if the premiums Humana charges are insufficient to cover the cost of health care services delivered to its members, or if its estimates of benefit expenses are inadequate, Humana's profitability could be materially adversely affected. Humana estimates the costs of its benefit expense payments, and designs and prices its products accordingly, using actuarial methods and assumptions based upon, among other relevant factors, claim payment patterns, medical cost inflation, and historical developments such as claim inventory levels and claim receipt patterns. These estimates, however, involve extensive judgment, and have considerable inherent variability that is extremely sensitive to payment patterns and medical cost trends.
  • If Humana fails to effectively implement its operational and strategic initiatives, including its Medicare initiatives, the company's business may be materially adversely affected, which is of particular importance given the concentration of the company's revenues in the Medicare business.
  • If Humana fails to properly maintain the integrity of its data, to strategically implement new information systems, or to protect Humana's proprietary rights to its systems, the company's business may be materially adversely affected.
  • Humana is involved in various legal actions, which, if resolved unfavorably to Humana, could result in substantial monetary damages. Increased litigation and negative publicity could increase the company's cost of doing business.
  • Humana's business activities are subject to substantial government regulation. New laws or regulations, or changes in existing laws or regulations or their manner of application, could increase the company's cost of doing business and may adversely affect the company's business, profitability and financial condition. In addition, as a government contractor, Humana is exposed to additional risks that may adversely affect the company's business or the company's willingness to participate in government health care programs.
  • Any failure to manage administrative costs could hamper Humana's profitability.
  • Any failure by Humana to manage acquisitions and other significant transactions successfully may have a material adverse effect on its results of operations, financial position, and cash flows.
  • If Humana fails to develop and maintain satisfactory relationships with the providers of care to its members, the company's business may be adversely affected.
  • Humana's mail order pharmacy business is highly competitive and subjects it to regulations in addition to those the company faces with its core health benefits businesses.
  • Changes in the prescription drug industry pricing benchmarks may adversely affect Humana's financial performance.
  • If Humana does not continue to earn and retain purchase discounts and volume rebates from pharmaceutical manufacturers at current levels, Humana's gross margins may decline.
  • Humana's ability to obtain funds from its subsidiaries is restricted by state insurance regulations.
  • Downgrades in Humana's debt ratings, should they occur, may adversely affect its business, results of operations, and financial condition.
  • Changes in economic conditions could adversely affect Humana's business and results of operations.
  • The securities and credit markets may experience volatility and disruption, which may adversely affect Humana's business.
  • Given the current economic climate, Humana's stock and the stock of other companies in the insurance industry may be increasingly subject to stock price and trading volume volatility.
In making forward-looking statements, Humana is not undertaking to address or update them in future filings or communications regarding its business or results. In light of these risks, uncertainties, and assumptions, the forward-looking events discussed herein may or may not occur. There also may be other risks that the company is unable to predict at this time. Any of these risks and uncertainties may cause actual results to differ materially from the results discussed in the forward-looking statements.

Humana advises investors to read the following documents as filed by the company with the SEC for further discussion both of the risks it faces and its historical performance:
  • Form 10-K for the year ended December 31, 2009;
  • Form 10-Q for the period ended March 31, 2010; 
  • Form 8-Ks filed during 2010.
              
About Humana Military Healthcare Services
Humana Military, a wholly owned subsidiary of Humana Inc., has been a Department of Defense contractor for the administration of the TRICARE program since July 1, 1996.  During its tenure, Humana Military has won numerous awards for its service to TRICARE beneficiaries. 

About Humana
Humana Inc., headquartered in Louisville, Kentucky, is one of the nation's largest publicly traded health and supplemental benefits companies, with approximately 10.4 million medical members and 7.2 million specialty members. Humana is a full-service benefits solutions company, offering a wide array of health, pharmacy and supplemental benefit plans for employer groups, government programs and individuals.

Over its 49-year history, Humana has consistently seized opportunities to meet changing customer needs. Today, the company is a leader in consumer engagement, providing guidance that leads to lower costs and a better health plan experience throughout its diversified customer portfolio. 
 
More information regarding Humana is available to investors via the Investor Relations page of the company’s web site at Humana's web site, including copies of:
  • Annual reports to stockholders;
  • Securities and Exchange Commission filings;
  • Most recent investor conference presentations;
  • Quarterly earnings news releases;
  • Replays of most recent earnings release conference calls;
  • Calendar of events (including upcoming earnings conference call dates and times, as well as planned interaction with research analysts and institutional investors);
  • Corporate Governance information.
 

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Last Reviewed: April 12, 2011