Humana 2015 Annual Report Download - page 135

Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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Act of 1985, as amended (commonly referred to as “sequestration”). Those challenges have led and could lead to
arbitration demands or other litigation. Also, under state guaranty assessment laws, including those related to state
cooperative failures in the industry, we may be assessed (up to prescribed limits) for certain obligations to the
policyholders and claimants of insolvent insurance companies that write the same line or lines of business as we do.
As a government contractor, we may also be subject to qui tam litigation brought by individuals who seek to sue
on behalf of the government, alleging that the government contractor submitted false claims to the government including,
among other allegations, those resulting from coding and review practices under the Medicare risk adjustment model.
Qui tam litigation is filed under seal to allow the government an opportunity to investigate and to decide if it wishes
to intervene and assume control of the litigation. If the government does not intervene, the lawsuit is unsealed, and the
individual may continue to prosecute the action on his or her own, on behalf of the government. We also are subject to
other allegations of non-performance of contractual obligations to providers, members, and others, including failure
to properly pay claims, improper policy terminations, challenges to our implementation of the Medicare Part D
prescription drug program and other litigation.
A limited number of the claims asserted against us are subject to insurance coverage. Personal injury claims, claims
for extracontractual damages, care delivery malpractice, and claims arising from medical benefit denials are covered
by insurance from our wholly owned captive insurance subsidiary and excess carriers, except to the extent that claimants
seek punitive damages, which may not be covered by insurance in certain states in which insurance coverage for punitive
damages is not permitted. In addition, insurance coverage for all or certain forms of liability has become increasingly
costly and may become unavailable or prohibitively expensive in the future.
We record accruals for the contingencies discussed in the sections above to the extent that we conclude it is probable
that a liability has been incurred and the amount of the loss can be reasonably estimated. No estimate of the possible
loss or range of loss in excess of amounts accrued, if any, can be made at this time regarding the matters specifically
described above because of the inherently unpredictable nature of legal proceedings, which also may be exacerbated
by various factors, including: (i) the damages sought in the proceedings are unsubstantiated or indeterminate;
(ii) discovery is not complete; (iii) the proceeding is in its early stages; (iv) the matters present legal uncertainties;
(v) there are significant facts in dispute; (vi) there are a large number of parties (including where it is uncertain how
liability, if any, will be shared among multiple defendants); or (vii) there is a wide range of potential outcomes.
The outcome of any current or future litigation or governmental or internal investigations, including the matters
described above, cannot be accurately predicted, nor can we predict any resulting judgments, penalties, fines or other
sanctions that may be imposed at the discretion of federal or state regulatory authorities or as a result of actions by
third parties. Nevertheless, it is reasonably possible that any such outcome of litigation, judgments, penalties, fines or
other sanctions could be substantial, and the outcome of these matters may have a material adverse effect on our results
of operations, financial position, and cash flows, and may also affect our reputation.