8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): October 20, 2011

HUMANA INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	1-5975	61-0647538
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)
500 West Main Street, Louisville, KY		40202
(Address of Principal Executive Offices)		(Zip Code)

502-580-1000

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 8.01 Other Events

During the first quarter of 2011, Humana Inc. (also referred to as “Humana”, “we”, “us” and “our”) realigned our business segments to reflect our evolving business model. We currently manage and report our operating results using the following segments: Retail, Employer Group, and Health and Well-Being Services. We also disclose results for Other Businesses.

We began to report using our new segments effective with the filing of our Quarterly Report on Form 10-Q for the three months ended March 31, 2011. This Current Report on Form 8-K (this “Form 8-K”) updates and supersedes the information in Items 1, 6, 7 and 8 of our Annual Report on Form 10-K for the year ended December 31, 2010 (the “2010 Form 10-K”) to reflect retrospective application of the new segments and reclassified historical results to conform to the new presentation. These adjustments had no impact on net income, cash flows or equity. Further, none of these adjustments impacted our regulated subsidiaries. Material revisions to the 2010 Form 10-K resulting from our new business segment reporting have been highlighted in blue font in the attached exhibits. Except as specifically provided, the information in this Form 8-K does not reflect any event or development occurring after February 17, 2011, the date we filed the 2010 Form 10-K. Certain disclosures unrelated to our new business segment reporting have been repeated in this Form 8-K without updates to those disclosures that may have been made in our filings with the Securities and Exchange Commission (“SEC”) after February 17, 2011. You should therefore read this document together with our SEC filings made after that date for updated disclosures.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits:

Exhibit No.	Description
23	Consent of Independent Registered Public Accounting Firm
99.1	Item 1. Business with Retrospective Application of Segments
99.2	Item 6. Selected Financial Data with Retrospective Application of Segments
99.3	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations with Retrospective Application of Segments
99.4	Item 8. Financial Statements and Supplementary Data with Retrospective Application of Segments
101	Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets at December 31, 2010 and 2009; (ii) the Consolidated Statements of Income for the years ended December 31, 2010, 2009 and 2008; (iii) the Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2010, 2009 and 2008; (iv) the Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008; and (v) Notes to Consolidated Financial Statements.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

HUMANA INC.
BY:	/S/ STEVEN E. MCCULLEY
	Steven E. McCulley
	Vice President and Controller
	(Principal Accounting Officer)

Dated: October 20, 2011

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INDEX TO EXHIBITS

Exhibit No.	Description
23	Consent of Independent Registered Public Accounting Firm
99.1	Item 1. Business with Retrospective Application of Segments
99.2	Item 6. Selected Financial Data with Retrospective Application of Segments
99.3	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations with Retrospective Application of Segments
99.4	Item 8. Financial Statements and Supplementary Data with Retrospective Application of Segments
101	Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets at December 31, 2010 and 2009; (ii) the Consolidated Statements of Income for the years ended December 31, 2010, 2009 and 2008; (iii) the Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2010, 2009 and 2008; (iv) the Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008; and (v) Notes to Consolidated Financial Statements.

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EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 33-49305, No. 33-54455, No. 333-04435, No. 333-57095, No. 333-86801, No. 333-41408, No. 333-86280, No. 333-105622, No. 333-134887, No. 333-162747, No. 333-171616 and No. 333-175350) and S-3 (No. 333-132878 and No. 333-157797) of Humana Inc. of our report dated February 17, 2011 except with respect to our opinion on the consolidated financial statements insofar as it relates to the realignment of business segments as discussed in Note 2, as to which the date is October 20, 2011 relating to the financial statements, financial statement schedules and the effectiveness of internal control over financial reporting, which appears in this Current Report on Form 8-K dated October 20, 2011.

/s/ PricewaterhouseCoopers LLP

Louisville, KY

October 20, 2011

EX-99.1

Exhibit 99.1

Explanatory Note

During the first quarter of 2011, Humana Inc. realigned its business segments to reflect its evolving business model. As a result, Humana reassessed and changed its operating and reportable segments effective with the filing of its Quarterly Report on Form 10-Q for the three months ended March 31, 2011. The Company currently manages and reports its operating results using the following segments: Retail, Employer Group, and Health and Well-Being Services. The Company also discloses results for Other Businesses. This Exhibit 99.1 has been revised from the “Item 1. Business” included in Part I to Humana’s Annual Report on Form 10-K for the year ended December 31, 2010 (the “2010 Form 10-K”) to reflect retrospective application of the new segments and reclassified historical results to conform to the new presentation.

Material revisions to the 2010 Form 10-K resulting from the Company’s new business segment reporting are highlighted in blue font. It is important to note, however, that other disclosures originally included in the 2010 Form 10-K, unrelated to the Company’s new business segment reporting, have been repeated in this Exhibit 99.1 without updates that may have been made to those disclosures in subsequent filings with the SEC. The non-updated disclosures, made as of February 17, 2011, appear in black font. For updated disclosures to these sections, you should read this Exhibit 99.1 together with the Company’s SEC filings made after February 17, 2011, including Humana’s Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2011 and June 30, 2011.

Forward-Looking Statements

Some of the statements under “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this report may contain forward-looking statements which reflect our views as of the date they were made with respect to future events and financial performance. These forward-looking statements are made within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we are including this statement for purposes of complying with these safe harbor provisions. We have based these forward-looking statements on our expectations and projections about future events, trends and uncertainties as of the date they were made. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions, including the information discussed under the section entitled “Risk Factors” in our 2010 Form 10-K. In making these statements, we are not undertaking to address or update them in future filings or communications regarding our business or results. Our business is highly complicated, regulated and competitive with many different factors affecting results.

PART I

ITEM 1. BUSINESS WITH RETROSPECTIVE APPLICATION OF SEGMENTS

General

Headquartered in Louisville, Kentucky, Humana Inc. and its subsidiaries, referred to throughout this document as “we,” “us,” “our,” the “Company” or “Humana,” is one of the nation’s largest publicly traded health and supplemental benefits companies, based on our 2010 revenues of approximately $33.6 billion. We provide full-service benefits and wellness solutions, offering a wide array of health, pharmacy and supplemental benefit products for employer groups, government benefit programs, and individuals, as well as primary and workplace care through our medical centers and worksite medical facilities. As of December 31, 2010, we had approximately 10.3 million members in our medical benefit plans, as well as approximately 7.0 million members in our specialty products. During 2010, 76% of our premiums and services revenue were derived from contracts with the federal government, including 17% related to our Medicare Advantage contracts in Florida with the Centers for Medicare and Medicaid Services, or CMS, and 11% related to our military services contracts. Under our Medicare Advantage CMS contracts in Florida, we provide health insurance coverage to approximately 378,700 members as of December 31, 2010.

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Humana Inc. was organized as a Delaware corporation in 1964. Our principal executive offices are located at 500 West Main Street, Louisville, Kentucky 40202, the telephone number at that address is (502) 580-1000, and our website address is www.humana.com. We have made available free of charge through the Investor Relations section of our web site our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

Our 2010 Form 10-K contains both historical and forward-looking information. See Item 1A. – Risk Factors in our 2010 Form 10-K for a description of a number of factors that may adversely affect our results or business.

Health Insurance Reform

In March 2010, the President signed into law The Patient Protection and Affordable Care Act and The Health Care and Education Reconciliation Act of 2010 (which we collectively refer to as the Health Insurance Reform Legislation) which enact significant reforms to various aspects of the U.S. health insurance industry. There are many significant provisions of the legislation that will require additional guidance and clarification in the form of regulations and interpretations in order to fully understand the impacts of the legislation on our overall business, which we expect to occur over the next several years.

Certain significant provisions of the Health Insurance Reform Legislation include, among others, mandated coverage requirements, rebates to policyholders based on minimum benefit ratios, adjustments to Medicare Advantage premiums, the establishment of state-based exchanges, and an annual insurance industry premium-based assessment. Implementation dates of the Health Insurance Reform Legislation vary from as early as six months from the date of enactment, or September 30, 2010, to as late as 2018. The Health Insurance Reform Legislation is discussed more fully in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations under the section titled “Health Insurance Reform.”

2011 Business Segment Realignment

During the first quarter of 2011, we realigned our business segments to reflect our evolving business model. As a result, we reassessed and changed our operating and reportable segments in the first quarter of 2011 to reflect management’s new view of the business and to align our external financial reporting with our new operating and internal financial reporting model. Historical segment information has been retrospectively adjusted to reflect the effect of this change. Our new reportable segments and the basis for determining those segments are discussed below.

Business Segments

We currently manage our business with three reportable segments: Retail, Employer Group, and Health and Well-Being Services. In addition, we include other businesses that are not reportable because they do not meet the quantitative thresholds required by generally accepted accounting principles in an Other Businesses category. These segments are based on a combination of the type of health plan customer and adjacent businesses centered on well-being solutions for our health plans and other customers, as described below. These segment groupings are consistent with information used by our Chief Executive Officer to assess performance and allocate resources.

The Retail segment consists of Medicare and commercial fully-insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health and financial protection products, marketed directly to individuals. The Employer Group segment consists of Medicare and commercial fully-insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health and financial

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protection products, as well as administrative services only products marketed to employer groups. The Health and Well-Being Services segment includes services offered to our health plan members as well as to third parties that promote health and wellness, including primary care, pharmacy, integrated wellness, and home care services. The Other Businesses category consists of our Military services, primarily our TRICARE South Region contract, Medicaid, and closed-block long-term care businesses as well as our contract with CMS to administer the Limited Income Newly Eligible Transition program, or the LI-NET program.

The results of each segment are measured by income before income taxes. Transactions between reportable segments consist of sales of services rendered by our Health and Well-Being Services segment, primarily pharmacy and behavioral health services, to our Retail and Employer Group customers. Intersegment sales and expenses are recorded at fair value and eliminated in consolidation. Members served by our segments often utilize the same provider networks, enabling us in some instances to obtain more favorable contract terms with providers. Our segments also share indirect costs and assets. As a result, the profitability of each segment is interdependent. We do not report total assets by segment since this is not a metric used to assess performance and allocate resources. We allocate most operating expenses to our segments. Certain corporate income and expenses are not allocated to the segments, including investment income not supporting segment operations, interest expense on corporate debt, and certain other corporate expenses. These items are managed at the corporate level. These corporate amounts are reported separately from our reportable segments and included with intersegment eliminations.

Our Products

Our medical and specialty insurance products allow members to access health care services primarily through our networks of health care providers with whom we have contracted. These products may vary in the degree to which members have coverage. Health maintenance organizations, or HMOs, generally require approval from the member’s primary care physician to access certain specialty physicians. Preferred provider organizations, or PPOs, provide members the freedom to choose a health care provider without requiring approval; however they generally require the member to pay a greater portion of the provider’s fee in the event the member chooses not to use a provider participating in the PPO’s network. Point of Service, or POS, plans combine the advantages of HMO plans with the flexibility of PPO plans. In general, POS plans allow members to choose, at the time medical services are needed, to seek care from a provider within the plan’s network or outside the network. The discussion that follows describes the products offered by each of our segments.

Our Retail Segment Products

This segment is comprised of products sold on a retail basis to individuals including medical and supplemental benefit plans described in the discussion that follows. The following table presents our premiums and services revenue for the Retail segment by product for the year ended December 31, 2010:

	Retail Segment Premiums and Services Revenue		Percent of Consolidated Premiums and Services Revenue
	(dollars in thousands)
Premiums:
Individual Medicare Advantage	$	16,265,839		48.9	%
Individual Medicare stand-alone PDP		1,960,063		5.9	%
Total individual Medicare		18,225,902		54.8	%
Individual commercial		745,329		2.3	%
Individual specialty		81,481		0.2	%
Total premiums		19,052,712		57.3	%
Services		11,105		0.0	%
Total premiums and services revenue	$	19,063,817		57.3	%

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Individual Medicare

We have participated in the Medicare program for private health plans for over 25 years and have established a national presence, offering at least one type of Medicare plan in all 50 states. We have a geographically diverse membership base that provides us with greater ability to expand our network of PPO and HMO providers. We employ strategies including health assessments and clinical guidance programs such as lifestyle and fitness programs for seniors to guide Medicare beneficiaries in making cost-effective decisions with respect to their health care, including cost savings that occur from making positive behavior changes that result in living healthier.

Medicare is a federal program that provides persons age 65 and over and some disabled persons under the age of 65 certain hospital and medical insurance benefits. CMS, an agency of the United States Department of Health and Human Services, administers the Medicare program. Hospitalization benefits are provided under Part A, without the payment of any premium, for up to 90 days per incident of illness plus a lifetime reserve aggregating 60 days. Eligible beneficiaries are required to pay an annually adjusted premium to the federal government to be eligible for physician care and other services under Part B. Beneficiaries eligible for Part A and Part B coverage under original Medicare are still required to pay out-of-pocket deductibles and coinsurance. Throughout this document this program is referred to as original Medicare. As an alternative to original Medicare, in geographic areas where a managed care organization has contracted with CMS pursuant to the Medicare Advantage program, Medicare beneficiaries may choose to receive benefits from a Medicare Advantage organization under Medicare Part C. Pursuant to Medicare Part C, Medicare Advantage organizations contract with CMS to offer Medicare Advantage plans to provide benefits at least comparable to those offered under original Medicare. Our Medicare Advantage plans are discussed more fully below. Prescription drug benefits are provided under Part D.

Individual Medicare Advantage Products

We contract with CMS under the Medicare Advantage program to provide a comprehensive array of health insurance benefits, including wellness programs, to Medicare eligible persons under HMO, PPO, and Private Fee-For-Service, or PFFS, plans in exchange for contractual payments received from CMS, usually a fixed payment per member per month. With each of these products, the beneficiary receives benefits in excess of original Medicare, typically including reduced cost sharing, enhanced prescription drug benefits, care coordination, data analysis techniques to help identify member needs, complex case management, tools to guide members in their health care decisions, disease 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 November 15 and December 31 for coverage that begins January 1. Beginning in 2011, individuals may enroll in one of our plan choices between October 15 and December 7 for coverage that begins on January 1, 2012.

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, 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 most 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.

Our Medicare PFFS plans generally 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 original Medicare payment rates. On January 1, 2011, most of our members enrolled in PFFS plans transitioned to networked-based PPO type products 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.

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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). CMS transitioned to this risk-based payment model while the old payment model based on demographic data including gender, age, and disability status was phased out. The phase-in of risk adjusted payment was completed in 2007. Under the risk-adjustment methodology, all health benefit organizations must collect and submit the necessary diagnosis code information to CMS within prescribed deadlines.

At December 31, 2010, we provided health insurance coverage under CMS contracts to approximately 1,460,700 individual Medicare Advantage members. Under our individual Medicare Advantage contracts with CMS in Florida, we provided health insurance coverage to approximately 360,500 members. These Florida contracts accounted for premium revenues of approximately $5.3 billion, which represented approximately 32.4% of our individual Medicare Advantage premium revenues, or 15.8% of our consolidated premiums and services revenue for the year ended December 31, 2010.

Our HMO, PPO, and PFFS products covered under Medicare Advantage contracts with CMS are renewed generally for a one-year term each December 31 unless CMS notifies us of its decision not to renew by August 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 business have been renewed for 2011.

Individual Medicare Stand-Alone Prescription Drug Products

We offer stand-alone prescription drug plans, or PDPs, under Medicare Part D. Generally, Medicare-eligible individuals enroll in one of our plan choices between November 15 and December 31 for coverage that begins January 1. Beginning in 2011, individuals may enroll in one of our plan choices between October 15 and December 7 for coverage that begins on January 1, 2012. Our stand-alone PDP offerings consist of plans offering basic coverage with benefits mandated by Congress, as well as plans providing enhanced coverage with varying degrees of out-of-pocket costs for premiums, deductibles, and co-insurance. In October 2010, we announced the lowest premium national stand-alone Medicare Part D prescription drug plan co-branded with Wal-Mart Stores, Inc., the Humana Walmart-Preferred Rx Plan, to be offered for the 2011 plan year. Our revenues from CMS and the beneficiary are determined from our bids submitted annually to CMS. These revenues also reflect the health status of the beneficiary and risk sharing provisions as more fully described in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations under the section titled “Medicare Part D Provisions.” Our stand-alone PDP contracts with CMS are renewed generally for a one-year term each December 31 unless CMS notifies us of its decision not to renew by August 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 stand-alone PDP business have been renewed for 2011.

Individual Commercial Coverage

Our individual health plans, marketed under the HumanaOne^® brand include offerings designed to promote wellness and engage consumers. HumanaOne plans are designed specifically for self-employed entrepreneurs, small-business employees, part-time workers, students, and early retirees and include a broad spectrum of major medical benefits with multiple in-network coinsurance levels and annual deductible choices.

Our HumanaOne plans primarily are offered as PPO plans in select markets where we can generally underwrite risk and utilize our existing networks and distribution channels. This individual product includes provisions mandated by law to guarantee renewal of coverage for as long as the individual chooses.

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The HumanaOne plans can be further customized with optional benefits such as dental, vision, life, and a broad portfolio of financial protection products.

Our Employer Group Segment Products

This segment is comprised of products sold to employer groups including medical and supplemental benefit plans described in the discussion that follows. The following table presents our premiums and services revenue for the Employer Group segment by product for the year ended December 31, 2010:

	Employer Group Segment Premiums and Services Revenue		Percent of Consolidated Premiums and Services Revenue
	(dollars in thousands)
Premiums:
Fully-insured commercial group	$	5,168,713		15.5	%
Group Medicare Advantage		3,020,282		9.1	%
Group Medicare stand-alone PDP		4,598		0.0	%
Total group Medicare		3,024,880		9.1	%
Group specialty		885,310		2.7	%
Total premiums		9,078,903		27.3	%
Services		394,950		1.2	%
Total premiums and services revenue	$	9,473,853		28.5	%

Employer Group Commercial Coverage

Our commercial products sold to employer groups include a broad spectrum of major medical benefits with multiple in-network coinsurance levels and annual deductible choices that employers of all sizes can offer to their employees on either a fully-insured, through HMO, PPO, or POS plans, or self-funded basis. Our plans integrate clinical programs, plan designs, communication tools, and spending accounts. We participate in the Federal Employee Health Benefits Program, or FEHBP, primarily with our HMO offering in certain markets. FEHBP is the government’s health insurance program for Federal employees, retirees, former employees, family members, and spouses.

Our administrative services only, or ASO, products are offered to employers who self-insure their employee health plans. We receive fees to provide administrative services which generally include the processing of claims, offering access to our provider networks and clinical programs, and responding to customer service inquiries from members of self-funded employers. These products may include all of the same benefit and product design characteristics of our fully-insured PPO or HMO products described previously. Under ASO contracts, self-funded employers retain the risk of financing substantially all of the cost of health benefits. However, most ASO customers purchase stop loss insurance coverage from us to cover catastrophic claims or to limit aggregate annual costs.

As with individual policies, employers can customize their offerings with optional benefits such as dental, vision, life, and a broad portfolio of financial protection products.

Group Medicare Advantage and Medicare stand-alone PDP

We offer products that enable employers that provide post-retirement health care benefits to replace Medicare wrap or Medicare supplement products with Medicare Advantage or stand-alone PDPs from Humana. These products offer the same types of benefits and services available to members in our individual Medicare plans discussed previously and can be tailored to closely match an employer’s post-retirement benefit structure.

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Our Health and Well-Being Services Segment Products

This segment is comprised of stand-alone businesses that promote health and well-being. These services are sold primarily to other Humana businesses, as well as external health plan members and other employers or individuals and are described in the discussion that follows. The following table presents our services revenues for the Health and Well-Being Services segment by line of business for the year ended December 31, 2010:

	Health and Well- Being Services Segment Premiums and Services Revenue		Percent of Consolidated Premiums and Services Revenue
	(dollars in thousands)
Intersegment revenues:
Pharmacy solutions	$	8,410,542		n/a
Primary care services		170,943		n/a
Integrated wellness services		165,730		n/a
Home care services		38,298		n/a
Total intersegment revenues	$	8,785,513
External services revenue:
Primary care services	$	22,335		0.1	%
Integrated wellness services		11,769		0.0	%
Total external services revenue	$	34,104		0.1	%

n/a – not applicable

Pharmacy solutions

Humana Pharmacy Solutions^®, or HPS, manages traditional prescription drug coverage for both individuals and employer groups in addition to providing a broad array of pharmacy solutions. HPS also operates prescription mail order services for brand and generic drugs, specialty drugs and diabetic supplies through RightSourceRx^®, as well as research services.

Primary care services

Our subsidiary, Concentra Inc.^®, acquired in December 2010, delivers occupational medicine, urgent care, physical therapy, and wellness services to employees and the general public through its operation of medical centers and worksite medical facilities.

In addition to Concentra, our primary care services also include our CAC Medical Centers, or CAC, in South Florida. CAC operates full-service, multi-specialty medical centers staffed by primary care physicians and medical specialists practicing cardiology, endocrinology, geriatric medicine, internal medicine, ophthalmology, neurology, and podiatry.

Integrated wellness services

Corphealth, Inc. (d/b/a LifeSynch^®), a Humana subsidiary, offers disease management services through an innovative suite of integrated products, integrating behavioral health services with wellness programs, and employee assistance programs and work-life services. LifeSynch’s integrated wellness services include Hummingbird Coaching^®, a wellness coaching company that offers a comprehensive turn-key coaching program, an enhancement to a medically based coaching protocol and a platform that makes coaching programs more efficient.

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Home care services

Humana Cares^® provides innovative and holistic care coordination services for individuals living with multiple chronic conditions, individuals with disabilities, fragile and aging-in-place members and their care givers.

Other Businesses

Products and services offered by our other businesses are described in the discussion that follows. The following table presents our premiums and services revenue for our other businesses for the year ended December 31, 2010:

	Other Businesses Premiums and Services Revenue		Percent of Consolidated Premiums and Services Revenue
	(dollars in thousands)
Premiums:
Military services	$	3,462,544		10.4	%
Medicaid		723,563		2.2	%
LI-NET		355,399		1.1	%
Closed-block long-term care		39,202		0.1	%
Total premiums		4,580,708		13.8	%
Services		115,021		0.3	%
Total premiums and services revenue	$	4,695,729		14.1	%

Military Services

Under our TRICARE South Region contract with the United States Department of Defense, or DoD, we provide health insurance coverage to the dependents of active duty military personnel and to retired military personnel and their dependents. Currently, three health benefit options are available to TRICARE beneficiaries. In addition to a traditional indemnity option, participants may enroll in a HMO-like plan with a point-of-service option or take advantage of reduced copayments by using a network of preferred providers, similar to a PPO.

We have participated in the TRICARE program since 1996 under contracts with the Department of Defense. Our current TRICARE South Region contract, which we were awarded in 2003, covers approximately 3.0 million eligible beneficiaries as of December 31, 2010 in Florida, Georgia, South Carolina, Mississippi, Alabama, Tennessee, Louisiana, Arkansas, Texas, and Oklahoma. The South Region is one of the three regions in the United States as defined by the Department of Defense. Of these eligible beneficiaries, 1.3 million were TRICARE ASO members representing active duty beneficiaries and seniors over the age of 65 for which the Department of Defense retains all of the risk of financing the cost of their health benefit. We have subcontracted with third parties to provide selected administration and specialty services under the contract. The original 5-year South Region contract expired on March 31, 2009 and was extended through March 31, 2011. On October 5, 2010, we were notified that the Department of Defense TRICARE Management Activity, or TMA, intended to negotiate with us for an extension of our administration of the TRICARE South Region contract, and on January 6, 2011, an Amendment of Solicitation/Modification of Contract to the TRICARE South Region contract, in the form of an undefinitized contract action, became effective. The Amendment adds one additional one-year option period, Option Period IX (which runs from April 1, 2011 through March 31, 2012). The Amendment does not include the costs of the underwritten target health care cost and underwritten health care target fee, which will be negotiated separately. On January 21, 2011, the TMA notified us of their intent to exercise Option Period IX.

As required under the current contract, the target underwritten health care cost and underwriting fee amounts for Option Period IX will be negotiated separately. Any variance from the target health care cost is shared with the federal government. Accordingly, events and circumstances not contemplated in the negotiated target health care

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cost amount may have a material adverse effect on us. These changes may include an increase or reduction in the number of persons enrolled or eligible to enroll due to the federal government’s decision to increase or decrease U.S. military deployments.

In July 2009, we were notified by the Department of Defense that we were not awarded the third generation TRICARE program contract for the South Region which had been subject to competing bids. We filed a protest with the Government Accountability Office, or GAO, in connection with the award to another contractor citing discrepancies between the award criteria and procedures prescribed in the request for proposals issued by the DoD and those that appear to have been used by the DoD in making its contractor selection. In October 2009, we learned that the GAO had upheld our protest, determining that the TMA evaluation of our proposal had unreasonably failed to fully recognize and reasonably account for the likely cost savings associated with our record of obtaining network provider discounts from our established network in the South Region. On December 22, 2009, we were advised that TMA notified the GAO of its intent to implement corrective action consistent with the discussion contained within the GAO’s decision with respect to our protest. On October 22, 2010, TMA issued its latest amendment to the request for proposal requesting from offerors final proposal revisions to address, among other things, health care cost savings resulting from provider network discounts in the South Region. We submitted our final proposal revisions on November 9, 2010. At this time, we are not able to determine whether or not the protest decision by the GAO will have any effect upon the ultimate disposition of the contract award.

The TRICARE South Region contract represents approximately 96% of total military services premiums and services revenue.

Medicaid

Medicaid is a federal program that is state-operated to facilitate the delivery of health care services primarily to low-income residents. Each electing state develops, through a state-specific regulatory agency, a Medicaid managed care initiative that must be approved by CMS. CMS requires that Medicaid managed care plans meet federal standards and cost no more than the amount that would have been spent on a comparable fee-for-service basis. States currently either use a formal proposal process in which they review many bidders before selecting one or award individual contracts to qualified bidders who apply for entry to the program. In either case, the contractual relationship with a state generally is for a one-year period. Under these contracts, we receive a fixed monthly payment from a government agency for which we are required to provide health insurance coverage to enrolled members. Due to the increased emphasis on state health care reform and budgetary constraints, more states are utilizing a managed care product in their Medicaid programs.

Our Medicaid business consists of contracts in Puerto Rico and Florida, with the vast majority in Puerto Rico.

LI-NET

In 2010, we began to administer CMS’s LI-NET program. This program allows individuals who receive Medicare’s low-income subsidy to also receive immediate prescription drug coverage at the point of sale if they are not already enrolled in a Medicare Part D plan. CMS temporarily enrolls newly identified individuals with both Medicare and Medicaid into the LI-NET program, and subsequently transitions each member into a Medicare Part D plan that may or may not be a Humana Medicare plan.

Closed Block of Long-Term Care Insurance

We acquired a closed block of approximately 36,000 long-term care policies in connection with our acquisition of KMG America Corporation in 2007. Long-term care policies are intended to protect the insured from the cost of long-term care services including those provided by nursing homes, assisted living facilities, and adult day care as well as home health care services. No new policies have been written since 2005 under this closed block.

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Membership

The following table summarizes our total medical membership at December 31, 2010, by market and product:

	Retail Segment						Employer Group Segment
	(in thousands)
	Individual Medicare Advantage		Individual Medicare stand-alone PDP		Individual Commercial		Fully- insured commercial Group		Group Medicare Advantage and stand- alone PDP		ASO			Other Businesses		Total		Percent of Total
Florida		360.5		73.7		76.1		184.3		18.2		66.6			0		779.4		7.6	%
Kentucky		39.3		34.4		18.7		117.9		25.3		531.4			0		767.0		7.5	%
Texas		99.0		148.4		47.7		239.5		4.0		110.7			0		649.3		6.3	%
Ohio		50.8		53.3		6.7		62.2		119.6		178.7			0		471.3		4.6	%
Illinois		59.1		51.0		30.5		180.9		6.2		129.4	(a)		0		457.1		4.4	%
Wisconsin		36.4		34.1		17.0		85.4		15.7		143.4			0		332.0		3.2	%
Tennessee		72.1		48.7		17.6		45.4		1.8		118.0			0		303.6		3.0	%
Missouri/Kansas		62.4		90.9		14.0		53.1		6.0		9.7			0		236.1		2.3	%
Georgia		45.4		34.9		23.8		68.4		1.6		41.7			0		215.8		2.1	%
Louisiana		82.5		24.7		12.1		45.3		7.0		20.1			0		191.7		1.9	%
Indiana		38.5		49.6		5.2		24.2		2.9		55.8			0		176.2		1.7	%
Michigan		29.6		55.2		14.1		21.8		7.0		4.9			0		132.6		1.3	%
North Carolina		57.2		59.6		6.5		0		1.6		0			0		124.9		1.2	%
Arizona		32.2		25.5		14.6		30.5		3.2		11.3			0		117.3		1.1	%
Virginia		53.2		53.8		3.2		0.1		0.7		0			0		111.0		1.1	%
Puerto Rico		18.6		0.2		1.0		49.3		0		34.8			0		103.9		1.0	%
Military services		0		0		0		0		0		0			1,755.2		1,755.2		17.1	%
Military services ASO		0		0		0		0		0		0			1,272.6		1,272.6		12.4	%
Medicaid and other		0		0		0		0		0		0			621.0		621.0		6.0	%
LI-NET		0		0		0		0		0		0			86.1		86.1		0.8	%
Others		323.9		832.3		102.4		43.9		54.7		25.3			0		1,382.5		13.4	%
Totals		1,460.7		1,670.3		411.2		1,252.2		275.5		1,481.8			3,734.9		10,286.6		100.0	%

(a) Includes 28,200 Medicare Advantage ASO members.

Provider Arrangements

We provide our members with access to health care services through our networks of health care providers with whom we have contracted, including hospitals and other independent facilities such as outpatient surgery centers, primary care physicians, specialist physicians, dentists and providers of ancillary health care services and facilities. These ancillary services and facilities include ambulance services, medical equipment services, home health agencies, mental health providers, rehabilitation facilities, nursing homes, optical services, and pharmacies. Our membership base and the ability to influence where our members seek care generally enable us to obtain contractual discounts with providers.

We use a variety of techniques to provide access to effective and efficient use of health care services for our members. These techniques include the coordination of care for our members, product and benefit designs, hospital inpatient management systems and enrolling members into various disease management programs. The focal point for health care services in many of our HMO networks is the primary care physician who, under

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contract with us, provides services to our members, and may control utilization of appropriate services by directing or approving hospitalization and referrals to specialists and other providers. Some physicians may have arrangements under which they can earn bonuses when certain target goals relating to the provision of quality patient care are met. Our hospitalist programs use specially-trained physicians to effectively manage the entire range of an HMO member’s medical care during a hospital admission and to effectively coordinate the member’s discharge and post-discharge care. We have available a variety of disease management programs related to specific medical conditions such as congestive heart failure, coronary artery disease, prenatal and premature infant care, asthma related illness, end stage renal disease, diabetes, cancer, and certain other conditions.

We typically contract with hospitals on either (1) a per diem rate, which is an all-inclusive rate per day, (2) a case rate or diagnosis-related groups (DRG), which is an all-inclusive rate per admission, or (3) a discounted charge for inpatient hospital services. Outpatient hospital services generally are contracted at a flat rate by type of service, ambulatory payment classifications, or APCs, or at a discounted charge. APCs are similar to flat rates except multiple services and procedures may be aggregated into one fixed payment. These contracts are often multi-year agreements, with rates that are adjusted for inflation annually based on the consumer price index or other nationally recognized inflation indexes. Outpatient surgery centers and other ancillary providers typically are contracted at flat rates per service provided or are reimbursed based upon a nationally recognized fee schedule such as the Medicare allowable fee schedule.

Our contracts with physicians typically are renewed automatically each year, unless either party gives written notice, generally ranging from 90 to 120 days, to the other party of its intent to terminate the arrangement. Most of the physicians in our PPO networks and some of our physicians in our HMO networks are reimbursed based upon a fixed fee schedule, which typically provides for reimbursement based upon a percentage of the standard Medicare allowable fee schedule.

Capitation

For approximately 1.0% of our medical membership, including 3.3% of our total Medicare Advantage membership, at December 31, 2010, we contract with hospitals and physicians to accept financial risk for a defined set of HMO membership. In transferring this risk, we prepay these providers a monthly fixed-fee per member, known as a capitation (per capita) payment, to coordinate substantially all of the medical care for their capitated HMO membership, including some health benefit administrative functions and claims processing. For these capitated HMO arrangements, we generally agree to reimbursement rates that target a benefit ratio. The benefit ratio measures underwriting profitability and is computed by taking total benefit expenses as a percentage of premium revenues. Providers participating in hospital-based capitated HMO arrangements generally receive a monthly payment for all of the services within their system for their HMO membership. Providers participating in physician-based capitated HMO arrangements generally have subcontracted directly with hospitals and specialist physicians, and are responsible for reimbursing such hospitals and physicians for services rendered to their HMO membership.

For approximately 8.9% of our medical membership, including 18.3% of our total Medicare Advantage membership, at December 31, 2010, we contract with physicians under risk-sharing arrangements whereby physicians have assumed some level of risk for all or a portion of the medical costs of their HMO membership. Although these arrangements do include physician capitation payments for services rendered, we share hospital and other benefit expenses and process substantially all of the claims under these arrangements.

Physicians under capitation arrangements typically have stop loss coverage so that a physician’s financial risk for any single member is limited to a maximum amount on an annual basis. We monitor the financial performance and solvency of our capitated providers. However, we remain financially responsible for health care services to our members in the event our providers fail to provide such services.

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Medical membership under these various arrangements was as follows at December 31, 2010 and 2009:

	Medical Membership
	December 31, 2010				December 31, 2009
Capitated HMO hospital system based		34,700	0.3	%		53,200	0.5	%
Capitated HMO physician group based		70,000	0.7	%		194,100	1.9	%
Risk-sharing		910,700	8.9	%		586,700	5.7	%
Other		9,271,200	90.1	%		9,500,000	91.9	%
Total		10,286,600	100.0	%		10,334,000	100.0	%

Capitation expense as a percentage of total benefit expense was as follows for the years ended December 31, 2010, 2009, and 2008:

	2010				2009				2008
	(dollars in thousands)
Benefit Expenses:
Capitated HMO expense	$	565,102	2.1	%	$	560,914	2.3	%	$	510,606	2.2	%
Other benefit expense		26,551,967	97.9	%		24,222,662	97.7	%		23,219,500	97.8	%
Consolidated benefit expense	$	27,117,069	100.0	%	$	24,783,576	100.0	%	$	23,730,106	100.0	%

Accreditation Assessment

Our accreditation assessment program consists of several internal programs, including those that credential providers and those designed to meet the audit standards of federal and state agencies, as well as external accreditation standards. We also offer quality and outcome measurement and improvement programs such as the Health Care Effectiveness Data and Information Sets, or HEDIS, which is used by employers, government purchasers and the National Committee for Quality Assurance, or NCQA, to evaluate health plans based on various criteria, including effectiveness of care and member satisfaction.

Physicians participating in our networks must satisfy specific criteria, including licensing, patient access, office standards, after-hours coverage, and other factors. Most participating hospitals also meet accreditation criteria established by CMS and/or the Joint Commission on Accreditation of Healthcare Organizations.

Recredentialing of participating providers occurs every two to three years, depending on applicable state laws. Recredentialing of participating physicians includes verification of their medical licenses; review of their malpractice liability claims histories; review of their board certifications, if applicable; and review of applicable quality information. Committees, composed of a peer group of physicians, review the applications of physicians being considered for credentialing and recredentialing.

We request accreditation for certain of our health plans and/or departments from NCQA, the Accreditation Association for Ambulatory Health Care, and the Utilization Review Accreditation Commission, or URAC. Accreditation or external review by an approved organization is mandatory in the states of Florida and Kansas for licensure as an HMO. Certain commercial businesses, like those impacted by a third-party labor agreement or those where a request is made by the employer, may require or prefer accredited health plans.

NCQA performs reviews of our compliance with standards for quality improvement, credentialing, utilization management, member connections, and member rights and responsibilities. We have achieved and maintained NCQA accreditation in all of our commercial, Medicare and Medicaid HMO/POS markets with enough history and membership, except Puerto Rico, and for many of our PPO markets.

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Sales and Marketing

We use various methods to market our products, including television, radio, the Internet, telemarketing, and direct mailings.

At December 31, 2010, we employed approximately 1,800 sales representatives, as well as approximately 800 telemarketing representatives who assisted in the marketing of Medicare products by making appointments for sales representatives with prospective members. We also market our Medicare products via a strategic alliance with Wal-Mart Stores, Inc., or Wal-Mart. This alliance includes stationing Humana representatives in certain Wal-Mart stores, SAM’S CLUB locations, and Neighborhood Markets across the country providing an opportunity to enroll Medicare eligible individuals in person. In addition, we market our Medicare products through licensed independent brokers and agents including strategic alliances with State Farm^® and United Services Automobile Association, or USAA. Finally, we sell group Medicare Advantage products through large employers, including via an alliance with CIGNA Corporation. Under the terms of the alliance, we and CIGNA coordinate services and share financial results. Commissions paid to employed sales representatives and independent brokers and agents are based on a per unit commission structure approved by CMS.

Individuals become members of our commercial HMOs and PPOs through their employers or other groups which typically offer employees or members a selection of health insurance products, pay for all or part of the premiums, and make payroll deductions for any premiums payable by the employees. We attempt to become an employer’s or group’s exclusive source of health insurance benefits by offering a variety of HMO, PPO, and specialty products that provide cost-effective quality health care coverage consistent with the needs and expectations of their employees or members. We also offer commercial health insurance and specialty products directly to individuals.

At December 31, 2010, we used licensed independent brokers and agents and approximately 1,100 licensed employees to sell our commercial insurance products. Many of our employer group customers are represented by insurance brokers and consultants who assist these groups in the design and purchase of health care products. We generally pay brokers a commission based on premiums, with commissions varying by market and premium volume. In addition to a commission based directly on premium volume for sales to particular customers, we also have programs that pay brokers and agents based on other metrics including certain other incentives for our commercial brokers. These include commission bonuses based on sales that attain certain levels or involve particular products. We also pay additional commissions based on aggregate volumes of sales involving multiple customers.

Underwriting

Through the use of internally developed underwriting criteria, we determine the risk we are willing to assume and the amount of premium to charge for our commercial products. In most instances, employer and other groups must meet our underwriting standards in order to qualify to contract with us for coverage. Small group laws in some states have imposed regulations which provide for guaranteed issue of certain health insurance products and prescribe certain limitations on the variation in rates charged based upon assessment of health conditions.

Underwriting techniques are not employed in connection with our Medicare, military services, or Medicaid products because government regulations require us to accept all eligible applicants regardless of their health or prior medical history.

Competition

The health benefits industry is highly competitive. Our competitors vary by local market and include other managed care companies, national insurance companies, and other HMOs and PPOs, including HMOs and PPOs owned by Blue Cross/Blue Shield plans. Many of our competitors have larger memberships and/or greater financial resources than our health plans in the markets in which we compete. Our ability to sell our products and to retain customers may be influenced by such factors as those described in the section entitled “Risk Factors” in our 2010 Form 10-K.

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Government Regulation

Diverse legislative and regulatory initiatives at both the federal and state levels continue to affect aspects of the nation’s health care system.

Our management works proactively to ensure compliance with all governmental laws and regulations affecting our business. We are unable to predict how existing federal or state laws and regulations may be changed or interpreted, what additional laws or regulations affecting our businesses may be enacted or proposed, when and which of the proposed laws will be adopted or what effect any such new laws and regulations will have on our results of operations, financial position, or cash flows.

For a description of all of the material current activities in the federal and state legislative areas, see the section entitled “Risk Factors” in our 2010 Form 10-K.

Other

Captive Insurance Company

We bear general business risks associated with operating our Company such as professional and general liability, employee workers’ compensation, and officer and director errors and omissions risks. Professional and general liability risks may include, for example, medical malpractice claims and disputes with members regarding benefit coverage. We retain certain of these risks through our wholly-owned, captive insurance subsidiary. We reduce exposure to these risks by insuring levels of coverage for losses in excess of our retained limits with a number of third-party insurance companies. We remain liable in the event these insurance companies are unable to pay their portion of the losses.

Centralized Management Services

We provide centralized management services to each of our health plans and to our business segments from our headquarters and service centers. These services include management information systems, product development and administration, finance, human resources, accounting, law, public relations, marketing, insurance, purchasing, risk management, internal audit, actuarial, underwriting, claims processing, and customer service.

Employees

As of December 31, 2010, we had approximately 35,200 employees, including approximately 1,900 medical professionals working at the Concentra medical centers and 34 employees covered by collective bargaining agreements. We believe we have good relations with our employees and have not experienced any work stoppages.

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EX-99.2

Exhibit 99.2

Explanatory Note

During the first quarter of 2011, Humana Inc. realigned its business segments to reflect its evolving business model. As a result, Humana reassessed and changed its operating and reportable segments effective with the filing of its Quarterly Report on Form 10-Q for the three months ended March 31, 2011. The Company currently manages and reports its operating results using the following segments: Retail, Employer Group, and Health and Well-Being Services. The Company also discloses results for Other Businesses. This Exhibit 99.2 has been revised from the “Item 6. Selected Financial Data” to Humana’s Annual Report on Form 10-K for the year ended December 31, 2010 (the “2010 Form 10-K”) to reflect retrospective application of the new segments and reclassified historical results to conform to the new presentation.

Material revisions to the 2010 Form 10-K resulting from the Company’s new business segment reporting are highlighted in blue font. It is important to note, however, that other disclosures originally included in the 2010 Form 10-K, unrelated to the Company’s new business segment reporting, have been repeated in this Exhibit 99.2 without updates that may have been made to those disclosures in subsequent filings with the SEC. The non-updated disclosures, made as of February 17, 2011, appear in black font. For updated disclosures to these sections, you should read this Exhibit 99.2 together with the Company’s SEC filings made after February 17, 2011, including Humana’s Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2011 and June 30, 2011.

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ITEM 6. SELECTED FINANCIAL DATA WITH RETROSPECTIVE APPLICATION OF SEGMENTS

	2010 (a)			2009			2008 (b)			2007 (c)			2006 (d)
	(in thousands, except per common share results, membership and ratios)
Summary of Operating Results:
Revenues:
Premiums	$	32,712,323		$	29,926,751		$	28,064,844		$	24,434,347		$	20,729,182
Services		555,180			519,507			468,239			404,636			343,930
Investment income		329,332			296,317			220,215			314,239			291,880
Total revenues		33,596,835			30,742,575			28,753,298			25,153,222			21,364,992
Operating expenses:
Benefits		27,117,069			24,783,576			23,730,106			20,246,162			17,425,589
Operating costs		4,380,319			4,013,984			3,739,655			3,372,415			2,972,289
Depreciation and amortization		244,825			237,412			210,400			176,467			141,888
Total operating expenses		31,742,213			29,034,972			27,680,161			23,795,044			20,539,766
Income from operations		1,854,622			1,707,603			1,073,137			1,358,178			825,226
Interest expense		105,060			105,843			80,289			68,878			63,141
Income before income taxes		1,749,562			1,601,760			992,848			1,289,300			762,085
Provision for income taxes		650,172			562,085			345,694			455,616			274,662
Net income	$	1,099,390		$	1,039,675		$	647,154		$	833,684		$	487,423
Basic earnings per common share	$	6.55		$	6.21		$	3.87		$	5.00		$	2.97
Diluted earnings per common share	$	6.47		$	6.15		$	3.83		$	4.91		$	2.90
Financial Position:
Cash and investments	$	10,045,576		$	9,110,738		$	7,185,865		$	6,690,820		$	5,347,454
Total assets		16,103,253			14,153,494			13,041,760			12,879,074			10,098,486
Benefits payable		3,469,306			3,222,574			3,205,579			2,696,833			2,410,407
Debt		1,668,849			1,678,166			1,937,032			1,687,823			1,269,100
Stockholders’ equity		6,924,056			5,776,003			4,457,190			4,028,937			3,053,886
Key Financial Indicators:
Benefit ratio		82.9	%		82.8	%		84.6	%		82.9	%		84.1	%
Operating cost ratio		13.2	%		13.2	%		13.1	%		13.6	%		14.1	%
Medical Membership by Segment:
Retail segment:
Medical membership		3,542,200			3,729,400			4,764,900			4,780,200			4,703,100
Specialty membership		510,000			297,300			324,600			299,400			116,500
Employer Group segment:
Medical membership		3,009,500			3,117,800			3,358,400			3,256,400			3,119,900
Specialty membership		6,517,500			6,761,900			6,244,100			6,305,200			1,786,300
Other Businesses:
Medical membership		3,734,900			3,486,800			3,488,900			3,470,100			3,449,100
Consolidated:
Total medical membership		10,286,600			10,334,000			11,612,200			11,506,700			11,272,100
Total specialty membership		7,027,500			7,059,200			6,568,700			6,604,600			1,902,800

(a) Includes the acquired operations of Concentra Inc. from December 21, 2010. Also includes the benefit of $231.2 million ($146.5 million after tax, or $0.86 per diluted common share) of prior year favorable reserve releases not in the ordinary course of business, as well as an expense of $147.5 million ($93.4 million after tax, or $0.55 per diluted common share) for the write-down of deferred acquisition costs associated with our individual major medical policies and an expense of $138.9 million ($88.0 million after tax, or $0.52 per diluted common share) associated with reserve strengthening for our closed block of long-term care policies acquired in connection with the 2007 acquisition of KMG America Corporation.

(b) Includes the acquired operations of UnitedHealth Group’s Las Vegas, Nevada individual SecureHorizons Medicare Advantage HMO business from April 30, 2008, the acquired operations of OSF Health Plans, Inc. from May 22, 2008, the acquired operations of Metcare Health Plans, Inc. from August 29, 2008, and the acquired operations of PHP Companies, Inc. (d/b/a Cariten Healthcare) from October 31, 2008.

(c) Includes the acquired operations of DefenseWeb Technologies, Inc. from March 1, 2007, the acquired operations of CompBenefits Corporation from October 1, 2007, and the acquired operations of KMG America Corporation from November 30, 2007. Also includes the benefit of $68.9 million ($43.0 million after tax, or $0.25 per diluted share) related to our 2006 Medicare Part D reconciliation with CMS and the settlement of some TRICARE contractual provisions related to prior years.

(d) Includes the acquired operations of CHA Service Company from May 1, 2006.

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EX-99.3

Exhibit 99.3

Explanatory Note

During the first quarter of 2011, Humana Inc. realigned its business segments to reflect its evolving business model. As a result, Humana reassessed and changed its operating and reportable segments effective with the filing of its Quarterly Report on Form 10-Q for the three months ended March 31, 2011. The Company currently manages and reports its operating results using the following segments: Retail, Employer Group, and Health and Well-Being Services. The Company also discloses results for Other Businesses. This Exhibit 99.3 has been revised from the “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” to Humana’s Annual Report on Form 10-K for the year ended December 31, 2010 (the “2010 Form 10-K”) to reflect retrospective application of the new segments and reclassified historical results to conform to the new presentation.

Material revisions to the 2010 Form 10-K resulting from the Company’s new business segment reporting are highlighted in blue font. It is important to note, however, that other disclosures originally included in the 2010 Form 10-K, unrelated to the Company’s new business segment reporting, have been repeated in this Exhibit 99.3 without updates that may have been made to those disclosures in subsequent filings with the SEC. The non-updated disclosures, made as of February 17, 2011, appear in black font. For updated disclosures to these sections, you should read this Exhibit 99.3 together with the Company’s SEC filings made after February 17, 2011, including Humana’s Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2011 and June 30, 2011.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS WITH RETROSPECTIVE APPLICATION OF SEGMENTS

Executive Overview

General

Headquartered in Louisville, Kentucky, Humana is one of the nation’s largest publicly traded health and supplemental benefits companies, based on our 2010 revenues of approximately $33.6 billion. We provide full-service benefits and wellness solutions, offering a wide array of health, pharmacy and supplemental benefit products for employer groups, government benefit programs, and individuals, as well as primary and workplace care through our medical centers and worksite medical facilities. As of December 31, 2010, we had approximately 10.3 million members in our medical benefit plans, as well as approximately 7.0 million members in our specialty products.

Our results are impacted by many factors, but most notably are influenced by our ability to establish and maintain a competitive and efficient cost structure and to accurately and consistently establish competitive premium, service fee, and plan benefit levels that are commensurate with our benefit and administrative costs. Benefit costs are subject to a high rate of inflation due to many forces, including new higher priced technologies and medical procedures, new prescription drugs and therapies, an aging population, lifestyle challenges including diet and smoking, the tort liability system, and government regulation.

Our industry relies on two key statistics to measure performance. The benefit ratio, which is computed by taking total benefit expenses as a percentage of premium revenues, represents a statistic used to measure underwriting profitability. The operating cost ratio, which is computed by taking total operating costs as a percentage of total revenue less investment income, represents a statistic used to measure administrative spending efficiency.

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2011 Business Segment Realignment

During the first quarter of 2011, we realigned our business segments to reflect our evolving business model. As a result, we reassessed and changed our operating and reportable segments in the first quarter of 2011 to reflect management’s new view of the business and to align our external financial reporting with our new operating and internal financial reporting model. Historical segment information has been retrospectively adjusted to reflect the effect of this change. Our new reportable segments and the basis for determining those segments are discussed below.

Business Segments

We currently manage our business with three reportable segments: Retail, Employer Group, and Health and Well-Being Services. In addition, we include other businesses that are not reportable because they do not meet the quantitative thresholds required by generally accepted accounting principles in an Other Businesses category. These segments are based on a combination of the type of health plan customer and adjacent businesses centered on well-being solutions for our health plans and other customers, as described below. These segment groupings are consistent with information used by our Chief Executive Officer to assess performance and allocate resources.

The Retail segment consists of Medicare and commercial fully-insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health and financial protection products, marketed directly to individuals. The Employer Group segment consists of Medicare and commercial fully-insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health and financial protection products, as well as administrative services only products marketed to employer groups. The Health and Well-Being Services segment includes services offered to our health plan members as well as to third parties that promote health and wellness, including primary care, pharmacy, integrated wellness, and home care services. The Other Businesses category consists of our Military services, primarily our TRICARE South Region contract, Medicaid, and closed-block long-term care businesses as well as our contract with CMS to administer the LI-NET program.

The results of each segment are measured by income before income taxes. Transactions between reportable segments consist of sales of services rendered by our Health and Well-Being Services segment, primarily pharmacy and behavioral health services, to our Retail and Employer Group customers. Intersegment sales and expenses are recorded at fair value and eliminated in consolidation. Members served by our segments often utilize the same provider networks, enabling us in some instances to obtain more favorable contract terms with providers. Our segments also share indirect costs and assets. As a result, the profitability of each segment is interdependent. We do not report total assets by segment since this is not a metric used to assess performance and allocate resources. We allocate most operating expenses to our segments. Certain corporate income and expenses are not allocated to the segments, including investment income not supporting segment operations, interest expense on corporate debt, and certain other corporate expenses. These items are managed at the corporate level. These corporate amounts are reported separately from our reportable segments and included with intersegment eliminations.

Health Insurance Reform

In March 2010, the President signed into law The Patient Protection and Affordable Care Act and The Health Care and Education Reconciliation Act of 2010 (which we collectively refer to as the Health Insurance Reform Legislation) which enact significant reforms to various aspects of the U.S. health insurance industry. While regulations and interpretive guidance on some provisions of the Health Insurance Reform Legislation have been issued to date by the Department of Health and Human Services (HHS), the Department of Labor, the Treasury Department, and the National Association of Insurance Commissioners, there are many significant provisions of the legislation that will require additional guidance and clarification in the form of regulations and interpretations in order to fully understand the impacts of the legislation on our overall business, which we expect to occur over the next several years.

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Implementation dates of the Health Insurance Reform Legislation vary from as early as six months from the date of enactment, or September 23, 2010, to as late as 2018. The following outlines certain provisions of the Health Insurance Reform Legislation:

• Changes effective for plan years beginning on or after September 23, 2010 included: elimination of pre-existing condition limits for enrollees under age 19, elimination of certain annual and lifetime caps on the dollar value of benefits, expansion of dependent coverage to include adult children until age 26, a requirement to provide coverage for preventive services without cost to members, new claim appeal requirements, and the establishment of an interim high risk program for those unable to obtain coverage due to a pre-existing condition or health status.

• Effective January 1, 2011, minimum benefit ratios were mandated for all commercial fully-insured health plans in the large group (85%), small group (80%), and individual (80%) markets, with rebates to policyholders if the actual benefit ratios do not meet these minimums.

• Medicare Advantage payment benchmarks for 2011 were frozen at 2010 levels and beginning in 2012, additional cuts to Medicare Advantage plan payments will take effect (plans will receive a range of 95% in high-cost areas to 115% in low-cost areas of Medicare fee-for-service rates), with changes being phased-in over two to six years, depending on the level of payment reduction in a county. In addition, beginning in 2011, the difference in a member’s initial coverage limit for Medicare Part D prescription drugs and the catastrophic coverage threshold, commonly known as the Medicare gap, will incrementally close.

• Beginning in 2014, the Health Insurance Reform Legislation requires: all individual and group health plans to guarantee issuance and renew coverage without pre-existing condition exclusions or health-status rating adjustments; the elimination of annual limits on coverage on certain plans; the establishment of state-based exchanges for individuals and small employers (with up to 100 employees); the introduction of standardized plan designs based on set actuarial values; the establishment of a minimum benefit ratio of 85% for Medicare Advantage plans; and an annual insurance industry premium-based assessment ($8 billion levied on the insurance industry in 2014 with increasing annual amounts thereafter), which is not deductible for income tax purposes.

The Health Insurance Reform Legislation also specifies required benefit designs, limits rating and pricing practices, encourages additional competition (including potential incentives for new market entrants) and expands eligibility for Medicaid programs. In addition, the law will significantly increase federal oversight of health plan premium rates and could adversely affect our ability to appropriately adjust health plan premiums on a timely basis. Financing for these reforms will come, in part, from material additional fees and taxes on us and other health insurers, health plans and individuals beginning in 2014, as well as reductions in certain levels of payments to us and other health plans under Medicare as described above.

Our results of operations have been affected by the Health Insurance Reform Legislation. During 2010, we recorded a charge of $147.5 million to write-down deferred acquisition costs associated with our guaranteed renewable individual major medical policies since these costs will not be recoverable from our estimates of future cash flows based on an analysis that considered, among others, our current understanding of the pertinent provisions of the Health Insurance Reform Legislation, including the 80% minimum benefit ratio requirement. In addition, our effective tax rate increased due to the limitation of deductible annual compensation over $500,000 per employee.

As discussed above, implementing regulations and related interpretive guidance continue to be issued on several significant provisions of the Health Insurance Reform Legislation, and it has been challenged in the judicial system. Given the breadth of possible changes and the uncertainties of interpretation, implementation, and timing of these changes, which we expect to occur over the next several years, the Health Insurance Reform

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Legislation could change the way we do business, potentially impacting our pricing, benefit design, product mix, geographic mix, and distribution channels. The response of other companies to Health Insurance Reform Legislation and adjustments to their offerings, if any, could cause meaningful disruption in the local health care markets. Further, various health insurance reform proposals are also emerging at the state level. It is reasonably possible that the Health Insurance Reform Legislation and related regulations, as well as future legislative changes, in the aggregate may have a material adverse effect on our results of operations, including restricting revenue, enrollment and premium growth in certain products and market segments, restricting our ability to expand into new markets, increasing our medical and administrative costs, lowering our Medicare payment rates and increasing our expenses associated with the non-deductible federal premium tax and other assessments; our financial position, including our ability to maintain the value of our goodwill; and our cash flows. If the new non-deductible federal premium tax is imposed as enacted, and if we are unable to adjust our 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 our results of operations, financial position, and cash flows.

Consolidated Highlights

• Our strategy and commitment to the Medicare programs have led to significant growth as discussed in our Retail and Employer Group segment discussions below.

• As more fully described herein under “Benefit Expense Recognition,” actuarial standards require the use of assumptions based on moderately adverse experience, which generally results in favorable reserve development, or reserves that are considered redundant. When we recognize a release of the redundancy, we disclose the amount that is not in the ordinary course of business. We experienced prior year favorable reserve releases not in the ordinary course of business in both our Retail and Employer Group segments of approximately $231.2 million in the aggregate, or $0.86 per diluted common share, for the year ended December 31, 2010. This favorable reserve development primarily resulted from improvements in the claims processing environment and, to a lesser extent, better than originally estimated utilization as well as a shortening of the cycle time associated with provider claim submissions. We believe we have consistently applied our methodology in determining our best estimate of benefits payable.

• Operating cash flows increased $820.2 million to $2,241.8 million for the year ended December 31, 2010 compared to $1,421.6 million for the year ended December 31, 2009. The increase primarily was due to earnings improvement, enrollment activity, and changes in working capital items.

Retail

Retail segment pretax earnings for 2010 were negatively impacted by a $147.5 million write-down of deferred acquisition costs associated with our individual major medical policies. As a result of significant reforms to the U.S. health insurance industry discussed previously, a substantial portion of deferred acquisition costs associated with our individual major medical block of business were not recoverable from future income and we recorded a charge to operating costs of $147.5 million during 2010 as discussed in Note 18 to the consolidated financial statements included in Item 8. – Financial Statements and Supplementary Data.

Individual Medicare Advantage fully-insured membership increased to 1,460,700 members at December 31, 2010, up 54,100 members, or 3.8%, from 1,406,600 members at December 31, 2009, primarily due to sales of preferred provider organization, or PPO, products. Average individual fully-insured Medicare Advantage membership increased 4.4% for the year ended December 31, 2010 compared to the year ended December 31, 2009. Likewise, individual Medicare Advantage premium revenues have increased 6.1% to $16.3 billion for the year ended December 31, 2010 from $15.3 billion for the year ended December 31, 2009.

Beginning in 2011, sponsors of Medicare Advantage Private Fee-For-Service, or PFFS, plans are required to contract with providers to establish adequate networks, except in geographic areas that CMS determines have fewer than two network-based Medicare Advantage plans. Our development of networks in multiple areas of the country over the past few years made it possible for many of our PFFS members to transition automatically to our network-based products.

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On April 5, 2010, CMS announced that Medicare Advantage payment rates would remain flat in 2011. Based on the information available at the time we filed our 2011 bids in June 2010, we believe we effectively designed Medicare Advantage products that address the flat rates while continuing to remain competitive compared to both the combination of original Medicare with a supplement policy as well as other Medicare Advantage competitors within our industry. In addition, we will continue to pursue our cost-reduction and outcome-enhancing strategies, including care coordination and disease management, which we believe will mitigate the adverse effects of the negative rate changes on our Medicare Advantage members. Nonetheless, there can be no assurance that we will be able to successfully execute operational and strategic initiatives with respect to changes in the Medicare Advantage program. Failure to execute these strategies may result in a material adverse effect on our results of operations, financial position, and cash flows.

We also offer Medicare stand-alone prescription drug plans, or PDPs, under the Medicare Part D program. These plans provide varying degrees of coverage. Our individual Medicare stand-alone PDP membership declined to 1,670,300 members at December 31, 2010, down 255,100 members, or 13.2%, from December 31, 2009, resulting primarily from our competitive positioning as we realigned stand-alone PDP premium and benefit designs to correspond with our historical prescription drug claims experience. In October 2010, we announced the lowest premium national stand-alone Medicare Part D prescription drug plan co-branded with Wal-Mart Stores, Inc., the Humana Walmart-Preferred Rx Plan, to be offered for the 2011 plan year.

Our quarterly Retail segment earnings and operating cash flows are impacted by the Medicare Part D benefit design and changes in the composition of our membership. The Medicare Part D benefit design results in coverage that varies as a member’s cumulative out-of-pocket costs pass through successive stages of a member’s plan period which begins annually on January 1 for renewals. These plan designs generally result in us sharing a greater portion of the responsibility for total prescription drug costs in the early stages and less in the latter stages. As a result, the PDP benefit ratio generally decreases as the year progresses. In addition, the number of low-income senior members as well as year-over-year changes in the mix of membership in our stand-alone PDP products affect the quarterly benefit ratio pattern.

CMS is conducting certain procedural Risk-Adjustment Data Validation Audits, or RADV audits, of us and various companies’ selected Medicare Advantage contracts to review medical record documentation in an attempt to validate provider coding practices and the presence of risk adjustment conditions which influence the calculation of rates paid to Medicare Advantage plans. The RADV audits are more fully described herein under “Government Contracts.”

Employer Group

Employer Group segment pretax earnings increased $301.4 million for 2010 compared to 2009 primarily due to an increase in Medicare Advantage group membership, and medical trend that was lower than trend assumed in pricing as well as continued pricing discipline, in each case particularly for our commercial business. Medicare Advantage group membership increased 199,400 members from December 31, 2009 to 301,300 members at December 31, 2010 primarily due to a new contract added during the first quarter of 2010. Likewise, Medicare Advantage group premium revenues have increased to $3.0 billion for the year ended December 31, 2010 from $1.1 billion for the year ended December 31, 2009. Fully-insured commercial group medical membership at December 31, 2010 of 1,252,200 decreased 189,900 members, or 13.2% from December 31, 2009 primarily as a result of continued pricing discipline.

Other Businesses

Pretax results for 2010 for our Other Businesses were negatively impacted by a net charge of $138.9 million due to reserve strengthening for our closed block of long-term care policies. During 2010, certain states approved premium rate increases for a large portion of our long-term care block that were significantly below our acquisition date assumptions. Based on these actions by the states, combined with the depressed interest rate environment and increased expenses, we recorded $138.9 million of additional benefit expense in the fourth quarter of 2010 as discussed in Note 18 to the consolidated financial statements included in Item 8. – Financial Statements and Supplementary Data.

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Included with Other Businesses is our military services business which primarily consists of the TRICARE South Region contract. For the year ended December 31, 2010, premiums and services revenue associated with the TRICARE South Region contract were $3,435.1 million, or 10.3% of our consolidated premiums and services revenue.

On March 3, 2010, the TMA exercised its options to extend the TRICARE South Region contract for Option Period VII and Option Period VIII. The exercise of these option periods extends the TRICARE South Region contract through March 31, 2011. On October 5, 2010, we were notified that the TMA intended to negotiate with us for an extension of our administration of the TRICARE South Region contract, and on January 6, 2011, an Amendment of Solicitation/Modification of Contract to the TRICARE South Region contract, in the form of an undefinitized contract action, became effective. The Amendment adds one additional one-year option period, Option Period IX (which runs from April 1, 2011 through March 31, 2012). On January 21, 2011, the TMA notified us of their intent to exercise Option Period IX.

In July 2009, we were notified by the DoD that we were not awarded the third generation TRICARE program contract for the South Region which had been subject to competing bids. We filed a protest with the GAO in connection with the award to another contractor citing discrepancies between the award criteria and procedures prescribed in the request for proposals issued by the DoD and those that appear to have been used by the DoD in making its contractor selection. In October 2009, we learned that the GAO had upheld our protest, determining that the TMA evaluation of our proposal had unreasonably failed to fully recognize and reasonably account for the likely cost savings associated with our record of obtaining network provider discounts from our established network in the South Region. On December 22, 2009, we were advised that TMA notified the GAO of its intent to implement corrective action consistent with the discussion contained within the GAO’s decision with respect to our protest. On October 22, 2010, TMA issued its latest amendment to the request for proposal requesting from offerors final proposal revisions to address, among other things, health care cost savings resulting from provider network discounts in the South Region. We submitted our final proposal revisions on November 9, 2010. At this time, we are not able to determine whether or not the protest decision by the GAO will have any effect upon the ultimate disposition of the contract award.

We are continuing to evaluate issues associated with our military services businesses such as potential impairment of certain assets primarily consisting of goodwill, which had a carrying value of $49.8 million at December 31, 2010, potential exit costs, possible asset sales, and a strategic assessment of ancillary businesses. Military services goodwill was not impaired at December 31, 2010. If our current contract is extended through March 31, 2012 and we are not ultimately awarded the new third generation TRICARE program contract for the South Region, we expect that as the March 31, 2012 contract end date nears, future cash flows will not be sufficient to warrant recoverability of all or a portion of the military services goodwill. In this event, we expect a goodwill impairment would occur during the second half of 2011.

Recent Acquisitions

On December 21, 2010, we acquired Concentra Inc., or Concentra, a health care company based in Addison, Texas, for cash consideration of $804.7 million. Through its affiliated clinicians, Concentra delivers occupational medicine, urgent care, physical therapy, and wellness services to workers and the general public through its operation of medical centers and worksite medical facilities. The Concentra acquisition provides entry into the primary care space on a national scale, offering additional means for achieving health and wellness solutions and providing an expandable platform for growth with a management team experienced in physician asset management and alternate site care.

On October 31, 2008 we acquired PHP Companies, Inc. (d/b/a Cariten Healthcare), or Cariten, for cash consideration of approximately $291.0 million. The Cariten acquisition increased our presence in eastern Tennessee, adding approximately 49,700 commercial fully-insured group members, 21,600 commercial ASO members, and 46,900 individual Medicare HMO members. This acquisition also added approximately 85,700 Medicaid ASO members under a contract which expired on December 31, 2008 and was not renewed.

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On August 29, 2008, we acquired Metcare Health Plans, Inc., or Metcare, for cash consideration of approximately $14.9 million. The acquisition expanded our individual Medicare HMO membership in central Florida, adding approximately 7,300 members.

On May 22, 2008, we acquired OSF Health Plans, Inc., or OSF, a managed care company serving both Medicare and commercial members in central Illinois, for cash consideration of approximately $87.3 million. This acquisition expanded our presence in Illinois, broadening our ability to serve multi-location employers with a wider range of products, including our specialty offerings. The acquisition added approximately 33,400 commercial fully-insured group members, 29,700 commercial ASO members, and 14,000 individual Medicare HMO and PPO members.

On April 30, 2008, we acquired UnitedHealth Group’s Las Vegas, Nevada individual SecureHorizons Medicare Advantage HMO business, or SecureHorizons, for cash consideration of approximately $185.3 million, plus subsidiary capital and surplus requirements of $40 million. The acquisition expanded our presence in the Las Vegas market, adding approximately 26,700 individual Medicare HMO members.

Certain of these transactions are more fully described in Note 3 to the consolidated financial statements included in Item 8. – Financial Statements and Supplementary Data.

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We intend for the discussion of our financial condition and results of operations that follows to assist in the understanding of our financial statements and related changes in certain key items in those financial statements from year to year, including the primary factors that accounted for those changes.

Comparison of Results of Operations for 2010 and 2009

Certain financial data on a consolidated basis and for our segments was as follows for the years ended December 31, 2010 and 2009:

Consolidated

							Change
	2010			2009			Dollars			Percentage
	(dollars in thousands)
Revenues:
Premiums:
Retail	$	19,052,712		$	18,348,538		$	704,174			3.8	%
Employer Group		9,078,903			7,466,589			1,612,314			21.6	%
Other Businesses		4,580,708			4,111,624			469,084			11.4	%
Total premiums		32,712,323			29,926,751			2,785,572			9.3	%
Services:
Retail		11,105			10,049			1,056			10.5	%
Employer Group		394,950			369,684			25,266			6.8	%
Health and Well-Being Services		34,104			16,412			17,692			107.8	%
Other Businesses		115,021			123,362			(8,341	)		(6.8	)%
Total services		555,180			519,507			35,673			6.9	%
Investment income		329,332			296,317			33,015			11.1	%
Total revenues		33,596,835			30,742,575			2,854,260			9.3	%
Operating expenses:
Benefits		27,117,069			24,783,576			2,333,493			9.4	%
Operating costs		4,380,319			4,013,984			366,335			9.1	%
Depreciation and amortization		244,825			237,412			7,413			3.1	%
Total operating expenses		31,742,213			29,034,972			2,707,241			9.3	%
Income from operations		1,854,622			1,707,603			147,019			8.6	%
Interest expense		105,060			105,843			(783	)		(0.7	)%
Income before income taxes		1,749,562			1,601,760			147,802			9.2	%
Provision for income taxes		650,172			562,085			88,087			15.7	%
Net income	$	1,099,390		$	1,039,675		$	59,715			5.7	%
Diluted earnings per common share	$	6.47		$	6.15		$	0.32			5.2	%
Benefit ratio(a)		82.9	%		82.8	%					0.1	%
Operating cost ratio(b)		13.2	%		13.2	%					0.0	%
Effective tax rate		37.2	%		35.1	%					2.1	%

(a) Represents total benefit expenses as a percentage of premium revenues.

(b) Represents total operating costs as a percentage of total revenues less investment income.

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Summary

Net income was $1,099.4 million, or $6.47 per diluted common share, in 2010 compared to $1,039.7 million, or $6.15 per diluted common share, in 2009 primarily as a result of an increase in average Medicare Advantage membership and prior year favorable reserve releases not in the ordinary course of business in 2010 in both our Retail and Employer Group segments. Our diluted earnings per common share for 2010 include the beneficial impact of prior year favorable reserve development of approximately $0.86 per diluted common share that primarily resulted from improvements in the claims processing environment and, to a lesser extent, better than originally estimated utilization as well as a shortening of the cycle time associated with provider claim submissions. These increases were partially offset by a $147.5 million ($0.55 per diluted common share) write-down of deferred acquisition costs associated with our individual major medical policies in our Retail segment and a net charge of $138.9 million ($0.52 per diluted common share) for reserve strengthening associated with our closed block of long-term care policies in our Other Businesses in 2010 as discussed in Note 18 to the consolidated financial statements included in Item 8. – Financial Statements and Supplementary Data. Net income for 2009 also included the favorable impact of the reduction of the liability for unrecognized tax benefits ($0.10 per diluted common share) as a result of Internal Revenue Service audit settlements.

Premiums

Consolidated premiums increased $2.8 billion, or 9.3%, to $32.7 billion for 2010, compared to $29.9 billion for 2009. The increase primarily was due to higher premium revenues in the Employer Group and Retail segments primarily due to higher average Medicare Advantage membership and an increase in per member premiums, as well as increased premiums for other businesses as a result of our new contract with CMS to administer the LI-NET program in 2010. Average membership is calculated by summing the ending membership for each month in a period and dividing the result by the number of months in a period. Premium revenues reflect changes in membership and increases in average per member premiums. Items impacting average per member premiums include changes in premium rates as well as changes in the geographic mix of membership, the mix of product offerings, and the mix of benefit plans selected by our membership.

Services Revenue

Consolidated services revenue increased $35.7 million, or 6.9%, to $555.2 million for 2010, compared to $519.5 million for 2009, primarily due to an increase in services revenue in our Employer Group segment primarily as a result of a new group Medicare ASO account in 2010 partially offset by a decline in commercial ASO membership, as well as an increase in primary care services revenue in our Health and Well-Being Services segment primarily as a result of the acquisition of Concentra on December 21, 2010.

Investment Income

Investment income totaled $329.3 million for 2010, an increase of $33.0 million from $296.3 million for 2009, primarily reflecting higher average invested balances as a result of the reinvestment of operating cash flows, partially offset by lower interest rates.

Benefit Expenses

Consolidated benefit expenses were $27.1 billion for 2010, an increase of $2.3 billion, or 9.4%, from $24.8 billion for 2009. The increase primarily was driven by an increase in the average number of Medicare Advantage members.

The consolidated benefit ratio for 2010 was 82.9%, essentially unchanged, increasing only 10 basis points from the 2009 benefit ratio of 82.8%.

Operating Costs

Our segments incur both direct and shared indirect operating costs. We allocate the indirect costs shared by the segments primarily as a function of revenues. As a result, the profitability of each segment is interdependent.

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Consolidated operating costs increased $366.3 million, or 9.1%, during 2010 compared to 2009, primarily due to the $147.5 million write-down of deferred acquisition costs associated with our individual major medical policies in 2010, increased Medicare investment spending for our 2011 offerings, and administrative costs associated with servicing higher average Medicare Advantage membership, partially offset by a decrease in the number of our employees as a result of our administrative cost reduction strategies, including planned workforce reductions in 2010. Excluding employees added with the acquisition of Concentra on December 21, 2010, the number of employees decreased by 800 to 27,300 at December 31, 2010 from 28,100 at December 31, 2009, or 2.8%, as we aligned the size of our workforce with our membership.

The consolidated operating cost ratio for 2010 of 13.2% remained unchanged from the 2009 ratio as an increase in the Retail segment operating cost ratio was offset by declines in the Employer Group and Health and Well-Being Services segment operating cost ratios.

Depreciation and Amortization

Depreciation and amortization for 2010 totaled $244.8 million compared to $237.4 million for 2009, an increase of $7.4 million, or 3.1%, primarily reflecting depreciation expense associated with capital expenditures.

Interest Expense

Interest expense was $105.1 million for 2010, compared to $105.8 million for 2009, a decrease of $0.7 million, or 0.7%.

Income Taxes

Our effective tax rate during 2010 was 37.2% compared to the effective tax rate of 35.1% in 2009. The increase from 2009 to 2010 primarily was due to the reduction of the $16.8 million liability for unrecognized tax benefits as a result of audit settlements which reduced the effective income tax rate by 1.0% during 2009. In addition, the tax rate for 2010 reflects the estimated impact of new limitations on the deductibility of annual compensation in excess of $500,000 per employee as mandated by recent health insurance reforms. See Note 10 to the consolidated financial statements included in Item 8. – Financial Statements and Supplementary Data for a complete reconciliation of the federal statutory rate to the effective tax rate. We expect the 2011 effective tax rate to be approximately 37%.

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Retail Segment

					Change
	2010		2009		Members			Percentage
Membership:
Medical membership:
Individual Medicare Advantage		1,460,700		1,406,600		54,100			3.8	%
Individual Medicare stand-alone PDP		1,670,300		1,925,400		(255,100	)		(13.2	)%
Total individual Medicare		3,131,000		3,332,000		(201,000	)		(6.0	)%
Individual commercial		411,200		397,400		13,800			3.5	%
Total individual medical members		3,542,200		3,729,400		(187,200	)		(5.0	)%
Individual specialty membership (a)		510,000		297,300		212,700			71.5	%

(a) Specialty products include dental, vision, and other supplemental health and financial protection products. Members included in these products may not be unique to each product since members have the ability to enroll in multiple products.

							Change
	2010			2009			Dollars			Percentage
	(in thousands)
Premiums and Services Revenue:
Premiums:
Individual Medicare Advantage	$	16,265,839		$	15,333,225		$	932,614			6.1	%
Individual Medicare stand-alone PDP		1,960,063			2,322,432			(362,369	)		(15.6	)%
Total individual Medicare		18,225,902			17,655,657			570,245			3.2	%
Individual commercial		745,329			638,044			107,285			16.8	%
Individual specialty		81,481			54,837			26,644			48.6	%
Total premiums		19,052,712			18,348,538			704,174			3.8	%
Services		11,105			10,049			1,056			10.5	%
Total premiums and services revenue	$	19,063,817		$	18,358,587		$	705,230			3.8	%
Income before income taxes	$	1,288,869		$	1,358,766		$	(69,897	)		(5.1	)%
Benefit ratio		82.0	%		81.7	%					0.3	%
Operating cost ratio		11.1	%		10.8	%					0.3	%

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Pretax Results

• Retail segment pretax income was $1.3 billion in 2010, a decrease of $69.9 million, or 5.1%, from 2009 primarily due to the negative impact of a $147.5 million write-down of deferred acquisition costs associated with our individual major medical policies in 2010 and a decline in average individual Medicare stand-alone PDP membership from 2009 to 2010, partially offset by the beneficial impact of an estimated $198 million in favorable prior-period medical claims reserve development in 2010.

Enrollment

• Individual Medicare Advantage membership increased 54,100 members, or 3.8%, from December 31, 2009 to December 31, 2010, with sales of our PPO products driving the majority of the increase.

• Individual Medicare stand-alone PDP membership decreased 255,100 members, or 13.2%, from December 31, 2009 to December 31, 2010 primarily from our competitive positioning as we realigned stand-alone PDP premium and benefit designs to correspond with our historical prescription drug claims experience.

• Individual specialty membership increased 212,700, or 71.5%, from December 31, 2009 to December 31, 2010, primarily driven by increased sales in dental and vision offerings.

Premiums

• Retail segment premiums increased $704.2 million, or 3.8%, from 2009 to 2010 primarily due to higher average individual Medicare Advantage membership and an increase in per member premiums, partially offset by a decline in average individual stand-alone PDP membership. Individual Medicare Advantage premium revenues increased $932.6 million, or 6.1%, from 2009 to 2010. Average individual Medicare Advantage membership increased 4.4% in 2010 compared to 2009. Individual Medicare Advantage per member premiums increased approximately 1.6% during 2010 compared to 2009. Individual Medicare stand-alone PDP premium revenues decreased $362.4 million, or 15.6%, from 2009 to 2010 primarily due to a 14.8% decrease in average individual PDP membership.

Benefit expenses

• The Retail segment benefit ratio increased 30 basis points from 81.7% in 2009 to 82.0% in 2010 primarily driven by a 40 basis point increase in the Medicare benefit ratio primarily as a result of higher average membership in products that generally carry higher benefit ratios, partially offset by prior year favorable reserve releases not in the ordinary course of business. These favorable reserve releases decreased the Retail segment benefit ratio by approximately 110 basis points in 2010.

Operating costs

• The Retail segment operating cost ratio of 11.1% for 2010 increased 30 basis points from 10.8% for 2009. The $147.5 million write-down of deferred acquisition costs in 2010 increased the operating cost ratio 80 basis points. Excluding the impact of the write-down of deferred acquisition costs, the decrease in the operating cost ratio year-over-year primarily reflects efficiency gains associated with servicing higher average individual Medicare Advantage membership as well as our continued focus on administrative cost reductions, partially offset by increased Medicare investment spending for our 2011 offerings.

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Employer Group Segment

					Change
	2010		2009		Members			Percentage
Membership:
Medical membership:
Fully-insured commercial group		1,252,200		1,442,100		(189,900	)		(13.2	)%
ASO		1,453,600		1,571,300		(117,700	)		(7.5	)%
Group Medicare Advantage		273,100		101,900		171,200			168.0	%
Medicare Advantage ASO		28,200		0		28,200			100.0	%
Total group Medicare Advantage		301,300		101,900		199,400			195.7	%
Group Medicare stand-alone PDP		2,400		2,500		(100	)		(4.0	)%
Total group Medicare		303,700		104,400		199,300			190.9	%
Total group medical members		3,009,500		3,117,800		(108,300	)		(3.5	)%
Group specialty membership (a)		6,517,500		6,761,900		(244,400	)		(3.6	)%

(a) Specialty products include dental, vision, and other supplemental health and financial protection products. Members included in these products may not be unique to each product since members have the ability to enroll in multiple products.

							Change
	2010			2009			Dollars			Percentage
	(in thousands)
Premiums and Services Revenue:
Premiums:
Fully-insured commercial group	$	5,168,713		$	5,547,114		$	(378,401	)		(6.8	)%
Group Medicare Advantage		3,020,282			1,080,076			1,940,206			179.6	%
Group Medicare stand-alone PDP		4,598			4,986			(388	)		(7.8	)%
Total group Medicare		3,024,880			1,085,062			1,939,818			178.8	%
Group specialty		885,310			834,413			50,897			6.1	%
Total premiums		9,078,903			7,466,589			1,612,314			21.6	%
Services		394,950			369,684			25,266			6.8	%
Total premiums and services revenue	$	9,473,853		$	7,836,273		$	1,637,580			20.9	%
Income (loss) before income taxes	$	288,054		$	(13,303	)	$	301,357			nm
Benefit ratio		82.4	%		84.2	%					(1.8	)%
Operating cost ratio		17.5	%		19.5	%					(2.0	)%

nm – not meaningful

13

Pretax Results

• Employer Group segment pretax income of $288.1 million in 2010 increased $301.4 million from 2009 primarily due to an increase in group Medicare Advantage membership, decreased utilization and our continued focus on pricing discipline primarily associated with our fully-insured commercial group products, as well as administrative cost reductions and the previously mentioned prior period favorable reserve releases. The Employer Group segment’s pretax income for 2010 included the beneficial effect of an estimated $33 million in favorable prior-period medical claims reserve development.

Enrollment

• Fully-insured group Medicare Advantage membership increased 171,200 members from December 31, 2009 to December 31, 2010. Approximately 109,600 of the members were associated with a new contract added during the first quarter of 2010.

• During 2010, we added 28,200 group Medicare Advantage ASO members due to a new account in 2010.

• Fully-insured commercial group medical membership decreased 189,900 members, or 13.2%, from December 31, 2009 to December 31, 2010 primarily due to the continued pricing discipline.

• Group ASO commercial medical membership decreased 117,700 members, or 7.5%, from December 31, 2009 to December 31, 2010 primarily reflecting the loss of a large group account on July 1, 2010.

Premiums

• Employer Group segment premiums increased $1.6 billion, or 21.6%, from 2009 to 2010 primarily due to increased fully-insured group Medicare Advantage membership and an increase in fully-insured commercial group per member premiums, partially offset by a decline in fully-insured commercial group medical membership year-over-year. Per member premiums for commercial fully-insured group accounts increased 7.6% during 2010 compared to 2009.

Benefit expenses

• The Employer Group segment benefit ratio of 82.4% for 2010 decreased 180 basis points from 84.2% for 2009 primarily due to medical trend that was lower than trend assumed in pricing as well as continued pricing discipline, in each case particularly for our commercial business, and prior year favorable reserve releases not in the ordinary course of business in 2010. These decreases were partially offset by growth in our group Medicare Advantage business which generally carries a higher benefit ratio than our fully-insured commercial group business. Medical trend was favorable, primarily affected by lower utilization of services as well as the use of services at lower levels of intensity than in the prior year. The favorable reserve releases decreased the Employer Group segment benefit ratio by approximately 40 basis points in 2010. Fully-insured group Medicare Advantage members represented 9.1% of total Employer Group segment medical membership at December 31, 2010 compared to 3.3% at December 31, 2009.

Operating costs

• The Employer Group segment operating cost ratio of 17.5% for 2010 decreased 200 basis points from 19.5% for 2009 primarily reflecting administrative scale efficiencies associated with an increase in average fully-insured group Medicare Advantage membership and our continued focus on administrative cost reductions.

14

Health and Well-Being Services Segment

							Change
	2010			2009			Dollars			Percentage
	(in thousands)
Revenues:
Services:
Primary care services	$	22,335		$	2,390		$	19,945			834.5	%
Integrated wellness services		11,769			14,022			(2,253	)		(16.1	)%
Total services revenues		34,104			16,412			17,692			107.8	%
Intersegment revenues:
Pharmacy solutions		8,410,542			8,629,921			(219,379	)		(2.5	)%
Primary care services		170,943			149,503			21,440			14.3	%
Integrated wellness services		165,730			149,815			15,915			10.6	%
Home care services		38,298			22,676			15,622			68.9	%
Total intersegment revenues		8,785,513			8,951,915			(166,402	)		(1.9	)%
Total services and intersegment revenues	$	8,819,617		$	8,968,327		$	(148,710	)		(1.7	)%
Income before income taxes	$	218,918		$	182,530		$	36,388			19.9	%
Operating cost ratio		97.2	%		97.8	%					(0.6	)%

Pretax results

• Health and Well-Being Services segment pretax income increased $36.4 million, or 19.9%, from 2009 to $218.9 million in 2010 primarily due to growth in both our mail order pharmacy business and our CAC medical centers. The opening of our new facility for processing specialty prescription drugs in late 2009 and continued growth from our processing facility opened in 2008 contributed to the growth in our mail order business in 2010.

Services revenue

• Services revenue increased $17.7 million, or 107.8%, from 2009 to $34.1 million in 2010 primarily due to an increase in primary care services revenue primarily as a result of the acquisition of Concentra on December 21, 2010.

Intersegment revenues

• Intersegment revenues decreased $166.4 million, or 1.9%, from 2009 to $8.8 billion for 2010 primarily due to a decline in our pharmacy solutions business primarily as a result of a decrease in average Medicare stand-alone PDP membership from our competitive positioning as we realigned stand-alone PDP premium and benefit designs to correspond with our historical prescription drug claims experience.

Operating costs

• The Health and Well-Being Services segment operating cost ratio decreased 60 basis points from 2009 to 97.2% for 2010 reflecting growth in our CAC medical centers as well as LifeSynch, our integrated behavioral health and wellness business, which carry lower operating cost ratios than other lines of business in this segment.

Other Businesses

Pretax losses for our Other Businesses of $1.4 million for 2010 compared to pretax income of $97.8 million for 2009. The decline in operating performance from 2009 to 2010 primarily resulted from a net charge of $138.9 million associated with reserve strengthening for our closed block of long-term care policies in 2010, partially offset by pretax income in 2010 associated with our new contract with CMS to administer the LI-NET program, under which we began providing services in the first quarter of 2010.

15

Comparison of Results of Operations for 2009 and 2008

Certain financial data on a consolidated basis and for our segments was as follows for the years ended December 31, 2009 and 2008:

Consolidated

							Change
	2009			2008			Dollars			Percentage
	(dollars in thousands)
Revenues:
Premiums:
Retail	$	18,348,538		$	16,948,690		$	1,399,848			8.3	%
Employer Group		7,466,589			7,264,699			201,890			2.8	%
Other Businesses		4,111,624			3,851,455			260,169			6.8	%
Total premiums		29,926,751			28,064,844			1,861,907			6.6	%
Services:
Retail		10,049			10,965			(916	)		(8.4	)%
Employer Group		369,684			352,769			16,915			4.8	%
Health and Well-Being Services		16,412			14,845			1,567			10.6	%
Other Businesses		123,362			89,660			33,702			37.6	%
Total services		519,507			468,239			51,268			10.9	%
Investment income		296,317			220,215			76,102			34.6	%
Total revenues		30,742,575			28,753,298			1,989,277			6.9	%
Operating expenses:
Benefits		24,783,576			23,730,106			1,053,470			4.4	%
Operating costs		4,013,984			3,739,655			274,329			7.3	%
Depreciation and amortization		237,412			210,400			27,012			12.8	%
Total operating expenses		29,034,972			27,680,161			1,354,811			4.9	%
Income from operations		1,707,603			1,073,137			634,466			59.1	%
Interest expense		105,843			80,289			25,554			31.8	%
Income before income taxes		1,601,760			992,848			608,912			61.3	%
Provision for income taxes		562,085			345,694			216,391			62.6	%
Net income	$	1,039,675		$	647,154		$	392,521			60.7	%
Diluted earnings per common share	$	6.15		$	3.83		$	2.32			60.6	%
Benefit ratio(a)		82.8	%		84.6	%					(1.8	)%
Operating cost ratio(b)		13.2	%		13.1	%					0.1	%
Effective tax rate		35.1	%		34.8	%					0.3	%

(a) Represents total benefit expenses as a percentage of premium revenues.

(b) Represents total operating costs as a percentage of total revenues less investment income.

16

Summary

Net income was $1,039.7 million, or $6.15 per diluted common share, in 2009 compared to $647.2 million, or $3.83 per diluted common share, in 2008. The year-over-year increase primarily reflects higher operating earnings in our Retail segment as a result of significantly lower prescription drug claims expenses associated with our individual Medicare stand-alone PDP products.

Premiums

Premium revenues increased $1.8 billion, or 6.6%, to $29.9 billion for 2009, compared to $28.1 billion for 2008 primarily due to higher premium revenues in the Retail segment primarily attributable to higher average individual Medicare Advantage membership and an increase in per member premiums partially offset by a decrease in our individual Medicare stand-alone PDP membership. Premium revenues reflected changes in membership and increases in average per member premiums. Items impacting average per member premiums included changes in premium rates as well as changes in the geographic mix of membership, the mix of product offerings, and the mix of benefit plans selected by our membership.

Services revenue

Our services revenue was $519.5 million for 2009, an increase of $51.3 million, or 10.9%, from $468.2 million for 2008, primarily due to an increase in per member fees, partially offset by a decline in commercial group ASO membership in our Employer Group segment, primarily isolated to the loss of two larger ASO accounts.

Investment Income

Investment income totaled $296.3 million for 2009, an increase of $76.1 million from $220.2 million for 2008 primarily reflecting net realized losses in 2008 of $79.4 million compared to net realized gains of $19.5 million in 2009. Net realized losses in 2008 primarily resulted from other-than-temporary impairments in our investment and securities lending portfolios of $103.1 million. Excluding the change associated with net realized gains/losses, investment income decreased primarily due to lower interest rates, partially offset by higher average invested balances as a result of the reinvestment of operating cash flow.

Benefit Expenses

Consolidated benefit expense was $24.8 billion for 2009, an increase of $1.1 billion, or 4.4%, from $23.7 billion for 2008. The increase primarily was driven by an increase in Retail segment benefit expense primarily due to an increase in the average number of individual Medicare Advantage members and the impact from the acquisitions of Cariten, Metcare, OSF, and SecureHorizons.

The consolidated benefit ratio for 2009 was 82.8%, a 180 basis point decrease from 84.6% for 2008. The decrease primarily was attributable to a decrease in the Retail segment benefit ratio primarily driven by a decline in the individual Medicare benefit ratio, partially offset by an increase in the Employer Group segment benefit ratio. The decline in the individual Medicare benefit ratio primarily resulted from a substantial decline in individual Medicare stand-alone PDP benefit expenses as a result of our competitive positioning as we realigned stand-alone PDP premium and benefit designs to correspond with our historical prescription drug claims experience.

Operating costs

Consolidated operating costs increased $274.3 million, or 7.3%, during 2009 compared to 2008. The increase primarily resulted from an increase in the average number of our employees due to the Medicare growth, primarily in our Retail segment. The average number of our employees increased 1,600 to 28,500 for 2009 from 26,900 for 2008, or 5.9%.

17

The consolidated operating cost ratio for 2009 was 13.2%, increasing 10 basis points from 13.1% for 2008 primarily due to an increase in the operating cost ratio for the Employer Group segment partially offset by a decline in the Retail segment operating cost ratio.

Depreciation and Amortization

Depreciation and amortization for 2009 totaled $237.4 million compared to $210.4 million for 2008, an increase of $27.0 million, or 12.8%, primarily reflecting depreciation expense associated with capital expenditures since December 31, 2008.

Interest Expense

Interest expense was $105.8 million for 2009, compared to $80.3 million for 2008, an increase of $25.5 million, primarily due to higher interest rates and higher average outstanding debt. In the second quarter of 2008, we issued $500 million of 7.20% senior notes due June 15, 2018 and $250 million of 8.15% senior notes due June 15, 2038, the proceeds of which were used for the repayment of the outstanding balance under our credit agreement. The weighted average effective interest rate for all of our long-term debt was 5.97% for 2009 and 4.73% for 2008.

Income Taxes

Our effective tax rate for 2009 of 35.1% compared to the effective tax rate of 34.8% for 2008. The increase was due to a lower proportion of tax exempt investment income to pretax income substantially offset by the reduction of the $16.8 million liability for unrecognized tax benefits in the first quarter of 2009 as a result of audit settlements. See Note 10 to the consolidated financial statements included in Item 8. – Financial Statements and Supplementary Data for a complete reconciliation of the federal statutory rate to the effective tax rate.

18

Retail Segment

					Change
	2009		2008		Members			Percentage
Membership:
Medical membership:
Individual Medicare Advantage		1,406,600		1,355,900		50,700			3.7	%
Individual Medicare stand-alone PDP		1,925,400		3,063,800		(1,138,400	)		(37.2	)%
Total individual Medicare		3,332,000		4,419,700		(1,087,700	)		(24.6	)%
Individual commercial		397,400		345,200		52,200			15.1	%
Total medical members		3,729,400		4,764,900		(1,035,500	)		(21.7	)%
Individual specialty membership (a)		297,300		324,600		(27,300	)		(8.4	)%

(a) Specialty products include dental, vision, and other supplemental health and financial protection products. Members included in these products may not be unique to each product since members have the ability to enroll in multiple products.

							Change
	2009			2008			Dollars			Percentage
	(in thousands)
Premiums and Services Revenue:
Premiums:
Individual Medicare Advantage	$	15,333,225		$	12,987,639		$	2,345,586			18.1	%
Individual Medicare stand-alone PDP		2,322,432			3,375,636			(1,053,204	)		(31.2	)%
Total individual Medicare		17,655,657			16,363,275			1,292,382			7.9	%
Individual commercial		638,044			519,077			118,967			22.9	%
Individual specialty		54,837			66,338			(11,501	)		(17.3	)%
Total premiums		18,348,538			16,948,690			1,399,848			8.3	%
Services		10,049			10,965			(916	)		(8.4	)%
Total premiums and services revenue	$	18,358,587		$	16,959,655		$	1,398,932			8.2	%
Income before income taxes	$	1,358,766		$	671,168		$	687,598			102.4	%
Benefit ratio		81.7	%		85.0	%					(3.3	)%
Operating cost ratio		10.8	%		10.9	%					(0.1	)%

19

Pretax Results

• Retail segment pretax income was $1.4 billion in 2009, an increase of $687.6 million, or 102.4%, compared to $671.2 million in 2008 primarily due to significantly lower prescription drug claims expenses associated with our individual Medicare stand-alone PDP products discussed below.

Enrollment

• Individual Medicare Advantage membership increased 50,700 members, or 3.7%, from December 31, 2008 to December 31, 2009, with sales of our PPO products driving the majority of the increase.

• Individual Medicare stand-alone PDP membership decreased 1,138,400 members, or 37.2%, from December 31, 2008 to December 31, 2009 primarily from our competitive positioning as we realigned stand-alone PDP premium and benefit designs to correspond with our historical prescription drug claims experience.

• Individual commercial medical membership continued to grow, increasing 52,200 members, or 15.1%, from December 31, 2008 to December 31, 2009.

Premiums

• Retail segment premiums increased $1.4 billion, or 8.3%, from 2008 to 2009 primarily attributable to higher average individual Medicare Advantage membership and an increase in per member premiums partially offset by a decrease in our individual Medicare stand-alone PDP membership. Individual Medicare Advantage premium revenues increased $2.3 billion, or 18.1%, from 2008 to 2009. Average individual Medicare Advantage membership increased 10.6% in 2009 compared to 2008, including the impact from the 2008 acquisitions of Cariten, Metcare, OSF, and SecureHorizons, discussed previously. Individual Medicare Advantage per member premiums increased 6.7% during 2009 compared to 2008 reflecting the effect of introducing member premiums for most of our Medicare Advantage products. Individual Medicare stand-alone PDP premium revenues decreased $1.1 billion, or 31.2%, during 2009 compared to 2008 primarily due to a 37.2% decrease in individual PDP membership discussed previously.

Benefit expenses

• The Retail segment benefit ratio decreased 330 basis points from 85.0% in 2008 to 81.7% in 2009 primarily driven by a 360 basis point decline in the individual Medicare benefit ratio. The decline in the individual Medicare benefit ratio primarily resulted from a substantial decline in individual Medicare stand-alone PDP benefit expenses as a result of our competitive positioning as we realigned stand-alone PDP premium and benefit designs to correspond with our historical prescription drug claims experience.

Operating costs

• The Retail segment operating cost ratio of 10.8% for 2009 decreased 10 basis points from 10.9% for 2008 primarily reflecting efficiency gains associated with servicing higher average individual Medicare Advantage membership. For example, during 2009 we transitioned the recently acquired OSF and Metcare members into our primary Medicare service platform and eliminated the cost of having duplicate platforms.

20

Employer Group Segment

					Change
	2009		2008		Members			Percentage
Membership:
Medical membership:
Fully-insured commercial group		1,442,100		1,633,600		(191,500	)		(11.7	)%
ASO		1,571,300		1,642,000		(70,700	)		(4.3	)%
Group Medicare Advantage		101,900		80,000		21,900			27.4	%
Group Medicare stand-alone PDP		2,500		2,800		(300	)		(10.7	)%
Total group Medicare		104,400		82,800		21,600			26.1	%
Total medical members		3,117,800		3,358,400		(240,600	)		(7.2	)%
Group specialty membership (a)		6,761,900		6,244,100		517,800			8.3	%

(a) Specialty products include dental, vision, and other supplemental health and financial protection products. Members included in these products may not be unique to each product since members have the ability to enroll in multiple products.

							Change
	2009			2008			Dollars			Percentage
	(in thousands)
Premiums and Services Revenue:
Premiums:
Fully-insured commercial group	$	5,547,114		$	5,650,326		$	(103,212	)		(1.8	)%
Group Medicare Advantage		1,080,076			790,360			289,716			36.7	%
Group Medicare stand-alone PDP		4,986			4,764			222			4.7	%
Total group Medicare		1,085,062			795,124			289,938			36.5	%
Group specialty		834,413			819,249			15,164			1.9	%
Total premiums		7,466,589			7,264,699			201,890			2.8	%
Services		369,684			352,769			16,915			4.8	%
Total premiums and services revenue	$	7,836,273		$	7,617,468		$	218,805			2.9	%
(Loss) income before income taxes	$	(13,303	)	$	96,648		$	(109,951	)		(113.8	)%
Benefit ratio		84.2	%		83.4	%					0.8	%
Operating cost ratio		19.5	%		18.8	%					0.7	%

21

Pretax Results

• Employer Group segment pretax losses of $13.3 million in 2009 compared to pretax income of $96.6 million in 2008. The decrease from 2008 to 2009 primarily was due to the impact of the economic recession which led to a decline in fully-insured commercial group medical membership as a result of increased in-group member attrition as employers reduced their workforce levels as well as higher utilization of benefits associated with the general economy and the highly competitive environment.

Enrollment

• Fully-insured commercial group medical membership decreased 191,500 members, or 11.7%, from December 31, 2008 to December 31, 2009 primarily due to the impact of the economic recession which has led to increased in-group member attrition as employers reduce their workforce levels.

• Group ASO commercial medical membership decreased 70,700 members, or 4.3%, from December 31, 2008 to December 31, 2009 primarily reflecting loss of two larger ASO accounts.

Premiums

• Employer Group segment premiums increased $201.9 million, or 2.8%, from 2008 to 2009 primarily due to an increase in fully-insured group Medicare Advantage membership and an increase in fully-insured commercial group per member premiums, partially offset by a decline in fully-insured commercial group membership. Per member premiums for fully-insured commercial group accounts increased 5.0% during 2009 compared to 2008.

Benefit expenses

• The Employer Group segment benefit ratio of 84.2% for 2009 increased 80 basis points from 83.4% for 2008 primarily reflecting an increase in the benefit ratio for our fully-insured commercial group accounts. The increase in the benefit ratio for our fully-insured commercial group accounts reflects higher utilization associated with the general economy and the highly competitive environment, as well as the impact of the H1N1 virus, partially offset by an increase in per member premiums. We experienced higher utilization of benefits in our fully-insured commercial group accounts as in-group attrition, primarily as a result of reductions of less experienced workers, led to a shift in the mix of members to an older workforce having more health care needs, as well as members utilizing more benefits ahead of actual or perceived layoffs, members seeking to maximize their benefits once their deductibles are met, and increased COBRA participation.

Operating costs

• The Employer Group segment operating cost ratio of 19.5% for 2009 increased 70 basis points from 18.8% for 2008 primarily reflecting lower revenues against a stable fixed cost structure due to a decline in fully-insured commercial group membership.

22

Health and Well-Being Services Segment

							Change
	2009			2008			Dollars			Percentage
	(in thousands)
Revenues:
Services:
Primary care services	$	2,390		$	2,017		$	373			18.5	%
Integrated wellness services		14,022			12,828			1,194			9.3	%
Total services revenues		16,412			14,845			1,567			10.6	%
Intersegment revenues:
Pharmacy solutions		8,629,921			11,050,687			(2,420,766	)		(21.9	)%
Primary care services		149,503			146,716			2,787			1.9	%
Integrated wellness services		149,815			135,198			14,617			10.8	%
Home care services		22,676			10,009			12,667			126.6	%
Total intersegment revenues		8,951,915			11,342,610			(2,390,695	)		(21.1	)%
Total services and intersegment revenues	$	8,968,327		$	11,357,455		$	(2,389,128	)		(21.0	)%
Income before income taxes	$	182,530		$	156,042		$	26,488			17.0	%
Operating cost ratio		97.8	%		98.5	%					(0.7	)%

Pretax results

• Health and Well-Being Services segment pretax income increased $26.5 million, or 17.0%, from 2008 to $182.5 million for 2009 primarily due to growth in our mail order pharmacy business as well as LifeSynch, our integrated behavioral health and wellness business.

Intersegment revenues

• Intersegment revenues decreased $2.4 billion, or 21.1%, from 2008 to $9.0 billion for 2009 primarily due to a decline in our pharmacy solutions business primarily as a result of a decrease in average Medicare stand-alone PDP membership from our competitive positioning as we realigned stand-alone PDP premium and benefit designs to correspond with our historical prescription drug claims experience.

Operating costs

• The Health and Well-Being Services segment operating cost ratio of 97.8% for 2009 decreased 70 basis points from 2008 primarily as a result of scale efficiencies associated with growth in our mail order pharmacy business. During 2008, we opened a new facility for processing prescription drugs that contributed to the growth in our mail order pharmacy business in 2009.

Other Businesses

Pretax income for our Other Businesses of $97.8 million for 2009 increased $32.2 million, or 49.1%, from $65.6 million for 2008. The increase from 2008 to 2009 primarily resulted from other-than-temporary impairments associated with our long-term care investment portfolio in 2008 that we did not experience in 2009.

23

Liquidity

Our primary sources of cash include receipts of premiums, services revenues, and investment and other income, as well as proceeds from the sale or maturity of our investment securities and borrowings. Our primary uses of cash include disbursements for claims payments, operating costs, interest on borrowings, taxes, purchases of investment securities, acquisitions, capital expenditures, repayments on borrowings, and share repurchases. Because premiums generally are collected in advance of claim payments by a period of up to several months, our business normally should produce positive cash flows during periods of increasing premiums and enrollment. Conversely, cash flows would be negatively impacted during periods of decreasing premiums and enrollment. The use of operating cash flows may be limited by regulatory requirements which require, among other items, that our regulated subsidiaries maintain minimum levels of capital.

Cash and cash equivalents increased to $1,673.1 million at December 31, 2010 from $1,613.6 million at December 31, 2009. The change in cash and cash equivalents for the years ended December 31, 2010, 2009 and 2008 is summarized as follows:

	2010			2009			2008
	(in thousands)
Net cash provided by operating activities	$	2,241,794		$	1,421,582		$	982,310
Net cash used in investing activities		(1,810,989	)		(1,859,261	)		(498,324	)
Net cash (used in) provided by financing activities		(371,256	)		80,844			(554,016	)
Increase (decrease) in cash and cash equivalents	$	59,549		$	(356,835	)	$	(70,030	)

Cash Flow from Operating Activities

The increase in operating cash flows over the three year period primarily results from the corresponding change in earnings, enrollment activity, and changes in working capital items. Cash flows were positively impacted by Medicare enrollment gains in 2010 because premiums generally are collected in advance of claim payments by a period of up to several months. Conversely, during 2009, cash flows were negatively impacted by the payment of run-off claims associated with enrollment losses in our stand-alone PDP business. Our 2008 operating cash flows and earnings were impacted by significantly higher prescription drug claim payments for our Medicare stand-alone PDPs.

Comparisons of our operating cash flows also are impacted by other changes in our working capital. The most significant drivers of changes in our working capital are typically the timing of payments of benefit expenses and receipts for premiums. We illustrate these changes with the following summaries of benefits payable and receivables.

The detail of benefits payable was as follows at December 31, 2010, 2009 and 2008:

							Change
	2010		2009		2008		2010			2009
	(in thousands)
IBNR (1)	$	2,051,227	$	1,902,700	$	1,851,047	$	148,527		$	51,653
Military services benefits payable (2)		255,180		279,195		306,797		(24,015	)		(27,602	)
Reported claims in process (3)		136,803		357,718		486,514		(220,915	)		(128,796	)
Other benefits payable (4)		1,026,096		682,961		561,221		343,135			121,740
Total benefits payable	$	3,469,306	$	3,222,574	$	3,205,579	$	246,732		$	16,995

(1) IBNR represents an estimate of benefits payable for claims incurred but not reported (IBNR) at the balance sheet date. The level of IBNR is primarily impacted by membership levels, medical claim trends and the receipt cycle time, which represents the length of time between when a claim is initially incurred and when the claim form is received (i.e. a shorter time span results in a lower IBNR).

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(2) Military services benefits payable primarily results from the timing of the cost of providing health care services to beneficiaries and the payment to the provider. A corresponding receivable for reimbursement by the federal government is included in the base receivable in the receivables table that follows.

(3) Reported claims in process represents the estimated valuation of processed claims that are in the post claim adjudication process, which consists of administrative functions such as audit and check batching and handling, as well as amounts owed to our pharmacy benefit administrator which fluctuate due to bi-weekly payments and the month-end cutoff.

(4) Other benefits payable include amounts owed to providers under capitated and risk sharing arrangements.

The increase in benefits payable in 2010 and 2009 primarily was due to an increase in amounts owed to providers under capitated and risk sharing arrangements as well as an increase in IBNR, both primarily as a result of Medicare Advantage membership growth, partially offset by a decrease in the amount of processed but unpaid claims, including pharmacy claims, which fluctuate due to the month-end cutoff. The increase in benefits payable in 2008 primarily was due to the increase in IBNR from growth in Medicare Advantage members and, to a lesser extent, benefit claims inflation, an increase in the amount of processed but unpaid claims, including pharmacy claims, which fluctuate due to month-end cutoff, and an increase in amounts owed to providers under capitated and risk sharing arrangements from Medicare Advantage membership growth.

The detail of total net receivables was as follows at December 31, 2010, 2009 and 2008:

										Change
	2010			2009			2008			2010			2009
	(in thousands)
Military services:
Base receivable	$	424,786		$	451,248		$	436,009		$	(26,462	)	$	15,239
Change orders		2,052			2,024			6,190			28			(4,166	)
Military services subtotal		426,838			453,272			442,199			(26,434	)		11,073
Medicare		216,080			238,056			232,608			(21,976	)		5,448
Commercial and other		367,570			183,124			164,035			184,446			19,089
Allowance for doubtful accounts		(51,470	)		(50,832	)		(49,160	)		(638	)		(1,672	)
Total net receivables	$	959,018		$	823,620		$	789,682			135,398			33,938
Reconciliation to cash flow statement:
Provision for doubtful accounts											18,708			19,054
Receivables from acquisition											(108,571	)		6,974
Change in receivables per cash flow statement resulting in cash from operations										$	45,535		$	59,966

Military services base receivables consist of estimated claims owed from the federal government for health care services provided to beneficiaries and underwriting fees. The claim reimbursement component of military services base receivables is generally collected over a three to four month period. The timing of claim reimbursements resulted in the $26.5 million decrease in base receivables for 2010 as compared to 2009 and the $15.2 million and $31.4 million increase in base receivables for 2009 as compared to 2008 and 2008 as compared to 2007, respectively.

Medicare receivables are impacted by the timing of accruals and related collections associated with the CMS risk-adjustment model.

Commercial and other receivables for 2010 include $108.6 million of patient services receivables acquired with the acquisition of Concentra in December 2010. Excluding the receivables acquired with Concentra, the timing of reimbursements from the Puerto Rico Health Insurance Administration for our Medicaid business resulted in the increase in commercial and other receivables for 2010 as compared to 2009.

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In addition to the timing of receipts for premiums and payments of benefit expenses, other working capital items impacting operating cash flows over the past three years primarily resulted from the timing of payments for the Medicare Part D risk corridor provisions of our contracts with CMS as well as changes in the timing of collections of pharmacy rebates.

Cash Flow from Investing Activities

We reinvested a portion of our operating cash flows in investment securities, primarily fixed income securities, totaling $827.0 million in 2010, $1,975.2 million in 2009, and $685.5 million in 2008. Our ongoing capital expenditures primarily relate to our information technology initiatives and administrative facilities necessary for activities such as claims processing, billing and collections, wellness solutions, care coordination, regulatory compliance and customer service. Total capital expenditures, excluding acquisitions, were $222.3 million in 2010, $185.5 million in 2009, and $261.6 million in 2008. Increased capital spending in 2008 included expenditures associated with constructing a new data center building and mail-order pharmacy warehouse. We expect total capital expenditures in 2011 of approximately $280 million reflecting increased spending due to the Concentra acquisition. Cash consideration paid for acquisitions, net of cash acquired, of $832.5 million in 2010, $12.4 million in 2009, and $422.9 million in 2008 primarily related to the Concentra acquisition in 2010 and the SecureHorizons, OSF, and Cariten acquisitions in 2008.

Cash Flow from Financing Activities

Receipts from CMS associated with Medicare Part D claim subsidies for which we do not assume risk were $237.2 million less than claims payments during 2010, $493.5 million higher than claim payments during 2009, and $188.7 million higher than claims payments during 2008. See Note 2 to the consolidated financial statements included in Item 8.-Financial Statements and Supplementary Data for further description.

During 2010, we repurchased 1.99 million shares for $100.0 million under the stock repurchase plan authorized by the Board of Directors in December 2009. During 2009, there were no repurchases of common shares under stock repurchase plans authorized by the Board of Directors. During 2008, we repurchased 2.10 million common shares for $92.8 million under a stock repurchase plan previously authorized by the Board of Directors. We also acquired common shares in connection with employee stock plans for an aggregate cost of $8.5 million in 2010, $22.8 million in 2009, and $13.3 million in 2008.

In 2009, net borrowings under our then existing credit agreement decreased $250.0 million primarily from the repayment of amounts borrowed to fund the acquisition of Cariten. During 2008, the net repayment of $550 million under our credit agreement primarily related to amounts repaid from the issuance of $750 million in senior notes offset by the $250 million financing of the Cariten acquisition.

In June 2008, we issued $500 million of 7.20% senior notes due June 15, 2018 and $250 million of 8.15% senior notes due June 15, 2038. Our net proceeds, reduced for the original issue discount and cost of the offering, were $742.6 million. We used the net proceeds from the offering for the repayment of the outstanding balance under our then existing credit agreement.

In exchange for terminating interest-rate swap agreements in 2008, we received cash of $93.0 million.

The remainder of the cash used in or provided by financing activities in 2010, 2009, and 2008 primarily resulted from the change in the securities lending payable. The decrease in securities lending since 2008 resulted from lower margins earned under the program.

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Future Sources and Uses of Liquidity

Stock Repurchase Authorization

In December 2009, the Board of Directors authorized the repurchase of up to $250 million of our common shares exclusive of shares repurchased in connection with employee stock plans. Under this share repurchase authorization, shares may be purchased from time to time at prevailing prices in the open market, by block purchases, or in privately-negotiated transactions, subject to certain regulatory restrictions on volume, pricing, and timing. During 2010, we repurchased 1.99 million shares in open market transactions for $100.0 million at an average price of $50.17. As of February 4, 2011, the remaining authorized amount totaled $150.0 million and the authorization expires on December 31, 2011.

Senior Notes

During 2008, we issued $500 million of 7.20% senior notes due June 15, 2018 and $250 million of 8.15% senior notes due June 15, 2038. The 7.20% and 8.15% senior notes are subject to an interest rate adjustment if the debt ratings assigned to the notes are downgraded (or subsequently upgraded) and contain a change of control provision that may require us to purchase the notes under certain circumstances. We also previously issued $300 million of 6.30% senior notes due August 1, 2018 and $500 million of 6.45% senior notes due June 1, 2016. All four series of our senior notes, which are unsecured, may be redeemed at our option at any time at 100% of the principal amount plus accrued interest and a specified make-whole amount. Concurrent with the senior notes issuances, we entered into interest-rate swap agreements to exchange the fixed interest rate under these senior notes for a variable interest rate based on LIBOR. During 2008, we terminated all of our swap agreements. We may re-enter into interest-rate swap agreements in the future depending on market conditions and other factors. Our senior notes and related swap agreements are more fully discussed in Notes 11 and 12 to the consolidated financial statements included in Item 8. – Financial Statements and Supplementary Data.

Credit Agreement

In December 2010, we replaced our 5-year $1.0 billion unsecured revolving credit agreement which was set to expire in July 2011 with a 3-year $1.0 billion unsecured revolving agreement expiring December 2013. Under the new credit agreement, at our option, we can borrow on either a competitive advance basis or a revolving credit basis. The revolving credit portion bears interest at either LIBOR or the base rate plus a spread. The spread, currently 200 basis points, varies depending on our credit ratings ranging from 150 to 262.5 basis points. We also pay an annual facility fee regardless of utilization. This facility fee, currently 37.5 basis points, may fluctuate between 25 and 62.5 basis points, depending upon our credit ratings. The competitive advance portion of any borrowings will bear interest at market rates prevailing at the time of borrowing on either a fixed rate or a floating rate based on LIBOR, at our option.

The terms of the new credit agreement include standard provisions related to conditions of borrowing, including a customary material adverse event clause which could limit our ability to borrow additional funds. In addition, the credit agreement contains customary restrictive and financial covenants as well as customary events of default, including financial covenants regarding the maintenance of a minimum level of net worth of $5,257.9 million at December 31, 2010 and a maximum leverage ratio of 3.0:1. We are in compliance with the financial covenants, with actual net worth of $6,924.1 million and a leverage ratio of 0.8:1, as measured in accordance with the credit agreement as of December 31, 2010. In addition, the new credit agreement includes an uncommitted $250 million incremental loan facility.

At December 31, 2010, we had no borrowings outstanding under the credit agreement. We have outstanding letters of credit of $10.4 million secured under the credit agreement. No amounts have ever been drawn on these letters of credit. Accordingly, as of December 31, 2010, we had $989.6 million of remaining borrowing capacity under the credit agreement, none of which would be restricted by our financial covenant compliance requirement. We have other customary, arms-length relationships, including financial advisory and banking, with some parties to the credit agreement.

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Other Long-Term Borrowings

Other long-term borrowings of $37.0 million at December 31, 2010 represent junior subordinated debt of $36.1 million and financing for the renovation of a building of $0.9 million. The junior subordinated debt, which is due in 2037, may be called by us without penalty in 2012 and bears a fixed annual interest rate of 8.02% payable quarterly until 2012, and then payable at a floating rate based on LIBOR plus 310 basis points. The debt associated with the building renovation bears interest at 2.00%, is collateralized by the building, and is payable in various installments through 2014.

Liquidity Requirements

We believe our cash balances, investment securities, operating cash flows, and funds available under our credit agreement or from other public or private financing sources, taken together, provide adequate resources to fund ongoing operating and regulatory requirements, future expansion opportunities, and capital expenditures for at least the next twelve months, as well as to refinance or repay debt and repurchase shares.

Adverse changes in our credit rating may increase the rate of interest we pay and may impact the amount of credit available to us in the future. Our investment-grade credit rating at December 31, 2010 was BBB- according to Standard & Poor’s Rating Services, or S&P, and Baa3 according to Moody’s Investors Services, Inc., or Moody’s. A downgrade by S&P to BB+ or by Moody’s to Ba1 triggers an interest rate increase of 25 basis points with respect to $750 million of our senior notes. Successive one notch downgrades increase the interest rate an additional 25 basis points, or annual interest expense by $1.9 million, up to a maximum 100 basis points, or annual interest expense by $7.5 million.

In addition, we operate as a holding company in a highly regulated industry. The parent company is dependent upon dividends and administrative expense reimbursements from our subsidiaries, most of which are subject to regulatory restrictions. Cash, cash equivalents and short-term investments at the parent company decreased $112.0 million to $553.6 million at December 31, 2010 compared to $665.6 million at December 31, 2009, primarily due to cash paid for the Concentra acquisition partially offset by dividends from our subsidiaries. We continue to maintain significant levels of aggregate excess statutory capital and surplus in our state-regulated operating subsidiaries. During 2010, our subsidiaries paid dividends of $746.6 million to the parent compared to $774.1 million in 2009 and $296.0 million in 2008. In addition, the parent made capital contributions to our subsidiaries of $230.0 million in 2010 compared to $132.3 million in 2009 and $242.8 million in 2008. The parent paid cash to fund acquisitions of $839.6 million in 2010, $5.9 million in 2009, and $566.3 million in 2008 primarily related to the Concentra acquisition in 2010 and the SecureHorizons, OSF, and Cariten acquisitions in 2008.

Regulatory Requirements

Certain of our subsidiaries operate in states that regulate the payment of dividends, loans, or other cash transfers to Humana Inc., our parent company, and require minimum levels of equity as well as limit investments to approved securities. The amount of dividends that may be paid to Humana Inc. by these subsidiaries, without prior approval by state regulatory authorities, is limited based on the entity’s level of statutory income and statutory capital and surplus. In most states, prior notification is provided before paying a dividend even if approval is not required.

Although minimum required levels of equity are largely based on premium volume, product mix, and the quality of assets held, minimum requirements can vary significantly at the state level. Our state regulated subsidiaries had aggregate statutory capital and surplus of approximately $4.3 billion and $3.8 billion as of December 31, 2010 and 2009, respectively, which exceeded aggregate minimum regulatory requirements. The amount of dividends that may be paid to our parent company in 2011 without prior approval by state regulatory authorities is approximately $740 million in the aggregate. This compares to dividends that were able to be paid in 2010 without prior regulatory approval of approximately $720 million.

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Contractual Obligations

We are contractually obligated to make payments for years subsequent to December 31, 2010 as follows:

	Payments Due by Period
			Less than						More than
	Total		1 Year		1-3 Years		3-5 Years		5 Years
	(in thousands)
Debt	$	1,586,988	$	447	$	333	$	125	$	1,586,083
Interest (1)		1,203,133		114,226		225,342		217,507		646,058
Operating leases (2)		810,234		190,525		295,868		190,164		133,677
Purchase obligations (3)		148,169		81,376		63,050		3,743		0
Future policy benefits payable and other long-term liabilities (4)		1,818,658		52,936		249,311		138,078		1,378,333
Total	$	5,567,182	$	439,510	$	833,904	$	549,617	$	3,744,151

(1) Interest includes the estimated contractual interest payments under our debt agreements.

(2) We lease facilities, computer hardware, and other equipment under long-term operating leases that are noncancelable and expire on various dates through 2025. We sublease facilities or partial facilities to third party tenants for space not used in our operations which partially mitigates our operating lease commitments. An operating lease is a type of off-balance sheet arrangement. Assuming we acquired the asset, rather than leased such asset, we would have recognized a liability for the financing of these assets. See also Note 16 to the consolidated financial statements included in Item 8. – Financial Statements and Supplementary Data.

(3) Purchase obligations include agreements to purchase services, primarily information technology related services, or to make improvements to real estate, in each case that are enforceable and legally binding on us and that specify all significant terms, including: fixed or minimum levels of service to be purchased; fixed, minimum or variable price provisions; and the appropriate timing of the transaction. Purchase obligations exclude agreements that are cancelable without penalty.

(4) Includes future policy benefits payable ceded to third parties through 100% coinsurance agreements as more fully described in Note 19 to the consolidated financial statements included in Item 8. – Financial Statements and Supplementary Data. We expect the assuming reinsurance carriers to fund these obligations and reflected these amounts as reinsurance recoverables included in other long-term assets on our consolidated balance sheet. Amounts payable in less than one year are included in trade accounts payable and accrued expenses in the consolidated balance sheet.

Off-Balance Sheet Arrangements

As part of our ongoing business, we do not participate or knowingly seek to participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities (SPEs), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of December 31, 2010, we are not involved in any SPE transactions.

Guarantees and Indemnifications

Through indemnity agreements approved by the state regulatory authorities, certain of our regulated subsidiaries generally are guaranteed by Humana Inc., our parent company, in the event of insolvency for (1) member coverage for which premium payment has been made prior to insolvency; (2) benefits for members then hospitalized until discharged; and (3) payment to providers for services rendered prior to insolvency. Our parent also has guaranteed the obligations of our military services subsidiaries.

In the ordinary course of business, we enter into contractual arrangements under which we may agree to indemnify a third party to such arrangement from any losses incurred relating to the services they perform on behalf of us, or for losses arising from certain events as defined within the particular contract, which may include, for example, litigation or claims relating to past performance. Such indemnification obligations may not be subject to maximum loss clauses. Historically, payments made related to these indemnifications have been immaterial.

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Related Parties

No related party transactions had a material effect on our results of operations, financial position, or cash flows. Certain related party transactions not having a material effect are discussed in our Proxy Statement for the meeting to be held April 21, 2011 appearing under the caption “Certain Transactions with Management and Others” of such Proxy Statement.

Government Contracts

Our Medicare business, which accounted for approximately 65% of our consolidated premiums and services revenue for the year ended December 31, 2010, primarily consisted of products covered under the Medicare Advantage and Medicare Part D Prescription Drug Plan contracts with the federal government. These contracts are renewed generally for a one-year term each December 31 unless CMS notifies us of its decision not to renew by August 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 business have been renewed for 2011.

CMS uses a risk-adjustment model which apportions premiums paid to Medicare Advantage plans according to health severity. The risk-adjustment model pays more for enrollees with predictably higher costs. Under this model, rates paid to Medicare Advantage plans are based on actuarially determined bids, which include a process whereby our prospective payments are based on a comparison of our beneficiaries’ risk scores, derived from medical diagnoses, to those enrolled in the government’s original Medicare program. Under the risk-adjustment methodology, all Medicare Advantage plans must collect and submit the necessary diagnosis code information from hospital inpatient, hospital outpatient, and physician providers to CMS within prescribed deadlines. The CMS risk-adjustment model uses this diagnosis data to calculate the risk adjusted premium payment to Medicare Advantage plans. We generally rely on providers to code their claim submissions with appropriate diagnoses, which we send to CMS as the basis for our payment received from CMS under the actuarial risk-adjustment model. We also rely on providers to appropriately document all medical data, including the diagnosis data submitted with claims.

CMS is continuing to perform audits of various companies’ selected Medicare Advantage contracts related to this risk adjustment diagnosis data. These audits are referred to herein as Risk-Adjustment Data Validation Audits, or RADV audits. RADV audits review medical record documentation in an attempt to validate provider coding practices and the presence of risk adjustment conditions which influence the calculation of premium payments to Medicare Advantage plans. To date, six Humana contracts have been selected by CMS for RADV audits for the 2007 contract year, consisting of one “pilot” audit and five “targeted” audits for Humana plans.

On December 21, 2010, CMS posted a description of the agency’s proposed RADV sampling and payment adjustment calculation methodology to its website, and invited public comment, noting that CMS may revise its sampling and payment error calculation methodology based upon the comments received. We believe the audit and payment adjustment methodology proposed by CMS is fundamentally flawed and actuarially unsound. In essence, in making the comparison referred to above, CMS relies on two interdependent sets of data to set payment rates for Medicare Advantage (MA) plans: (1) fee for service (FFS) data from the government’s original Medicare program; and (2) MA data. The proposed methodology would review medical records for only one set of data (MA data), while not performing the same exercise on the other set (FFS data). However, because these two sets of data are inextricably linked, we believe CMS must audit and validate both of them before extrapolating any potential RADV audit results, in order to ensure that any resulting payment adjustment is accurate. We believe that the Social Security Act, under which the payment model was established, requires the consistent use of these data sets in determining risk-adjusted payments to MA plans. Furthermore, our payment received from CMS, as well as benefits offered and premiums charged to members, is based on bids that did not, by CMS design, include any assumption of retroactive audit payment adjustments. We believe that applying a retroactive audit adjustment after CMS acceptance of bids would improperly alter this process of establishing member benefits and premiums.

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CMS has received public comments, including our comments and comments from other industry participants and the American Academy of Actuaries, which expressed concerns about the failure to appropriately compare the two sets of data. On February 3, 2011, CMS issued a statement that it was closely evaluating the comments it has received on this matter and anticipates making changes to the proposed methodology based on input it has received, although we are unable to predict the extent of changes that they may make.

We believe that the proposed methodology is actuarially unsound and in violation of the Social Security Act. We intend to defend that position vigorously. However, if CMS moves forward with implementation of the proposed methodology without changes to adequately address the data inconsistency issues described above, it would have a material adverse effect on our revenues derived from the Medicare Advantage program and, therefore, our results of operations, financial position, and cash flows.

Our Medicaid business, which accounted for approximately 2% of our consolidated premiums and services revenue for the year ended December 31, 2010, consists of contracts in Puerto Rico and Florida, with the vast majority in Puerto Rico. Effective October 1, 2010, the Puerto Rico Health Insurance Administration, or PRHIA, awarded us three contracts for the East, Southeast, and Southwest regions for a one year term with two options to extend the contracts for an additional term of up to one year, exercisable at the sole discretion of the PRHIA.

The loss of any of the contracts above or significant changes in these programs as a result of legislative action, including reductions in premium payments to us, or increases in member benefits without corresponding increases in premium payments to us may have a material adverse effect on our results of operations, financial position, and cash flows.

Our military services business, which accounted for approximately 11% of our consolidated premiums and services revenue for the year ended December 31, 2010, primarily consists of the TRICARE South Region contract. The original 5-year South Region contract expired on March 31, 2009 and was extended through March 31, 2011. On October 5, 2010, we were notified that the Department of Defense TRICARE Management Activity, or TMA, intended to negotiate with us for an extension of our administration of the TRICARE South Region contract, and on January 6, 2011, an Amendment of Solicitation/Modification of Contract to the TRICARE South Region contract, in the form of an undefinitized contract action, became effective. The Amendment adds one additional one-year option period, Option Period IX (which runs from April 1, 2011 through March 31, 2012). The Amendment does not include the costs of the underwritten target health care cost and underwritten health care target fee, which will be negotiated separately. On January 21, 2011, the TMA notified us of their intent to exercise Option Period IX.

As required under the current contract, the target underwritten health care cost and underwriting fee amounts for Option Period IX will be negotiated separately. Any variance from the target health care cost is shared with the federal government. Accordingly, events and circumstances not contemplated in the negotiated target health care cost amount may have a material adverse effect on us. These changes may include an increase or reduction in the number of persons enrolled or eligible to enroll due to the federal government’s decision to increase or decrease U.S. military deployments. In the event government reimbursements were to decline from projected amounts, any failure to reduce the health care costs associated with these programs may have a material adverse effect on our results of operations, financial position, and cash flows.

In July 2009, we were notified by the Department of Defense, or DoD, that we were not awarded the third generation TRICARE program contract for the South Region which had been subject to competing bids. We filed a protest with the Government Accountability Office, or GAO, in connection with the award to another contractor citing discrepancies between the award criteria and procedures prescribed in the request for proposals issued by the DoD and those that appear to have been used by the DoD in making its contractor selection. In October 2009, we learned that the GAO had upheld our protest, determining that the TMA evaluation of our proposal had unreasonably failed to fully recognize and reasonably account for the likely cost savings associated with our record of obtaining network provider discounts from our established network in the South Region. On December 22, 2009, we were advised that TMA notified the GAO of its intent to implement corrective action

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consistent with the discussion contained within the GAO’s decision with respect to our protest. On October 22, 2010, TMA issued its latest amendment to the request for proposal requesting from offerors final proposal revisions to address, among other things, health care cost savings resulting from provider network discounts in the South Region. We submitted our final proposal revisions on November 9, 2010. At this time, we are not able to determine whether or not the protest decision by the GAO will have any effect upon the ultimate disposition of the contract award.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements and accompanying notes, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements and accompanying notes requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We continuously evaluate our estimates and those critical accounting policies related primarily to benefit expenses and revenue recognition as well as accounting for impairments related to our investment securities, goodwill, and long-lived assets. These estimates are based on knowledge of current events and anticipated future events and, accordingly, actual results ultimately may differ from those estimates. We believe the following critical accounting policies involve the most significant judgments and estimates used in the preparation of our consolidated financial statements.

Benefit Expense Recognition

Benefit expenses are recognized in the period in which services are provided and include an estimate of the cost of services which have been incurred but not yet reported, or IBNR. IBNR represents a substantial portion of our benefits payable as follows:

	December 31,		Percentage			December 31,		Percentage
	2010		of Total			2009		of Total
	(dollars in thousands)
IBNR	$	2,051,227		59.1	%	$	1,902,700		59.0	%
Reported claims in process		136,803		3.9	%		357,718		11.1	%
Other benefits payable		1,026,096		29.6	%		682,961		21.2	%
Benefits payable, excluding military services		3,214,126		92.6	%		2,943,379		91.3	%
Military services benefits payable		255,180		7.4	%		279,195		8.7	%
Total benefits payable	$	3,469,306		100.0	%	$	3,222,574		100.0	%

Military services benefits payable primarily consists of our estimate of incurred healthcare services provided to beneficiaries which are in turn reimbursed by the federal government as more fully described in Note 2 to the consolidated financial statements included in Item 8. - Financial Statements and Supplementary Data. This amount is generally offset by a corresponding receivable due from the federal government, as more fully-described in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations under the section titled “Cash Flow from Operating Activities.”

Estimating IBNR is complex and involves a significant amount of judgment. Changes in this estimate can materially affect, either favorably or unfavorably, our results of operations and overall financial position. Accordingly, it represents a critical accounting estimate. Most benefit claims are paid within a few months of the member receiving service from a physician or other health care provider. As a result, these liabilities generally are described as having a “short-tail”. As such, we expect that substantially all of the December 31, 2010 estimate of benefits payable will be known and paid during 2011.

Our reserving practice is to consistently recognize the actuarial best point estimate within a level of confidence required by actuarial standards. Actuarial standards of practice generally require a level of confidence

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such that the liabilities established for IBNR have a greater probability of being adequate versus being insufficient, or such that the liabilities established for IBNR are sufficient to cover obligations under an assumption of moderately adverse conditions. Adverse conditions are situations in which the actual claims are expected to be higher than the otherwise estimated value of such claims at the time of the estimate. Therefore, in many situations, the claim amounts ultimately settled will be less than the estimate that satisfies the actuarial standards of practice.

We develop our estimate for IBNR using actuarial methodologies and assumptions, primarily based upon historical claim experience. Depending on the period for which incurred claims are estimated, we apply a different method in determining our estimate. For periods prior to the most recent three months, the key assumption used in estimating our IBNR is that the completion factor pattern remains consistent over a rolling 12-month period after adjusting for known changes in claim inventory levels and known changes in claim payment processes. Completion factors result from the calculation of the percentage of claims incurred during a given period that have historically been adjudicated as of the reporting period. For the most recent three months, the incurred claims are estimated primarily from a trend analysis based upon per member per month claims trends developed from our historical experience in the preceding months, adjusted for known changes in estimates of recent hospital and drug utilization data, provider contracting changes, changes in benefit levels, changes in member cost sharing, changes in medical management processes, product mix, and weekday seasonality.

The completion factor method is used for the months of incurred claims prior to the most recent three months because the historical percentage of claims processed for those months is at a level sufficient to produce a consistently reliable result. Conversely, for the most recent three months of incurred claims, the volume of claims processed historically is not at a level sufficient to produce a reliable result, which therefore requires us to examine historical trend patterns as the primary method of evaluation. Changes in claim processes, including receipt cycle times, claim inventory levels, recoveries of overpayments, outsourcing, system conversions, and processing disruptions due to weather or other events affect views regarding the reasonable choice of completion factors. The receipt cycle time measures the average length of time between when a medical claim was initially incurred and when the claim form was received. Increased electronic claim submissions from providers have decreased the receipt cycle time over the last few years. For example, the average receipt cycle time has decreased from 15.0 days in 2008 to 13.8 days in 2010 which represents an 8.0% reduction in cycle time over the three year period. If claims are submitted or processed on a faster (slower) pace than prior periods, the actual claim may be more (less) complete than originally estimated using our completion factors, which may result in reserves that are higher (lower) than required.

Medical cost trends potentially are more volatile than other segments of the economy. The drivers of medical cost trends include increases in the utilization of hospital facilities, physician services, new higher priced technologies and medical procedures, and new prescription drugs and therapies, as well as the inflationary effect on the cost per unit of each of these expense components. Other external factors such as government-mandated benefits or other regulatory changes, the tort liability system, increases in medical services capacity, direct to consumer advertising for prescription drugs and medical services, an aging population, lifestyle changes including diet and smoking, catastrophes, and epidemics also may impact medical cost trends. Internal factors such as system conversions, claims processing cycle times, changes in medical management practices and changes in provider contracts also may impact our ability to accurately predict estimates of historical completion factors or medical cost trends. All of these factors are considered in estimating IBNR and in estimating the per member per month claims trend for purposes of determining the reserve for the most recent three months. Additionally, we continually prepare and review follow-up studies to assess the reasonableness of the estimates generated by our process and methods over time. The results of these studies are also considered in determining the reserve for the most recent three months. Each of these factors requires significant judgment by management.

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The completion and claims per member per month trend factors are the most significant factors impacting the IBNR estimate. The portion of IBNR estimated using completion factors for claims incurred prior to the most recent three months is generally less variable than the portion of IBNR estimated using trend factors. The following table illustrates the sensitivity of these factors assuming moderate adverse experience and the estimated potential impact on our operating results caused by reasonably likely changes in these factors based on December 31, 2010 data:

Completion Factor (a):					Claims Trend Factor (b):
Factor Change (c)		Decrease in Benefits Payable			Factor Change (c)			Decrease in Benefits Payable
(dollars in thousands)
	1.25%	$	(184,444	)		(5.00	)%	$	(249,764	)
	1.10%	$	(162,310	)		(4.25	)%	$	(212,299	)
	0.95%	$	(140,177	)		(3.50	)%	$	(174,835	)
	0.80%	$	(118,044	)		(2.75	)%	$	(137,370	)
	0.65%	$	(95,911	)		(2.00	)%	$	(99,906	)
	0.50%	$	(73,777	)		(1.25	)%	$	(62,441	)
	0.35%	$	(51,644	)		(0.25	)%	$	(12,488	)

(a) Reflects estimated potential changes in benefits payable at December 31, 2010 caused by changes in completion factors for incurred months prior to the most recent three months.

(b) Reflects estimated potential changes in benefits payable at December 31, 2010 caused by changes in annualized claims trend used for the estimation of per member per month incurred claims for the most recent three months.

(c) The factor change indicated represents the percentage point change.

The following table provides a historical perspective regarding the accrual and payment of our benefits payable, excluding military services. Components of the total incurred claims for each year include amounts accrued for current year estimated benefit expenses as well as adjustments to prior year estimated accruals.

	2010			2009			2008
	(in thousands)
Balances at January 1	$	2,943,379		$	2,898,782		$	2,355,461
Acquisitions		0			0			96,021
Incurred related to:
Current year		24,185,717			21,943,547			21,114,008
Prior years		(434,015	)		(252,756	)		(268,027	)
Total incurred		23,751,702			21,690,791			20,845,981
Paid related to:
Current year		(21,671,345	)		(19,581,314	)		(18,601,120	)
Prior years		(1,809,610	)		(2,064,880	)		(1,797,561	)
Total paid		(23,480,955	)		(21,646,194	)		(20,398,681	)
Balances at December 31	$	3,214,126		$	2,943,379		$	2,898,782

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The following table summarizes the changes in estimate for incurred claims related to prior years attributable to our key assumptions. As previously described, our key assumptions consist of trend and completion factors estimated using an assumption of moderately adverse conditions. The amounts below represent the difference between our original estimates and the actual benefit expenses ultimately incurred as determined from subsequent claim payments.

	Favorable Development by Changes in Key Assumptions
	2010						2009						2008
				Factor						Factor						Factor
	Amount			Change (a)			Amount			Change (a)			Amount			Change (a)
	(dollars in thousands)
Completion factors	$	(220,653	)		1.6	%	$	(101,585	)		0.8	%	$	(92,759	)		1.0	%
Trend factors		(213,362	)		(4.7	)%		(151,171	)		(3.5	)%		(175,268	)		(5.2	)%
Total	$	(434,015	)				$	(252,756	)				$	(268,027	)

(a) The factor change indicated represents the percentage point change.

As previously discussed, our reserving practice is to consistently recognize the actuarial best estimate of our ultimate liability for claims. Actuarial standards require the use of assumptions based on moderately adverse experience, which generally results in favorable reserve development, or reserves that are considered redundant. The amount of redundancy over the last three years primarily has been impacted by the growth in our Medicare business, coupled with the application of consistent reserving practices. When we recognize a release of the redundancy, we disclose the amount that is not in the ordinary course of business, if material. During 2010, we experienced prior year favorable reserve releases not in the ordinary course of business of approximately $231.2 million. This favorable reserve development primarily resulted from improvements in the claims processing environment and, to a lesser extent, better than originally estimated utilization as well as a shortening of the cycle time associated with provider claim submissions. The improvements in the claims processing environment benefited all lines of business, but were most prominent in our Medicare PFFS line of business. These improvements resulted in recoveries from the identification of claims billed at higher cost codes than those documented in the medical records via audits, as well as an improved ability to collect overpayments due to the development of system enhancements to our commercial claims processing platform. We believe we have consistently applied our methodology in determining our best estimate for benefits payable.

We continually adjust our historical trend and completion factor experience with our knowledge of recent events that may impact current trends and completion factors when establishing our reserves. Because our reserving practice is to consistently recognize the actuarial best point estimate using an assumption of moderately adverse conditions as required by actuarial standards, there is a reasonable possibility that variances between actual trend and completion factors and those assumed in our December 31, 2010 estimates would fall towards the middle of the ranges previously presented in our sensitivity table.

Benefit expenses associated with military services and provisions associated with future policy benefits excluded from the previous table were as follows for the years ended December 31, 2010, 2009 and 2008:

	2010		2009		2008
	(in thousands)
Military services	$	3,059,492	$	3,019,655	$	2,819,787
Future policy benefits		305,875		73,130		64,338
Total	$	3,365,367	$	3,092,785	$	2,884,125

Our TRICARE contract contains provisions whereby the federal government bears a substantial portion of the risk of financing health benefits. The federal government both reimburses us for our cost of providing health benefits and bears responsibility for 80% of any variance from the annual targeted health care cost and actual

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health care cost as more fully described in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations under the section titled “Military Services.” Therefore, the impact on our income from operations from changes in estimate for TRICARE benefits payable is reduced substantially by corresponding adjustments to revenues. The net decrease to income from operations as determined retrospectively, after giving consideration to claim development occurring in the current period, was approximately $9.4 million for 2009 and $7.8 million for 2008. The impact from changes in estimates for 2010 is not yet determinable as the amount of prior period development recorded in 2011 will change as our December 31, 2010 benefits payable estimate develops throughout 2011.

Future policy benefits payable of $1,492.9 million and $1,193.0 million at December 31, 2010 and 2009, respectively, represent liabilities for long-duration insurance policies including long-term care, health, and life insurance policies and annuities sold to individuals for which some of the premium received in the earlier years is intended to pay anticipated benefits to be incurred in future years. These reserves are recognized on a net level premium method based on interest rates, mortality, morbidity, withdrawal and maintenance expense assumptions from published actuarial tables, modified based upon actual experience. The assumptions used to determine the liability for future policy benefits are established and locked in at the time each contract is acquired and would only change if our expected future experience deteriorated to the point that the level of the liability, together with the present value of future gross premiums, are not adequate to provide for future expected policy benefits. Future policy benefits payable include $824.6 million at December 31, 2010 and $571.9 million at December 31, 2009 associated with a closed block of long-term care policies acquired in connection with the November 30, 2007 KMG acquisition. Long-term care policies provide for long-duration coverage and, therefore, our actual claims experience will emerge many years after assumptions have been established. The risk of a deviation of the actual morbidity and mortality rates from those assumed in our reserves are particularly significant to our closed block of long-term care policies. We monitor the loss experience of these long-term care policies and, when necessary, apply for premium rate increases through a regulatory filing and approval process in the jurisdictions in which such products were sold. To the extent premium rate increases and/or loss experience vary from our acquisition date assumptions, future adjustments to reserves could be required. During the fourth quarter of 2010, certain states approved premium rate increases for a large portion of our long-term care block that were significantly below our acquisition date assumptions. Based on these actions by the states, combined with lower interest rates and higher actual expenses as compared to acquisition date assumptions, we determined that our existing future policy benefits payable, together with the present value of future gross premiums, associated with our long-term care policies were not adequate to provide for future policy benefits under these policies; therefore we unlocked and modified our assumptions based on current expectations. Accordingly, during the fourth quarter of 2010 we recorded $138.9 million of additional benefit expense, with a corresponding increase in future policy benefits payable of $170.3 million partially offset by a related reinsurance recoverable of $31.4 million included in other long-term assets. In addition, future policy benefits payable include amounts of $218.9 million at December 31, 2010 and $225.0 million at December 31, 2009 which are subject to 100% coinsurance agreements as more fully described in Note 19 to the consolidated financial statements included in Item 8. – Financial Statements and Supplementary Data, and as such are offset by a related reinsurance recoverable included in other long-term assets.

Revenue Recognition

We generally establish one-year commercial membership contracts with employer groups, subject to cancellation by the employer group on 30-day written notice. Our Medicare contracts with CMS renew annually. Our military services contracts with the federal government and our contracts with various state Medicaid programs generally are multi-year contracts subject to annual renewal provisions.

Our commercial contracts establish rates on a per member basis for each month of coverage. Our Medicare and Medicaid contracts also establish monthly rates per member. However, our Medicare contracts also have additional provisions as outlined in the following separate section.

Premium revenues and administrative services only, or ASO, fees are estimated by multiplying the membership covered under the various contracts by the contractual rates. In addition, we adjust revenues for

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estimated changes in an employer’s enrollment and individuals that ultimately may fail to pay, and beginning January 1, 2011, for estimated rebates to policyholders under the minimum benefit ratios required under the Health Insurance Reform Legislation. Enrollment changes not yet processed or not yet reported by an employer group or the government, also known as retroactive membership adjustments, are estimated based on available data and historical trends. We routinely monitor the collectibility of specific accounts, the aging of receivables, historical retroactivity trends, as well as prevailing and anticipated economic conditions, and reflect any required adjustments in the current period’s revenue.

We bill and collect premium and administrative fee remittances from employer groups and members in our Medicare and other individual products monthly. We receive monthly premiums and administrative fees from the federal government and various states according to government specified payment rates and various contractual terms. Changes in revenues from CMS for our Medicare products resulting from the periodic changes in risk-adjustment scores for our membership are recognized when the amounts become determinable and the collectibility is reasonably assured.

Medicare Part D Provisions

We cover prescription drug benefits in accordance with Medicare Part D under multiple contracts with CMS. The payments we receive monthly from CMS and members, which are determined from our annual bid, represent amounts for providing prescription drug insurance coverage. We recognize premium revenues for providing this insurance coverage ratably over the term of our annual contract. Our CMS payment is subject to risk sharing through the Medicare Part D risk corridor provisions. In addition, we receive and disburse amounts for portions of prescription drug costs for which we are not at risk, as described more fully below.

The risk corridor provisions compare costs targeted in our bids to actual prescription drug costs, limited to actual costs that would have been incurred under the standard coverage as defined by CMS. Variances exceeding certain thresholds may result in CMS making additional payments to us or require us to refund to CMS a portion of the premiums we received. We estimate and recognize an adjustment to premium revenues related to these risk corridor provisions based upon pharmacy claims experience to date as if the annual contract were to terminate at the end of the reporting period. Accordingly, this estimate provides no consideration to future pharmacy claims experience. We record a receivable or payable at the contract level and classify the amount as current or long-term in the consolidated balance sheets based on the expected settlement.

The estimate of the settlement associated with risk corridor provisions requires us to consider factors that may not be certain at period end, including member eligibility and risk adjustment score differences with CMS as well as pharmacy rebates from manufacturers. These factors have an offsetting effect on changes in the risk corridor estimate. In 2010, we paid $180.2 million related to our reconciliation with CMS regarding the 2009 Medicare Part D risk corridor provisions compared to our estimate of $144.6 million at December 31, 2009. In 2009, we received net proceeds of $59.6 million related to our reconciliation with CMS regarding the 2008 Medicare Part D risk corridor provisions compared to our estimate of $55.4 million at December 31, 2008. The net liability associated with the 2010 risk corridor estimate, which will be settled in 2011, was $387.6 million at December 31, 2010.

Reinsurance and low-income cost subsidies represent funding from CMS in connection with the Medicare Part D program for which we assume no risk. Reinsurance subsidies represent funding from CMS for its portion of prescription drug costs which exceed the member’s out-of-pocket threshold, or the catastrophic coverage level. Low-income cost subsidies represent funding from CMS for all or a portion of the deductible, the coinsurance and co-payment amounts above the out-of-pocket threshold for low-income beneficiaries. Monthly prospective payments from CMS for reinsurance and low-income cost subsidies are based on assumptions submitted with our annual bid. A reconciliation and related settlement of CMS’s prospective subsidies against actual prescription drug costs we paid is made after the end of the year. We account for these subsidies as a deposit in our consolidated balance sheets and as a financing activity in our consolidated statements of cash flows. We do not recognize premium revenues or benefit expense for these subsidies. Receipt and payment activity is accumulated at the contract level and recorded in our consolidated balance sheets in other current assets or trade accounts

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payable and accrued expenses depending on the contract balance at the end of the reporting period. Gross financing receipts were $1,757.2 million and gross financing withdrawals were $1,994.4 million during 2010. CMS subsidy activity recorded to the consolidated balance sheets at December 31, 2010 was $16.2 million to other current assets and $170.2 million to trade accounts payable and accrued expenses.

In order to allow plans offering enhanced benefits the maximum flexibility in designing alternative prescription drug coverage, CMS provided a demonstration payment option in lieu of the reinsurance subsidy for plans offering enhanced coverage, or coverage beyond CMS’s defined standard benefits. The demonstration payment option, available to plans through 2010, was an arrangement in which CMS agreed to pay a capitation amount to a plan for assuming the government’s portion of prescription drug costs in the catastrophic layer of coverage. The capitation amount represented a fixed monthly amount per member to provide prescription drug coverage in the catastrophic layer. We chose the demonstration payment option for some of our plans that offered enhanced coverage over the last three years. This capitation amount, derived from our annual bid submissions, was recorded as premium revenue. The variance between the capitation amount and actual drug costs in the catastrophic layer was subject to risk sharing as part of the risk corridor settlement.

Settlement of the reinsurance and low-income cost subsidies as well as the risk corridor payment is based on a reconciliation made approximately 9 months after the close of each calendar year. This reconciliation process requires us to submit claims data necessary for CMS to administer the program.

Medicare Risk-Adjustment Provisions

CMS utilizes a risk-adjustment model which apportions premiums paid to Medicare Advantage plans according to health severity. A risk-adjustment model pays more for enrollees with predictably higher costs. Under the risk-adjustment methodology, all Medicare Advantage plans must collect and submit the necessary diagnosis code information from hospital inpatient, hospital outpatient, and physician providers to CMS within prescribed deadlines. The CMS risk-adjustment model uses this diagnosis data to calculate the risk adjusted premium payment to Medicare Advantage plans. Rates paid to Medicare Advantage plans are established under an actuarial bid model, including a process whereby our payments are based on a comparison of our beneficiaries’ risk scores, derived from medical diagnoses, to those enrolled in the government’s original Medicare program. We generally rely on providers to code their claim submissions with appropriate diagnoses, which we send to CMS as the basis for our payment received from CMS under the actuarial risk-adjustment model. We also rely on providers to appropriately document all medical data, including the diagnosis data submitted with claims. We estimate risk-adjustment revenues based upon the diagnosis data submitted to CMS and ultimately accepted by CMS. The risk-adjustment model is more fully described in Item 1. – Business under the section titled “Individual Medicare.”

Military services

In 2010, revenues derived from our military services business represented approximately 11% of consolidated premiums and services revenue. Military services premiums and services revenue primarily is derived from our TRICARE South Region contract with the Department of Defense. The single TRICARE contract for the South Region includes multiple revenue generating activities. We allocate the consideration to the various components of the contract based on the relative fair value of the components. TRICARE revenues consist generally of (1) an insurance premium for assuming underwriting risk for the cost of civilian health care services delivered to eligible beneficiaries; (2) health care services provided to beneficiaries which are in turn reimbursed by the federal government; and (3) administrative services fees related to claim processing, customer service, enrollment, and other services. We recognize the insurance premium as revenue ratably over the period coverage is provided. Health care services reimbursements are recognized as revenue in the period health services are provided. Administrative services fees are recognized as revenue in the period services are performed.

The TRICARE South Region contract contains provisions whereby the federal government bears a substantial portion of the risk associated with financing the cost of health benefits. Annually, we negotiate a target health care cost amount, or target cost, with the federal government and determine an underwriting fee. Any variance from the target cost is shared. We earn more revenue or incur additional costs based on the variance of actual health

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care costs versus the negotiated target cost. We receive 20% for any cost underrun, subject to a ceiling that limits the underwriting profit to 10% of the target cost. We pay 20% for any cost overrun, subject to a floor that limits the underwriting loss to negative 4% of the target cost. A final settlement occurs 12 to 18 months after the end of each contract year to which it applies. We defer the recognition of any revenues for favorable contingent underwriting fee adjustments related to cost underruns until the amount is determinable and the collectibility is reasonably assured. We estimate and recognize unfavorable contingent underwriting fee adjustments related to cost overruns currently in operations as an increase in benefit expenses. We continually review these benefit expense estimates of future payments to the government for cost overruns and make necessary adjustments to our reserves.

The military services contracts contain provisions to negotiate change orders. Change orders occur when we perform services or incur costs under the directive of the federal government that were not originally specified in our contract. Under federal regulations we may be entitled to an equitable adjustment to the contract price in these situations. Change orders may be negotiated and settled at any time throughout the year. We record revenue applicable to change orders when services are performed and these amounts are determinable and the collectibility is reasonably assured.

Investment Securities

Investment securities totaled $8,372.4 million, or 52% of total assets at December 31, 2010, and $7,497.2 million, or 53% of total assets at December 31, 2009. Debt securities, detailed below, comprised this entire investment portfolio at December 31, 2010 and at December 31, 2009. The fair value of debt securities were as follows at December 31, 2010 and 2009:

	December 31, 2010		Percentage of Total			December 31, 2009		Percentage of Total
	(dollars in thousands)
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	711,613		8.5	%	$	1,009,352		13.5	%
Mortgage-backed securities		1,663,179		19.9	%		1,688,663		22.5	%
Tax-exempt municipal securities		2,433,334		29.1	%		2,224,041		29.7	%
Mortgage-backed securities:
Residential		55,887		0.6	%		95,412		1.3	%
Commercial		321,031		3.8	%		279,626		3.7	%
Asset-backed securities		149,751		1.8	%		107,188		1.4	%
Corporate debt securities		3,032,311		36.2	%		2,079,568		27.7	%
Redeemable preferred stock		5,333		0.1	%		13,300		0.2	%
Total debt securities	$	8,372,439		100.0	%	$	7,497,150		100.0	%

Approximately 96% of our debt securities were investment-grade quality, with an average credit rating of AA by S&P at December 31, 2010. Most of the debt securities that were below investment-grade were rated BB, the higher end of the below investment-grade rating scale. Our investment policy limits investments in a single issuer and requires diversification among various asset types.

Tax-exempt municipal securities included pre-refunded bonds of $343.9 million at December 31, 2010 and $346.9 million at December 31, 2009. These pre-refunded bonds were secured by an escrow fund consisting of U.S. government obligations sufficient to pay off all amounts outstanding at maturity. The ratings of these pre-refunded bonds generally assume the rating of the government obligations (AAA by S&P) at the time the fund is established. In addition, certain monoline insurers guarantee the timely repayment of bond principal and interest when a bond issuer defaults and generally provide credit enhancement for bond issues related to our tax-exempt

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municipal securities. We have no direct exposure to these monoline insurers. We owned $597.2 million and $587.2 million at December 31, 2010 and 2009, respectively, of tax-exempt securities guaranteed by monoline insurers. The equivalent S&P credit rating of these tax-exempt securities without the guarantee from the monoline insurer was AA.

Our direct exposure to subprime mortgage lending is limited to investment in residential mortgage-backed securities and asset-backed securities backed by home equity loans. The fair value of securities backed by Alt-A and subprime loans was $3.4 million at December 31, 2010 and $5.5 million at December 31, 2009. There are no collateralized debt obligations or structured investment vehicles in our investment portfolio.

The percentage of corporate securities associated with the financial services industry was 29.4% at December 31, 2010 and 37.3% at December 31, 2009.

Duration is indicative of the relationship between changes in fair value and changes in interest rates, providing a general indication of the sensitivity of the fair values of our debt securities to changes in interest rates. However, actual fair values may differ significantly from estimates based on duration. The average duration of our debt securities was approximately 4.6 years at December 31, 2010. Including cash equivalents, the average duration was approximately 4.0 years. Based on the duration including cash equivalents, a 1% increase in interest rates would generally decrease the fair value of our securities by approximately $395 million.

Gross unrealized losses and fair values aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position were as follows at December 31, 2010:

	Less than 12 months					12 months or more					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
	(in thousands)
December 31, 2010
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	141,766	$	(615	)	$	0	$	0		$	141,766	$	(615	)
Mortgage-backed securities		110,358		(1,054	)		5,557		(119	)		115,915		(1,173	)
Tax-exempt municipal securities		1,168,221		(33,218	)		97,809		(10,401	)		1,266,030		(43,619	)
Mortgage-backed securities:
Residential		0		0			32,671		(2,675	)		32,671		(2,675	)
Commercial		0		0			2,752		(171	)		2,752		(171	)
Asset-backed securities		17,069		(42	)		283		(2	)		17,352		(44	)
Corporate debt securities		383,677		(9,572	)		31,464		(4,138	)		415,141		(13,710	)
Total debt securities	$	1,821,091	$	(44,501	)	$	170,536	$	(17,506	)	$	1,991,627	$	(62,007	)

In April 2009, the Financial Accounting Standards Board, or the FASB, issued new guidance to address concerns about (1) measuring the fair value of financial instruments when the markets become inactive and quoted prices may reflect distressed transactions and (2) recording impairment charges on investments in debt securities. The new guidance highlighted and expanded on the factors that should be considered in estimating fair value when the volume and level of activity for a financial asset or liability has significantly decreased and required new disclosures relating to fair value measurement inputs and valuation techniques (including changes in inputs and valuation techniques). In addition, new guidance regarding recognition and presentation of other-than-temporary impairments changed (1) the trigger for determining whether an other-than-temporary impairment exists and (2) the amount of an impairment charge to be recorded in earnings. We adopted the provisions of the new guidance for the quarter ended June 30, 2009. Refer to Note 4 and Note 5 to the consolidated financial statements included in Item 8. – Financial Statements and Supplementary Data for disclosures related to the implementation of the new guidance.

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Under the revised other-than-temporary impairment model for debt securities held, we recognize an impairment loss in income in an amount equal to the full difference between the amortized cost basis and the fair value when we have the intent to sell the debt security or it is more likely than not we will be required to sell the debt security before recovery of our amortized cost basis. However, if we do not intend to sell the debt security, we evaluate the expected cash flows to be received as compared to amortized cost and determine if a credit loss has occurred. In the event of a credit loss, only the amount of the impairment associated with the credit loss is recognized currently in income with the remainder of the loss recognized in other comprehensive income.

When we do not intend to sell a security in an unrealized loss position, potential other-than-temporary impairment is considered using a variety of factors, including the length of time and extent to which the fair value has been less than cost; adverse conditions specifically related to the industry, geographic area or financial condition of the issuer or underlying collateral of a security; payment structure of the security; changes in credit rating of the security by the rating agencies; the volatility of the fair value changes; and changes in fair value of the security after the balance sheet date. For debt securities, we take into account expectations of relevant market and economic data. For example, with respect to mortgage and asset-backed securities, such data includes underlying loan level data and structural features such as seniority and other forms of credit enhancements. A decline in fair value is considered other-than-temporary when we do not expect to recover the entire amortized cost basis of the security. We estimate the amount of the credit loss component of a debt security as the difference between the amortized cost and the present value of the expected cash flows of the security. The present value is determined using the best estimate of future cash flows discounted at the implicit interest rate at the date of purchase. The risks inherent in assessing the impairment of an investment include the risk that market factors may differ from our expectations, facts and circumstances factored into our assessment may change with the passage of time, or we may decide to subsequently sell the investment. The determination of whether a decline in the value of an investment is other than temporary requires us to exercise significant diligence and judgment. The discovery of new information and the passage of time can significantly change these judgments. The status of the general economic environment and significant changes in the national securities markets influence the determination of fair value and the assessment of investment impairment. There is a continuing risk that further declines in fair value may occur and additional material realized losses from sales or other-than-temporary impairments may be recorded in future periods.

The recoverability of our residential and commercial mortgage-backed securities is supported by factors such as seniority, underlying collateral characteristics and credit enhancements. Our residential and commercial mortgage-backed securities at December 31, 2010 primarily were composed of senior tranches having high credit support, with 99% of the collateral consisting of prime loans. All commercial mortgage-backed securities were rated AA+ at December 31, 2010.

All issuers of securities we own that were trading at an unrealized loss at December 31, 2010 remain current on all contractual payments. After taking into account these and other factors previously described, we believe these unrealized losses primarily were caused by an increase in market interest rates and tighter liquidity conditions in the current markets than when the securities were purchased. At December 31, 2010, we did not intend to sell the securities with an unrealized loss position in accumulated other comprehensive income, and it is not likely that we will be required to sell these securities before recovery of their amortized cost basis. As a result, we believe that the securities with an unrealized loss were not other-than-temporarily impaired at December 31, 2010.

There were no material other-than-temporary impairments in 2010 or 2009. Gross realized losses in 2008 included other-than-temporary impairments of $103.1 million, primarily due to investments in Lehman Brothers Holdings Inc. and certain of its subsidiaries, which filed for bankruptcy protection in 2008, as well as declines in the values of securities primarily associated with the financial services industry.

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Goodwill and Long-lived Assets

At December 31, 2010, goodwill and other long-lived assets represented 23% of total assets and 55% of total stockholders’ equity, compared to 21% and 50%, respectively, at December 31, 2009.

We are required to test at least annually for impairment at a level of reporting referred to as the reporting unit, and more frequently if adverse events or changes in circumstances indicate that the asset may be impaired. A reporting unit either is our operating segments or one level below the operating segments, referred to as a component, which comprise our reportable segments. A component is considered a reporting unit if the component constitutes a business for which discrete financial information is available that is regularly reviewed by management. We are required to aggregate the components of an operating segment into one reporting unit if they have similar economic characteristics. Goodwill is assigned to the reporting unit that is expected to benefit from a specific acquisition.

Our strategy, long-range business plan, and annual planning process support our goodwill impairment tests. These tests are performed, at a minimum, annually in the fourth quarter, and are based on an evaluation of future discounted cash flows. We rely on this discounted cash flow analysis to determine fair value. However outcomes from the discounted cash flow analysis are compared to other market approach valuation methodologies for reasonableness. We use discount rates that correspond to a market-based weighted-average cost of capital and terminal growth rates that correspond to long-term growth prospects, consistent with the long-term inflation rate. Key assumptions in our cash flow projections, including changes in membership, premium yields, medical and administrative cost trends, and certain government contract extensions, are consistent with those utilized in our long-range business plan and annual planning process. If these assumptions differ from actual, including the impact of the ultimate outcome of health care reform legislation the estimates underlying our goodwill impairment tests could be adversely affected. Goodwill impairment tests completed in each of the last three years did not result in an impairment loss. Based on the goodwill impairment test completed in 2010, the fair value of our reporting units with significant goodwill exceeded carrying amounts by a margin ranging from approximately 68% to 107%. A 100 basis point increase in the discount rate would decrease this margin to a range of approximately 43% to 84%.

The ultimate loss of the TRICARE South Region contract would adversely affect $49.8 million of the military services reporting unit’s goodwill. In July 2009, we were notified by the DoD that we were not awarded the third generation TRICARE program contract for the South Region which had been subject to competing bids. We filed a protest with the GAO in connection with the award to another contractor and in October 2009 we learned that the GAO had upheld our protest, determining that the TMA evaluation of our proposal had unreasonably failed to fully recognize and reasonably account for the likely cost savings associated with our record of obtaining network provider discounts from our established network in the South Region. On December 22, 2009, we were advised that TMA notified the GAO of its intent to implement corrective action consistent with the discussion contained within the GAO’s decision with respect to our protest. On October 22, 2010, TMA issued its latest amendment to the request for proposal requesting from offerors final proposal revisions to address, among other things, health care cost savings resulting from provider network discounts in the South Region. We submitted our final proposal revisions on November 9, 2010. At this time, we are not able to determine whether or not the protest decision by the GAO will have any effect upon the ultimate disposition of the contract award.

On October 5, 2010, we were notified that the TMA intended to negotiate with us for an extension of our administration of the TRICARE South Region contract scheduled to end on March 31, 2011, and on January 6, 2011, an Amendment of Solicitation/Modification of Contract to the TRICARE South Region contract, in the form of an undefinitized contract action, became effective. The Amendment adds one additional one-year option period, Option Period IX (which runs from April 1, 2011 through March 31, 2012). On January 21, 2011, the TMA notified us of their intent to exercise Option Period IX. We will continue to assess the fair value of our military services reporting unit each reporting period based on our estimate of future discounted cash flows associated with the reporting unit, primarily derived from cash flows associated with the TRICARE South Region contract. We will recognize a goodwill impairment if and when our impairment test indicates that the carrying

42

value of goodwill exceeds the implied fair value. If we are not ultimately awarded the new third generation TRICARE program contract for the South Region, we expect that as the March 31, 2012 contract end date nears, future cash flows will not be sufficient to warrant recoverability of all or a portion of the military services goodwill. In this event, we expect a goodwill impairment would occur during the second half of 2011. Refer to Note 16 to the consolidated financial statements included in Item 8. – Financial Statements and Supplementary Data for further discussion of the TRICARE South Region contract.

The realignment of our business segments and corresponding change in our reportable segments, more fully described in Note 17 to the consolidated financial statements included in Item 8.-Financial Statements and Supplementary Data, resulted in a change in the composition of our reporting units. Accordingly, we reassigned goodwill to our reporting units as of January 1, 2011 using the relative fair value approach. We completed an impairment test as of January 1, 2011 based on the new reporting units which did not result in an impairment loss. The fair value of our reporting units with significant goodwill exceeded carrying amounts by a substantial margin. A 100 basis point increase in the discount rate would not have a significant impact on the amount of margin for any of our reporting units with significant goodwill.

Long-lived assets consist of property and equipment and other finite-lived intangible assets. These assets are depreciated or amortized over their estimated useful life, and are subject to impairment reviews. We periodically review long-lived assets whenever adverse events or changes in circumstances indicate the carrying value of the asset may not be recoverable. In assessing recoverability, we must make assumptions regarding estimated future cash flows and other factors to determine if an impairment loss may exist, and, if so, estimate fair value. We also must estimate and make assumptions regarding the useful life we assign to our long-lived assets. If these estimates or their related assumptions change in the future, we may be required to record impairment losses or change the useful life, including accelerating depreciation or amortization for these assets. There were no material impairment losses in the last three years. Long-lived assets associated with our military services business are not material.

43

EX-99.4

Exhibit 99.4

Explanatory Note

During the first quarter of 2011, Humana Inc. realigned its business segments to reflect its evolving business model. As a result, Humana reassessed and changed its operating and reportable segments effective with the filing of its Quarterly Report on Form 10-Q for the three months ended March 31, 2011. The Company currently manages and reports its operating results using the following segments: Retail, Employer Group, and Health and Well-Being Services. The Company also discloses results for Other Businesses. This Exhibit 99.4 has been revised from the “Item 8.-Financial Statements and Supplementary Data” to Humana’s Annual Report on Form 10-K for the year ended December 31, 2010 (the “2010 Form 10-K”) to reflect retrospective application of the new segments and reclassified historical results to conform to the new presentation.

Material revisions to the 2010 Form 10-K resulting from the Company’s new business segment reporting are highlighted in blue font. It is important to note, however, that other disclosures originally included in the 2010 Form 10-K, unrelated to the Company’s new business segment reporting, have been repeated in this Exhibit 99.4 without updates that may have been made to those disclosures in subsequent filings with the SEC. The non-updated disclosures, made as of February 17, 2011, appear in black font. For updated disclosures to these sections, you should read this Exhibit 99.4 together with the Company’s SEC filings made after February 17, 2011, including Humana’s Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2011 and June 30, 2011.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA WITH RETROSPECTIVE APPLICATION OF SEGMENTS

Humana Inc.

CONSOLIDATED BALANCE SHEETS

	December 31,
	2010			2009
	(in thousands, except share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	1,673,137		$	1,613,588
Investment securities		6,872,767			6,190,062
Receivables, less allowance for doubtful accounts of $51,470 in 2010 and $50,832 in 2009:		959,018			823,620
Securities lending invested collateral		49,636			119,586
Other current assets		583,141			505,960
Total current assets		10,137,699			9,252,816
Property and equipment, net		815,337			679,142
Long-term investment securities		1,499,672			1,307,088
Goodwill		2,567,809			1,992,924
Other long-term assets		1,082,736			921,524
Total assets	$	16,103,253		$	14,153,494
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Benefits payable	$	3,469,306		$	3,222,574
Trade accounts payable and accrued expenses		1,624,832			1,307,710
Book overdraft		409,385			374,464
Securities lending payable		55,693			126,427
Unearned revenues		185,410			228,817
Total current liabilities		5,744,626			5,259,992
Long-term debt		1,668,849			1,678,166
Future policy benefits payable		1,492,855			1,193,047
Other long-term liabilities		272,867			246,286
Total liabilities		9,179,197			8,377,491
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $1 par; 10,000,000 shares authorized; none issued		0			0
Common stock, $0.16 2/3 par; 300,000,000 shares authorized; 190,244,741 shares issued in 2010 and 189,801,119 shares issued in 2009		31,707			31,634
Capital in excess of par value		1,737,207			1,658,521
Retained earnings		5,529,001			4,429,611
Accumulated other comprehensive income		120,584			42,135
Treasury stock, at cost, 21,795,051 shares in 2010 and 19,621,069 shares in 2009		(494,443	)		(385,898	)
Total stockholders’ equity		6,924,056			5,776,003
Total liabilities and stockholders’ equity	$	16,103,253		$	14,153,494

The accompanying notes are an integral part of the consolidated financial statements.

2

Humana Inc.

CONSOLIDATED STATEMENTS OF INCOME

	For the year ended December 31,
	2010		2009		2008
	(in thousands, except per share results)
Revenues:
Premiums	$	32,712,323	$	29,926,751	$	28,064,844
Services		555,180		519,507		468,239
Investment income		329,332		296,317		220,215
Total revenues		33,596,835		30,742,575		28,753,298
Operating expenses:
Benefits		27,117,069		24,783,576		23,730,106
Operating costs		4,380,319		4,013,984		3,739,655
Depreciation and amortization		244,825		237,412		210,400
Total operating expenses		31,742,213		29,034,972		27,680,161
Income from operations		1,854,622		1,707,603		1,073,137
Interest expense		105,060		105,843		80,289
Income before income taxes		1,749,562		1,601,760		992,848
Provision for income taxes		650,172		562,085		345,694
Net income	$	1,099,390	$	1,039,675	$	647,154
Basic earnings per common share	$	6.55	$	6.21	$	3.87
Diluted earnings per common share	$	6.47	$	6.15	$	3.83

The accompanying notes are an integral part of the consolidated financial statements.

3

Humana Inc.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

							Capital In Excess of Par Value			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Stockholders’ Equity
	Common Stock
	Issued Shares			Amount
	(in thousands)
Balances, January 1, 2008		186,739		$	31,123		$	1,497,998		$	2,742,782	$	14,021		$	(256,987	)	$	4,028,937
Comprehensive income:
Net income											647,154								647,154
Other comprehensive loss:
Net unrealized investment losses, net of tax benefit of $136,967													(239,591	)					(239,591	)
Reclassification adjustment for net realized losses included in net income, net of tax benefit of $29,090													50,327						50,327
Comprehensive income																			457,890
Common stock repurchases																(106,070	)		(106,070	)
Stock-based compensation								55,369											55,369
Restricted stock grants		667			111														111
Restricted stock forfeitures		(83	)		(14	)		12											(2	)
Stock option exercises		534			89			11,331											11,420
Stock option and restricted stock tax benefit								9,535											9,535
Balances, December 31, 2008		187,857			31,309			1,574,245			3,389,936		(175,243	)		(363,057	)		4,457,190
Comprehensive income:
Net income											1,039,675								1,039,675
Other comprehensive income:
Net unrealized investment gains, net of tax expense of $131,229													229,724						229,724
Reclassification adjustment for net realized gains included in net income, net of tax expense of $7,137													(12,346	)					(12,346	)
Comprehensive income																			1,257,053
Common stock repurchases																(22,841	)		(22,841	)
Stock-based compensation								65,870											65,870
Restricted stock grants		978			163														163
Restricted stock forfeitures		(87	)		(14	)		14											0
Stock option exercises		1,053			176			18,173											18,349
Stock option and restricted stock tax benefit								219											219
Balances, December 31, 2009		189,801			31,634			1,658,521			4,429,611		42,135			(385,898	)		5,776,003
Comprehensive income:
Net income											1,099,390								1,099,390
Other comprehensive income:
Net unrealized investment gains, net of tax expense of $47,383													82,026						82,026
Reclassification adjustment for net realized gains included in net income, net of tax expense of $2,069													(3,577	)					(3,577	)
Comprehensive income																			1,177,839
Common stock repurchases																(108,545	)		(108,545	)
Stock-based compensation								62,947											62,947
Restricted stock grants and restricted stock unit vesting		5			0														0
Restricted stock forfeitures		(127	)		(21	)		21											0
Stock option exercises		566			94			17,384											17,478
Stock option and restricted stock tax benefit								(1,666	)										(1,666	)
Balances, December 31, 2010		190,245		$	31,707		$	1,737,207		$	5,529,001	$	120,584		$	(494,443	)	$	6,924,056

The accompanying notes are an integral part of the consolidated financial statements.

4

Humana Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the year ended December 31,
	2010			2009			2008
	(in thousands)
Cash flows from operating activities
Net income	$	1,099,390		$	1,039,675		$	647,154
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		262,910			250,274			220,350
Stock-based compensation		62,947			65,870			55,369
Net realized capital (gains) losses		(5,646	)		(19,483	)		79,417
(Gain) loss on sale of property and equipment, net		(25	)		228			(5	)
Benefit from deferred income taxes		(198,978	)		(26,792	)		(22,005	)
Provision for doubtful accounts		18,708			19,054			5,398
Changes in operating assets and liabilities, net of effect of businesses acquired:
Receivables		(45,535	)		(59,966	)		(152,893	)
Other assets		81,133			112,473			(100,887	)
Benefits payable		246,732			16,995			412,725
Other liabilities		721,894			13,682			(170,140	)
Unearned revenues		(46,233	)		(9,281	)		(10,280	)
Other		44,497			18,853			18,107
Net cash provided by operating activities		2,241,794			1,421,582			982,310
Cash flows from investing activities
Acquisitions, net of cash acquired		(832,450	)		(12,436	)		(422,915	)
Purchases of property and equipment		(222,302	)		(185,450	)		(261,572	)
Proceeds from sales of property and equipment		66			1,509			6
Purchases of investment securities		(4,589,332	)		(7,197,007	)		(5,681,103	)
Maturities of investment securities		1,749,801			1,270,525			498,650
Proceeds from sales of investment securities		2,012,494			3,951,326			4,496,929
Change in securities lending collateral		70,734			312,272			871,681
Net cash used in investing activities		(1,810,989	)		(1,859,261	)		(498,324	)
Cash flows from financing activities
Receipts from CMS contract deposits		1,757,217			2,354,238			2,761,276
Withdrawals from CMS contract deposits		(1,994,391	)		(1,860,748	)		(2,572,624	)
Borrowings under credit agreement		0			0			1,175,000
Repayments under credit agreement		0			(250,000	)		(1,725,000	)
Proceeds from issuance of senior notes		0			0			749,247
Debt issue costs		(7,777	)		0			(6,696	)
Proceeds from swap termination		0			0			93,008
Change in securities lending payable		(70,734	)		(312,272	)		(898,350	)
Change in book overdraft		34,921			149,922			(44,684	)
Common stock repurchases		(108,545	)		(22,841	)		(106,070	)
Excess tax benefit from stock-based compensation		1,964			5,339			9,912
Proceeds from stock option exercises and other, net		16,089			17,206			10,965
Net cash (used in) provided by financing activities		(371,256	)		80,844			(554,016	)
Increase (decrease) in cash and cash equivalents		59,549			(356,835	)		(70,030	)
Cash and cash equivalents at beginning of year		1,613,588			1,970,423			2,040,453
Cash and cash equivalents at end of year	$	1,673,137		$	1,613,588		$	1,970,423
Supplemental cash flow disclosures:
Interest payments	$	111,848		$	112,532		$	73,813
Income tax payments, net	$	784,924		$	627,227		$	347,353
Details of businesses acquired in purchase transactions:
Fair value of assets acquired, net of cash acquired	$	1,043,455		$	12,436		$	772,811
Less: Fair value of liabilities assumed		(211,005	)		0			(349,896	)
Cash paid for acquired businesses, net of cash acquired	$	832,450		$	12,436		$	422,915

The accompanying notes are an integral part of the consolidated financial statements.

5

Humana Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. REPORTING ENTITY

Nature of Operations

Headquartered in Louisville, Kentucky, Humana is one of the nation’s largest publicly traded health and supplemental benefits companies, based on our 2010 revenues of approximately $33.6 billion. References throughout these notes to consolidated financial statements to “we,” “us,” “our,” “Company,” and “Humana,” mean Humana Inc. and its subsidiaries. We provide full-service benefits and wellness solutions, offering a wide array of health, pharmacy and supplemental benefit products for employer groups, government benefit programs, and individuals, as well as primary and workplace care through our medical centers and worksite medical facilities. We derived approximately 76% of our premiums and services revenue from contracts with the federal government in 2010. Under our federal government contracts with the Centers for Medicare and Medicaid Services, or CMS, we provide health insurance coverage for Medicare Advantage members in Florida, accounting for approximately 17% of our consolidated premiums and services revenue in 2010. CMS is the federal government’s agency responsible for administering the Medicare program. Under federal government contracts with the Department of Defense we primarily provide health insurance coverage to TRICARE members, accounting for approximately 11% of our consolidated premiums and services revenue in 2010.

Health Insurance Reform

In March 2010, the President signed into law The Patient Protection and Affordable Care Act and The Health Care and Education Reconciliation Act of 2010 (which we collectively refer to as the Health Insurance Reform Legislation) which enact significant reforms to various aspects of the U.S. health insurance industry. There are many significant provisions of the legislation that will require additional guidance and clarification in the form of regulations and interpretations in order to fully understand the impacts of the legislation on our overall business, which we expect to occur over the next several years.

Certain significant provisions of the Health Insurance Reform Legislation include, among others, mandated coverage requirements, rebates to policyholders based on minimum benefit ratios, adjustments to Medicare Advantage premiums, the establishment of state-based exchanges, and an annual insurance industry premium-based assessment. Implementation dates of the Health Insurance Reform Legislation vary from as early as six months from the date of enactment, or September 30, 2010, to as late as 2018.

6

Humana Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Our financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America. Our consolidated financial statements include the accounts of Humana Inc. and subsidiaries that the Company controls including variable interest entities associated with medical practices for which the Company is the primary beneficiary. Generally, we do not own medical practices but instead enter into exclusive long-term management agreements with the affiliated Professional Associations, or P.A.s, that operate the medical practices. Based upon the provisions of these agreements, these affiliated P.A.s are variable interest entities and we are the primary beneficiary, and accordingly we consolidated the affiliated P.A.s. All significant intercompany balances and transactions have been eliminated.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The areas involving the most significant use of estimates are the estimation of benefits payable, the impact of risk sharing provisions related to our Medicare and TRICARE contracts, the valuation and related impairment recognition of investment securities, and the valuation and related impairment recognition of long-lived assets, including goodwill. These estimates are based on knowledge of current events and anticipated future events, and accordingly, actual results may ultimately differ materially from those estimates.

Realignment of Business Segments

During the first quarter of 2011, we realigned our business segments to reflect our evolving business model. We currently manage and report our operating results using the following segments: Retail, Employer Group, and Health and Well-Being Services. We also disclose results for Other Businesses. All respective amounts related to the segment change have been retrospectively adjusted throughout the financial statements. Our segment information is more fully described in Note 17.

As a result of changing our reportable segments, we also changed the classification of certain revenues and costs. Beginning January 1, 2011, costs of certain health and well-being services were reclassified as benefits expense including costs incurred by our wholly-owned mail order pharmacy from transactions with our members that were historically classified as selling, general and administrative (and now titled operating costs), as well as depreciation and amortization expenses. The effect of this reclassification is to account for the cost of providing these benefits to our members similarly whether the services are provided via a third party provider or internally through a stand-alone subsidiary. Likewise, co-share amounts from our members associated with our wholly-owned mail order pharmacy operations, historically classified as other revenue, are now classified as a reduction of benefits expense. The remaining items previously classified as other revenue, primarily consisting of patient service revenue associated with our recently acquired Concentra Inc. subsidiary, were combined with our previous administrative services fee revenue and are now classified as services revenue. All amounts herein have been reclassified to conform to the new presentation. These adjustments had no impact on net income, cash flows or equity. Further, none of these adjustments impacted our regulated subsidiaries.

Depreciation and amortization expense associated with certain businesses in our Health and Well-Being Services segment delivering benefits to our members, primarily associated with our pharmacy operations, are now included with benefits expense. The amount of this expense was $18.1 million in 2010, $12.9 million in 2009, and $10.0 million in 2008.

7

Humana Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Cash and Cash Equivalents

Cash and cash equivalents include cash, time deposits, money market funds, commercial paper, other money market instruments, and certain U.S. Government securities with an original maturity of three months or less. Carrying value approximates fair value due to the short-term maturity of the investments.

Investment Securities

Investment securities, which consist entirely of debt securities, have been categorized as available for sale and, as a result, are stated at fair value. Investment securities available for current operations are classified as current assets. Investment securities available for our long-term insurance product and professional liability funding requirements, as well as restricted statutory deposits and venture capital investments, are classified as long-term assets. For the purpose of determining gross realized gains and losses, which are included as a component of investment income in the consolidated statements of income, the cost of investment securities sold is based upon specific identification. Unrealized holding gains and losses, net of applicable deferred taxes, are included as a component of stockholders’ equity and comprehensive income until realized from a sale or other-than-temporary impairment.

In April 2009, the Financial Accounting Standards Board, or the FASB, issued new guidance to address concerns about (1) measuring the fair value of financial instruments when the markets become inactive and quoted prices may reflect distressed transactions and (2) recording impairment charges on investments in debt securities. The new guidance highlighted and expanded on the factors that should be considered in estimating fair value when the volume and level of activity for a financial asset or liability has significantly decreased and required new disclosures relating to fair value measurement inputs and valuation techniques (including changes in inputs and valuation techniques). In addition, new guidance regarding recognition and presentation of other-than-temporary impairments changed (1) the trigger for determining whether an other-than-temporary impairment exists and (2) the amount of an impairment charge to be recorded in earnings. We adopted the provisions of the new guidance for the quarter ended June 30, 2009. Refer to Note 4 and Note 5.

Under the revised other-than-temporary impairment model for debt securities held, we recognize an impairment loss in income in an amount equal to the full difference between the amortized cost basis and the fair value when we have the intent to sell the debt security or it is more likely than not we will be required to sell the debt security before recovery of our amortized cost basis. However, if we do not intend to sell the debt security, we evaluate the expected cash flows to be received as compared to amortized cost and determine if a credit loss has occurred. In the event of a credit loss, only the amount of the impairment associated with the credit loss is recognized currently in income with the remainder of the loss recognized in other comprehensive income. A transition adjustment to reclassify the non-credit portion of any previously recognized impairment from retained earnings to accumulated other comprehensive income was required upon adoption if we did not intend to sell and it was not more likely than not that we would be required to sell the security before recovery of its amortized cost basis. We did not record a transition adjustment for securities previously considered other-than-temporarily impaired because these securities were already sold or we had the intent to sell these securities.

When we do not intend to sell a security in an unrealized loss position, potential other-than-temporary impairment is considered using a variety of factors, including the length of time and extent to which the fair value has been less than cost; adverse conditions specifically related to the industry, geographic area or financial condition of the issuer or underlying collateral of a security; payment structure of the security; changes in credit rating of the security by the rating agencies; the volatility of the fair value changes; and changes in fair value of the security after the balance sheet date. For debt securities, we take into account expectations of relevant market and economic data. For example, with respect to mortgage and asset-backed securities, such data includes underlying loan level data and structural features such as seniority and other forms of credit enhancements. A

8

Humana Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

decline in fair value is considered other-than-temporary when we do not expect to recover the entire amortized cost basis of the security. We estimate the amount of the credit loss component of a debt security as the difference between the amortized cost and the present value of the expected cash flows of the security. The present value is determined using the best estimate of future cash flows discounted at the implicit interest rate at the date of purchase.

We participate in a securities lending program to optimize investment income. We loan certain investment securities for short periods of time in exchange for collateral initially equal to at least 102% of the fair value of the investment securities on loan. The fair value of the loaned investment securities is monitored on a daily basis, with additional collateral obtained or refunded as the fair value of the loaned investment securities fluctuates. The collateral, which may be in the form of cash or U.S. Government securities, is deposited by the borrower with an independent lending agent. Any cash collateral is recorded on our consolidated balance sheets, along with a liability to reflect our obligation to return the collateral. The cash collateral is invested by the lending agent according to our investment guidelines, primarily in money market funds, certificates of deposit, and short-term corporate and asset-backed securities, and accounted for consistent with our investment securities. Collateral received in the form of securities is not recorded in our consolidated balance sheets because, absent default by the borrower, we do not have the right to sell, pledge or otherwise reinvest securities collateral. Loaned securities continue to be carried as investment securities on the consolidated balance sheets. Earnings on the invested cash collateral, net of expense, associated with the securities lending payable are recorded as investment income.

Receivables and Revenue Recognition

We generally establish one-year commercial membership contracts with employer groups, subject to cancellation by the employer group on 30-day written notice. Our Medicare contracts with CMS renew annually. Our military services contracts with the federal government and our contracts with various state Medicaid programs generally are multi-year contracts subject to annual renewal provisions.

Premiums

We bill and collect premium remittances from employer groups and members in our Medicare and other individual products monthly. We receive monthly premiums from the federal government and various states according to government specified payment rates and various contractual terms. Changes in revenues from CMS for our Medicare products resulting from the periodic changes in risk-adjustment scores for our membership are recognized when the amounts become determinable and the collectibility is reasonably assured.

Premium revenues are recognized as income in the period members are entitled to receive services, and are net of estimated uncollectible amounts, retroactive membership adjustments, and beginning January 1, 2011, adjustments to recognize rebates to policyholders under the minimum benefit ratios required under Health Insurance Reform Legislation. Retroactive membership adjustments result from enrollment changes not yet processed, or not yet reported by an employer group or the government. We routinely monitor the collectibility of specific accounts, the aging of receivables, historical retroactivity trends, as well as prevailing and anticipated economic conditions, and reflect any required adjustments in current operations. Premiums received prior to the service period are recorded as unearned revenues.

Medicare Part D

We cover prescription drug benefits in accordance with Medicare Part D under multiple contracts with CMS. The payments we receive monthly from CMS and members, which are determined from our annual bid, represent amounts for providing prescription drug insurance coverage. We recognize premium revenues for providing this

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insurance coverage ratably over the term of our annual contract. Our CMS payment is subject to risk sharing through the Medicare Part D risk corridor provisions. In addition, receipts for reinsurance and low-income cost subsidies represent payments for prescription drug costs for which we are not at risk.

The risk corridor provisions compare costs targeted in our bids to actual prescription drug costs, limited to actual costs that would have been incurred under the standard coverage as defined by CMS. Variances exceeding certain thresholds may result in CMS making additional payments to us or require us to refund to CMS a portion of the premiums we received. We estimate and recognize an adjustment to premium revenues related to these risk corridor provisions based upon pharmacy claims experience to date as if the annual contract were to terminate at the end of the reporting period. Accordingly, this estimate provides no consideration to future pharmacy claims experience. We record a receivable or payable at the contract level and classify the amount as current or long-term in the consolidated balance sheets based on the expected settlement.

Reinsurance and low-income cost subsidies represent funding from CMS in connection with the Medicare Part D program for which we assume no risk. Reinsurance subsidies represent funding from CMS for its portion of prescription drug costs which exceed the member’s out-of-pocket threshold, or the catastrophic coverage level. Low-income cost subsidies represent funding from CMS for all or a portion of the deductible, the coinsurance and co-payment amounts above the out-of-pocket threshold for low-income beneficiaries. Monthly prospective payments from CMS for reinsurance and low-income cost subsidies are based on assumptions submitted with our annual bid. A reconciliation and related settlement of CMS’s prospective subsidies against actual prescription drug costs we paid is made after the end of the year. We account for these subsidies as a deposit in our consolidated balance sheets and as a financing activity in our consolidated statements of cash flows. We do not recognize premium revenues or benefit expense for these subsidies. Receipt and payment activity is accumulated at the contract level and recorded in our consolidated balance sheets in other current assets or trade accounts payable and accrued expenses depending on the contract balance at the end of the reporting period.

For plans where we provide enhanced benefits and selected the alternative demonstration payment option in lieu of the reinsurance subsidy, we receive a monthly per member capitation amount from CMS determined from our annual bid submissions. The capitation amount we receive from CMS for assuming the government’s portion of prescription drug costs in the catastrophic layer of coverage is recorded as premium revenue. The variance between the capitation amount and actual drug costs in the catastrophic layer is subject to risk sharing as part of the risk corridor settlement. The demonstration provision terminated at the end of 2010. See Note 6 for detail regarding amounts recorded to the consolidated balance sheets related to the risk corridor settlement and subsidies from CMS.

Settlement of the reinsurance and low-income cost subsidies as well as the risk corridor payment is based on a reconciliation made approximately 9 months after the close of each calendar year. We continue to revise our estimates with respect to the risk corridor provisions based on subsequent period pharmacy claims data.

Military services

Military services premium and services revenue primarily is derived from our TRICARE South Region contract with the Department of Defense, or DoD. We allocate the consideration to the various components of the contract based on the relative fair value of the components. TRICARE revenues consist generally of (1) an insurance premium for assuming underwriting risk for the cost of civilian health care services delivered to eligible beneficiaries; (2) health care services provided to beneficiaries which are in turn reimbursed by the federal government; and (3) administrative services fees related to claim processing, customer service, enrollment, and other services. We recognize the insurance premium as revenue ratably over the period coverage is provided. Health care services reimbursements are recognized as revenue in the period health services are provided.

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Administrative services fees are recognized as revenue in the period services are performed. Our TRICARE South Region contract contains provisions to share the risk associated with financing the cost of health benefits with the federal government. We earn more revenue or incur additional costs based on the variance of actual health care costs versus a negotiated target cost. We defer the recognition of any contingent revenues for favorable variances until the end of the contract period when the amount is determinable and the collectibility is reasonably assured. We estimate and recognize contingent benefit expense for unfavorable variances currently in our results of operations. We continually review the contingent benefit expense estimates of future payments to the government for cost overruns relative to our negotiated target cost and make necessary adjustments to our reserves.

Revenues also may include change orders attributable to our military services contracts. Change orders represent equitable adjustments for services not originally specified in the contracts. Revenues for these adjustments are recognized when a settlement amount becomes determinable and the collectibility is reasonably assured.

Administrative Services Fees

Administrative services fees cover the processing of claims, offering access to our provider networks and clinical programs, and responding to customer service inquiries from members of self-funded groups. Revenues from providing administration services, also known as administrative services only, or ASO, are recognized in the period services are performed and are net of estimated uncollectible amounts. Under ASO contracts, self-funded employers retain the risk of financing substantially all of the cost of health benefits. However, many ASO customers purchase stop loss insurance coverage from us to cover catastrophic claims or to limit aggregate annual costs. Accordingly, we have recorded premiums and benefit expenses related to these stop loss insurance contracts. We routinely monitor the collectibility of specific accounts, the aging of receivables, as well as prevailing and anticipated economic conditions, and reflect any required adjustments in current operations. ASO fees received prior to the service period are recorded as unearned revenues.

Other Revenue

Other revenues primarily consist of copay revenues associated with our mail order pharmacy as well as patient services revenue associated with the December 21, 2010 acquisition of Concentra Inc. more fully described in Note 3.

Revenues associated with RightSourceRx^SM, our mail-order pharmacy, are recognized in connection with the shipment of the prescriptions.

Patient services include workers’ compensation injury care and related services as well as other healthcare services related to employer needs or statutory requirements. Patient services revenues are recognized in the period services are provided to the customer when the sales price is fixed or determinable, and are net of estimated uncollectible accounts and contractual allowances.

Receivables

Receivables, including premium receivables, patient services revenue receivables, and ASO fee receivables, are shown net of allowances for estimated uncollectible accounts, retroactive membership adjustments, and contractual allowances.

Policy Acquisition Costs

Policy acquisition costs are those costs that vary with and primarily are related to the acquisition of new and renewal business. Such costs include commissions, costs of policy issuance and underwriting, and other costs we

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incur to acquire new business or renew existing business. We expense policy acquisition costs related to our employer-group prepaid health services policies as incurred. These short-duration employer-group prepaid health services policies typically have a one-year term and may be cancelled upon 30 days notice by the employer group.

Life insurance, annuities, health and other supplemental policies sold to individuals are accounted for as long-duration insurance products because they are expected to remain in force for an extended period beyond one year due to contractual and regulatory requirements. As a result, we defer policy acquisition costs and amortize them over the estimated life of the policies in proportion to premiums earned. Deferred acquisition costs are reviewed to determine if they are recoverable from future income. See Note 18.

Long-Lived Assets

Property and equipment is recorded at cost. Gains and losses on sales or disposals of property and equipment are included in administrative expense. Certain costs related to the development or purchase of internal-use software are capitalized. Depreciation is computed using the straight-line method over estimated useful lives ranging from 3 to 10 years for equipment, 3 to 7 years for computer software, and 20 to 40 years for buildings. Improvements to leased facilities are depreciated over the shorter of the remaining lease term or the anticipated life of the improvement.

We periodically review long-lived assets, including property and equipment and other intangible assets, for impairment whenever adverse events or changes in circumstances indicate the carrying value of the asset may not be recoverable. Losses are recognized for a long-lived asset to be held and used in our operations when the undiscounted future cash flows expected to result from the use of the asset are less than its carrying value. We recognize an impairment loss based on the excess of the carrying value over the fair value of the asset. A long-lived asset held for sale is reported at the lower of the carrying amount or fair value less costs to sell. Depreciation expense is not recognized on assets held for sale. Losses are recognized for a long-lived asset to be abandoned when the asset ceases to be used. In addition, we periodically review the estimated lives of all long-lived assets for reasonableness.

Goodwill and Other Intangible Assets

Goodwill represents the unamortized excess of cost over the fair value of the net tangible and other intangible assets acquired. We are required to test at least annually for impairment at a level of reporting referred to as the reporting unit, and more frequently if adverse events or changes in circumstances indicate that the asset may be impaired. A reporting unit either is our operating segments or one level below the operating segments, referred to as a component, which comprise our reportable segments. A component is considered a reporting unit if the component constitutes a business for which discrete financial information is available that is regularly reviewed by management. We aggregate the components of an operating segment into one reporting unit if they have similar economic characteristics. Goodwill is assigned to the reporting unit that is expected to benefit from a specific acquisition.

We use a two-step process to review goodwill for impairment. The first step is a screen for potential impairment, and the second step measures the amount of impairment, if any. Impairment tests are performed, at a minimum, in the fourth quarter of each year supported by our long-range business plan and annual planning process. Impairment tests completed for 2010, 2009 and 2008 did not result in an impairment loss. As discussed previously under Realignment of Business Segments within this Note 2, during the first quarter of 2011, we realigned our business segments to reflect our evolving business model. As a result, we reassigned goodwill to our new reporting units as of January 1, 2011 using the relative fair value approach as discussed in Note 8. We completed an impairment test in the first quarter of 2011 based on the new reporting units which did not result in an impairment loss.

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Other intangible assets primarily relate to acquired customer contracts/relationships and are included with other long-term assets in the consolidated balance sheets. Other intangible assets are amortized over the useful life, based upon the pattern of future cash flows attributable to the asset. This sometimes results in an accelerated method of amortization for customer contracts because the asset tends to dissipate at a more rapid rate in earlier periods. Other than customer contracts, other intangible assets generally are amortized using the straight-line method. We review other finite-lived intangible assets for impairment under our long-lived asset policy.

Benefits Payable and Benefit Expense Recognition

Benefit expenses include claim payments, capitation payments, pharmacy costs net of rebates, allocations of certain centralized expenses and various other costs incurred to provide health insurance coverage to members, as well as estimates of future payments to hospitals and others for medical care and other supplemental benefits provided prior to the balance sheet date. Capitation payments represent monthly contractual fees disbursed to primary care physicians and other providers who are responsible for providing medical care to members. Pharmacy costs represent payments for members’ prescription drug benefits, net of rebates from drug manufacturers. Receivables for such pharmacy rebates are included in other current assets in the consolidated balance sheets. Other supplemental benefits include dental, vision, and other voluntary benefits.

We estimate the costs of our benefit expense payments using actuarial methods and assumptions based upon claim payment patterns, medical cost inflation, historical developments such as claim inventory levels and claim receipt patterns, and other relevant factors, and record benefit reserves for future payments. We continually review estimates of future payments relating to claims costs for services incurred in the current and prior periods and make necessary adjustments to our reserves.

We reassess the profitability of our contracts for providing insurance coverage to our members when current operating results or forecasts indicate probable future losses. We establish a premium deficiency liability in current operations to the extent that the sum of expected future costs, claim adjustment expenses, and maintenance costs exceeds related future premiums under contract without consideration of investment income. For purposes of determining premium deficiencies, contracts are grouped in a manner consistent with our method of acquiring, servicing, and measuring the profitability of such contracts. Losses recognized as a premium deficiency result in a beneficial effect in subsequent periods as operating losses under these contracts are charged to the liability previously established. Because the majority of our member contracts renew annually, we do not anticipate recording a material premium deficiency liability, except when unanticipated adverse events or changes in circumstances indicate otherwise.

We believe our benefits payable are adequate to cover future claims payments required. However, such estimates are based on knowledge of current events and anticipated future events. Therefore, the actual liability could differ materially from the amounts provided.

Future policy benefits payable

Future policy benefits payable include liabilities for long-duration insurance policies including life insurance, annuities, health, and long-term care policies sold to individuals for which some of the premium received in the earlier years is intended to pay anticipated benefits to be incurred in future years. These reserves are recognized on a net level premium method based on interest, mortality, morbidity, withdrawal and maintenance expense assumptions from published actuarial tables, modified based upon actual experience. Changes in estimates of these reserves are recognized as an adjustment to benefit expenses in the period the changes occur.

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Book Overdraft

Under our cash management system, checks issued but not yet presented to banks frequently result in overdraft balances for accounting purposes and are classified as a current liability in the consolidated balance sheets. Changes in book overdrafts from period to period are reported in the consolidated statement of cash flows as a financing activity.

Income Taxes

We recognize an asset or liability for the deferred tax consequences of temporary differences between the tax bases of assets or liabilities and their reported amounts in the consolidated financial statements. These temporary differences will result in taxable or deductible amounts in future years when the reported amounts of the assets or liabilities are recovered or settled. We also recognize the future tax benefits such as net operating and capital loss carryforwards as deferred tax assets. A valuation allowance is provided against these deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized. Future years’ tax expense may be increased or decreased by adjustments to the valuation allowance or to the estimated accrual for income taxes.

We record tax benefits when it is more likely than not that the tax return position taken with respect to a particular transaction will be sustained. A liability, if recorded, is not considered resolved until the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired, or the tax position is ultimately settled through examination, negotiation, or litigation. We classify interest and penalties associated with uncertain tax positions in our provision for income taxes.

Derivative Financial Instruments

At times, we may use interest-rate swap agreements to manage our exposure to interest rate risk. The differential between fixed and variable rates to be paid or received is accrued and recognized over the life of the agreements as adjustments to interest expense in the consolidated statements of income. Our interest-rate swap agreements convert the fixed interest rates on our senior notes to a variable rate and are accounted for as fair value hedges. Our interest-rate swap agreements, terminated in 2008, are more fully described in Note 12.

Stock-Based Compensation

We recognize stock-based compensation expense, as determined on the date of grant at fair value, straight-line over the period during which an employee is required to provide service in exchange for the award (usually the vesting period). We estimate expected forfeitures and recognize compensation expense only for those awards which are expected to vest. We estimate the grant-date fair value of stock options using the Black-Scholes option-pricing model. In addition, we report certain tax effects of stock-based compensation as a financing activity rather than an operating activity in the consolidated statement of cash flows. Additional detail regarding our stock-based compensation plans is included in Note 13.

Earnings Per Common Share

We compute basic earnings per common share on the basis of the weighted-average number of unrestricted common shares outstanding. Diluted earnings per common share is computed on the basis of the weighted-average number of unrestricted common shares outstanding plus the dilutive effect of outstanding employee stock options and restricted shares using the treasury stock method.

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Fair Value

Assets and liabilities measured at fair value are categorized into a fair value hierarchy based on whether the inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our own assumptions about the assumptions market participants would use. The fair value hierarchy includes three levels of inputs that may be used to measure fair value as described below.

Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities that are traded in an active exchange market.

Level 2 – Observable inputs other than Level 1 prices such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments as well as debt securities and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.

Level 3 – Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Level 3 includes assets and liabilities whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques reflecting our own assumptions about the assumptions market participants would use as well as those requiring significant management judgment.

Fair value of actively traded debt securities are based on quoted market prices. Fair value of other debt securities are based on quoted market prices of identical or similar securities or based on observable inputs like interest rates generally using a market valuation approach, or, less frequently, an income valuation approach and are generally classified as Level 2. We generally obtain one quoted price for each security from a third party pricing service. These prices are generally derived from recently reported trades for identical or similar securities, including adjustments through the reporting date based upon observable market information. When quoted prices are not available, the third party pricing service may use quoted market prices of comparable securities or discounted cash flow analyses, incorporating inputs that are currently observable in the markets for similar securities. Inputs that are often used in the valuation methodologies include benchmark yields, reported trades, credit spreads, broker quotes, default rates and prepayment speeds. We are responsible for the determination of fair value and as such we perform analysis on the prices received from the third party pricing service to determine whether the prices are reasonable estimates of fair value. Our analysis includes a review of monthly price fluctuations as well as a quarterly comparison of the prices received from the pricing service to prices reported by our third party investment advisor.

Fair value of privately held debt securities, including venture capital investments as well as auction rate securities, are estimated using a variety of valuation methodologies, including both market and income approaches, where an observable quoted market does not exist and are generally classified as Level 3. For privately-held debt securities, such methodologies include reviewing the value ascribed to the most recent financing, comparing the security with securities of publicly-traded companies in similar lines of business, and reviewing the underlying financial performance including estimating discounted cash flows. For auction rate securities, such methodologies include consideration of the quality of the sector and issuer, underlying collateral, underlying final maturity dates, and liquidity.

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Recently Issued Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board, or FASB issued new guidance that expands and clarifies existing disclosures about fair value measurements. Under the new guidance, we are required to disclose additional information about movements of assets among the three-tier fair value hierarchy, present separately (that is, on a gross basis) information about purchases, sales, issuances, and settlements of financial instruments in the reconciliation of fair value measurements using significant unobservable inputs (Level 3), and expand disclosures regarding the determination of fair value measurements. We adopted the new disclosure provisions during the year ended December 31, 2010, except for the gross disclosures regarding purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements which will be effective for us beginning with the filing of our Form 10-Q for the three months ending March 31, 2011.

In October 2010, the FASB issued new guidance that modifies the types of costs that can be capitalized in the acquisition of insurance contracts. We defer policy acquisition costs, primarily commissions, associated with our health, life insurance, annuities, and other supplemental policies sold to individuals and accounted for as long-duration insurance products because they are expected to remain in force for an extended period beyond one year. Premiums under our long-duration insurance products represented approximately 2% of our consolidated premiums and ASO fees for the year ended December 31, 2010. The new guidance specifies that only costs that are related directly to the successful acquisition of insurance contracts qualify for deferral. Commissions representing direct costs of contract acquisitions will continue to qualify for capitalization. The new guidance is effective for us January 1, 2012 with early adoption permitted January 1, 2011. We currently are evaluating the impact of the new guidance on our results of operations and financial position.

3. ACQUISITIONS

On December 21, 2010, we acquired Concentra Inc., or Concentra, a health care company based in Addison, Texas, for cash consideration of $804.7 million. Through its affiliated clinicians, Concentra delivers occupational medicine, urgent care, physical therapy, and wellness services to workers and the general public through its operation of medical centers and worksite medical facilities. The Concentra acquisition provides entry into the primary care space on a national scale, offering additional means for achieving health and wellness solutions and providing an expandable platform for growth with a management team experienced in physician asset management and alternate site care. The preliminary fair values of Concentra’s assets acquired and liabilities assumed at the date of the acquisition are summarized as follows:

	Concentra
	(in thousands)
Cash and cash equivalents	$	21,317
Receivables		108,571
Other current assets		20,589
Property and equipment		131,837
Goodwill		531,372
Other intangible assets		188,000
Other long-term assets		12,935
Total assets acquired		1,014,621
Current liabilities		(100,091	)
Other long-term liabilities		(109,811	)
Total liabilities assumed		(209,902	)
Net assets acquired	$	804,719

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The other intangible assets, which primarily consist of customer relationships and trade name, have a weighted average useful life of 13.7 years. Approximately $57.9 million of the acquired goodwill is deductible for tax purposes. The purchase price allocation is preliminary, subject to completion of valuation analyses, including, for example, refining assumptions used to calculate the fair value of other intangible assets. The purchase agreement contains provisions under which there may be future consideration paid or received related to the subsequent determination of working capital that existed at the acquisition date. Any payments or receipts for provisional amounts for working capital will be recorded as an adjustment to goodwill when paid or received.

The results of operations and financial condition of Concentra have been included in our consolidated statements of income and consolidated balance sheets from the acquisition date. In connection with the acquisition, we recognized approximately $14.9 million of acquisition-related costs, primarily banker and other professional fees, in operating costs. The proforma financial information assuming the acquisition had occurred as of January 1, 2009 was not material to our results of operations.

On October 31, 2008, we acquired PHP Companies, Inc. (d/b/a Cariten Healthcare), or Cariten, for cash consideration of approximately $291.0 million, including the payment of $34.9 million during 2010 to settle a purchase price contingency. The Cariten acquisition increased our commercial fully-insured and ASO presence as well as our Medicare HMO presence in eastern Tennessee. During 2009, we continued our review of the fair value estimate of certain other intangible and net tangible assets acquired. This review resulted in a decrease of $27.1 million in the fair value of other intangible assets, primarily related to the fair value assigned to the customer contracts acquired. There was a corresponding adjustment to goodwill and deferred income taxes. The total consideration paid exceeded our estimated fair value of the net tangible assets acquired by approximately $145.8 million of which we allocated $52.3 million to other intangible assets and $93.5 million to goodwill. The other intangible assets, which primarily consist of customer contracts, have a weighted-average useful life of 11.6 years. The acquired goodwill is not deductible for tax purposes.

On August 29, 2008, we acquired Metcare Health Plans, Inc., or Metcare, for cash consideration of approximately $14.9 million. The acquisition expanded our Medicare HMO membership in central Florida.

On May 22, 2008, we acquired OSF Health Plans, Inc., or OSF, a managed care company serving both Medicare and commercial members in central Illinois, for cash consideration of approximately $87.3 million, including the payment of $3.3 million during 2009 to settle a purchase price contingency. This acquisition expanded our presence in Illinois, broadening our ability to serve multi-location employers with a wider range of products including our specialty offerings. The total consideration paid exceeded our estimated fair value of the net tangible assets acquired by approximately $31.1 million of which we allocated $10.1 million to other intangible assets and $21.0 million to goodwill. The other intangible assets, which primarily consist of customer contracts, have a weighted-average useful life of 9.9 years. The acquired goodwill is not deductible for tax purposes.

On April 30, 2008, we acquired UnitedHealth Group’s Las Vegas, Nevada individual SecureHorizons Medicare Advantage HMO business, or SecureHorizons, for cash consideration of approximately $185.3 million, plus subsidiary capital and surplus requirements of $40 million. The acquisition expanded our presence in the Las Vegas market. The total consideration paid exceeded our estimated fair value of the net tangible assets acquired by approximately $185.3 million of which we allocated $69.3 million to other intangible assets and $116.0 million to goodwill. The other intangible assets, which primarily consist of customer contracts, have a weighted-average useful life of 10.9 years. The acquired goodwill is not deductible for tax purposes.

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The purchase agreements for certain of the acquisitions discussed above occurring prior to January 1, 2009 contain provisions under which there may be future contingent consideration paid or received primarily associated with balance sheet settlements. Any contingent consideration paid or received will be recorded as an adjustment to goodwill when the contingencies are resolved. We do not expect these adjustments to be material.

The results of operations and financial condition of Cariten, Metcare, OSF, and SecureHorizons have been included in our consolidated statements of income and consolidated balance sheets since the acquisition dates.

4. INVESTMENT SECURITIES

Investment securities classified as current and long-term were as follows at December 31, 2010 and 2009, respectively:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
December 31, 2010
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	697,816	$	14,412	$	(615	)	$	711,613
Mortgage-backed securities		1,614,569		49,783		(1,173	)		1,663,179
Tax-exempt municipal securities		2,439,659		37,294		(43,619	)		2,433,334
Mortgage-backed securities:
Residential		58,017		545		(2,675	)		55,887
Commercial		306,291		14,911		(171	)		321,031
Asset-backed securities		148,068		1,727		(44	)		149,751
Corporate debt securities		2,906,228		139,793		(13,710	)		3,032,311
Redeemable preferred stock		5,333		0		0			5,333
Total debt securities	$	8,175,981	$	258,465	$	(62,007	)	$	8,372,439
December 31, 2009
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	1,005,203	$	6,683	$	(2,534	)	$	1,009,352
Mortgage-backed securities		1,675,667		24,324		(11,328	)		1,688,663
Tax-exempt municipal securities		2,195,077		52,381		(23,417	)		2,224,041
Mortgage-backed securities:
Residential		106,191		220		(10,999	)		95,412
Commercial		285,014		3,252		(8,640	)		279,626
Asset-backed securities		106,471		824		(107	)		107,188
Corporate debt securities		2,043,721		57,173		(21,326	)		2,079,568
Redeemable preferred stock		8,400		4,900		0			13,300
Total debt securities	$	7,425,744	$	149,757	$	(78,351	)	$	7,497,150

We participate in a securities lending program where we loan certain investment securities for short periods of time in exchange for collateral, consisting of cash or U.S. Government securities, initially equal to at least

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102% of the fair value of the investment securities on loan. Investment securities with a fair value of $54.0 million at December 31, 2010 and $126.1 million at December 31, 2009 were on loan. At December 31, 2010, all collateral from lending our investment securities was in the form of cash which has been reinvested in money market funds and short-term asset-backed securities.

Gross unrealized losses and fair values aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position were as follows at December 31, 2010 and 2009, respectively:

	Less than 12 months					12 months or more					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
	(in thousands)
December 31, 2010
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	141,766	$	(615	)	$	0	$	0		$	141,766	$	(615	)
Mortgage-backed securities		110,358		(1,054	)		5,557		(119	)		115,915		(1,173	)
Tax-exempt municipal securities		1,168,221		(33,218	)		97,809		(10,401	)		1,266,030		(43,619	)
Mortgage-backed securities:
Residential		0		0			32,671		(2,675	)		32,671		(2,675	)
Commercial		0		0			2,752		(171	)		2,752		(171	)
Asset-backed securities		17,069		(42	)		283		(2	)		17,352		(44	)
Corporate debt securities		383,677		(9,572	)		31,464		(4,138	)		415,141		(13,710	)
Total debt securities	$	1,821,091	$	(44,501	)	$	170,536	$	(17,506	)	$	1,991,627	$	(62,007	)
December 31, 2009
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	301,843	$	(2,425	)	$	2,970	$	(109	)	$	304,813	$	(2,534	)
Mortgage-backed securities		823,365		(11,005	)		6,834		(323	)		830,199		(11,328	)
Tax-exempt municipal securities		598,520		(14,286	)		198,327		(9,131	)		796,847		(23,417	)
Mortgage-backed securities:
Residential		1,771		(5	)		73,178		(10,994	)		74,949		(10,999	)
Commercial		31,941		(359	)		142,944		(8,281	)		174,885		(8,640	)
Asset-backed securities		1,930		(19	)		2,179		(88	)		4,109		(107	)
Corporate debt securities		636,833		(9,354	)		99,830		(11,972	)		736,663		(21,326	)
Total debt securities	$	2,396,203	$	(37,453	)	$	526,262	$	(40,898	)	$	2,922,465	$	(78,351	)

Approximately 96% of our debt securities were investment-grade quality, with an average credit rating of AA by S&P at December 31, 2010. Most of the debt securities that were below investment-grade were rated BB, the higher end of the below investment-grade rating scale. At December 31, 2010, 14% of our tax-exempt municipal securities were pre-refunded, generally with U.S. government and agency securities, and 25% of our tax-exempt securities were insured by bond insurers and had an equivalent S&P credit rating of AA exclusive of the bond insurers’ guarantee. Our investment policy limits investments in a single issuer and requires diversification among various asset types.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The recoverability of our residential and commercial mortgage-backed securities is supported by factors such as seniority, underlying collateral characteristics and credit enhancements. Our residential and commercial mortgage-backed securities at December 31, 2010 primarily were composed of senior tranches having high credit support, with 99% of the collateral consisting of prime loans. All commercial mortgage-backed securities were rated AA+ at December 31, 2010.

All issuers of securities we own that were trading at an unrealized loss at December 31, 2010 remain current on all contractual payments. After taking into account these and other factors previously described, we believe these unrealized losses primarily were caused by an increase in market interest rates and tighter liquidity conditions in the current markets than when the securities were purchased. At December 31, 2010, we did not intend to sell the securities with an unrealized loss position in accumulated other comprehensive income, and it is not likely that we will be required to sell these securities before recovery of their amortized cost basis. As a result, we believe that the securities with an unrealized loss were not other-than-temporarily impaired at December 31, 2010.

The detail of realized gains (losses) related to investment securities and included within investment income was as follows for the years ended December 31, 2010, 2009, and 2008:

	2010			2009			2008
	(in thousands)
Gross realized gains	$	34,815		$	123,361		$	56,879
Gross realized losses		(29,169	)		(103,878	)		(136,296	)
Net realized capital gains (losses)	$	5,646		$	19,483		$	(79,417	)

There were no material other-than-temporary impairments in 2010 or 2009. Gross realized losses in 2008 included other-than-temporary impairments of $103.1 million, primarily due to investments in Lehman Brothers Holdings Inc. and certain of its subsidiaries, which filed for bankruptcy protection in 2008, as well as declines in the values of securities primarily associated with the financial services industry.

The contractual maturities of debt securities available for sale at December 31, 2010, regardless of their balance sheet classification, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Fair Value
	(in thousands)
Due within one year	$	299,861	$	301,630
Due after one year through five years		1,936,215		1,991,966
Due after five years through ten years		2,072,510		2,134,576
Due after ten years		1,740,450		1,754,419
Mortgage and asset-backed securities		2,126,945		2,189,848
Total debt securities	$	8,175,981	$	8,372,439

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5. FAIR VALUE

Financial Assets

The following table summarizes our fair value measurements at December 31, 2010 and 2009, respectively, for financial assets measured at fair value on a recurring basis:

			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
December 31, 2010
Cash equivalents	$	1,606,592	$	1,606,592	$	0	$	0
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations		711,613		0		711,613		0
Mortgage-backed securities		1,663,179		0		1,663,179		0
Tax-exempt municipal securities		2,433,334		0		2,381,528		51,806
Mortgage-backed securities:
Residential		55,887		0		55,887		0
Commercial		321,031		0		321,031		0
Asset-backed securities		149,751		0		148,545		1,206
Corporate debt securities		3,032,311		0		3,025,097		7,214
Redeemable preferred stock		5,333		0		0		5,333
Total debt securities		8,372,439		0		8,306,880		65,559
Securities lending invested collateral		49,636		24,639		24,997		0
Total invested assets	$	10,028,667	$	1,631,231	$	8,331,877	$	65,559
December 31, 2009
Cash equivalents	$	1,507,490	$	1,507,490	$	0	$	0
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations		1,009,352		0		1,009,352		0
Mortgage-backed securities		1,688,663		0		1,688,663		0
Tax-exempt municipal securities		2,224,041		0		2,155,227		68,814
Mortgage-backed securities:
Residential		95,412		0		95,412		0
Commercial		279,626		0		279,626		0
Asset-backed securities		107,188		0		105,060		2,128
Corporate debt securities		2,079,568		0		2,071,087		8,481
Redeemable preferred stock		13,300		0		0		13,300
Total debt securities		7,497,150		0		7,404,427		92,723
Securities lending invested collateral		119,586		53,569		66,017		0
Total invested assets	$	9,124,226	$	1,561,059	$	7,470,444	$	92,723

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

There were no material transfers between level 1 and level 2 during 2010 or 2009. During the years ended December 31, 2010 and 2009, the changes in the fair value of the assets measured using significant unobservable inputs (Level 3) were comprised of the following:

	For the year ended December 31,
	2010									2009
	Auction Rate Securities			Privates and Venture Capital			Total			Auction Rate Securities			Privates and Venture Capital			Total
	(in thousands)
Beginning balance at January 1	$	68,814		$	23,909		$	92,723		$	73,654		$	18,272		$	91,926
Total gains or losses:
Realized in earnings		16			6,244			6,260			16			74			90
Unrealized in other comprehensive income		1,901			(4,426	)		(2,525	)		269			4,382			4,651
Purchases, sales, issuances, and settlements, net		(18,925	)		(11,974	)		(30,899	)		(5,125	)		(2,102	)		(7,227	)
Transfers into Level 3		0			0			0			0			3,283			3,283
Balance at December 31	$	51,806		$	13,753		$	65,559		$	68,814		$	23,909		$	92,723

Our level 3 assets primarily included auction rate securities for the periods presented. Auction rate securities are debt instruments with interest rates that reset through periodic short-term auctions. The auction rate securities we own, which had a fair value of $51.8 million at December 31, 2010, or less than 1% of our total invested assets, primarily consisted of tax-exempt bonds rated AA and above and were collateralized by federally-guaranteed student loans. From time to time, liquidity issues in the credit markets have led to failed auctions. A failed auction is not a default of the debt instrument, but does set a new, generally higher, interest rate in accordance with the original terms of the debt instrument. Liquidation of auction rate securities results when (1) a successful auction occurs, (2) the securities are called or refinanced by the issuer, (3) a buyer is found outside the auction process, or (4) the security matures. We continue to receive income on all auction rate securities as well as periodic full and partial redemption calls. Given the liquidity issues, fair value could not be estimated based on observable market prices, and as such, unobservable inputs were used.

Financial Liabilities

Our long-term debt is recorded at carrying value in our consolidated balance sheets. The carrying value of our long-term debt outstanding was $1,668.8 million at December 31, 2010 and $1,678.2 million at December 31, 2009. The fair value of our long-term debt was $1,746.5 million at December 31, 2010 and $1,596.4 million at December 31, 2009. The fair value of our long-term debt is determined based on quoted market prices for the same or similar debt, or, if no quoted market prices are available, on the current prices estimated to be available to us for debt with similar terms and remaining maturities.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

6. MEDICARE PART D

As discussed in Note 2, we cover prescription drug benefits in accordance with Medicare Part D under multiple contracts with CMS. The consolidated balance sheets include the following amounts associated with Medicare Part D as of December 31, 2010 and 2009:

	2010						2009
	Risk Corridor Settlement			CMS Subsidies			Risk Corridor Settlement			CMS Subsidies
	(in thousands)
Other current assets	$	1,563		$	16,211		$	2,165		$	11,660
Trade accounts payable and accrued expenses		(389,203	)		(170,231	)		(146,750	)		(402,854	)
Net current liability	$	(387,640	)	$	(154,020	)	$	(144,585	)	$	(391,194	)

7. PROPERTY AND EQUIPMENT, NET

Property and equipment was comprised of the following at December 31, 2010 and 2009:

	2010			2009
	(in thousands)
Land	$	18,405		$	16,206
Buildings and leasehold improvements		476,057			368,341
Equipment		539,518			536,328
Computer software		1,025,468			1,013,461
		2,059,448			1,934,336
Accumulated depreciation		(1,244,111	)		(1,255,194	)
Property and equipment, net	$	815,337		$	679,142

Depreciation expense was $225.1 million in 2010, $213.0 million in 2009, and $183.3 million in 2008, including amortization expense for capitalized internally developed and purchased software of $135.5 million in 2010, $126.9 million in 2009, and $92.9 million in 2008. The table above includes $131.0 million of net property and equipment acquired in connection with the December 21, 2010 acquisition of Concentra more fully described in Note 3.

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Humana Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

8. GOODWILL AND OTHER INTANGIBLE ASSETS

The realignment of our business segments and corresponding change in our reportable segments, more fully described in Note 17, resulted in a change in the composition of our reporting units, the unit of accounting for goodwill. Accordingly, we reassigned goodwill to our reporting units as of January 1, 2011 using the relative fair value approach. Changes in the carrying amount of goodwill retrospectively adjusted for our new reportable segments for the years ended December 31, 2010 and 2009 were as follows:

	Retail		Employer Group		Health & Well-Being Services		Other Businesses		Total
	(in thousands)
Balance at December 31, 2008	$	547,896	$	40,533	$	1,317,229	$	57,453	$	1,963,111
Subsequent payments/adjustments related to 2008 acquisitions		17,087		12,726		0		0		29,813
Balance at December 31, 2009		564,983		53,259		1,317,229		57,453		1,992,924
Acquisitions		0		0		538,293		0		538,293
Subsequent payments/adjustments related to 2008 acquisitions		27,861		8,731		0		0		36,592
Balance at December 31, 2010	$	592,844	$	61,990	$	1,855,522	$	57,453	$	2,567,809

The following table presents details of our other intangible assets included in other long-term assets in the accompanying consolidated balance sheets at December 31, 2010 and 2009:

	Weighted Average Life		2010						2009
			Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
			(in thousands)
Other intangible assets:
Customer contracts/relationships		10.7 yrs	$	413,855	$	145,997	$	267,858	$	314,885	$	117,748	$	197,137
Trade names		19.6 yrs		87,400		2,268		85,132		5,200		567		4,633
Provider contracts		16.0 yrs		42,753		11,659		31,094		42,753		8,281		34,472
Noncompetes and other		9.5 yrs		19,475		4,085		15,390		11,786		4,560		7,226
Total other intangible assets		12.5 yrs	$	563,483	$	164,009	$	399,474	$	374,624	$	131,156	$	243,468

Amortization expense for other intangible assets was approximately $37.8 million in 2010, $37.3 million in 2009 and $37.1 million in 2008. The following table presents our estimate of amortization expense for each of the five next succeeding fiscal years:

	(in thousands)
For the years ending December 31,:
2011	$	50,421
2012		48,792
2013		45,537
2014		41,039
2015		35,707

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Humana Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

9. BENEFITS PAYABLE

Activity in benefits payable, excluding military services, was as follows for the years ended December 31, 2010, 2009 and 2008:

	2010			2009			2008
	(in thousands)
Balances at January 1	$	2,943,379		$	2,898,782		$	2,355,461
Acquisitions		0			0			96,021
Incurred related to:
Current year		24,185,717			21,943,547			21,114,008
Prior years		(434,015	)		(252,756	)		(268,027	)
Total incurred		23,751,702			21,690,791			20,845,981
Paid related to:
Current year		(21,671,345	)		(19,581,314	)		(18,601,120	)
Prior years		(1,809,610	)		(2,064,880	)		(1,797,561	)
Total paid		(23,480,955	)		(21,646,194	)		(20,398,681	)
Balances at December 31	$	3,214,126		$	2,943,379		$	2,898,782

Amounts incurred related to prior years vary from previously estimated liabilities as the claims ultimately are settled. Negative amounts reported for incurred related to prior years result from claims being ultimately settled for amounts less than originally estimated (favorable development).

Actuarial standards require the use of assumptions based on moderately adverse experience, which generally results in favorable reserve development, or reserves that are considered redundant. The amount of redundancy over the last three years primarily has been impacted by the growth in our Medicare business, coupled with the application of consistent reserving practices. During 2010, we experienced prior year favorable reserve releases not in the ordinary course of business of approximately $231.2 million. This favorable reserve development primarily resulted from improvements in the claims processing environment and, to a lesser extent, better than originally estimated utilization as well as a shortening of the cycle time associated with provider claim submissions. The improvements in the claims processing environment benefited all lines of business, but were most prominent in our Medicare PFFS line of business. These improvements resulted in recoveries from the identification of claims billed at higher cost codes than those documented in the medical records via audits, as well as an improved ability to collect overpayments due to the development of system enhancements to our Commercial claims processing platform.

Military services benefits payable of $255.2 million and $279.2 million at December 31, 2010 and 2009, respectively, primarily consisted of our estimate of incurred healthcare services provided to beneficiaries which are in turn reimbursed by the federal government, as more fully described in Note 2. This amount is generally offset by a corresponding receivable due from the federal government.

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Humana Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Benefit expenses associated with military services and provisions associated with future policy benefits excluded from the previous table were as follows for the years ended December 31, 2010, 2009 and 2008:

	2010		2009		2008
	(in thousands)
Military services	$	3,059,492	$	3,019,655	$	2,819,787
Future policy benefits		305,875		73,130		64,338
Total	$	3,365,367	$	3,092,785	$	2,884,125

The increase in benefit expenses associated with future policy benefits payable during 2010 relates to reserve strengthening for our closed block of long-term care policies acquired in connection with the 2007 KMG America Corporation, or KMG, acquisition more fully described in Note 18.

10. INCOME TAXES

The provision for income taxes consisted of the following for the years ended December 31, 2010, 2009 and 2008:

	2010			2009			2008
	(in thousands)
Current provision:
Federal	$	785,888		$	532,722		$	336,870
States and Puerto Rico		63,262			56,155			30,829
Total current provision		849,150			588,877			367,699
Deferred benefit		(198,978	)		(26,792	)		(22,005	)
Provision for income taxes	$	650,172		$	562,085		$	345,694

The provision for income taxes was different from the amount computed using the federal statutory rate for the years ended December 31, 2010, 2009 and 2008 due to the following:

	2010			2009			2008
	(in thousands)
Income tax provision at federal statutory rate	$	612,347		$	560,616		$	347,497
States, net of federal benefit and Puerto Rico		30,865			28,968			12,412
Tax exempt investment income		(23,776	)		(21,327	)		(21,253	)
Nondeductible executive compensation		12,655			55			30
Contingent tax benefits		0			(16,781	)		0
Other, net		18,081			10,554			7,008
Provision for income taxes	$	650,172		$	562,085		$	345,694

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Humana Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The provision for income taxes for 2010 reflects a $12.7 million estimated impact from new limitations on the deductibility of annual compensation in excess of $500,000 per employee as mandated by the Health Insurance Reform Legislation.

The liability for unrecognized tax benefits was $16.8 million at December 31, 2008 and $16.0 million at December 31, 2007. This liability, which was released in 2009 as a result of settlements associated with the completion of the audit of our U.S. income tax returns for 2005 and 2006, reduced tax expense $16.8 million in 2009. As of December 31, 2010, we do not have material uncertain tax positions reflected in our consolidated balance sheet.

Deferred income tax balances reflect the impact of temporary differences between the tax bases of assets or liabilities and their reported amounts in our consolidated financial statements, and are stated at enacted tax rates expected to be in effect when the reported amounts are actually recovered or settled. Principal components of our net deferred tax balances at December 31, 2010 and 2009 were as follows:

	Assets (Liabilities)
	2010			2009
	(in thousands)
Future policy benefits payable	$	153,293		$	103,941
Net operating loss carryforward		136,894			97,398
Compensation and other accrued expenses		127,442			121,516
Benefits payable		88,617			36,996
Deferred acquisition costs		34,044			0
Capital loss carryforward		13,032			13,169
Unearned premiums		9,813			25,528
Other		19,004			24,715
Total deferred income tax assets		582,139			423,263
Valuation allowance		(28,063	)		(30,093	)
Total deferred income tax assets, net of valuation allowance		554,076			393,170
Depreciable property and intangible assets		(275,569	)		(213,291	)
Investment securities		(65,921	)		(25,077	)
Prepaid expenses		(47,185	)		(47,290	)
Deferred acquisition costs		0			(38,899	)
Total deferred income tax liabilities		(388,675	)		(324,557	)
Total net deferred income tax assets	$	165,401		$	68,613
Amounts recognized in the consolidated balance sheets:
Other current assets	$	76,598		$	32,206
Other long-term assets		88,803			36,407
Total net deferred income tax assets	$	165,401		$	68,613

At December 31, 2010, we had approximately $373.7 million of net operating losses to carry forward related to prior acquisitions. These net operating loss carryforwards, if not used to offset future taxable income, will expire from 2011 through 2030. A significant portion of these losses are in a subsidiary that will not be included in the Humana Inc. consolidated tax return until 2013, and, therefore, may not be used until that point. Due to limitations and uncertainty regarding our ability to use some of the carryforwards, a valuation allowance was established on $76.6 million of net operating loss carryforwards related to prior acquisitions. For the remainder of the net operating loss carryforwards, based on our historical record of producing taxable income and profitability, we have concluded that future operating income will be sufficient to give rise to tax expense to recover all deferred tax assets.

27

Humana Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

We file income tax returns in the United States and certain foreign jurisdictions. With few exceptions, which are immaterial in the aggregate, we are no longer subject to state, local and foreign tax examinations by tax authorities for years before 2008.

Our U.S. income tax returns for 2007 and 2008 are currently under examination by the Internal Revenue Service (IRS). Beginning with the 2009 tax year, as well as 2010, we are participating in the Compliance Assurance Process (CAP) with the IRS. Under CAP, the IRS does advance reviews during the tax year and as the return is being prepared for filing, thereby reducing the need for post-filing examinations. We expect the IRS will conclude its audits of the 2007, 2008, 2009 and 2010 tax years during 2011. As of December 31, 2010, we are not aware of any material adjustments the IRS may propose.

11. DEBT

The carrying value of long-term debt outstanding was as follows at December 31, 2010 and 2009:

	2010		2009
	(in thousands)
Long-term debt:
Senior notes:
$500 million, 6.45% due June 1, 2016	$	535,342	$	540,907
$500 million, 7.20% due June 15, 2018		508,005		508,799
$300 million, 6.30% due August 1, 2018		321,622		323,862
$250 million, 8.15% due June 15, 2038		266,892		267,070
Total senior notes		1,631,861		1,640,638
Other long-term borrowings		36,988		37,528
Total long-term debt	$	1,668,849	$	1,678,166

Senior Notes

Our senior notes, which are unsecured, may be redeemed at our option at any time at 100% of the principal amount plus accrued interest and a specified make-whole amount. The 7.20% and 8.15% senior notes are subject to an interest rate adjustment if the debt ratings assigned to the notes are downgraded (or subsequently upgraded) and contain a change of control provision that may require us to purchase the notes under certain circumstances.

We had been parties to interest-rate swap agreements to exchange the fixed interest rate under our senior notes for a variable interest rate based on LIBOR. As a result, the carrying value of the senior notes had been adjusted to reflect changes in value caused by an increase or decrease in interest rates. During 2008, we terminated all of our swap agreements. The cumulative adjustment to the carrying value of our senior notes was $103.4 million as of the termination date which is being amortized as a reduction to interest expense over the remaining term of the senior notes, resulting in a weighted-average effective interest rate fixed at 6.08%. The unamortized carrying value adjustment was $83.8 million as of December 31, 2010 and $92.9 million as of December 31, 2009.

Credit Agreement

In December 2010, we replaced our 5-year $1.0 billion unsecured revolving credit agreement which was set to expire in July 2011 with a 3-year $1.0 billion unsecured revolving agreement expiring December 2013. Under the new credit agreement, at our option, we can borrow on either a competitive advance basis or a revolving credit basis. The revolving credit portion bears interest at either LIBOR or the base rate plus a spread. The spread,

28

Humana Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

currently 200 basis points, varies depending on our credit ratings ranging from 150 to 262.5 basis points. We also pay an annual facility fee regardless of utilization. This facility fee, currently 37.5 basis points, may fluctuate between 25 and 62.5 basis points, depending upon our credit ratings. The competitive advance portion of any borrowings will bear interest at market rates prevailing at the time of borrowing on either a fixed rate or a floating rate based on LIBOR, at our option.

The terms of the new credit agreement include standard provisions related to conditions of borrowing, including a customary material adverse event clause which could limit our ability to borrow additional funds. In addition, the credit agreement contains customary restrictive and financial covenants as well as customary events of default, including financial covenants regarding the maintenance of a minimum level of net worth of $5,257.9 million at December 31, 2010 and a maximum leverage ratio of 3.0:1. We are in compliance with the financial covenants, with actual net worth of $6,924.1 million and a leverage ratio of 0.8:1, as measured in accordance with the credit agreement as of December 31, 2010. In addition, the new credit agreement includes an uncommitted $250 million incremental loan facility.

At December 31, 2010, we had no borrowings outstanding under the credit agreement. We have outstanding letters of credit of $10.4 million secured under the credit agreement. No amounts have ever been drawn on these letters of credit. Accordingly, as of December 31, 2010, we had $989.6 million of remaining borrowing capacity under the credit agreement, none of which would be restricted by our financial covenant compliance requirement. We have other customary, arms-length relationships, including financial advisory and banking, with some parties to the credit agreement.

Other Long-Term Borrowings

Other long-term borrowings of $37.0 million at December 31, 2010 represent junior subordinated debt of $36.1 million and financing for the renovation of a building of $0.9 million. The junior subordinated debt, which is due in 2037, may be called by us without penalty in 2012 and bears a fixed annual interest rate of 8.02% payable quarterly until 2012, and then payable at a floating rate based on LIBOR plus 310 basis points. The debt associated with the building renovation bears interest at 2.00%, is collateralized by the building, and is payable in various installments through 2014.

12. DERIVATIVE FINANCIAL INSTRUMENTS

We entered into interest-rate swap agreements with major financial institutions upon issuance of our senior notes. These swap agreements, which were considered derivative instruments, exchanged the fixed interest rate under all our senior notes for a variable interest rate based on LIBOR. The notional amount of the swap agreements was equal to the par amount of our senior notes. These swap agreements were qualified and designated as a fair value hedge. The gain or loss on the swap agreements as well as the offsetting loss or gain on the senior notes was recognized in current earnings. We included the gain or loss on the swap agreements in interest expense, the same line item as the offsetting loss or gain on the related senior notes. The gain or loss due to hedge ineffectiveness was not material for 2008.

During 2008, we terminated all of our interest-rate swap agreements for cash consideration of $93.0 million. We recognized a $10.4 million impairment charge as a realized investment loss associated with the termination of a swap with a subsidiary of Lehman, which subsequently filed for bankruptcy protection.

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Humana Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

13. EMPLOYEE BENEFIT PLANS

Employee Savings Plan

We have defined contribution retirement and savings plans covering eligible employees. Our contribution to these plans is based on various percentages of compensation, and in some instances, on the amount of our employees’ contributions to the plans. The cost of these plans amounted to approximately $108.6 million in 2010, $109.5 million in 2009, and $79.6 million in 2008, all of which was funded currently to the extent it was deductible for federal income tax purposes. The Company’s cash match is invested pursuant to the participant’s contribution direction. Based on the closing price of our common stock of $54.74 on December 31, 2010, approximately 14% of the retirement and savings plan’s assets were invested in our common stock, or approximately 4.1 million shares, representing 2% of the shares outstanding as of December 31, 2010. At December 31, 2010, approximately 7.2 million shares of our common stock were reserved for issuance under our defined contribution retirement and savings plans.

Stock-Based Compensation

We have plans under which options to purchase our common stock and restricted stock awards have been granted to executive officers, directors and key employees. The terms and vesting schedules for stock-based awards vary by type of grant. Generally, the awards vest upon time-based conditions. The stock awards of retirement-eligible participants granted on or after January 1, 2010 will continue to vest upon retirement from the Company. Our equity award program includes a retirement provision that treats all employees with a combination of age and years of service with the Company totaling 65 or greater, with a minimum required age of 55 and a minimum requirement of 5 years of service, as retirement-eligible. Upon exercise, stock-based compensation awards are settled with authorized but unissued company stock. The compensation expense that has been charged against income for these plans was as follows for the years ended December 31, 2010, 2009, and 2008:

	2010			2009			2008
	(in thousands)
Stock-based compensation expense by type:
Stock options	$	21,757		$	19,555		$	18,202
Restricted stock awards		41,190			46,315			37,167
Total stock-based compensation expense		62,947			65,870			55,369
Tax benefit recognized		(23,057	)		(24,128	)		(20,282	)
Stock-based compensation expense, net of tax	$	39,890		$	41,742		$	35,087

The tax benefit recognized in our consolidated financial statements is based on the amount of compensation expense recorded for book purposes. The actual tax benefit realized in our tax return is based on the intrinsic value, or the excess of the market value over the exercise or purchase price, of stock options exercised and restricted stock awards vested during the period. The actual tax benefit realized for the deductions taken on our tax returns from option exercises and restricted stock award vesting totaled $14.9 million in 2010, $16.3 million in 2009, and $16.9 million in 2008. There was no capitalized stock-based compensation expense.

The stock plans provide that one restricted share is equivalent to 1.7 stock options. At December 31, 2010, there were 12,375,233 shares reserved for stock award plans, including 3,225,299 shares of common stock available for future grants assuming all stock options or 1,897,235 shares available for future grants assuming all restricted shares.

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Stock Options

Stock options are granted with an exercise price equal to the fair market value of the underlying common stock on the date of grant. Our stock plans, as approved by the Board of Directors and stockholders, define fair market value as the average of the highest and lowest composite stock prices reported by the New York Stock Exchange on a given date. Exercise provisions vary, but most options vest in whole or in part 1 to 3 years after grant and expire 7 to 10 years after grant. Upon grant, stock options are assigned a fair value based on the Black-Scholes valuation model. Compensation expense is recognized on a straight-line basis over the total requisite service period, generally the total vesting period, for the entire award. For stock options granted on or after January 1, 2010 to retirement eligible employees, the compensation expense is recognized on a straight-line basis over the shorter of the requisite service period or the period from the date of grant to an employee’s eligible retirement date.

The weighted-average fair value of each option granted during 2010, 2009, and 2008 is provided below. The fair value was estimated on the date of grant using the Black-Scholes pricing model with the weighted-average assumptions indicated below:

	2010			2009			2008
Weighted-average fair value at grant date	$	19.58		$	14.24		$	17.95
Expected option life (years)		5.2			4.6			5.1
Expected volatility		43.8	%		39.2	%		28.2	%
Risk-free interest rate at grant date		2.7	%		1.9	%		2.9	%
Dividend yield		None			None			None

When valuing employee stock options, we stratify the employee population into three homogenous groups that historically have exhibited similar exercise behaviors. These groups are executive officers, directors, and all other employees. We value the stock options based on the unique assumptions for each of these employee groups.

We calculate the expected term for our employee stock options based on historical employee exercise behavior and base the risk-free interest rate on a traded zero-coupon U.S. Treasury bond with a term substantially equal to the option’s expected term.

The volatility used to value employee stock options is based on historical volatility. We calculate historical volatility using a simple-average calculation methodology based on daily price intervals as measured over the expected term of the option.

Activity for our option plans was as follows for the year ended December 31, 2010:

	Shares Under Option			Weighted-Average Exercise Price
Options outstanding at December 31, 2009		6,058,321		$	46.10
Granted		639,989			46.12
Exercised		(565,500	)		30.91
Expired		(250,545	)		62.10
Forfeited		(87,293	)		48.24
Options outstanding at December 31, 2010		5,794,972		$	46.86
Options exercisable at December 31, 2010		3,625,225		$	47.46

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As of December 31, 2010, outstanding stock options had an aggregate intrinsic value of $62.4 million, and a weighted-average remaining contractual term of 3.8 years. As of December 31, 2010, exercisable stock options had an aggregate intrinsic value of $39.8 million, and a weighted-average remaining contractual term of 2.9 years. The total intrinsic value of stock options exercised during 2010 was $11.3 million, compared with $23.7 million during 2009 and $18.3 million during 2008. Cash received from stock option exercises totaled $17.5 million in 2010, $18.3 million in 2009, and $12.1 million in 2008.

Total compensation expense not yet recognized related to nonvested options was $16.6 million at December 31, 2010. We expect to recognize this compensation expense over a weighted-average period of approximately 2.0 years.

Restricted Stock Awards

Restricted stock awards, including both restricted stock and restricted stock units, are granted with a fair value equal to the market price of our common stock on the date of grant. Compensation expense is recorded straight-line over the vesting period, generally three years from the date of grant. For restricted stock awards granted on or after January 1, 2010 to retirement eligible employees, the compensation expense is recognized on a straight-line basis over the shorter of the vesting period or the period from the date of grant to an employee’s eligible retirement date.

The weighted-average grant date fair value of our restricted stock awards was $49.29 in 2010, $41.16 in 2009, and $68.10 in 2008. Activity for our restricted stock awards was as follows for the year ended December 31, 2010:

	Shares			Weighted- Average Grant-Date Fair Value
Nonvested restricted stock awards at December 31, 2009		2,345,555		$	55.11
Granted		901,660			49.29
Vested		(634,202	)		62.18
Forfeited		(150,154	)		51.35
Expired		(3,899	)		59.66
Nonvested restricted stock awards at December 31, 2010		2,458,960		$	51.38

The fair value of shares vested during the years ended was $30.0 million in 2010, $22.3 million in 2009, and $28.7 million in 2008. Total compensation expense not yet recognized related to nonvested restricted stock awards was $38.4 million at December 31, 2010. We expect to recognize this compensation expense over a weighted-average period of approximately 2.0 years. There are no other contractual terms covering restricted stock awards once vested.

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14. EARNINGS PER COMMON SHARE COMPUTATION

Detail supporting the computation of basic and diluted earnings per common share was as follows for the years ended December 31, 2010, 2009 and 2008:

	2010		2009		2008
	(in thousands, except per share results)
Net income available for common stockholders	$	1,099,390	$	1,039,675	$	647,154
Weighted-average outstanding shares of common stock used to compute basic earnings per common share		167,782		167,364		167,172
Dilutive effect of:
Employee stock options		676		677		1,173
Restricted stock awards		1,340		1,030		842
Shares used to compute diluted earnings per common share		169,798		169,071		169,187
Basic earnings per common share	$	6.55	$	6.21	$	3.87
Diluted earnings per common share	$	6.47	$	6.15	$	3.83

Restricted stock awards and stock options to purchase 3,819,511 shares in 2010, 5,675,241 shares in 2009, and 3,243,933 shares in 2008 were anti-dilutive and, therefore, were not included in the computations of diluted earnings per common share.

15. STOCKHOLDERS’ EQUITY

In December 2009, the Board of Directors authorized the repurchase of up to $250 million of our common shares exclusive of shares repurchased in connection with employee stock plans. Under this share repurchase authorization, shares may be purchased from time to time at prevailing prices in the open market, by block purchases, or in privately-negotiated transactions, subject to certain regulatory restrictions on volume, pricing, and timing. During 2010, we repurchased 1.99 million common shares in open market transactions for $100.0 million at an average price of $50.17. As of February 4, 2011, the remaining authorized amount totaled $150.0 million and the authorization expires on December 31, 2011.

No shares were repurchased in open market transactions during 2009. During 2008, we repurchased 2.10 million common shares in open market transactions for $92.8 million at an average price of $44.19 under a stock repurchase plan previously authorized by the Board of Directors.

In connection with employee stock plans, we acquired 0.2 million common shares for $8.5 million in 2010, 0.6 million common shares for $22.8 million in 2009, and 0.2 million common shares for $13.3 million in 2008.

Regulatory Requirements

Certain of our subsidiaries operate in states that regulate the payment of dividends, loans, or other cash transfers to Humana Inc., our parent company, and require minimum levels of equity as well as limit investments to approved securities. The amount of dividends that may be paid to Humana Inc. by these subsidiaries, without prior approval by state regulatory authorities, is limited based on the entity’s level of statutory income and statutory capital and surplus. In most states, prior notification is provided before paying a dividend even if approval is not required.

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Although minimum required levels of equity are largely based on premium volume, product mix, and the quality of assets held, minimum requirements can vary significantly at the state level. Our state regulated subsidiaries had aggregate statutory capital and surplus of approximately $4.3 billion and $3.8 billion as of December 31, 2010 and 2009, respectively, which exceeded aggregate minimum regulatory requirements. The amount of dividends that may be paid to our parent company in 2011 without prior approval by state regulatory authorities is approximately $740 million in the aggregate. This compares to dividends that were able to be paid in 2010 without prior regulatory approval of approximately $720 million.

16. COMMITMENTS, GUARANTEES AND CONTINGENCIES

Leases

We lease facilities, computer hardware, and other furniture and equipment under long-term operating leases that are noncancelable and expire on various dates through 2025. We sublease facilities or partial facilities to third party tenants for space not used in our operations. Rent with scheduled escalation terms are accounted for on a straight-line basis over the lease term. Rent expense and sublease rental income, which are recorded net as an administrative expense, for all operating leases were as follows for the years ended December 31, 2010, 2009 and 2008:

	2010			2009			2008
	(in thousands)
Rent expense	$	155,206		$	160,927		$	142,885
Sublease rental income		(9,639	)		(9,049	)		(9,283	)
Net rent expense	$	145,567		$	151,878		$	133,602

Future annual minimum payments due subsequent to December 31, 2010 under all of our noncancelable operating leases with initial terms in excess of one year are as follows:

	Minimum Lease Payments		Sublease Rental Receipts			Net Lease Commitments
	(in thousands)
For the years ending December 31:
2011	$	190,525	$	(963	)	$	189,562
2012		162,434		(433	)		162,001
2013		133,434		(143	)		133,291
2014		108,159		(110	)		108,049
2015		82,005		(20	)		81,985
Thereafter		133,677		0			133,677
Total	$	810,234	$	(1,669	)	$	808,565

The table above includes noncancelable operating leases acquired in connection with the acquisition of Concentra on December 21, 2010 as described further in Note 3, including leases for medical and operating facilities, certain corporate office space as well as office and medical equipment.

Purchase Obligations

We have agreements to purchase services, primarily information technology related services, or to make improvements to real estate, in each case that are enforceable and legally binding on us and that specify all

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significant terms, including: fixed or minimum levels of service to be purchased; fixed, minimum or variable price provisions; and the appropriate timing of the transaction. We have purchase obligation commitments of $81.4 million in 2011, $44.6 million in 2012, $18.4 million in 2013, $3.7 million in 2014, and no material commitments thereafter. Purchase obligations exclude agreements that are cancelable without penalty.

Off-Balance Sheet Arrangements

As part of our ongoing business, we do not participate or knowingly seek to participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities (SPEs), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of December 31, 2010, we are not involved in any SPE transactions.

Guarantees and Indemnifications

Through indemnity agreements approved by the state regulatory authorities, certain of our regulated subsidiaries generally are guaranteed by Humana Inc., our parent company, in the event of insolvency for (1) member coverage for which premium payment has been made prior to insolvency; (2) benefits for members then hospitalized until discharged; and (3) payment to providers for services rendered prior to insolvency. Our parent also has guaranteed the obligations of our military services subsidiaries.

In the ordinary course of business, we enter into contractual arrangements under which we may agree to indemnify a third party to such arrangement from any losses incurred relating to the services they perform on behalf of us, or for losses arising from certain events as defined within the particular contract, which may include, for example, litigation or claims relating to past performance. Such indemnification obligations may not be subject to maximum loss clauses. Historically, payments made related to these indemnifications have been immaterial.

Government Contracts

Our Medicare business, which accounted for approximately 65% of our consolidated premiums and services revenue for the year ended December 31, 2010, primarily consisted of products covered under the Medicare Advantage and Medicare Part D Prescription Drug Plan contracts with the federal government. These contracts are renewed generally for a one-year term each December 31 unless CMS notifies us of its decision not to renew by August 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 business have been renewed for 2011.

CMS uses a risk-adjustment model which apportions premiums paid to Medicare Advantage plans according to health severity. The risk-adjustment model pays more for enrollees with predictably higher costs. Under this model, rates paid to Medicare Advantage plans are based on actuarially determined bids, which include a process whereby our prospective payments are based on a comparison of our beneficiaries’ risk scores, derived from medical diagnoses, to those enrolled in the government’s original Medicare program. Under the risk-adjustment methodology, all Medicare Advantage plans must collect and submit the necessary diagnosis code information from hospital inpatient, hospital outpatient, and physician providers to CMS within prescribed deadlines. The CMS risk-adjustment model uses this diagnosis data to calculate the risk adjusted premium payment to Medicare Advantage plans. We generally rely on providers to code their claim submissions with appropriate diagnoses, which we send to CMS as the basis for our payment received from CMS under the actuarial risk-adjustment model. We also rely on providers to appropriately document all medical data, including the diagnosis data submitted with claims.

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CMS is continuing to perform audits of various companies’ selected Medicare Advantage contracts related to this risk adjustment diagnosis data. These audits are referred to herein as Risk-Adjustment Data Validation Audits, or RADV audits. RADV audits review medical record documentation in an attempt to validate provider coding practices and the presence of risk adjustment conditions which influence the calculation of premium payments to Medicare Advantage plans. To date, six Humana contracts have been selected by CMS for RADV audits for the 2007 contract year, consisting of one “pilot” audit and five “targeted” audits for Humana plans.

On December 21, 2010, CMS posted a description of the agency’s proposed RADV sampling and payment adjustment calculation methodology to its website, and invited public comment, noting that CMS may revise its sampling and payment error calculation methodology based upon the comments received. We believe the audit and payment adjustment methodology proposed by CMS is fundamentally flawed and actuarially unsound. In essence, in making the comparison referred to above, CMS relies on two interdependent sets of data to set payment rates for Medicare Advantage (MA) plans: (1) fee for service (FFS) data from the government’s original Medicare program; and (2) MA data. The proposed methodology would review medical records for only one set of data (MA data), while not performing the same exercise on the other set (FFS data). However, because these two sets of data are inextricably linked, we believe CMS must audit and validate both of them before extrapolating any potential RADV audit results, in order to ensure that any resulting payment adjustment is accurate. We believe that the Social Security Act, under which the payment model was established, requires the consistent use of these data sets in determining risk-adjusted payments to MA plans. Furthermore, our payment received from CMS, as well as benefits offered and premiums charged to members, is based on bids that did not, by CMS design, include any assumption of retroactive audit payment adjustments. We believe that applying a retroactive audit adjustment after CMS acceptance of bids would improperly alter this process of establishing member benefits and premiums.

CMS has received public comments, including our comments and comments from other industry participants and the American Academy of Actuaries, which expressed concerns about the failure to appropriately compare the two sets of data. On February 3, 2011, CMS issued a statement that it was closely evaluating the comments it has received on this matter and anticipates making changes to the proposed methodology based on input it has received, although we are unable to predict the extent of changes that they may make.

We believe that the proposed methodology is actuarially unsound and in violation of the Social Security Act. We intend to defend that position vigorously. However, if CMS moves forward with implementation of the proposed methodology without changes to adequately address the data inconsistency issues described above, it would have a material adverse effect on our revenues derived from the Medicare Advantage program and, therefore, our results of operations, financial position, and cash flows.

Our Medicaid business, which accounted for approximately 2% of our consolidated premiums and services revenue for the year ended December 31, 2010, consists of contracts in Puerto Rico and Florida, with the vast majority in Puerto Rico. Effective October 1, 2010, the Puerto Rico Health Insurance Administration, or PRHIA, awarded us three contracts for the East, Southeast, and Southwest regions for a one year term with two options to extend the contracts for an additional term of up to one year, exercisable at the sole discretion of the PRHIA.

The loss of any of the contracts above or significant changes in these programs as a result of legislative action, including reductions in premium payments to us, or increases in member benefits without corresponding increases in premium payments to us may have a material adverse effect on our results of operations, financial position, and cash flows.

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Our military services business, which accounted for approximately 11% of our consolidated premiums and services revenue for the year ended December 31, 2010, primarily consists of the TRICARE South Region contract. The original 5-year South Region contract expired on March 31, 2009 and was extended through March 31, 2011. On October 5, 2010, we were notified that the Department of Defense TRICARE Management Activity, or TMA, intended to negotiate with us for an extension of our administration of the TRICARE South Region contract, and on January 6, 2011, an Amendment of Solicitation/Modification of Contract to the TRICARE South Region contract, in the form of an undefinitized contract action, became effective. The Amendment adds one additional one-year option period, Option Period IX (which runs from April 1, 2011 through March 31, 2012). The Amendment does not include the costs of the underwritten target health care cost and underwritten health care target fee, which will be negotiated separately. On January 21, 2011, the TMA notified us of their intent to exercise Option Period IX.

As required under the current contract, the target underwritten health care cost and underwriting fee amounts for Option Period IX will be negotiated separately. Any variance from the target health care cost is shared with the federal government. Accordingly, events and circumstances not contemplated in the negotiated target health care cost amount may have a material adverse effect on us. These changes may include an increase or reduction in the number of persons enrolled or eligible to enroll due to the federal government’s decision to increase or decrease U.S. military deployments. In the event government reimbursements were to decline from projected amounts, any failure to reduce the health care costs associated with these programs may have a material adverse effect on our results of operations, financial position, and cash flows.

In July 2009, we were notified by the Department of Defense that we were not awarded the third generation TRICARE program contract for the South Region which had been subject to competing bids. We filed a protest with the Government Accountability Office, or GAO, in connection with the award to another contractor citing discrepancies between the award criteria and procedures prescribed in the request for proposals issued by the DoD and those that appear to have been used by the DoD in making its contractor selection. In October 2009, we learned that the GAO had upheld our protest, determining that the TMA evaluation of our proposal had unreasonably failed to fully recognize and reasonably account for the likely cost savings associated with our record of obtaining network provider discounts from our established network in the South Region. On December 22, 2009, we were advised that TMA notified the GAO of its intent to implement corrective action consistent with the discussion contained within the GAO’s decision with respect to our protest. On October 22, 2010, TMA issued its latest amendment to the request for proposal requesting from offerors final proposal revisions to address, among other things, health care cost savings resulting from provider network discounts in the South Region. We submitted our final proposal revisions on November 9, 2010. At this time, we are not able to determine whether or not the protest decision by the GAO will have any effect upon the ultimate disposition of the contract award.

Legal Proceedings and Certain Regulatory Matters

Provider Litigation

Humana Military Healthcare Services, Inc. (“Humana Military”) was named as a defendant in Sacred Heart Health System, Inc., et al. v. Humana Military Healthcare Services Inc., Case No. 3:07-cv-00062 MCR/EMT (the “Sacred Heart” Complaint), a class action lawsuit filed on February 5, 2007 in the U.S. District Court for the Northern District of Florida asserting contract and fraud claims against Humana Military. The Sacred Heart Complaint alleged, among other things, that, Humana Military breached its network agreements with a class of hospitals in six states, including the seven named plaintiffs, that contracted for reimbursement of outpatient services provided to beneficiaries of the DoD’s TRICARE health benefits program (“TRICARE”). The Complaint alleged that Humana Military breached its network agreements when it failed to reimburse the hospitals based on negotiated discounts for non-surgical outpatient services performed on or after October 1, 1999, and instead

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reimbursed them based on published CHAMPUS Maximum Allowable Charges (so-called “CMAC rates”). Humana Military denied that it breached the network agreements with the hospitals and asserted a number of defenses to these claims. The Complaint sought, among other things, the following relief for the purported class members: (i) damages as a result of the alleged breach of contract by Humana Military, (ii) taxable costs of the litigation, (iii) attorneys fees, and (iv) any other relief the court deems just and proper. Separate and apart from the class relief, named plaintiff Sacred Heart Health System Inc. requested damages and other relief for its individual claim against Humana Military for fraud in the inducement to contract. On September 25, 2008, the district court certified a class consisting of all institutional healthcare service providers in TRICARE former Regions 3 and 4 which had network agreements with Humana Military to provide outpatient non-surgical services to CHAMPUS/TRICARE beneficiaries as of November 18, 1999, excluding those network providers who contractually agreed with Humana Military to submit any such disputes with Humana Military to arbitration. On March 3, 2010, the Court of Appeals reversed the district court’s class certification order and remanded the case to the district court for further proceeding. On June 28, 2010, the plaintiffs sought leave of the district court to amend their complaint to join additional hospital plaintiffs. Humana Military filed its response to the motion on July 28, 2010. The district court granted the plaintiffs’ motion to join 33 additional hospitals on September 24, 2010. On October 27, 2010, the plaintiffs filed their Fourth Amended Complaint claiming the U.S. District Court for the Northern District of Florida has subject matter jurisdiction over the case because the allegations in the complaint raise a substantial question under federal law. The amended complaint asserts no other material changes to the allegations or relief sought by the plaintiffs. Humana Military’s Answer to the Fourth Amended Complaint was filed on November 30, 2010.

On March 2, 2009, in a case styled Southeast Georgia Regional Medical Center, et al. v. Humana Military Healthcare Services, Inc., the named plaintiffs filed an arbitration demand, seeking relief on the same grounds as the plaintiffs in the Sacred Heart litigation. The arbitration plaintiffs originally sought certification of a class consisting of all institutional healthcare service providers that had contracts with Humana Military to provide outpatient non-surgical services and whose agreements provided for dispute resolution through arbitration. Humana Military submitted its response to the demand for arbitration on May 1, 2009. The plaintiffs have subsequently withdrawn their motion for class certification. On June 18, 2010, plaintiffs submitted their amended arbitration complaint. Humana Military’s answer to the complaint was submitted on July 9, 2010. On June 24, 2010, the arbitrators issued a case management order and scheduled a hearing to begin on May 23, 2011. On November 12, 2010, the arbitrators issued a revised case management and scheduling order and scheduled a hearing to begin on September 26, 2011.

Humana intends to defend each of these actions vigorously.

Internal Investigations

With the assistance of outside counsel, we are conducting an ongoing internal investigation related to certain aspects of our Florida subsidiary operations, and have voluntarily self-reported the existence of this investigation to CMS, the U.S. Department of Justice and the Florida Agency for Health Care Administration. Matters under review include, without limitation, the relationships between certain of our Florida-based employees and providers in our Medicaid and/or Medicare networks, practices related to the financial support of non-profit or provider access centers for Medicaid enrollment and related enrollment processes, and financial support of physician practices. We have reported to the regulatory authorities noted above on the progress of our investigation to date, and intend to continue to discuss with these authorities our factual findings as well as any remedial actions we may take.

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Other Lawsuits and Regulatory Matters

Our current and past business practices are subject to review or other investigations by various state insurance and health care regulatory authorities and other state and federal regulatory authorities. These authorities regularly scrutinize the business practices of health insurance and benefits companies. These reviews focus on numerous facets of our business, including claims payment practices, provider contracting, competitive practices, commission payments, privacy issues, utilization management practices, and sales practices, among others. Some of these reviews have historically resulted in fines imposed on us and some have required changes to some of our practices. We continue to be subject to these reviews, which could result in additional fines or other sanctions being imposed on us or additional changes in some of our practices. In addition, we have responded and are continuing to respond to requests for information regarding certain provider-payment practices from various states’ attorneys general and departments of insurance.

On September 10, 2009, the Office of Inspector General, or OIG, of the United States Department of Health and Human Services issued subpoenas to us and our subsidiary, Humana Pharmacy, Inc., seeking documents related to our Medicare Part D prescription plans and the operation of RightSourceRx^SM, our mail order pharmacy in Phoenix, Arizona. The government has informed us that no additional materials will be sought pursuant to the subpoenas.

We also are involved in various other lawsuits that arise, for the most part, in the ordinary course of our business operations, including employment litigation, claims of medical malpractice, bad faith, nonacceptance or termination of providers, anticompetitive practices, improper rate setting, failure to disclose network discounts and various other provider arrangements, general contractual matters, intellectual property matters, and challenges to subrogation practices. We also are subject to claims relating to performance of contractual obligations to providers, members, and others, including failure to properly pay claims, improper policy terminations, challenges to our implementation of the new Medicare prescription drug program and other litigation.

Personal injury claims and claims for extracontractual damages 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.

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 penalties, fines or other sanctions that may be imposed at the discretion of federal or state regulatory authorities. Nevertheless, it is reasonably possible that the outcome of these matters may have a material adverse effect on our results of operations, financial position, and cash flows. Certain of these matters could also affect our reputation.

17. SEGMENT INFORMATION

During the first quarter of 2011, we realigned our business segments to reflect our evolving business model. As a result, we reassessed and changed our operating and reportable segments in the first quarter of 2011 to reflect management’s new view of the business and to align our external financial reporting with our new operating and internal financial reporting model. All respective amounts related to the segment change have been retrospectively adjusted throughout the financial statements as discussed in Note 2. Our new reportable segments and the basis for determining those segments are discussed below.

We currently manage our business with three reportable segments: Retail, Employer Group, and Health and Well-Being Services. In addition, we include businesses that are not individually reportable because they do not meet

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the quantitative thresholds required by generally accepted accounting principles in an Other Businesses category. These segments are based on a combination of the type of health plan customer and adjacent businesses centered on well-being solutions for our health plans and other customers, as described below. These segment groupings are consistent with information used by our Chief Executive Officer to assess performance and allocate resources.

The Retail segment consists of Medicare and commercial fully-insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health and financial protection products, marketed directly to individuals. The Employer Group segment consists of Medicare and commercial fully-insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health and financial protection products, as well as administrative services only products marketed to employer groups. The Health and Well-Being Services segment includes services offered to our health plan members as well as to third parties that promote health and wellness, including primary care, pharmacy, integrated wellness, and home care services. The Other Businesses category consists of our Military services, primarily our TRICARE South Region contract, Medicaid, and closed-block long-term care businesses as well as our contract with CMS to administer the LI-NET program.

Our Health and Well-Being Services intersegment revenues primarily relate to managing prescription drug coverage for members of our other segments through Humana Pharmacy Solutions^®, or HPS, and includes the operations of RightSourceRx^®, our mail order pharmacy business. These revenues consist of the prescription price (ingredient cost plus dispensing fee), including the portion to be settled with the member (co-share) or with the government (subsidies), plus any associated administrative fees. Service revenues related to the distribution of prescriptions by third party retail pharmacies in our networks are recognized when the claim is processed and product revenues from dispensing prescriptions from our mail order pharmacies are recorded when the prescription or product is shipped. Our pharmacy operations, which are responsible for designing pharmacy benefits, including defining member co-share responsibilities, determining formulary listings, selecting and establishing prices charged by retail pharmacies, confirming member eligibility, reviewing drug utilization, and processing claims, act as a principal in the arrangement on behalf of members in our other segments. As principal, our Health and Well-Being Services segment reports revenues on a gross basis including co-share amounts from members collected by third party retail pharmacies at the point of service.

We present our consolidated results of operations from the perspective of the health plans. As a result, the cost of providing benefits to our members, whether provided via a third party provider or internally through a stand-alone subsidiary, is classified as benefits expense and excludes the portion of the cost for which the health plans do not bear responsibility, including member co-share amounts and government subsidies of $3.5 billion, $3.5 billion, and $4.6 billion for years ended December 31, 2010, 2009, and 2008, respectively.

Other than those described previously, the accounting policies of each segment are the same and are described in Note 2. Transactions between reportable segments consist of sales of services rendered by our Health and Well-Being Services segment, primarily pharmacy and behavioral health services, to our Retail and Employer Group customers. Intersegment sales and expenses are recorded at fair value and eliminated in consolidation. Members served by our segments often utilize the same provider networks, enabling us in some instances to obtain more favorable contract terms with providers. Our segments also share indirect costs and assets. As a result, the profitability of each segment is interdependent. We do not report total assets by segment since this is not a metric used to assess performance and allocate resources. We allocate most operating expenses to our segments. Certain corporate income and expenses are not allocated to the segments, including investment income not supporting segment operations, interest expense on corporate debt, and certain other corporate expenses. These items are managed at a corporate level. These corporate amounts are reported separately from our reportable segments and included with intersegment eliminations in the tables presenting segment results below.

40

Humana Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Our segment results were as follows for the years ended December 31, 2010, 2009, and 2008:

	Retail		Employer Group		Health and Well-Being Services		Other Businesses			Eliminations/ Corporate			Consolidated
	(in thousands)
2010
Revenues - external customers
Premiums:
Medicare Advantage	$	16,265,839	$	3,020,282	$	0	$	0		$	0		$	19,286,121
Medicare stand-alone PDP		1,960,063		4,598		0		355,399			0			2,320,060
Total Medicare		18,225,902		3,024,880		0		355,399			0			21,606,181
Fully-insured		745,329		5,168,713		0		0			0			5,914,042
Specialty		81,481		885,310		0		0			0			966,791
Military services		0		0		0		3,462,544			0			3,462,544
Medicaid and other		0		0		0		762,765			0			762,765
Total premiums		19,052,712		9,078,903		0		4,580,708			0			32,712,323
Services revenue:
Provider		0		0		34,104		0			0			34,104
ASO and other		11,105		394,950		0		115,021			0			521,076
Total services revenue		11,105		394,950		34,104		115,021			0			555,180
Total revenues - external customers		19,063,817		9,473,853		34,104		4,695,729			0			33,267,503
Intersegment revenues
Services		0		13,137		7,493,941		0			(7,507,078	)		0
Products		0		0		1,291,572		0			(1,291,572	)		0
Total intersegment revenues		0		13,137		8,785,513		0			(8,798,650	)		0
Investment income		80,525		42,205		0		42,581			164,021			329,332
Total revenues		19,144,342		9,529,195		8,819,617		4,738,310			(8,634,629	)		33,596,835
Operating expenses:
Benefits		15,625,243		7,485,497		0		4,252,333			(246,004	)		27,117,069
Operating costs		2,113,011		1,662,166		8,575,077		475,463			(8,445,398	)		4,380,319
Depreciation and amortization		117,219		93,478		25,622		11,865			(3,359	)		244,825
Total operating expenses		17,855,473		9,241,141		8,600,699		4,739,661			(8,694,761	)		31,742,213
Income from operations		1,288,869		288,054		218,918		(1,351	)		60,132			1,854,622
Interest expense		0		0		0		0			105,060			105,060
Income (loss) before income taxes	$	1,288,869	$	288,054	$	218,918	$	(1,351	)	$	(44,928	)	$	1,749,562

Premium and services revenues derived from our contracts with the federal government, as a percentage of our total premium and services revenues, were approximately 76% for 2010, 73% for 2009 and 72% for 2008.

Retail segment benefit expenses for 2010 include $198.4 million related to prior year favorable reserve releases not in the ordinary course of business as discussed more fully in Note 9. Retail segment operating costs for 2010 include $147.5 million for the write-down of deferred acquisition costs associated with our individual major medical policies as discussed more fully in Note 18.

41

Humana Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Employer Group segment benefit expenses for 2010 include $32.8 million related to prior year favorable reserve releases not in the ordinary course of business as discussed more fully in Note 9.

Benefit expenses for Other Businesses for 2010 include $138.9 million for reserve strengthening associated with our closed block of long-term care policies as discussed more fully in Note 18.

	Retail		Employer Group			Health and Well-Being Services		Other Businesses		Eliminations/ Corporate			Consolidated
	(in thousands)
2009
Revenues - external customers
Premiums:
Medicare Advantage	$	15,333,225	$	1,080,076		$	0	$	0	$	0		$	16,413,301
Medicare stand-alone PDP		2,322,432		4,986			0		0		0			2,327,418
Total Medicare		17,655,657		1,085,062			0		0		0			18,740,719
Fully-insured		638,044		5,547,114			0		0		0			6,185,158
Specialty		54,837		834,413			0		0		0			889,250
Military services		0		0			0		3,426,739		0			3,426,739
Medicaid and other		0		0			0		684,885		0			684,885
Total premiums		18,348,538		7,466,589			0		4,111,624		0			29,926,751
Services revenue:
Provider		0		0			16,412		0		0			16,412
ASO and other		10,049		369,684			0		123,362		0			503,095
Total services revenue		10,049		369,684			16,412		123,362		0			519,507
Total revenues - external customers		18,358,587		7,836,273			16,412		4,234,986		0			30,446,258
Intersegment revenues
Services		0		13,814			8,002,820		0		(8,016,634	)		0
Products		0		0			949,095		0		(949,095	)		0
Total intersegment revenues		0		13,814			8,951,915		0		(8,965,729	)		0
Investment income		88,013		47,573			0		23,361		137,370			296,317
Total revenues		18,446,600		7,897,660			8,968,327		4,258,347		(8,828,359	)		30,742,575
Operating expenses:
Benefits		14,987,915		6,289,033			0		3,704,460		(197,832	)		24,783,576
Operating costs		1,984,817		1,533,069			8,767,686		431,051		(8,702,639	)		4,013,984
Depreciation and amortization		115,102		88,861			18,111		25,001		(9,663	)		237,412
Total operating expenses		17,087,834		7,910,963			8,785,797		4,160,512		(8,910,134	)		29,034,972
Income from operations		1,358,766		(13,303	)		182,530		97,835		81,775			1,707,603
Interest expense		0		0			0		0		105,843			105,843
Income (loss) before income taxes	$	1,358,766	$	(13,303	)	$	182,530	$	97,835	$	(24,068	)	$	1,601,760

42

Humana Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Retail		Employer Group		Health and Well-Being Services		Other Businesses		Eliminations/ Corporate			Consolidated
	(in thousands)
2008
Revenues - external customers
Premiums:
Medicare Advantage	$	12,987,639	$	790,360	$	0	$	0	$	0		$	13,777,999
Medicare stand-alone PDP		3,375,636		4,764		0		0		0			3,380,400
Total Medicare		16,363,275		795,124		0		0		0			17,158,399
Fully-insured		519,077		5,650,326		0		0		0			6,169,403
Specialty		66,338		819,249		0		0		0			885,587
Military services		0		0		0		3,218,270		0			3,218,270
Medicaid and other		0		0		0		633,185		0			633,185
Total premiums		16,948,690		7,264,699		0		3,851,455		0			28,064,844
Services revenue:
Provider		0		0		14,845		0		0			14,845
ASO and other		10,965		352,769		0		89,660		0			453,394
Total services revenue		10,965		352,769		14,845		89,660		0			468,239
Total revenues - external customers		16,959,655		7,617,468		14,845		3,941,115		0			28,533,083
Intersegment revenues
Services		0		12,706		10,505,782		0		(10,518,488	)		0
Products		0		0		836,828		0		(836,828	)		0
Total intersegment revenues		0		12,706		11,342,610		0		(11,355,316	)		0
Investment income		60,399		36,515		0		7,316		115,985			220,215
Total revenues		17,020,054		7,666,689		11,357,455		3,948,431		(11,239,331	)		28,753,298
Operating expenses:
Benefits		14,398,572		6,057,804		0		3,438,619		(164,889	)		23,730,106
Operating costs		1,848,651		1,433,365		11,187,070		420,459		(11,149,890	)		3,739,655
Depreciation and amortization		101,663		78,872		14,343		23,773		(8,251	)		210,400
Total operating expenses		16,348,886		7,570,041		11,201,413		3,882,851		(11,323,030	)		27,680,161
Income from operations		671,168		96,648		156,042		65,580		83,699			1,073,137
Interest expense		0		0		0		0		80,289			80,289
Income before income taxes	$	671,168	$	96,648	$	156,042	$	65,580	$	3,410		$	992,848

43

Humana Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

18. EXPENSES ASSOCIATED WITH LONG-DURATION INSURANCE PRODUCTS

Premiums associated with our long-duration insurance products accounted for approximately 2% of our consolidated premiums and services revenue for the year ended December 31, 2010. We use long-duration accounting for products such as long-term care, life insurance, annuities, and certain health and other supplemental policies sold to individuals because they are expected to remain in force for an extended period beyond one year and because premium received in the earlier years is intended to pay anticipated benefits to be incurred in future years. As a result, we defer policy acquisition costs and amortize them over the estimated life of the policies in proportion to premiums earned.

In addition, we establish reserves for future policy benefits in recognition of the fact that some of the premium received in the earlier years is intended to pay anticipated benefits to be incurred in future years. These reserves are recognized on a net level premium method based on interest rates, mortality, morbidity, withdrawal and maintenance expense assumptions from published actuarial tables, modified based upon actual experience. The assumptions used to determine the liability for future policy benefits are established and locked in at the time each contract is acquired and would only change if our expected future experience deteriorated to the point that the level of the liability, together with the present value of future gross premiums, are not adequate to provide for future expected policy benefits. Long-term care policies provide for long-duration coverage and, therefore, our actual claims experience will emerge many years after assumptions have been established. The risk of a deviation of the actual morbidity and mortality rates from those assumed in our reserves are particularly significant to our closed block of long-term care policies. We monitor the loss experience of these long-term care policies and, when necessary, apply for premium rate increases through a regulatory filing and approval process in the jurisdictions in which such products were sold. To the extent premium rate increases and/or loss experience vary from our acquisition date assumptions, future adjustments to reserves could be required.

The table below presents deferred acquisition costs and future policy benefits payable associated with our long-duration insurance products for the years ended December 31, 2010 and 2009.

	2010					2009
	Deferred acquisition costs		Future policy benefits payable			Deferred acquisition costs		Future policy benefits payable
	(in thousands)
Other long-term assets	$	73,503	$	0		$	201,431	$	0
Trade accounts payable and accrued expenses		0		(52,936	)		0		(40,249	)
Long-term liabilities		0		(1,492,855	)		0		(1,193,047	)
Total asset (liability)	$	73,503	$	(1,545,791	)	$	201,431	$	(1,233,296	)

In addition, future policy benefits payable include amounts of $218.9 million at December 31, 2010 and $225.0 million at December 31, 2009 which are subject to 100% coinsurance agreements as more fully described in Note 19.

Benefit expense associated with future policy benefits payable was $305.9 million in 2010, $73.1 million in 2009, and $64.3 million in 2008. Benefit expense for 2010 included a net charge of $138.9 million associated with our long-term care policies discussed further below. Amortization of deferred acquisition costs included in operating costs was $198.1 million in 2010, $52.4 million in 2009, and $43.0 million in 2008. Amortization expense for 2010 included a write-down of deferred acquisition costs of $147.5 million discussed further below.

44

Humana Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Future policy benefits payable include $824.6 million at December 31, 2010 and $571.9 million at December 31, 2009 associated with a closed block of long-term care policies acquired in connection with the November 30, 2007 KMG acquisition. During the fourth quarter of 2010, certain states approved premium rate increases for a large portion of our long-term care block that were significantly below our acquisition date assumptions. Based on these actions by the states, combined with lower interest rates and higher actual expenses as compared to acquisition date assumptions, we determined that our existing future policy benefits payable, together with the present value of future gross premiums, associated with our long-term care policies were not adequate to provide for future policy benefits under these policies; therefore we unlocked and modified our assumptions based on current expectations. Accordingly, during the fourth quarter of 2010 we recorded $138.9 million of additional benefit expense, with a corresponding increase in future policy benefits payable of $170.3 million partially offset by a related reinsurance recoverable of $31.4 million included in other long-term assets.

Deferred acquisition costs included $36.2 million and $165.7 million associated with our individual major medical policies at December 31, 2010 and December 31, 2009, respectively. Future policy benefits payable associated with our individual major medical policies were $179.8 million at December 31, 2010 and $128.3 million at December 31, 2009. In light of the Health Insurance Reform Legislation, including mandating that 80% of premium revenues be expended on medical costs for individual major medical policies beginning in 2011, we completed a deferred acquisition cost recoverability analysis for our individual major medical policies during 2010. Our recoverability test indicated that a substantial portion of unamortized deferred acquisition costs associated with the individual major medical block of business were not recoverable from future income. As a result, during 2010 we recorded a write-down of deferred acquisition costs of $147.5 million with a corresponding charge to operating costs.

19. REINSURANCE

Certain blocks of insurance assumed in acquisitions, primarily life, long-term care, and annuities in run-off status, are subject to reinsurance where some or all of the underwriting risk related to these policies has been ceded to a third party. In addition, a large portion of our reinsurance takes the form of 100% coinsurance agreements where, in addition to all of the underwriting risk, all administrative responsibilities, including premium collections and claim payment, have also been ceded to a third party. We acquired these policies and related reinsurance agreements with the purchase of stock of companies in which the policies were originally written. We acquired these companies for business reasons unrelated to these particular policies, including the companies’ other products and licenses necessary to fulfill strategic plans.

A reinsurance agreement between two entities transfers the underwriting risk of policyholder liabilities to a reinsurer while the primary insurer retains the contractual relationship with the ultimate insured. As such, these reinsurance agreements do not completely relieve us of our potential liability to the ultimate insured. However, given the transfer of underwriting risk, our potential liability is limited to the credit exposure which exists should the reinsurer be unable to meet its obligations assumed under these reinsurance agreements.

Reinsurance recoverables represent the portion of future policy benefits payable that are covered by reinsurance. Amounts recoverable from reinsurers are estimated in a manner consistent with the methods used to determine future policy benefits payable as detailed in Note 2. Reinsurance recoverables, included in other long-term assets, were $420.7 million at December 31, 2010 and $378.3 million at December 31, 2009. The percentage of these reinsurance recoverables resulting from 100% coinsurance agreements was 52% at December 31, 2010 and 59% at December 31, 2009. Premiums ceded were $33.7 million in 2010, $33.0 million in 2009 and $34.2 million in 2008.

45

Humana Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

We evaluate the financial condition of these reinsurers on a regular basis. These reinsurers are well-known and well-established, as evidenced by the strong financial ratings at December 31, 2010 presented below:

Reinsurer	Total Recoverable		A.M. Best Rating at December 31, 2010
	(in thousands)
Protective Life Insurance Company	$	200,833	A+ (superior)
All others		219,863	A++ to B++ (superior to good)
	$	420,696

The all other category represents approximately 20 reinsurers with individual balances less than $60 million. Two of these reinsurers have placed $26.2 million of cash and securities in trusts, an amount at least equal to the recoverable from the reinsurer.

46

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

        of Humana Inc.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, of stockholders’ equity and of cash flows, present fairly, in all material respects, the financial position of Humana Inc. and its subsidiaries (“Company”) at December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules (not appearing herein) appearing under Item 15a(2) of the Annual Report on Form 10-K for the year ended December 31, 2010 present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedules, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting (not presented herein) appearing under Item 9A of the Annual Report on Form 10-K for the year ended December 31, 2010. Our responsibility is to express opinions on these financial statements, on the financial statement schedules, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

47

As described in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A, management has excluded Concentra from its assessment of internal control over financial reporting as of December 31, 2010 because this entity was acquired by the Company in a purchase business combination during 2010. We have also excluded Concentra from our audit of internal control over financial reporting. Concentra is a wholly-owned subsidiary whose total assets and total revenues represent 6% and 0.1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2010.

/s/ PricewaterhouseCoopers LLP

Louisville, Kentucky

February 17, 2011 (except with respect to our opinion on the consolidated financial statements insofar as it relates to the effects of the business segment realignment as discussed in Note 2, to which the date is October 20, 2011)

48

Humana Inc.

QUARTERLY FINANCIAL INFORMATION

(Unaudited)

A summary of our quarterly unaudited results of operations for the years ended December 31, 2010 and 2009 follows:

	2010
	First		Second (1)		Third		Fourth (2)
	(in thousands, except per share results)
Total revenues	$	8,380,338	$	8,589,243	$	8,350,812	$	8,276,442
Income before income taxes		416,926		535,854		622,290		174,492
Net income		258,768		340,076		393,221		107,325
Basic earnings per common share		1.54		2.02		2.35		0.64
Diluted earnings per common share		1.52		2.00		2.32		0.63
	2009
	First		Second		Third		Fourth
	(in thousands, except per share results)
Total revenues	$	7,662,986	$	7,842,909	$	7,657,773	$	7,578,907
Income before income taxes		293,762		439,950		469,348		398,700
Net income		205,717		281,780		301,519		250,659
Basic earnings per common share		1.23		1.68		1.80		1.49
Diluted earnings per common share		1.22		1.67		1.78		1.48

(1) Includes an expense of $147.5 million ($93.4 million after tax, or $0.55 per diluted common share) for the write-down of deferred acquisition costs associated with our individual major medical policies as more fully described in Note 18 to the consolidated financial statements.

(2) Includes an expense of $138.9 million ($88.0 million after tax, or $0.52 per diluted common share) associated with reserve strengthening for our closed block of long-term care policies acquired in connection with the 2007 acquisition of KMG America Corporation as more fully described in Note 18 to the consolidated financial statements.

49

XML

Commitments, Guarantees And Contingencies (Narrative) (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2010
Purchase obligations in 2011	81.4
Purchase obligations in 2012	44.6
Purchase obligations in 2013	18.4
Purchase obligations in 2014	3.7
Medicare [Member]
Percentage of premiums and services revenues	65.00%
Medicaid And Other [Member]
Percentage of premiums and services revenues	2.00%
Military Services [Member]
Percentage of premiums and services revenues	11.00%
Military Services [Member] | TRICARE South Region Contract [Member]
Original South Region contract, term in years	5

XML

Investment Securities (Investment Securities Classified As Current And Long-Term) (Details) (USD $) In Thousands	Dec. 31, 2010	Dec. 31, 2009
Available For Sale Securities Amortized Cost	$ 8,175,981	$ 7,425,744
Available For Sale Securities Gross Unrealized Gains	258,465	149,757
Available For Sale Securities Gross Unrealized Losses	(62,007)	(78,351)
Available For Sale Securities Fair Value	8,372,439	7,497,150
Debt Securities [Member] | US Treasury And Government [Member] | US Treasury And Agency Obligations [Member]
Available For Sale Securities Amortized Cost	697,816	1,005,203
Available For Sale Securities Gross Unrealized Gains	14,412	6,683
Available For Sale Securities Gross Unrealized Losses	(615)	(2,534)
Available For Sale Securities Fair Value	711,613	1,009,352
Debt Securities [Member] | US Treasury And Government [Member] | Mortgage-Backed Securities [Member]
Available For Sale Securities Amortized Cost	1,614,569	1,675,667
Available For Sale Securities Gross Unrealized Gains	49,783	24,324
Available For Sale Securities Gross Unrealized Losses	(1,173)	(11,328)
Available For Sale Securities Fair Value	1,663,179	1,688,663
Debt Securities [Member] | Tax-Exempt Municipal Securities [Member]
Available For Sale Securities Amortized Cost	2,439,659	2,195,077
Available For Sale Securities Gross Unrealized Gains	37,294	52,381
Available For Sale Securities Gross Unrealized Losses	(43,619)	(23,417)
Available For Sale Securities Fair Value	2,433,334	2,224,041
Debt Securities [Member] | Residential Mortgage Backed Securities [Member]
Available For Sale Securities Amortized Cost	58,017	106,191
Available For Sale Securities Gross Unrealized Gains	545	220
Available For Sale Securities Gross Unrealized Losses	(2,675)	(10,999)
Available For Sale Securities Fair Value	55,887	95,412
Debt Securities [Member] | Commercial Mortgage Backed Securities [Member]
Available For Sale Securities Amortized Cost	306,291	285,014
Available For Sale Securities Gross Unrealized Gains	14,911	3,252
Available For Sale Securities Gross Unrealized Losses	(171)	(8,640)
Available For Sale Securities Fair Value	321,031	279,626
Debt Securities [Member] | Asset-Backed Securities [Member]
Available For Sale Securities Amortized Cost	148,068	106,471
Available For Sale Securities Gross Unrealized Gains	1,727	824
Available For Sale Securities Gross Unrealized Losses	(44)	(107)
Available For Sale Securities Fair Value	149,751	107,188
Debt Securities [Member] | Corporate Debt Securities [Member]
Available For Sale Securities Amortized Cost	2,906,228	2,043,721
Available For Sale Securities Gross Unrealized Gains	139,793	57,173
Available For Sale Securities Gross Unrealized Losses	(13,710)	(21,326)
Available For Sale Securities Fair Value	3,032,311	2,079,568
Debt Securities [Member] | Redeemable Preferred Stock [Member]
Available For Sale Securities Amortized Cost	5,333	8,400
Available For Sale Securities Gross Unrealized Gains	0	4,900
Available For Sale Securities Gross Unrealized Losses	0	0
Available For Sale Securities Fair Value	$ 5,333	$ 13,300

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data	Dec. 31, 2010	Dec. 31, 2009
Consolidated Balance Sheets [Abstract]
Receivables, allowance for doubtful accounts	$ 51,470	$ 50,832
Preferred stock, par	$ 1	$ 1
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, issued	0	0
Common stock, par	$ 0.1667	$ 0.1667
Common stock, shares authorized	300,000,000	300,000,000
Common stock, shares issued	190,244,741	189,801,119
Treasury stock, shares	21,795,051	19,621,069

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Consolidated Statements Of Income (USD $) In Thousands, except Per Share data	3 Months Ended										12 Months Ended
	Dec. 31, 2010		Sep. 30, 2010	Jun. 30, 2010		Mar. 31, 2010	Dec. 31, 2009	Sep. 30, 2009	Jun. 30, 2009	Mar. 31, 2009	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Revenues:
Premiums											$ 32,712,323	$ 29,926,751	$ 28,064,844
Services											555,180	519,507	468,239
Investment income											329,332	296,317	220,215
Total revenues	8,276,442	[1]	8,350,812	8,589,243	[2]	8,380,338	7,578,907	7,657,773	7,842,909	7,662,986	33,596,835	30,742,575	28,753,298
Operating expenses:
Benefits											27,117,069	24,783,576	23,730,106
Operating costs											4,380,319	4,013,984	3,739,655
Depreciation and amortization											244,825	237,412	210,400
Total operating expenses											31,742,213	29,034,972	27,680,161
Income from operations											1,854,622	1,707,603	1,073,137
Interest expense											105,060	105,843	80,289
Income before income taxes	174,492	[1]	622,290	535,854	[2]	416,926	398,700	469,348	439,950	293,762	1,749,562	1,601,760	992,848
Provision for income taxes											650,172	562,085	345,694
Net income	$ 107,325	[1]	$ 393,221	$ 340,076	[2]	$ 258,768	$ 250,659	$ 301,519	$ 281,780	$ 205,717	$ 1,099,390	$ 1,039,675	$ 647,154
Basic earnings per common share	$ 0.64	[1]	$ 2.35	$ 2.02	[2]	$ 1.54	$ 1.49	$ 1.80	$ 1.68	$ 1.23	$ 6.55	$ 6.21	$ 3.87
Diluted earnings per common share	$ 0.63	[1]	$ 2.32	$ 2.00	[2]	$ 1.52	$ 1.48	$ 1.78	$ 1.67	$ 1.22	$ 6.47	$ 6.15	$ 3.83

[1] Includes an expense of $138.9 million ($88.0 million after tax, or $0.52 per diluted common share) associated with reserve strengthening for our closed block of long-term care policies acquired in connection with the 2007 acquisition of KMG America Corporation as more fully described in Note 18 to the consolidated financial statements.

[2] Includes an expense of $147.5 million ($93.4 million after tax, or $0.55 per diluted common share) for the write-down of deferred acquisition costs associated with our individual major medical policies as more fully described in Note 18 to the consolidated financial statements.

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Debt (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2010 years	Dec. 31, 2009	Dec. 31, 2008
Percentage of senior notes principal amount which may be redeemed at our option	100.00%
Cumulative adjustment to carrying value of senior note			$ 103,400,000
Weighted-average effective interest rate fixed			6.08%
Unamortized carrying value adjustment	83,800,000	92,900,000
Revolving credit agreement term, in years	5
Amount of unsecured revolving credit agreement	1,000,000,000
Expiration date of credit agreement	July 2011
Current basis points spread over LIBOR of revolving credit agreement	200
Lower limit of spread variance that is dependent upon credit rating, basis points	150
Upper limit of spread variance that is dependent upon credit rating, basis points	262.5
Current facility fee, basis points	37.5
Lower limit of facility fee that is dependent upon credit rating, basis points	25
Upper limit of facility fee that is dependent upon credit rating, basis points	62.5
Outstanding letters of credit	10,400,000
Borrowings outstanding under credit agreement	0
Remaining borrowing capacity	989,600,000
Line of credit facility, covenant terms	The terms of the new credit agreement include standard provisions related to conditions of borrowing, including a customary material adverse event clause which could limit our ability to borrow additional funds. In addition, the credit agreement contains customary restrictive and financial covenants as well as customary events of default, including financial covenants regarding the maintenance of a minimum level of net worth of $5,257.9 million at December 31, 2010 and a maximum leverage ratio of 3.0:1. We are in compliance with the financial covenants, with actual net worth of $6,924.1 million and a leverage ratio of 0.8:1, as measured in accordance with the credit agreement as of December 31, 2010.
Uncommited Incremental Loan Facility	250,000,000
Portion of other long-term borrowings	37,000,000
Building Renovation Financing [Member] | Other Long Term Borrowings [Member]
Stated interest rate	2.00%
Maturity date	Dec. 31, 2014
Portion of other long-term borrowings	900,000
Payment terms	Various installments
Junior Subordinated Debt From Acquisition [Member]
Junior Subordinated Debt, Interest Rate Beginning 2012	LIBOR plus 310 basis points
Junior Subordinated Debt From Acquisition [Member] | Other Long Term Borrowings [Member]
Stated interest rate	8.02%
Maturity date	Dec. 31, 2037
Junior subordinated debt callable date	Dec. 31, 2012
Portion of other long-term borrowings	36,100,000
Payment terms	Quarterly
$500 Million, 7.20% Due June 15, 2018 [Member]
Stated interest rate	7.20%
Maturity date	Jun. 15, 2018
$250 Million, 8.15% Due June 15, 2038 [Member]
Stated interest rate	8.15%
Maturity date	Jun. 15, 2038
New Credit Agreement [Member]
Revolving credit agreement term, in years	3
Amount of unsecured revolving credit agreement	$ 1,000,000,000
Expiration date of credit agreement	December 2013

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Investment Securities (Contractual Maturities Of Debt Securities Available For Sale) (Details) (USD $) In Thousands	Dec. 31, 2010	Dec. 31, 2009
Investment Securities [Abstract]
Due within one year, amortized cost	$ 299,861
Due after one year through five years, amortized cost	1,936,215
Due after five years through ten years, amortized cost	2,072,510
Due after ten years, amortized cost	1,740,450
Mortgage and asset-backed securities, amortized cost	2,126,945
Total debt securities, amortized cost	8,175,981	7,425,744
Due within one year, fair value	301,630
Due after one year through five years, fair value	1,991,966
Due after five years through ten years, fair value	2,134,576
Due after ten years, fair value	1,754,419
Mortgage and asset-backed securities, fair value	2,189,848
Total debt securities, fair value	$ 8,372,439	$ 7,497,150

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Commitments, Guarantees And Contingencies (Future Annual Minimum Payments Due) (Details) (USD $) In Thousands	Dec. 31, 2010
Commitments, Guarantees And Contingencies [Abstract]
Minimum lease payments, 2011	$ 190,525
Minimum lease payments, 2012	162,434
Minimum lease payments, 2013	133,434
Minimum lease payments, 2014	108,159
Minimum lease payments, 2015	82,005
Minimum lease payments, thereafter	133,677
Minimum lease payments, total	810,234
Sublease rental receipts, 2011	(963)
Sublease rental receipts, 2012	(433)
Sublease rental receipts, 2013	(143)
Sublease rental receipts, 2014	(110)
Sublease rental receipts, 2015	(20)
Sublease rental receipts, thereafter	0
Sublease rental receipts, total	(1,669)
Net operating lease commitments, 2011	189,562
Net operating lease commitments, 2012	162,001
Net operating lease commitments, 2013	133,291
Net operating lease commitments, 2014	108,049
Net operating lease commitments, 2015	81,985
Net operating lease commitments, thereafter	133,677
Net operating lease commitments, total	$ 808,565

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Reinsurance (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Reinsurance
Reinsurance recoverables included in other long-term assets	$ 420,696,000	$ 378,300,000
Percentage of reinsurance recoverables resulting 100% coinsurance agreements	52.00%	59.00%
Premiums ceded	33,700,000	33,000,000	34,200,000
Number of reinsurers other than Protective Life Insurance Company that comprise the reinsurance recoverables balance	20
Maximum balance related to reinsurers other than Protective Life Insurance Company	60,000,000
Number of reinsurers who have placed cash and securities in trusts	2
Cash and securities in trusts held by certain reinsurers	$ 26,200,000

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Commitments, Guarantees And Contingencies

12 Months Ended

Dec. 31, 2010

Commitments, Guarantees And Contingencies [Abstract]

Commitments, Guarantees And Contingencies

16. COMMITMENTS, GUARANTEES AND CONTINGENCIES

Leases

We lease facilities, computer hardware, and other furniture and equipment under long-term operating leases that are noncancelable and expire on various dates through 2025. We sublease facilities or partial facilities to third party tenants for space not used in our operations. Rent with scheduled escalation terms are accounted for on a straight-line basis over the lease term. Rent expense and sublease rental income, which are recorded net as an administrative expense, for all operating leases were as follows for the years ended December 31, 2010, 2009 and 2008:

	2010			2009			2008
	(in thousands)
Rent expense	$	155,206		$	160,927		$	142,885
Sublease rental income		(9,639	)		(9,049	)		(9,283	)
Net rent expense	$	145,567		$	151,878		$	133,602

Future annual minimum payments due subsequent to December 31, 2010 under all of our noncancelable operating leases with initial terms in excess of one year are as follows:

	Minimum Lease Payments		Sublease Rental Receipts			Net Lease Commitments
	(in thousands)
For the years ending December 31:
2011	$	190,525	$	(963	)	$	189,562
2012		162,434		(433	)		162,001
2013		133,434		(143	)		133,291
2014		108,159		(110	)		108,049
2015		82,005		(20	)		81,985
Thereafter		133,677		0			133,677
Total	$	810,234	$	(1,669	)	$	808,565

The table above includes noncancelable operating leases acquired in connection with the acquisition of Concentra on December 21, 2010 as described further in Note 3, including leases for medical and operating facilities, certain corporate office space as well as office and medical equipment.

Purchase Obligations

We have agreements to purchase services, primarily information technology related services, or to make improvements to real estate, in each case that are enforceable and legally binding on us and that specify all significant terms, including: fixed or minimum levels of service to be purchased; fixed, minimum or variable price provisions; and the appropriate timing of the transaction. We have purchase obligation commitments of $81.4 million in 2011, $44.6 million in 2012, $18.4 million in 2013, $3.7 million in 2014, and no material commitments thereafter. Purchase obligations exclude agreements that are cancelable without penalty.

Off-Balance Sheet Arrangements

As part of our ongoing business, we do not participate or knowingly seek to participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities (SPEs), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of December 31, 2010, we are not involved in any SPE transactions.

Guarantees and Indemnifications

Through indemnity agreements approved by the state regulatory authorities, certain of our regulated subsidiaries generally are guaranteed by Humana Inc., our parent company, in the event of insolvency for (1) member coverage for which premium payment has been made prior to insolvency; (2) benefits for members then hospitalized until discharged; and (3) payment to providers for services rendered prior to insolvency. Our parent also has guaranteed the obligations of our military services subsidiaries.

In the ordinary course of business, we enter into contractual arrangements under which we may agree to indemnify a third party to such arrangement from any losses incurred relating to the services they perform on behalf of us, or for losses arising from certain events as defined within the particular contract, which may include, for example, litigation or claims relating to past performance. Such indemnification obligations may not be subject to maximum loss clauses. Historically, payments made related to these indemnifications have been immaterial.

Government Contracts

Our Medicare business, which accounted for approximately 65% of our consolidated premiums and services revenue for the year ended December 31, 2010, primarily consisted of products covered under the Medicare Advantage and Medicare Part D Prescription Drug Plan contracts with the federal government. These contracts are renewed generally for a one-year term each December 31 unless CMS notifies us of its decision not to renew by August 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 business have been renewed for 2011.

CMS uses a risk-adjustment model which apportions premiums paid to Medicare Advantage plans according to health severity. The risk-adjustment model pays more for enrollees with predictably higher costs. Under this model, rates paid to Medicare Advantage plans are based on actuarially determined bids, which include a process whereby our prospective payments are based on a comparison of our beneficiaries' risk scores, derived from medical diagnoses, to those enrolled in the government's original Medicare program. Under the risk-adjustment methodology, all Medicare Advantage plans must collect and submit the necessary diagnosis code information from hospital inpatient, hospital outpatient, and physician providers to CMS within prescribed deadlines. The CMS risk-adjustment model uses this diagnosis data to calculate the risk adjusted premium payment to Medicare Advantage plans. We generally rely on providers to code their claim submissions with appropriate diagnoses, which we send to CMS as the basis for our payment received from CMS under the actuarial risk-adjustment model. We also rely on providers to appropriately document all medical data, including the diagnosis data submitted with claims.

CMS is continuing to perform audits of various companies' selected Medicare Advantage contracts related to this risk adjustment diagnosis data. These audits are referred to herein as Risk-Adjustment Data Validation Audits, or RADV audits. RADV audits review medical record documentation in an attempt to validate provider coding practices and the presence of risk adjustment conditions which influence the calculation of premium payments to Medicare Advantage plans. To date, six Humana contracts have been selected by CMS for RADV audits for the 2007 contract year, consisting of one "pilot" audit and five "targeted" audits for Humana plans.

On December 21, 2010, CMS posted a description of the agency's proposed RADV sampling and payment adjustment calculation methodology to its website, and invited public comment, noting that CMS may revise its sampling and payment error calculation methodology based upon the comments received. We believe the audit and payment adjustment methodology proposed by CMS is fundamentally flawed and actuarially unsound. In essence, in making the comparison referred to above, CMS relies on two interdependent sets of data to set payment rates for Medicare Advantage (MA) plans: (1) fee for service (FFS) data from the government's original Medicare program; and (2) MA data. The proposed methodology would review medical records for only one set of data (MA data), while not performing the same exercise on the other set (FFS data). However, because these two sets of data are inextricably linked, we believe CMS must audit and validate both of them before extrapolating any potential RADV audit results, in order to ensure that any resulting payment adjustment is accurate. We believe that the Social Security Act, under which the payment model was established, requires the consistent use of these data sets in determining risk-adjusted payments to MA plans. Furthermore, our payment received from CMS, as well as benefits offered and premiums charged to members, is based on bids that did not, by CMS design, include any assumption of retroactive audit payment adjustments. We believe that applying a retroactive audit adjustment after CMS acceptance of bids would improperly alter this process of establishing member benefits and premiums.

CMS has received public comments, including our comments and comments from other industry participants and the American Academy of Actuaries, which expressed concerns about the failure to appropriately compare the two sets of data. On February 3, 2011, CMS issued a statement that it was closely evaluating the comments it has received on this matter and anticipates making changes to the proposed methodology based on input it has received, although we are unable to predict the extent of changes that they may make.

We believe that the proposed methodology is actuarially unsound and in violation of the Social Security Act. We intend to defend that position vigorously. However, if CMS moves forward with implementation of the proposed methodology without changes to adequately address the data inconsistency issues described above, it would have a material adverse effect on our revenues derived from the Medicare Advantage program and, therefore, our results of operations, financial position, and cash flows.

Our Medicaid business, which accounted for approximately 2% of our consolidated premiums and services revenue for the year ended December 31, 2010, consists of contracts in Puerto Rico and Florida, with the vast majority in Puerto Rico. Effective October 1, 2010, the Puerto Rico Health Insurance Administration, or PRHIA, awarded us three contracts for the East, Southeast, and Southwest regions for a one year term with two options to extend the contracts for an additional term of up to one year, exercisable at the sole discretion of the PRHIA.

The loss of any of the contracts above or significant changes in these programs as a result of legislative action, including reductions in premium payments to us, or increases in member benefits without corresponding increases in premium payments to us may have a material adverse effect on our results of operations, financial position, and cash flows.

Our military services business, which accounted for approximately 11% of our consolidated premiums and services revenue for the year ended December 31, 2010, primarily consists of the TRICARE South Region contract. The original 5-year South Region contract expired on March 31, 2009 and was extended through March 31, 2011. On October 5, 2010, we were notified that the Department of Defense TRICARE Management Activity, or TMA, intended to negotiate with us for an extension of our administration of the TRICARE South Region contract, and on January 6, 2011, an Amendment of Solicitation/Modification of Contract to the TRICARE South Region contract, in the form of an undefinitized contract action, became effective. The Amendment adds one additional one-year option period, Option Period IX (which runs from April 1, 2011 through March 31, 2012). The Amendment does not include the costs of the underwritten target health care cost and underwritten health care target fee, which will be negotiated separately. On January 21, 2011, the TMA notified us of their intent to exercise Option Period IX.

As required under the current contract, the target underwritten health care cost and underwriting fee amounts for Option Period IX will be negotiated separately. Any variance from the target health care cost is shared with the federal government. Accordingly, events and circumstances not contemplated in the negotiated target health care cost amount may have a material adverse effect on us. These changes may include an increase or reduction in the number of persons enrolled or eligible to enroll due to the federal government's decision to increase or decrease U.S. military deployments. In the event government reimbursements were to decline from projected amounts, any failure to reduce the health care costs associated with these programs may have a material adverse effect on our results of operations, financial position, and cash flows.

In July 2009, we were notified by the Department of Defense that we were not awarded the third generation TRICARE program contract for the South Region which had been subject to competing bids. We filed a protest with the Government Accountability Office, or GAO, in connection with the award to another contractor citing discrepancies between the award criteria and procedures prescribed in the request for proposals issued by the DoD and those that appear to have been used by the DoD in making its contractor selection. In October 2009, we learned that the GAO had upheld our protest, determining that the TMA evaluation of our proposal had unreasonably failed to fully recognize and reasonably account for the likely cost savings associated with our record of obtaining network provider discounts from our established network in the South Region. On December 22, 2009, we were advised that TMA notified the GAO of its intent to implement corrective action consistent with the discussion contained within the GAO's decision with respect to our protest. On October 22, 2010, TMA issued its latest amendment to the request for proposal requesting from offerors final proposal revisions to address, among other things, health care cost savings resulting from provider network discounts in the South Region. We submitted our final proposal revisions on November 9, 2010. At this time, we are not able to determine whether or not the protest decision by the GAO will have any effect upon the ultimate disposition of the contract award.

Legal Proceedings and Certain Regulatory Matters

Provider Litigation

Humana Military Healthcare Services, Inc. ("Humana Military") was named as a defendant in Sacred Heart Health System, Inc., et al. v. Humana Military Healthcare Services Inc., Case No. 3:07-cv-00062 MCR/EMT (the "Sacred Heart" Complaint), a class action lawsuit filed on February 5, 2007 in the U.S. District Court for the Northern District of Florida asserting contract and fraud claims against Humana Military. The Sacred Heart Complaint alleged, among other things, that, Humana Military breached its network agreements with a class of hospitals in six states, including the seven named plaintiffs, that contracted for reimbursement of outpatient services provided to beneficiaries of the DoD's TRICARE health benefits program ("TRICARE"). The Complaint alleged that Humana Military breached its network agreements when it failed to reimburse the hospitals based on negotiated discounts for non-surgical outpatient services performed on or after October 1, 1999, and instead reimbursed them based on published CHAMPUS Maximum Allowable Charges (so-called "CMAC rates"). Humana Military denied that it breached the network agreements with the hospitals and asserted a number of defenses to these claims. The Complaint sought, among other things, the following relief for the purported class members: (i) damages as a result of the alleged breach of contract by Humana Military, (ii) taxable costs of the litigation, (iii) attorneys fees, and (iv) any other relief the court deems just and proper. Separate and apart from the class relief, named plaintiff Sacred Heart Health System Inc. requested damages and other relief for its individual claim against Humana Military for fraud in the inducement to contract. On September 25, 2008, the district court certified a class consisting of all institutional healthcare service providers in TRICARE former Regions 3 and 4 which had network agreements with Humana Military to provide outpatient non-surgical services to CHAMPUS/TRICARE beneficiaries as of November 18, 1999, excluding those network providers who contractually agreed with Humana Military to submit any such disputes with Humana Military to arbitration. On March 3, 2010, the Court of Appeals reversed the district court's class certification order and remanded the case to the district court for further proceeding. On June 28, 2010, the plaintiffs sought leave of the district court to amend their complaint to join additional hospital plaintiffs. Humana Military filed its response to the motion on July 28, 2010. The district court granted the plaintiffs' motion to join 33 additional hospitals on September 24, 2010. On October 27, 2010, the plaintiffs filed their Fourth Amended Complaint claiming the U.S. District Court for the Northern District of Florida has subject matter jurisdiction over the case because the allegations in the complaint raise a substantial question under federal law. The amended complaint asserts no other material changes to the allegations or relief sought by the plaintiffs. Humana Military's Answer to the Fourth Amended Complaint was filed on November 30, 2010.

On March 2, 2009, in a case styled Southeast Georgia Regional Medical Center, et al. v. Humana Military Healthcare Services, Inc., the named plaintiffs filed an arbitration demand, seeking relief on the same grounds as the plaintiffs in the Sacred Heart litigation. The arbitration plaintiffs originally sought certification of a class consisting of all institutional healthcare service providers that had contracts with Humana Military to provide outpatient non-surgical services and whose agreements provided for dispute resolution through arbitration. Humana Military submitted its response to the demand for arbitration on May 1, 2009. The plaintiffs have subsequently withdrawn their motion for class certification. On June 18, 2010, plaintiffs submitted their amended arbitration complaint. Humana Military's answer to the complaint was submitted on July 9, 2010. On June 24, 2010, the arbitrators issued a case management order and scheduled a hearing to begin on May 23, 2011. On November 12, 2010, the arbitrators issued a revised case management and scheduling order and scheduled a hearing to begin on September 26, 2011.

Humana intends to defend each of these actions vigorously.

Internal Investigations

With the assistance of outside counsel, we are conducting an ongoing internal investigation related to certain aspects of our Florida subsidiary operations, and have voluntarily self-reported the existence of this investigation to CMS, the U.S. Department of Justice and the Florida Agency for Health Care Administration. Matters under review include, without limitation, the relationships between certain of our Florida-based employees and providers in our Medicaid and/or Medicare networks, practices related to the financial support of non-profit or provider access centers for Medicaid enrollment and related enrollment processes, and financial support of physician practices. We have reported to the regulatory authorities noted above on the progress of our investigation to date, and intend to continue to discuss with these authorities our factual findings as well as any remedial actions we may take.

Other Lawsuits and Regulatory Matters

Our current and past business practices are subject to review or other investigations by various state insurance and health care regulatory authorities and other state and federal regulatory authorities. These authorities regularly scrutinize the business practices of health insurance and benefits companies. These reviews focus on numerous facets of our business, including claims payment practices, provider contracting, competitive practices, commission payments, privacy issues, utilization management practices, and sales practices, among others. Some of these reviews have historically resulted in fines imposed on us and some have required changes to some of our practices. We continue to be subject to these reviews, which could result in additional fines or other sanctions being imposed on us or additional changes in some of our practices. In addition, we have responded and are continuing to respond to requests for information regarding certain provider-payment practices from various states' attorneys general and departments of insurance.

On September 10, 2009, the Office of Inspector General, or OIG, of the United States Department of Health and Human Services issued subpoenas to us and our subsidiary, Humana Pharmacy, Inc., seeking documents related to our Medicare Part D prescription plans and the operation of RightSourceRx^SM, our mail order pharmacy in Phoenix, Arizona. The government has informed us that no additional materials will be sought pursuant to the subpoenas.

We also are involved in various other lawsuits that arise, for the most part, in the ordinary course of our business operations, including employment litigation, claims of medical malpractice, bad faith, nonacceptance or termination of providers, anticompetitive practices, improper rate setting, failure to disclose network discounts and various other provider arrangements, general contractual matters, intellectual property matters, and challenges to subrogation practices. We also are subject to claims relating to performance of contractual obligations to providers, members, and others, including failure to properly pay claims, improper policy terminations, challenges to our implementation of the new Medicare prescription drug program and other litigation.

Personal injury claims and claims for extracontractual damages 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.

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 penalties, fines or other sanctions that may be imposed at the discretion of federal or state regulatory authorities. Nevertheless, it is reasonably possible that the outcome of these matters may have a material adverse effect on our results of operations, financial position, and cash flows. Certain of these matters could also affect our reputation.

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Earnings Per Common Share Computation (Detail Supporting The Computation Of Basic And Diluted Earnings Per Common Share) (Details) (USD $) In Thousands, except Per Share data	3 Months Ended										12 Months Ended
	Dec. 31, 2010		Sep. 30, 2010	Jun. 30, 2010		Mar. 31, 2010	Dec. 31, 2009	Sep. 30, 2009	Jun. 30, 2009	Mar. 31, 2009	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Net income available for common stockholders	$ 107,325	[1]	$ 393,221	$ 340,076	[2]	$ 258,768	$ 250,659	$ 301,519	$ 281,780	$ 205,717	$ 1,099,390	$ 1,039,675	$ 647,154
Weighted average outstanding shares of common stock used to compute basic earnings per common share											167,782	167,364	167,172
Shares used to compute diluted earnings per common share											169,798	169,071	169,187
Basic earnings per common share	$ 0.64	[1]	$ 2.35	$ 2.02	[2]	$ 1.54	$ 1.49	$ 1.80	$ 1.68	$ 1.23	$ 6.55	$ 6.21	$ 3.87
Diluted earnings per common share	$ 0.63	[1]	$ 2.32	$ 2.00	[2]	$ 1.52	$ 1.48	$ 1.78	$ 1.67	$ 1.22	$ 6.47	$ 6.15	$ 3.83
Employee Stock Option [Member]
Dilutive effect of employee stock options and restricted stock awards											676	677	1,173
Restricted Stock [Member]
Dilutive effect of employee stock options and restricted stock awards											1,340	1,030	842

[1] Includes an expense of $138.9 million ($88.0 million after tax, or $0.52 per diluted common share) associated with reserve strengthening for our closed block of long-term care policies acquired in connection with the 2007 acquisition of KMG America Corporation as more fully described in Note 18 to the consolidated financial statements.

[2] Includes an expense of $147.5 million ($93.4 million after tax, or $0.55 per diluted common share) for the write-down of deferred acquisition costs associated with our individual major medical policies as more fully described in Note 18 to the consolidated financial statements.

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Document And Entity Information	12 Months Ended
	Dec. 31, 2010
Document and Entity Information [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2010
Document Fiscal Year Focus	2010
Document Fiscal Period Focus	FY
Trading Symbol	hum
Entity Registrant Name	HUMANA INC
Entity Central Index Key	0000049071

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Acquisitions (Fair Values Of Assets Acquired And Liabilities Assumed At The Date Of The Acquisition) (Details) (Concentra [Member], USD $) In Thousands	Dec. 31, 2010
Concentra [Member]
Cash and cash equivalents	$ 21,317
Receivables	108,571
Other current assets	20,589
Property and equipment	131,837
Goodwill	531,372
Other intangible assets	188,000
Other long-term assets	12,935
Total assets acquired	1,014,621
Current liabilities	(100,091)
Other long-term liabilities	(109,811)
Total liabilities assumed	(209,902)
Net assets acquired	$ 804,719

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Reinsurance

12 Months Ended

Dec. 31, 2010

Reinsurance

Reinsurance

19. REINSURANCE

Certain blocks of insurance assumed in acquisitions, primarily life, long-term care, and annuities in run-off status, are subject to reinsurance where some or all of the underwriting risk related to these policies has been ceded to a third party. In addition, a large portion of our reinsurance takes the form of 100% coinsurance agreements where, in addition to all of the underwriting risk, all administrative responsibilities, including premium collections and claim payment, have also been ceded to a third party. We acquired these policies and related reinsurance agreements with the purchase of stock of companies in which the policies were originally written. We acquired these companies for business reasons unrelated to these particular policies, including the companies' other products and licenses necessary to fulfill strategic plans.

A reinsurance agreement between two entities transfers the underwriting risk of policyholder liabilities to a reinsurer while the primary insurer retains the contractual relationship with the ultimate insured. As such, these reinsurance agreements do not completely relieve us of our potential liability to the ultimate insured. However, given the transfer of underwriting risk, our potential liability is limited to the credit exposure which exists should the reinsurer be unable to meet its obligations assumed under these reinsurance agreements.

Reinsurance recoverables represent the portion of future policy benefits payable that are covered by reinsurance. Amounts recoverable from reinsurers are estimated in a manner consistent with the methods used to determine future policy benefits payable as detailed in Note 2. Reinsurance recoverables, included in other long-term assets, were $420.7 million at December 31, 2010 and $378.3 million at December 31, 2009. The percentage of these reinsurance recoverables resulting from 100% coinsurance agreements was 52% at December 31, 2010 and 59% at December 31, 2009. Premiums ceded were $33.7 million in 2010, $33.0 million in 2009 and $34.2 million in 2008.

We evaluate the financial condition of these reinsurers on a regular basis. These reinsurers are well-known and well-established, as evidenced by the strong financial ratings at December 31, 2010 presented below:

Reinsurer	Total Recoverable		A.M. Best Rating at December 31, 2010
	(in thousands)
Protective Life Insurance Company	$	200,833	A+ (superior)
All others		219,863	A++ to B++ (superior to good)
	$	420,696

The all other category represents approximately 20 reinsurers with individual balances less than $60 million. Two of these reinsurers have placed $26.2 million of cash and securities in trusts, an amount at least equal to the recoverable from the reinsurer.

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Acquisitions (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2010
Concentra [Member]
Date of acquisition	December 21, 2010
Cash consideration	$ 804,700,000
Other intangible assets useful life, years	13.7
Acquired goodwill deductible for tax purpose	57,900,000
Acquisition-related costs	14,900,000
Amount allocated to other intangible assets	188,000,000
Amount allocated to goodwill	531,372,000
Cariten [Member]
Date of acquisition	October 31, 2008
Cash consideration	291,000,000
Other intangible assets useful life, years	11.6
Payments to settle purchase price contingency	34,900,000
Change in the fair value of intangible assets	(27,100,000)
Amount which consideration paid exceeded fair value of net tangible assets acquired	145,800,000
Amount allocated to other intangible assets	52,300,000
Amount allocated to goodwill	93,500,000
Metcare [Member]
Date of acquisition	August 29, 2008
Cash consideration	14,900,000
OSF Health Plans [Member]
Date of acquisition	May 22, 2008
Cash consideration	87,300,000
Other intangible assets useful life, years	9.9
Amount which consideration paid exceeded fair value of net tangible assets acquired	31,100,000
Amount allocated to other intangible assets	10,100,000
Amount allocated to goodwill	21,000,000
Purchase price settlement	3,300,000
SecureHorizons [Member]
Date of acquisition	April 30, 2008
Cash consideration	185,300,000
Other intangible assets useful life, years	10.9
Amount which consideration paid exceeded fair value of net tangible assets acquired	185,300,000
Amount allocated to other intangible assets	69,300,000
Amount allocated to goodwill	116,000,000
Additional subsidiary capital and surplus requirements related to acquisition	$ 40,000,000

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Employee Benefit Plans (Activity For Option Plans) (Details) (USD $)	12 Months Ended
	Dec. 31, 2010
Employee Benefit Plans [Abstract]
Shares under options outstanding, beginning balance	6,058,321
Shares under options, granted	639,989
Shares under options, exercised	(565,500)
Shares under options, expired	(250,545)
Shares under options, forfeited	(87,293)
Shares under options outstanding, ending balance	5,794,972
Shares under options, options exercisable	3,625,225
Weighted-average exercise price of options outstanding, beginning balance	$ 46.10
Weighted average exercise price of options, granted	$ 46.12
Weighted average exercise price of options, exercised	$ 30.91
Weighted average exercise price of options, expired	$ 62.10
Weighted average exercise price of options, forfeited	$ 48.24
Weighted-average exercise price of options outstanding, ending balance	$ 46.86
Options exercisable, weighted average exercise price	$ 47.46

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Fair Value

12 Months Ended

Dec. 31, 2010

Fair Value [Abstract]

Fair Value

5. FAIR VALUE

Financial Assets

The following table summarizes our fair value measurements at December 31, 2010 and 2009, respectively, for financial assets measured at fair value on a recurring basis:

			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant  Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
December 31, 2010
Cash equivalents	$	1,606,592	$	1,606,592	$	0	$	0
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations		711,613		0		711,613		0
Mortgage-backed securities		1,663,179		0		1,663,179		0
Tax-exempt municipal securities		2,433,334		0		2,381,528		51,806
Mortgage-backed securities:
Residential		55,887		0		55,887		0
Commercial		321,031		0		321,031		0
Asset-backed securities		149,751		0		148,545		1,206
Corporate debt securities		3,032,311		0		3,025,097		7,214
Redeemable preferred stock		5,333		0		0		5,333
Total debt securities		8,372,439		0		8,306,880		65,559
Securities lending invested collateral		49,636		24,639		24,997		0
Total invested assets	$	10,028,667	$	1,631,231	$	8,331,877	$	65,559
December 31, 2009
Cash equivalents	$	1,507,490	$	1,507,490	$	0	$	0
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations		1,009,352		0		1,009,352		0
Mortgage-backed securities		1,688,663		0		1,688,663		0
Tax-exempt municipal securities		2,224,041		0		2,155,227		68,814
Mortgage-backed securities:
Residential		95,412		0		95,412		0
Commercial		279,626		0		279,626		0
Asset-backed securities		107,188		0		105,060		2,128
Corporate debt securities		2,079,568		0		2,071,087		8,481
Redeemable preferred stock		13,300		0		0		13,300
Total debt securities		7,497,150		0		7,404,427		92,723
Securities lending invested collateral		119,586		53,569		66,017		0
Total invested assets	$	9,124,226	$	1,561,059	$	7,470,444	$	92,723

There were no material transfers between level 1 and level 2 during 2010 or 2009. During the years ended December 31, 2010 and 2009, the changes in the fair value of the assets measured using significant unobservable inputs (Level 3) were comprised of the following:

	For the year ended December 31,
	2010									2009
	Auction Rate Securities			Privates and Venture Capital			Total			Auction Rate Securities			Privates and Venture Capital			Total
	(in thousands)
Beginning balance at January 1	$	68,814		$	23,909		$	92,723		$	73,654		$	18,272		$	91,926
Total gains or losses:
Realized in earnings		16			6,244			6,260			16			74			90
Unrealized in other comprehensive income		1,901			(4,426	)		(2,525	)		269			4,382			4,651
Purchases, sales, issuances, and settlements, net		(18,925	)		(11,974	)		(30,899	)		(5,125	)		(2,102	)		(7,227	)
Transfers into Level 3		0			0			0			0			3,283			3,283
Balance at December 31	$	51,806		$	13,753		$	65,559		$	68,814		$	23,909		$	92,723

Our level 3 assets primarily included auction rate securities for the periods presented. Auction rate securities are debt instruments with interest rates that reset through periodic short-term auctions. The auction rate securities we own, which had a fair value of $51.8 million at December 31, 2010, or less than 1% of our total invested assets, primarily consisted of tax-exempt bonds rated AA and above and were collateralized by federally-guaranteed student loans. From time to time, liquidity issues in the credit markets have led to failed auctions. A failed auction is not a default of the debt instrument, but does set a new, generally higher, interest rate in accordance with the original terms of the debt instrument. Liquidation of auction rate securities results when (1) a successful auction occurs, (2) the securities are called or refinanced by the issuer, (3) a buyer is found outside the auction process, or (4) the security matures. We continue to receive income on all auction rate securities as well as periodic full and partial redemption calls. Given the liquidity issues, fair value could not be estimated based on observable market prices, and as such, unobservable inputs were used.

Financial Liabilities

Our long-term debt is recorded at carrying value in our consolidated balance sheets. The carrying value of our long-term debt outstanding was $1,668.8 million at December 31, 2010 and $1,678.2 million at December 31, 2009. The fair value of our long-term debt was $1,746.5 million at December 31, 2010 and $1,596.4 million at December 31, 2009. The fair value of our long-term debt is determined based on quoted market prices for the same or similar debt, or, if no quoted market prices are available, on the current prices estimated to be available to us for debt with similar terms and remaining maturities.

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Quarterly Financial Information

12 Months Ended

Dec. 31, 2010

Quarterly Financial Information

Quarterly Financial Information

Humana Inc.

QUARTERLY FINANCIAL INFORMATION

(Unaudited)

A summary of our quarterly unaudited results of operations for the years ended December 31, 2010 and 2009 follows:

2010
	First		Second(1)		Third		Fourth(2)
	(in thousands, except per share results)
Total revenues	$	8,380,338	$	8,589,243	$	8,350,812	$	8,276,442
Income before income taxes		416,926		535,854		622,290		174,492
Net income		258,768		340,076		393,221		107,325
Basic earnings per common share		1.54		2.02		2.35		0.64
Diluted earnings per common share		1.52		2.00		2.32		0.63
	2009
	First		Second		Third		Fourth
	(in thousands, except per share results)
Total revenues	$	7,662,986	$	7,842,909	$	7,657,773	$	7,578,907
Income before income taxes		293,762		439,950		469,348		398,700
Net income		205,717		281,780		301,519		250,659
Basic earnings per common share		1.23		1.68		1.80		1.49
Diluted earnings per common share		1.22		1.67		1.78		1.48

(1) Includes an expense of $147.5 million ($93.4 million after tax, or $0.55 per diluted common share) for the write-down of deferred acquisition costs associated with our individual major medical policies as more fully described in Note 18 to the consolidated financial statements.

(2) Includes an expense of $138.9 million ($88.0 million after tax, or $0.52 per diluted common share) associated with reserve strengthening for our closed block of long-term care policies acquired in connection with the 2007 acquisition of KMG America Corporation as more fully described in Note 18 to the consolidated financial statements.

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Reinsurance (Tables)

12 Months Ended

Dec. 31, 2010

Reinsurance

Balance And Financial Rating Related To Reinsurers

Reinsurer	Total Recoverable		A.M. Best Rating at December 31, 2010
	(in thousands)
Protective Life Insurance Company	$	200,833	A+ (superior)
All others		219,863	A++ to B++ (superior to good)
	$	420,696

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Employee Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2010

Employee Benefit Plans [Abstract]

Stock-Based Compensation Expense

	2010			2009			2008
	(in thousands)
Stock-based compensation expense by type:
Stock options	$	21,757		$	19,555		$	18,202
Restricted stock awards		41,190			46,315			37,167
Total stock-based compensation expense		62,947			65,870			55,369
Tax benefit recognized		(23,057	)		(24,128	)		(20,282	)
Stock-based compensation expense, net of tax	$	39,890		$	41,742		$	35,087

Weighted-Average Fair Value Of Stock Options

	2010			2009			2008
Weighted-average fair value at grant date	$	19.58		$	14.24		$	17.95
Expected option life (years)		5.2			4.6			5.1
Expected volatility		43.8	%		39.2	%		28.2	%
Risk-free interest rate at grant date		2.7	%		1.9	%		2.9	%
Dividend yield		None			None			None

Activity For Option Plans

	Shares Under Option			Weighted-Average Exercise Price
Options outstanding at December 31, 2009		6,058,321		$	46.10
Granted		639,989			46.12
Exercised		(565,500	)		30.91
Expired		(250,545	)		62.10
Forfeited		(87,293	)		48.24
Options outstanding at December 31, 2010		5,794,972		$	46.86
Options exercisable at December 31, 2010		3,625,225		$	47.46

Activity for Restricted Stock Awards

	Shares			Weighted- Average Grant-Date Fair Value
Nonvested restricted stock awards at December 31, 2009		2,345,555		$	55.11
Granted		901,660			49.29
Vested		(634,202	)		62.18
Forfeited		(150,154	)		51.35
Expired		(3,899	)		59.66
Nonvested restricted stock awards at December 31, 2010		2,458,960		$	51.38

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Expenses Associated With Long-Duration Insurance Products

12 Months Ended

Dec. 31, 2010

Expenses Associated With Long Duration Insurance Products [Abstract]

Expenses Associated With Long-Duration Insurance Products

18. EXPENSES ASSOCIATED WITH LONG-DURATION INSURANCE PRODUCTS

Premiums associated with our long-duration insurance products accounted for approximately 2% of our consolidated premiums and services revenue for the year ended December 31, 2010. We use long-duration accounting for products such as long-term care, life insurance, annuities, and certain health and other supplemental policies sold to individuals because they are expected to remain in force for an extended period beyond one year and because premium received in the earlier years is intended to pay anticipated benefits to be incurred in future years. As a result, we defer policy acquisition costs and amortize them over the estimated life of the policies in proportion to premiums earned.

In addition, we establish reserves for future policy benefits in recognition of the fact that some of the premium received in the earlier years is intended to pay anticipated benefits to be incurred in future years. These reserves are recognized on a net level premium method based on interest rates, mortality, morbidity, withdrawal and maintenance expense assumptions from published actuarial tables, modified based upon actual experience. The assumptions used to determine the liability for future policy benefits are established and locked in at the time each contract is acquired and would only change if our expected future experience deteriorated to the point that the level of the liability, together with the present value of future gross premiums, are not adequate to provide for future expected policy benefits. Long-term care policies provide for long-duration coverage and, therefore, our actual claims experience will emerge many years after assumptions have been established. The risk of a deviation of the actual morbidity and mortality rates from those assumed in our reserves are particularly significant to our closed block of long-term care policies. We monitor the loss experience of these long-term care policies and, when necessary, apply for premium rate increases through a regulatory filing and approval process in the jurisdictions in which such products were sold. To the extent premium rate increases and/or loss experience vary from our acquisition date assumptions, future adjustments to reserves could be required.

The table below presents deferred acquisition costs and future policy benefits payable associated with our long-duration insurance products for the years ended December 31, 2010 and 2009.

	2010					2009
	Deferred acquisition costs		Future policy benefits payable			Deferred acquisition costs		Future policy benefits payable
	(in thousands)
Other long-term assets	$	73,503	$	0		$	201,431	$	0
Trade accounts payable and accrued expenses		0		(52,936	)		0		(40,249	)
Long-term liabilities		0		(1,492,855	)		0		(1,193,047	)
Total asset (liability)	$	73,503	$	(1,545,791	)	$	201,431	$	(1,233,296	)

In addition, future policy benefits payable include amounts of $218.9 million at December 31, 2010 and $225.0 million at December 31, 2009 which are subject to 100% coinsurance agreements as more fully described in Note 19.

Benefit expense associated with future policy benefits payable was $305.9 million in 2010, $73.1 million in 2009, and $64.3 million in 2008. Benefit expense for 2010 included a net charge of $138.9 million associated with our long-term care policies discussed further below. Amortization of deferred acquisition costs included in operating costs was $198.1 million in 2010, $52.4 million in 2009, and $43.0 million in 2008. Amortization expense for 2010 included a write-down of deferred acquisition costs of $147.5 million discussed further below.

Future policy benefits payable include $824.6 million at December 31, 2010 and $571.9 million at December 31, 2009 associated with a closed block of long-term care policies acquired in connection with the November 30, 2007 KMG acquisition. During the fourth quarter of 2010, certain states approved premium rate increases for a large portion of our long-term care block that were significantly below our acquisition date assumptions. Based on these actions by the states, combined with lower interest rates and higher actual expenses as compared to acquisition date assumptions, we determined that our existing future policy benefits payable, together with the present value of future gross premiums, associated with our long-term care policies were not adequate to provide for future policy benefits under these policies; therefore we unlocked and modified our assumptions based on current expectations. Accordingly, during the fourth quarter of 2010 we recorded $138.9 million of additional benefit expense, with a corresponding increase in future policy benefits payable of $170.3 million partially offset by a related reinsurance recoverable of $31.4 million included in other long-term assets.

Deferred acquisition costs included $36.2 million and $165.7 million associated with our individual major medical policies at December 31, 2010 and December 31, 2009, respectively. Future policy benefits payable associated with our individual major medical policies were $179.8 million at December 31, 2010 and $128.3 million at December 31, 2009. In light of the Health Insurance Reform Legislation, including mandating that 80% of premium revenues be expended on medical costs for individual major medical policies beginning in 2011, we completed a deferred acquisition cost recoverability analysis for our individual major medical policies during 2010. Our recoverability test indicated that a substantial portion of unamortized deferred acquisition costs associated with the individual major medical block of business were not recoverable from future income. As a result, during 2010 we recorded a write-down of deferred acquisition costs of $147.5 million with a corresponding charge to operating costs.

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Income Taxes

12 Months Ended

Dec. 31, 2010

Income Taxes [Abstract]

Income Taxes

10. INCOME TAXES

The provision for income taxes consisted of the following for the years ended December 31, 2010, 2009 and 2008:

	2010			2009			2008
	(in thousands)
Current provision:
Federal	$	785,888		$	532,722		$	336,870
States and Puerto Rico		63,262			56,155			30,829
Total current provision		849,150			588,877			367,699
Deferred benefit		(198,978	)		(26,792	)		(22,005	)
Provision for income taxes	$	650,172		$	562,085		$	345,694

The provision for income taxes was different from the amount computed using the federal statutory rate for the years ended December 31, 2010, 2009 and 2008 due to the following:

	2010			2009			2008
	(in thousands)
Income tax provision at federal statutory rate	$	612,347		$	560,616		$	347,497
States, net of federal benefit and Puerto Rico		30,865			28,968			12,412
Tax exempt investment income		(23,776	)		(21,327	)		(21,253	)
Nondeductible executive compensation		12,655			55			30
Contingent tax benefits		0			(16,781	)		0
Other, net		18,081			10,554			7,008
Provision for income taxes	$	650,172		$	562,085		$	345,694

The provision for income taxes for 2010 reflects a $12.7 million estimated impact from new limitations on the deductibility of annual compensation in excess of $500,000 per employee as mandated by the Health Insurance Reform Legislation.

The liability for unrecognized tax benefits was $16.8 million at December 31, 2008 and $16.0 million at December 31, 2007. This liability, which was released in 2009 as a result of settlements associated with the completion of the audit of our U.S. income tax returns for 2005 and 2006, reduced tax expense $16.8 million in 2009. As of December 31, 2010, we do not have material uncertain tax positions reflected in our consolidated balance sheet.

Deferred income tax balances reflect the impact of temporary differences between the tax bases of assets or liabilities and their reported amounts in our consolidated financial statements, and are stated at enacted tax rates expected to be in effect when the reported amounts are actually recovered or settled. Principal components of our net deferred tax balances at December 31, 2010 and 2009 were as follows:

	Assets (Liabilities)
	2010			2009
	(in thousands)
Future policy benefits payable	$	153,293		$	103,941
Net operating loss carryforward		136,894			97,398
Compensation and other accrued expenses		127,442			121,516
Benefits payable		88,617			36,996
Deferred acquisition costs		34,044			0
Capital loss carryforward		13,032			13,169
Unearned premiums		9,813			25,528
Other		19,004			24,715
Total deferred income tax assets		582,139			423,263
Valuation allowance		(28,063	)		(30,093	)
Total deferred income tax assets, net of valuation allowance		554,076			393,170
Depreciable property and intangible assets		(275,569	)		(213,291	)
Investment securities		(65,921	)		(25,077	)
Prepaid expenses		(47,185	)		(47,290	)
Deferred acquisition costs		0			(38,899	)
Total deferred income tax liabilities		(388,675	)		(324,557	)
Total net deferred income tax assets	$	165,401		$	68,613
Amounts recognized in the consolidated balance sheets:
Other current assets	$	76,598		$	32,206
Other long-term assets		88,803			36,407
Total net deferred income tax assets	$	165,401		$	68,613

At December 31, 2010, we had approximately $373.7 million of net operating losses to carry forward related to prior acquisitions. These net operating loss carryforwards, if not used to offset future taxable income, will expire from 2011 through 2030. A significant portion of these losses are in a subsidiary that will not be included in the Humana Inc. consolidated tax return until 2013, and, therefore, may not be used until that point. Due to limitations and uncertainty regarding our ability to use some of the carryforwards, a valuation allowance was established on $76.6 million of net operating loss carryforwards related to prior acquisitions. For the remainder of the net operating loss carryforwards, based on our historical record of producing taxable income and profitability, we have concluded that future operating income will be sufficient to give rise to tax expense to recover all deferred tax assets.

We file income tax returns in the United States and certain foreign jurisdictions. With few exceptions, which are immaterial in the aggregate, we are no longer subject to state, local and foreign tax examinations by tax authorities for years before 2008.

Our U.S. income tax returns for 2007 and 2008 are currently under examination by the Internal Revenue Service (IRS). Beginning with the 2009 tax year, as well as 2010, we are participating in the Compliance Assurance Process (CAP) with the IRS. Under CAP, the IRS does advance reviews during the tax year and as the return is being prepared for filing, thereby reducing the need for post-filing examinations. We expect the IRS will conclude its audits of the 2007, 2008, 2009 and 2010 tax years during 2011. As of December 31, 2010, we are not aware of any material adjustments the IRS may propose.

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Reporting Entity

12 Months Ended

Dec. 31, 2010

Reporting Entity [Abstract]

Reporting Entity

1. REPORTING ENTITY

Nature of Operations

Headquartered in Louisville, Kentucky, Humana is one of the nation's largest publicly traded health and supplemental benefits companies, based on our 2010 revenues of approximately $33.6 billion. References throughout these notes to consolidated financial statements to "we," "us," "our," "Company," and "Humana," mean Humana Inc. and its subsidiaries. We provide full-service benefits and wellness solutions, offering a wide array of health, pharmacy and supplemental benefit products for employer groups, government benefit programs, and individuals, as well as primary and workplace care through our medical centers and worksite medical facilities. We derived approximately 76% of our premiums and services revenue from contracts with the federal government in 2010. Under our federal government contracts with the Centers for Medicare and Medicaid Services, or CMS, we provide health insurance coverage for Medicare Advantage members in Florida, accounting for approximately 17% of our consolidated premiums and services revenue in 2010. CMS is the federal government's agency responsible for administering the Medicare program. Under federal government contracts with the Department of Defense we primarily provide health insurance coverage to TRICARE members, accounting for approximately 11% of our consolidated premiums and services revenue in 2010.

Health Insurance Reform

In March 2010, the President signed into law The Patient Protection and Affordable Care Act and The Health Care and Education Reconciliation Act of 2010 (which we collectively refer to as the Health Insurance Reform Legislation) which enact significant reforms to various aspects of the U.S. health insurance industry. There are many significant provisions of the legislation that will require additional guidance and clarification in the form of regulations and interpretations in order to fully understand the impacts of the legislation on our overall business, which we expect to occur over the next several years.

Certain significant provisions of the Health Insurance Reform Legislation include, among others, mandated coverage requirements, rebates to policyholders based on minimum benefit ratios, adjustments to Medicare Advantage premiums, the establishment of state-based exchanges, and an annual insurance industry premium-based assessment. Implementation dates of the Health Insurance Reform Legislation vary from as early as six months from the date of enactment, or September 30, 2010, to as late as 2018.

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Benefits Payable (Tables)

12 Months Ended

Dec. 31, 2010

Benefits Payable [Abstract]

Activity In Benefits Payable

	2010			2009			2008
	(in thousands)
Balances at January 1	$	2,943,379		$	2,898,782		$	2,355,461
Acquisitions		0			0			96,021
Incurred related to:
Current year		24,185,717			21,943,547			21,114,008
Prior years		(434,015	)		(252,756	)		(268,027	)
Total incurred		23,751,702			21,690,791			20,845,981
Paid related to:
Current year		(21,671,345	)		(19,581,314	)		(18,601,120	)
Prior years		(1,809,610	)		(2,064,880	)		(1,797,561	)
Total paid		(23,480,955	)		(21,646,194	)		(20,398,681	)
Balances at December 31	$	3,214,126		$	2,943,379		$	2,898,782

Benefit Expenses Excluded From Activity In Benefits Payable

	2010		2009		2008
	(in thousands)
Military services	$	3,059,492	$	3,019,655	$	2,819,787
Future policy benefits		305,875		73,130		64,338
Total	$	3,365,367	$	3,092,785	$	2,884,125

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Property And Equipment, Net

12 Months Ended

Dec. 31, 2010

Property And Equipment, Net [Abstract]

Property And Equipment, Net

7. PROPERTY AND EQUIPMENT, NET

Property and equipment was comprised of the following at December 31, 2010 and 2009:

	2010			2009
	(in thousands)
Land	$	18,405		$	16,206
Buildings and leasehold improvements		476,057			368,341
Equipment		539,518			536,328
Computer software		1,025,468			1,013,461
		2,059,448			1,934,336
Accumulated depreciation		(1,244,111	)		(1,255,194	)
Property and equipment, net	$	815,337		$	679,142

Depreciation expense was $225.1 million in 2010, $213.0 million in 2009, and $183.3 million in 2008, including amortization expense for capitalized internally developed and purchased software of $135.5 million in 2010, $126.9 million in 2009, and $92.9 million in 2008. The table above includes $131.0 million of net property and equipment acquired in connection with the December 21, 2010 acquisition of Concentra more fully described in Note 3.

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Derivative Financial Instruments

12 Months Ended

Dec. 31, 2010

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

12. DERIVATIVE FINANCIAL INSTRUMENTS

We entered into interest-rate swap agreements with major financial institutions upon issuance of our senior notes. These swap agreements, which were considered derivative instruments, exchanged the fixed interest rate under all our senior notes for a variable interest rate based on LIBOR. The notional amount of the swap agreements was equal to the par amount of our senior notes. These swap agreements were qualified and designated as a fair value hedge. The gain or loss on the swap agreements as well as the offsetting loss or gain on the senior notes was recognized in current earnings. We included the gain or loss on the swap agreements in interest expense, the same line item as the offsetting loss or gain on the related senior notes. The gain or loss due to hedge ineffectiveness was not material for 2008.

During 2008, we terminated all of our interest-rate swap agreements for cash consideration of $93.0 million. We recognized a $10.4 million impairment charge as a realized investment loss associated with the termination of a swap with a subsidiary of Lehman, which subsequently filed for bankruptcy protection.

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Derivative Financial Instruments (Narrative) (Details) (USD $) In Millions	12 Months Ended
	Dec. 31, 2008
Derivative Financial Instruments [Abstract]
Cash consideration	$ 93.0
Realized investment loss associated with termination of a swap with a subsidiary of Lehman	$ 10.4

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Goodwill And Other Intangible Assets

12 Months Ended

Dec. 31, 2010

Goodwill And Other Intangible Assets [Abstract]

Goodwill And Other Intangible Assets

8. GOODWILL AND OTHER INTANGIBLE ASSETS

The realignment of our business segments and corresponding change in our reportable segments, more fully described in Note 17, resulted in a change in the composition of our reporting units, the unit of accounting for goodwill. Accordingly, we reassigned goodwill to our reporting units as of January 1, 2011 using the relative fair value approach. Changes in the carrying amount of goodwill retrospectively adjusted for our new reportable segments for the years ended December 31, 2010 and 2009 were as follows:

	Retail		Employer Group		Health & Well-Being Services		Other Businesses		Total
	(in thousands)
Balance at December 31, 2008	$	547,896	$	40,533	$	1,317,229	$	57,453	$	1,963,111
Subsequent payments/adjustments related to 2008 acquisitions		17,087		12,726		0		0		29,813
Balance at December 31, 2009		564,983		53,259		1,317,229		57,453		1,992,924
Acquisitions		0		0		538,293		0		538,293
Subsequent payments/adjustments related to 2008 acquisitions		27,861		8,731		0		0		36,592
Balance at December 31, 2010	$	592,844	$	61,990	$	1,855,522	$	57,453	$	2,567,809

The following table presents details of our other intangible assets included in other long-term assets in the accompanying consolidated balance sheets at December 31, 2010 and 2009:

	Weighted Average Life		2010						2009
			Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
			(in thousands)
Other intangible assets:
Customer contracts/relationships		10.7 yrs	$	413,855	$	145,997	$	267,858	$	314,885	$	117,748	$	197,137
Trade names		19.6 yrs		87,400		2,268		85,132		5,200		567		4,633
Provider contracts		16.0 yrs		42,753		11,659		31,094		42,753		8,281		34,472
Noncompetes and other		9.5 yrs		19,475		4,085		15,390		11,786		4,560		7,226
Total other intangible assets		12.5 yrs	$	563,483	$	164,009	$	399,474	$	374,624	$	131,156	$	243,468

Amortization expense for other intangible assets was approximately $37.8 million in 2010, $37.3 million in 2009 and $37.1 million in 2008. The following table presents our estimate of amortization expense for each of the five next succeeding fiscal years:

	(in thousands)
For the years ending December 31,:
2011	$	50,421
2012		48,792
2013		45,537
2014		41,039
2015		35,707

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Expenses Associated With Long-Duration Insurance Products (Schedule Of Deferred Acquisition Cost And Future Policy Benefits Payable With Our Long-Duration Insurance Products) (Details) (USD $) In Thousands	Dec. 31, 2010	Dec. 31, 2009
Expenses Associated With Long Duration Insurance Products [Abstract]
Other long-term assets, Deferred acquisition Costs	$ 73,503	$ 201,431
Trade accounts payable and accrued expenses, Deferred acquisition Cost	0	0
Long-term liabilities, Deferred acquisition Cost	0	0
Total asset (liability), Deferred acquisition Cost	73,503	201,431
Other long-term assets, Future policy benefits payable	0	0
Trade accounts payable and accrued expenses, Future policy benefits payable	(52,936)	(40,249)
Long-term liabilities, Future policy benefits payable	(1,492,855)	(1,193,047)
Total asset (liability), Future policy benefits payable	$ (1,545,791)	$ (1,233,296)

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Segment Information (Narrative) (Details) (USD $)	3 Months Ended	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Percentage of total premium and services revenues derived from contracts with the federal government		76.00%	73.00%	72.00%
Prior year favorable reserve releases		$ 231,200,000
Charge related to closed block of long-term care policies	138,900,000	138,900,000
Member co-share amounts and government subsidies		3,500,000,000	3,500,000,000	4,600,000,000
Retail [Member]
Prior year favorable reserve releases		198,400,000
Write-down of deferred acquisition cost		147,500,000
Employer Group [Member]
Prior year favorable reserve releases		$ 32,800,000

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Medicare Part D (Tables)

12 Months Ended

Dec. 31, 2010

Medicare Part D [Abstract]

Balance Sheet Accounts Associated With Medicare Part D

	2010						2009
	Risk Corridor Settlement			CMS Subsidies			Risk Corridor Settlement			CMS Subsidies
	(in thousands)
Other current assets	$	1,563		$	16,211		$	2,165		$	11,660
Trade accounts payable and accrued expenses		(389,203	)		(170,231	)		(146,750	)		(402,854	)
Net current liability	$	(387,640	)	$	(154,020	)	$	(144,585	)	$	(391,194	)

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Medicare Part D

12 Months Ended

Dec. 31, 2010

Medicare Part D [Abstract]

Medicare Part D

6. MEDICARE PART D

As discussed in Note 2, we cover prescription drug benefits in accordance with Medicare Part D under multiple contracts with CMS. The consolidated balance sheets include the following amounts associated with Medicare Part D as of December 31, 2010 and 2009:

	2010						2009
	Risk Corridor Settlement			CMS Subsidies			Risk Corridor Settlement			CMS Subsidies
	(in thousands)
Other current assets	$	1,563		$	16,211		$	2,165		$	11,660
Trade accounts payable and accrued expenses		(389,203	)		(170,231	)		(146,750	)		(402,854	)
Net current liability	$	(387,640	)	$	(154,020	)	$	(144,585	)	$	(391,194	)

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Investment Securities (Detail Of Realized Gains (Losses) Related To Investment Securities And Included With Investment Income) (Details) (USD $) In Thousands	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Investment Securities [Abstract]
Gross realized gains	$ 34,815	$ 123,361	$ 56,879
Gross realized losses	(29,169)	(103,878)	(136,296)
Net realized capital gains (losses)	$ 5,646	$ 19,483	$ (79,417)

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Consolidated Statements Of Stockholders' Equity (Parenthetical) (USD $) In Thousands	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Consolidated Statements Of Stockholders' Equity [Abstract]
Net unrealized investment losses/gains, tax	$ (47,383)	$ (131,229)	$ 136,967
Reclassification adjustment for net realized losses/gains included in net income, tax	$ (2,069)	$ (7,137)	$ 29,090

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Commitments, Guarantees And Contingencies (Rent Expense And Sublease Rental Income Associated With Operating Leases) (Details) (USD $) In Thousands	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Commitments, Guarantees And Contingencies [Abstract]
Rent expense	$ 155,206	$ 160,927	$ 142,885
Sublease rental income	(9,639)	(9,049)	(9,283)
Net rent expense	$ 145,567	$ 151,878	$ 133,602

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Summary Of Significant Accounting Policies

12 Months Ended

Dec. 31, 2010

Summary Of Significant Accounting Policies [Abstract]

Summary Of Significant Accounting Policies

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Our financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America. Our consolidated financial statements include the accounts of Humana Inc. and subsidiaries that the Company controls including variable interest entities associated with medical practices for which the Company is the primary beneficiary. Generally, we do not own medical practices but instead enter into exclusive long-term management agreements with the affiliated Professional Associations, or P.A.s, that operate the medical practices. Based upon the provisions of these agreements, these affiliated P.A.s are variable interest entities and we are the primary beneficiary, and accordingly we consolidated the affiliated P.A.s. All significant intercompany balances and transactions have been eliminated.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The areas involving the most significant use of estimates are the estimation of benefits payable, the impact of risk sharing provisions related to our Medicare and TRICARE contracts, the valuation and related impairment recognition of investment securities, and the valuation and related impairment recognition of long-lived assets, including goodwill. These estimates are based on knowledge of current events and anticipated future events, and accordingly, actual results may ultimately differ materially from those estimates.

Realignment of Business Segments

During the first quarter of 2011, we realigned our business segments to reflect our evolving business model. We currently manage and report our operating results using the following segments: Retail, Employer Group, and Health and Well-Being Services. We also disclose results for Other Businesses. All respective amounts related to the segment change have been retrospectively adjusted throughout the financial statements. Our segment information is more fully described in Note 17.

As a result of changing our reportable segments, we also changed the classification of certain revenues and costs. Beginning January 1, 2011, costs of certain health and well-being services were reclassified as benefits expense including costs incurred by our wholly-owned mail order pharmacy from transactions with our members that were historically classified as selling, general and administrative (and now titled operating costs), as well as depreciation and amortization expenses. The effect of this reclassification is to account for the cost of providing these benefits to our members similarly whether the services are provided via a third party provider or internally through a stand-alone subsidiary. Likewise, co-share amounts from our members associated with our wholly-owned mail order pharmacy operations, historically classified as other revenue, are now classified as a reduction of benefits expense. The remaining items previously classified as other revenue, primarily consisting of patient service revenue associated with our recently acquired Concentra Inc. subsidiary, were combined with our previous administrative services fee revenue and are now classified as services revenue. All amounts herein have been reclassified to conform to the new presentation. These adjustments had no impact on net income, cash flows or equity. Further, none of these adjustments impacted our regulated subsidiaries.

Depreciation and amortization expense associated with certain businesses in our Health and Well-Being Services segment delivering benefits to our members, primarily associated with our pharmacy operations, are now included with benefits expense. The amount of this expense was $18.1 million in 2010, $12.9 million in 2009, and $10.0 million in 2008.

Cash and Cash Equivalents

Cash and cash equivalents include cash, time deposits, money market funds, commercial paper, other money market instruments, and certain U.S. Government securities with an original maturity of three months or less. Carrying value approximates fair value due to the short-term maturity of the investments.

Investment Securities

Investment securities, which consist entirely of debt securities, have been categorized as available for sale and, as a result, are stated at fair value. Investment securities available for current operations are classified as current assets. Investment securities available for our long-term insurance product and professional liability funding requirements, as well as restricted statutory deposits and venture capital investments, are classified as long-term assets. For the purpose of determining gross realized gains and losses, which are included as a component of investment income in the consolidated statements of income, the cost of investment securities sold is based upon specific identification. Unrealized holding gains and losses, net of applicable deferred taxes, are included as a component of stockholders' equity and comprehensive income until realized from a sale or other-than-temporary impairment.

In April 2009, the Financial Accounting Standards Board, or the FASB, issued new guidance to address concerns about (1) measuring the fair value of financial instruments when the markets become inactive and quoted prices may reflect distressed transactions and (2) recording impairment charges on investments in debt securities. The new guidance highlighted and expanded on the factors that should be considered in estimating fair value when the volume and level of activity for a financial asset or liability has significantly decreased and required new disclosures relating to fair value measurement inputs and valuation techniques (including changes in inputs and valuation techniques). In addition, new guidance regarding recognition and presentation of other-than-temporary impairments changed (1) the trigger for determining whether an other-than-temporary impairment exists and (2) the amount of an impairment charge to be recorded in earnings. We adopted the provisions of the new guidance for the quarter ended June 30, 2009. Refer to Note 4 and Note 5.

Under the revised other-than-temporary impairment model for debt securities held, we recognize an impairment loss in income in an amount equal to the full difference between the amortized cost basis and the fair value when we have the intent to sell the debt security or it is more likely than not we will be required to sell the debt security before recovery of our amortized cost basis. However, if we do not intend to sell the debt security, we evaluate the expected cash flows to be received as compared to amortized cost and determine if a credit loss has occurred. In the event of a credit loss, only the amount of the impairment associated with the credit loss is recognized currently in income with the remainder of the loss recognized in other comprehensive income. A transition adjustment to reclassify the non-credit portion of any previously recognized impairment from retained earnings to accumulated other comprehensive income was required upon adoption if we did not intend to sell and it was not more likely than not that we would be required to sell the security before recovery of its amortized cost basis. We did not record a transition adjustment for securities previously considered other-than-temporarily impaired because these securities were already sold or we had the intent to sell these securities.

When we do not intend to sell a security in an unrealized loss position, potential other-than-temporary impairment is considered using a variety of factors, including the length of time and extent to which the fair value has been less than cost; adverse conditions specifically related to the industry, geographic area or financial condition of the issuer or underlying collateral of a security; payment structure of the security; changes in credit rating of the security by the rating agencies; the volatility of the fair value changes; and changes in fair value of the security after the balance sheet date. For debt securities, we take into account expectations of relevant market and economic data. For example, with respect to mortgage and asset-backed securities, such data includes underlying loan level data and structural features such as seniority and other forms of credit enhancements. A decline in fair value is considered other-than-temporary when we do not expect to recover the entire amortized cost basis of the security. We estimate the amount of the credit loss component of a debt security as the difference between the amortized cost and the present value of the expected cash flows of the security. The present value is determined using the best estimate of future cash flows discounted at the implicit interest rate at the date of purchase.

We participate in a securities lending program to optimize investment income. We loan certain investment securities for short periods of time in exchange for collateral initially equal to at least 102% of the fair value of the investment securities on loan. The fair value of the loaned investment securities is monitored on a daily basis, with additional collateral obtained or refunded as the fair value of the loaned investment securities fluctuates. The collateral, which may be in the form of cash or U.S. Government securities, is deposited by the borrower with an independent lending agent. Any cash collateral is recorded on our consolidated balance sheets, along with a liability to reflect our obligation to return the collateral. The cash collateral is invested by the lending agent according to our investment guidelines, primarily in money market funds, certificates of deposit, and short-term corporate and asset-backed securities, and accounted for consistent with our investment securities. Collateral received in the form of securities is not recorded in our consolidated balance sheets because, absent default by the borrower, we do not have the right to sell, pledge or otherwise reinvest securities collateral. Loaned securities continue to be carried as investment securities on the consolidated balance sheets. Earnings on the invested cash collateral, net of expense, associated with the securities lending payable are recorded as investment income.

Receivables and Revenue Recognition

We generally establish one-year commercial membership contracts with employer groups, subject to cancellation by the employer group on 30-day written notice. Our Medicare contracts with CMS renew annually. Our military services contracts with the federal government and our contracts with various state Medicaid programs generally are multi-year contracts subject to annual renewal provisions.

Premiums

We bill and collect premium remittances from employer groups and members in our Medicare and other individual products monthly. We receive monthly premiums from the federal government and various states according to government specified payment rates and various contractual terms. Changes in revenues from CMS for our Medicare products resulting from the periodic changes in risk-adjustment scores for our membership are recognized when the amounts become determinable and the collectibility is reasonably assured.

Premium revenues are recognized as income in the period members are entitled to receive services, and are net of estimated uncollectible amounts, retroactive membership adjustments, and beginning January 1, 2011, adjustments to recognize rebates to policyholders under the minimum benefit ratios required under Health Insurance Reform Legislation. Retroactive membership adjustments result from enrollment changes not yet processed, or not yet reported by an employer group or the government. We routinely monitor the collectibility of specific accounts, the aging of receivables, historical retroactivity trends, as well as prevailing and anticipated economic conditions, and reflect any required adjustments in current operations. Premiums received prior to the service period are recorded as unearned revenues.

Medicare Part D

We cover prescription drug benefits in accordance with Medicare Part D under multiple contracts with CMS. The payments we receive monthly from CMS and members, which are determined from our annual bid, represent amounts for providing prescription drug insurance coverage. We recognize premium revenues for providing this insurance coverage ratably over the term of our annual contract. Our CMS payment is subject to risk sharing through the Medicare Part D risk corridor provisions. In addition, receipts for reinsurance and low-income cost subsidies represent payments for prescription drug costs for which we are not at risk.

The risk corridor provisions compare costs targeted in our bids to actual prescription drug costs, limited to actual costs that would have been incurred under the standard coverage as defined by CMS. Variances exceeding certain thresholds may result in CMS making additional payments to us or require us to refund to CMS a portion of the premiums we received. We estimate and recognize an adjustment to premium revenues related to these risk corridor provisions based upon pharmacy claims experience to date as if the annual contract were to terminate at the end of the reporting period. Accordingly, this estimate provides no consideration to future pharmacy claims experience. We record a receivable or payable at the contract level and classify the amount as current or long-term in the consolidated balance sheets based on the expected settlement.

Reinsurance and low-income cost subsidies represent funding from CMS in connection with the Medicare Part D program for which we assume no risk. Reinsurance subsidies represent funding from CMS for its portion of prescription drug costs which exceed the member's out-of-pocket threshold, or the catastrophic coverage level. Low-income cost subsidies represent funding from CMS for all or a portion of the deductible, the coinsurance and co-payment amounts above the out-of-pocket threshold for low-income beneficiaries. Monthly prospective payments from CMS for reinsurance and low-income cost subsidies are based on assumptions submitted with our annual bid. A reconciliation and related settlement of CMS's prospective subsidies against actual prescription drug costs we paid is made after the end of the year. We account for these subsidies as a deposit in our consolidated balance sheets and as a financing activity in our consolidated statements of cash flows. We do not recognize premium revenues or benefit expense for these subsidies. Receipt and payment activity is accumulated at the contract level and recorded in our consolidated balance sheets in other current assets or trade accounts payable and accrued expenses depending on the contract balance at the end of the reporting period.

For plans where we provide enhanced benefits and selected the alternative demonstration payment option in lieu of the reinsurance subsidy, we receive a monthly per member capitation amount from CMS determined from our annual bid submissions. The capitation amount we receive from CMS for assuming the government's portion of prescription drug costs in the catastrophic layer of coverage is recorded as premium revenue. The variance between the capitation amount and actual drug costs in the catastrophic layer is subject to risk sharing as part of the risk corridor settlement. The demonstration provision terminated at the end of 2010. See Note 6 for detail regarding amounts recorded to the consolidated balance sheets related to the risk corridor settlement and subsidies from CMS.

Settlement of the reinsurance and low-income cost subsidies as well as the risk corridor payment is based on a reconciliation made approximately 9 months after the close of each calendar year. We continue to revise our estimates with respect to the risk corridor provisions based on subsequent period pharmacy claims data.

Military services

Military services premium and services revenue primarily is derived from our TRICARE South Region contract with the Department of Defense, or DoD. We allocate the consideration to the various components of the contract based on the relative fair value of the components. TRICARE revenues consist generally of (1) an insurance premium for assuming underwriting risk for the cost of civilian health care services delivered to eligible beneficiaries; (2) health care services provided to beneficiaries which are in turn reimbursed by the federal government; and (3) administrative services fees related to claim processing, customer service, enrollment, and other services. We recognize the insurance premium as revenue ratably over the period coverage is provided. Health care services reimbursements are recognized as revenue in the period health services are provided. Administrative services fees are recognized as revenue in the period services are performed. Our TRICARE South Region contract contains provisions to share the risk associated with financing the cost of health benefits with the federal government. We earn more revenue or incur additional costs based on the variance of actual health care costs versus a negotiated target cost. We defer the recognition of any contingent revenues for favorable variances until the end of the contract period when the amount is determinable and the collectibility is reasonably assured. We estimate and recognize contingent benefit expense for unfavorable variances currently in our results of operations. We continually review the contingent benefit expense estimates of future payments to the government for cost overruns relative to our negotiated target cost and make necessary adjustments to our reserves.

Revenues also may include change orders attributable to our military services contracts. Change orders represent equitable adjustments for services not originally specified in the contracts. Revenues for these adjustments are recognized when a settlement amount becomes determinable and the collectibility is reasonably assured.

Administrative Services Fees

Administrative services fees cover the processing of claims, offering access to our provider networks and clinical programs, and responding to customer service inquiries from members of self-funded groups. Revenues from providing administration services, also known as administrative services only, or ASO, are recognized in the period services are performed and are net of estimated uncollectible amounts. Under ASO contracts, self-funded employers retain the risk of financing substantially all of the cost of health benefits. However, many ASO customers purchase stop loss insurance coverage from us to cover catastrophic claims or to limit aggregate annual costs. Accordingly, we have recorded premiums and benefit expenses related to these stop loss insurance contracts. We routinely monitor the collectibility of specific accounts, the aging of receivables, as well as prevailing and anticipated economic conditions, and reflect any required adjustments in current operations. ASO fees received prior to the service period are recorded as unearned revenues.

Other Revenue

Other revenues primarily consist of copay revenues associated with our mail order pharmacy as well as patient services revenue associated with the December 21, 2010 acquisition of Concentra Inc. more fully described in Note 3.

Revenues associated with RightSourceRx^SM, our mail-order pharmacy, are recognized in connection with the shipment of the prescriptions.

Patient services include workers' compensation injury care and related services as well as other healthcare services related to employer needs or statutory requirements. Patient services revenues are recognized in the period services are provided to the customer when the sales price is fixed or determinable, and are net of estimated uncollectible accounts and contractual allowances.

Receivables

Receivables, including premium receivables, patient services revenue receivables, and ASO fee receivables, are shown net of allowances for estimated uncollectible accounts, retroactive membership adjustments, and contractual allowances.

Policy Acquisition Costs

Policy acquisition costs are those costs that vary with and primarily are related to the acquisition of new and renewal business. Such costs include commissions, costs of policy issuance and underwriting, and other costs we incur to acquire new business or renew existing business. We expense policy acquisition costs related to our employer-group prepaid health services policies as incurred. These short-duration employer-group prepaid health services policies typically have a one-year term and may be cancelled upon 30 days notice by the employer group.

Life insurance, annuities, health and other supplemental policies sold to individuals are accounted for as long-duration insurance products because they are expected to remain in force for an extended period beyond one year due to contractual and regulatory requirements. As a result, we defer policy acquisition costs and amortize them over the estimated life of the policies in proportion to premiums earned. Deferred acquisition costs are reviewed to determine if they are recoverable from future income. See Note 18.

Long-Lived Assets

Property and equipment is recorded at cost. Gains and losses on sales or disposals of property and equipment are included in administrative expense. Certain costs related to the development or purchase of internal-use software are capitalized. Depreciation is computed using the straight-line method over estimated useful lives ranging from 3 to 10 years for equipment, 3 to 7 years for computer software, and 20 to 40 years for buildings. Improvements to leased facilities are depreciated over the shorter of the remaining lease term or the anticipated life of the improvement.

We periodically review long-lived assets, including property and equipment and other intangible assets, for impairment whenever adverse events or changes in circumstances indicate the carrying value of the asset may not be recoverable. Losses are recognized for a long-lived asset to be held and used in our operations when the undiscounted future cash flows expected to result from the use of the asset are less than its carrying value. We recognize an impairment loss based on the excess of the carrying value over the fair value of the asset. A long-lived asset held for sale is reported at the lower of the carrying amount or fair value less costs to sell. Depreciation expense is not recognized on assets held for sale. Losses are recognized for a long-lived asset to be abandoned when the asset ceases to be used. In addition, we periodically review the estimated lives of all long-lived assets for reasonableness.

Goodwill and Other Intangible Assets

Goodwill represents the unamortized excess of cost over the fair value of the net tangible and other intangible assets acquired. We are required to test at least annually for impairment at a level of reporting referred to as the reporting unit, and more frequently if adverse events or changes in circumstances indicate that the asset may be impaired. A reporting unit either is our operating segments or one level below the operating segments, referred to as a component, which comprise our reportable segments. A component is considered a reporting unit if the component constitutes a business for which discrete financial information is available that is regularly reviewed by management. We aggregate the components of an operating segment into one reporting unit if they have similar economic characteristics. Goodwill is assigned to the reporting unit that is expected to benefit from a specific acquisition.

We use a two-step process to review goodwill for impairment. The first step is a screen for potential impairment, and the second step measures the amount of impairment, if any. Impairment tests are performed, at a minimum, in the fourth quarter of each year supported by our long-range business plan and annual planning process. Impairment tests completed for 2010, 2009 and 2008 did not result in an impairment loss. As discussed previously under Realignment of Business Segments within this Note 2, during the first quarter of 2011, we realigned our business segments to reflect our evolving business model. As a result, we reassigned goodwill to our new reporting units as of January 1, 2011 using the relative fair value approach as discussed in Note 8. We completed an impairment test in the first quarter of 2011 based on the new reporting units which did not result in an impairment loss.

Other intangible assets primarily relate to acquired customer contracts/relationships and are included with other long-term assets in the consolidated balance sheets. Other intangible assets are amortized over the useful life, based upon the pattern of future cash flows attributable to the asset. This sometimes results in an accelerated method of amortization for customer contracts because the asset tends to dissipate at a more rapid rate in earlier periods. Other than customer contracts, other intangible assets generally are amortized using the straight-line method. We review other finite-lived intangible assets for impairment under our long-lived asset policy.

Benefits Payable and Benefit Expense Recognition

Benefit expenses include claim payments, capitation payments, pharmacy costs net of rebates, allocations of certain centralized expenses and various other costs incurred to provide health insurance coverage to members, as well as estimates of future payments to hospitals and others for medical care and other supplemental benefits provided prior to the balance sheet date. Capitation payments represent monthly contractual fees disbursed to primary care physicians and other providers who are responsible for providing medical care to members. Pharmacy costs represent payments for members' prescription drug benefits, net of rebates from drug manufacturers. Receivables for such pharmacy rebates are included in other current assets in the consolidated balance sheets. Other supplemental benefits include dental, vision, and other voluntary benefits.

We estimate the costs of our benefit expense payments using actuarial methods and assumptions based upon claim payment patterns, medical cost inflation, historical developments such as claim inventory levels and claim receipt patterns, and other relevant factors, and record benefit reserves for future payments. We continually review estimates of future payments relating to claims costs for services incurred in the current and prior periods and make necessary adjustments to our reserves.

We reassess the profitability of our contracts for providing insurance coverage to our members when current operating results or forecasts indicate probable future losses. We establish a premium deficiency liability in current operations to the extent that the sum of expected future costs, claim adjustment expenses, and maintenance costs exceeds related future premiums under contract without consideration of investment income. For purposes of determining premium deficiencies, contracts are grouped in a manner consistent with our method of acquiring, servicing, and measuring the profitability of such contracts. Losses recognized as a premium deficiency result in a beneficial effect in subsequent periods as operating losses under these contracts are charged to the liability previously established. Because the majority of our member contracts renew annually, we do not anticipate recording a material premium deficiency liability, except when unanticipated adverse events or changes in circumstances indicate otherwise.

We believe our benefits payable are adequate to cover future claims payments required. However, such estimates are based on knowledge of current events and anticipated future events. Therefore, the actual liability could differ materially from the amounts provided.

Future policy benefits payable

Future policy benefits payable include liabilities for long-duration insurance policies including life insurance, annuities, health, and long-term care policies sold to individuals for which some of the premium received in the earlier years is intended to pay anticipated benefits to be incurred in future years. These reserves are recognized on a net level premium method based on interest, mortality, morbidity, withdrawal and maintenance expense assumptions from published actuarial tables, modified based upon actual experience. Changes in estimates of these reserves are recognized as an adjustment to benefit expenses in the period the changes occur.

Book Overdraft

Under our cash management system, checks issued but not yet presented to banks frequently result in overdraft balances for accounting purposes and are classified as a current liability in the consolidated balance sheets. Changes in book overdrafts from period to period are reported in the consolidated statement of cash flows as a financing activity.

Income Taxes

We recognize an asset or liability for the deferred tax consequences of temporary differences between the tax bases of assets or liabilities and their reported amounts in the consolidated financial statements. These temporary differences will result in taxable or deductible amounts in future years when the reported amounts of the assets or liabilities are recovered or settled. We also recognize the future tax benefits such as net operating and capital loss carryforwards as deferred tax assets. A valuation allowance is provided against these deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized. Future years' tax expense may be increased or decreased by adjustments to the valuation allowance or to the estimated accrual for income taxes.

We record tax benefits when it is more likely than not that the tax return position taken with respect to a particular transaction will be sustained. A liability, if recorded, is not considered resolved until the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired, or the tax position is ultimately settled through examination, negotiation, or litigation. We classify interest and penalties associated with uncertain tax positions in our provision for income taxes.

Derivative Financial Instruments

At times, we may use interest-rate swap agreements to manage our exposure to interest rate risk. The differential between fixed and variable rates to be paid or received is accrued and recognized over the life of the agreements as adjustments to interest expense in the consolidated statements of income. Our interest-rate swap agreements convert the fixed interest rates on our senior notes to a variable rate and are accounted for as fair value hedges. Our interest-rate swap agreements, terminated in 2008, are more fully described in Note 12.

Stock-Based Compensation

We recognize stock-based compensation expense, as determined on the date of grant at fair value, straight-line over the period during which an employee is required to provide service in exchange for the award (usually the vesting period). We estimate expected forfeitures and recognize compensation expense only for those awards which are expected to vest. We estimate the grant-date fair value of stock options using the Black-Scholes option-pricing model. In addition, we report certain tax effects of stock-based compensation as a financing activity rather than an operating activity in the consolidated statement of cash flows. Additional detail regarding our stock-based compensation plans is included in Note 13.

Earnings Per Common Share

We compute basic earnings per common share on the basis of the weighted-average number of unrestricted common shares outstanding. Diluted earnings per common share is computed on the basis of the weighted-average number of unrestricted common shares outstanding plus the dilutive effect of outstanding employee stock options and restricted shares using the treasury stock method.

Fair Value

Assets and liabilities measured at fair value are categorized into a fair value hierarchy based on whether the inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our own assumptions about the assumptions market participants would use. The fair value hierarchy includes three levels of inputs that may be used to measure fair value as described below.

Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities that are traded in an active exchange market.

Level 2 – Observable inputs other than Level 1 prices such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments as well as debt securities and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.

Level 3 – Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Level 3 includes assets and liabilities whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques reflecting our own assumptions about the assumptions market participants would use as well as those requiring significant management judgment.

Fair value of actively traded debt securities are based on quoted market prices. Fair value of other debt securities are based on quoted market prices of identical or similar securities or based on observable inputs like interest rates generally using a market valuation approach, or, less frequently, an income valuation approach and are generally classified as Level 2. We generally obtain one quoted price for each security from a third party pricing service. These prices are generally derived from recently reported trades for identical or similar securities, including adjustments through the reporting date based upon observable market information. When quoted prices are not available, the third party pricing service may use quoted market prices of comparable securities or discounted cash flow analyses, incorporating inputs that are currently observable in the markets for similar securities. Inputs that are often used in the valuation methodologies include benchmark yields, reported trades, credit spreads, broker quotes, default rates and prepayment speeds. We are responsible for the determination of fair value and as such we perform analysis on the prices received from the third party pricing service to determine whether the prices are reasonable estimates of fair value. Our analysis includes a review of monthly price fluctuations as well as a quarterly comparison of the prices received from the pricing service to prices reported by our third party investment advisor.

Fair value of privately held debt securities, including venture capital investments as well as auction rate securities, are estimated using a variety of valuation methodologies, including both market and income approaches, where an observable quoted market does not exist and are generally classified as Level 3. For privately-held debt securities, such methodologies include reviewing the value ascribed to the most recent financing, comparing the security with securities of publicly-traded companies in similar lines of business, and reviewing the underlying financial performance including estimating discounted cash flows. For auction rate securities, such methodologies include consideration of the quality of the sector and issuer, underlying collateral, underlying final maturity dates, and liquidity.

Recently Issued Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board, or FASB issued new guidance that expands and clarifies existing disclosures about fair value measurements. Under the new guidance, we are required to disclose additional information about movements of assets among the three-tier fair value hierarchy, present separately (that is, on a gross basis) information about purchases, sales, issuances, and settlements of financial instruments in the reconciliation of fair value measurements using significant unobservable inputs (Level 3), and expand disclosures regarding the determination of fair value measurements. We adopted the new disclosure provisions during the year ended December 31, 2010, except for the gross disclosures regarding purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements which will be effective for us beginning with the filing of our Form 10-Q for the three months ending March 31, 2011.

In October 2010, the FASB issued new guidance that modifies the types of costs that can be capitalized in the acquisition of insurance contracts. We defer policy acquisition costs, primarily commissions, associated with our health, life insurance, annuities, and other supplemental policies sold to individuals and accounted for as long-duration insurance products because they are expected to remain in force for an extended period beyond one year. Premiums under our long-duration insurance products represented approximately 2% of our consolidated premiums and ASO fees for the year ended December 31, 2010. The new guidance specifies that only costs that are related directly to the successful acquisition of insurance contracts qualify for deferral. Commissions representing direct costs of contract acquisitions will continue to qualify for capitalization. The new guidance is effective for us January 1, 2012 with early adoption permitted January 1, 2011. We currently are evaluating the impact of the new guidance on our results of operations and financial position.

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Commitments, Guarantees And Contingencies (Tables)

12 Months Ended

Dec. 31, 2010

Commitments, Guarantees And Contingencies [Abstract]

Rent Expense And Sublease Rental Income Associated With Operating Leases

	2010			2009			2008
	(in thousands)
Rent expense	$	155,206		$	160,927		$	142,885
Sublease rental income		(9,639	)		(9,049	)		(9,283	)
Net rent expense	$	145,567		$	151,878		$	133,602

Future Annual Minimum Payments Due

	Minimum Lease Payments		Sublease Rental Receipts			Net Lease Commitments
	(in thousands)
For the years ending December 31:
2011	$	190,525	$	(963	)	$	189,562
2012		162,434		(433	)		162,001
2013		133,434		(143	)		133,291
2014		108,159		(110	)		108,049
2015		82,005		(20	)		81,985
Thereafter		133,677		0			133,677
Total	$	810,234	$	(1,669	)	$	808,565

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Fair Value (Tables)

12 Months Ended

Dec. 31, 2010

Fair Value [Abstract]

Fair Value, Assets Measured On Recurring Basis

			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant  Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
December 31, 2010
Cash equivalents	$	1,606,592	$	1,606,592	$	0	$	0
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations		711,613		0		711,613		0
Mortgage-backed securities		1,663,179		0		1,663,179		0
Tax-exempt municipal securities		2,433,334		0		2,381,528		51,806
Mortgage-backed securities:
Residential		55,887		0		55,887		0
Commercial		321,031		0		321,031		0
Asset-backed securities		149,751		0		148,545		1,206
Corporate debt securities		3,032,311		0		3,025,097		7,214
Redeemable preferred stock		5,333		0		0		5,333
Total debt securities		8,372,439		0		8,306,880		65,559
Securities lending invested collateral		49,636		24,639		24,997		0
Total invested assets	$	10,028,667	$	1,631,231	$	8,331,877	$	65,559
December 31, 2009
Cash equivalents	$	1,507,490	$	1,507,490	$	0	$	0
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations		1,009,352		0		1,009,352		0
Mortgage-backed securities		1,688,663		0		1,688,663		0
Tax-exempt municipal securities		2,224,041		0		2,155,227		68,814
Mortgage-backed securities:
Residential		95,412		0		95,412		0
Commercial		279,626		0		279,626		0
Asset-backed securities		107,188		0		105,060		2,128
Corporate debt securities		2,079,568		0		2,071,087		8,481
Redeemable preferred stock		13,300		0		0		13,300
Total debt securities		7,497,150		0		7,404,427		92,723
Securities lending invested collateral		119,586		53,569		66,017		0
Total invested assets	$	9,124,226	$	1,561,059	$	7,470,444	$	92,723

Fair Value, Assets Measured On Recurring Basis, Unobservable Input Reconciliation

	For the year ended December 31,
	2010									2009
	Auction Rate Securities			Privates and Venture Capital			Total			Auction Rate Securities			Privates and Venture Capital			Total
	(in thousands)
Beginning balance at January 1	$	68,814		$	23,909		$	92,723		$	73,654		$	18,272		$	91,926
Total gains or losses:
Realized in earnings		16			6,244			6,260			16			74			90
Unrealized in other comprehensive income		1,901			(4,426	)		(2,525	)		269			4,382			4,651
Purchases, sales, issuances, and settlements, net		(18,925	)		(11,974	)		(30,899	)		(5,125	)		(2,102	)		(7,227	)
Transfers into Level 3		0			0			0			0			3,283			3,283
Balance at December 31	$	51,806		$	13,753		$	65,559		$	68,814		$	23,909		$	92,723

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Property And Equipment, Net (Narrative) (Details) (USD $) In Millions	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008	Dec. 21, 2010 Concentra [Member]
Depreciation expense	$ 225.1	$ 213.0	$ 183.3
Amortization expense	135.5	126.9	92.9
Net ending property and equipment balance from the acquisition of concentra				$ 131.0

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Goodwill And Other Intangible Assets (Narrative) (Details) (USD $) In Millions	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Goodwill And Other Intangible Assets [Abstract]
Amortization expense for other intangible assets	$ 37.8	$ 37.3	$ 37.1

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Investment Securities (Gross Unrealized Losses And Fair Values Aggregated By Investment Category And Length Of Time In Continuous Unrealized Loss Position) (Details) (USD $) In Thousands	Dec. 31, 2010	Dec. 31, 2009
Less than 12 months Fair Value	$ 1,821,091	$ 2,396,203
Less than 12 months Gross Unrealized Losses	(44,501)	(37,453)
12 months or more Fair Value	170,536	526,262
12 months or more Gross Unrealized Losses	(17,506)	(40,898)
Total Fair Value	1,991,627	2,922,465
Total Gross Unrealized Losses	(62,007)	(78,351)
Debt Securities [Member] | US Treasury And Government [Member] | US Treasury And Agency Obligations [Member]
Less than 12 months Fair Value	141,766	301,843
Less than 12 months Gross Unrealized Losses	(615)	(2,425)
12 months or more Fair Value	0	2,970
12 months or more Gross Unrealized Losses	0	(109)
Total Fair Value	141,766	304,813
Total Gross Unrealized Losses	(615)	(2,534)
Debt Securities [Member] | US Treasury And Government [Member] | Mortgage-Backed Securities [Member]
Less than 12 months Fair Value	110,358	823,365
Less than 12 months Gross Unrealized Losses	(1,054)	(11,005)
12 months or more Fair Value	5,557	6,834
12 months or more Gross Unrealized Losses	(119)	(323)
Total Fair Value	115,915	830,199
Total Gross Unrealized Losses	(1,173)	(11,328)
Debt Securities [Member] | Tax-Exempt Municipal Securities [Member]
Less than 12 months Fair Value	1,168,221	598,520
Less than 12 months Gross Unrealized Losses	(33,218)	(14,286)
12 months or more Fair Value	97,809	198,327
12 months or more Gross Unrealized Losses	(10,401)	(9,131)
Total Fair Value	1,266,030	796,847
Total Gross Unrealized Losses	(43,619)	(23,417)
Debt Securities [Member] | Residential Mortgage Backed Securities [Member]
Less than 12 months Fair Value	0	1,771
Less than 12 months Gross Unrealized Losses	0	(5)
12 months or more Fair Value	32,671	73,178
12 months or more Gross Unrealized Losses	(2,675)	(10,994)
Total Fair Value	32,671	74,949
Total Gross Unrealized Losses	(2,675)	(10,999)
Debt Securities [Member] | Commercial Mortgage Backed Securities [Member]
Less than 12 months Fair Value	0	31,941
Less than 12 months Gross Unrealized Losses	0	(359)
12 months or more Fair Value	2,752	142,944
12 months or more Gross Unrealized Losses	(171)	(8,281)
Total Fair Value	2,752	174,885
Total Gross Unrealized Losses	(171)	(8,640)
Debt Securities [Member] | Asset-Backed Securities [Member]
Less than 12 months Fair Value	17,069	1,930
Less than 12 months Gross Unrealized Losses	(42)	(19)
12 months or more Fair Value	283	2,179
12 months or more Gross Unrealized Losses	(2)	(88)
Total Fair Value	17,352	4,109
Total Gross Unrealized Losses	(44)	(107)
Debt Securities [Member] | Corporate Debt Securities [Member]
Less than 12 months Fair Value	383,677	636,833
Less than 12 months Gross Unrealized Losses	(9,572)	(9,354)
12 months or more Fair Value	31,464	99,830
12 months or more Gross Unrealized Losses	(4,138)	(11,972)
Total Fair Value	415,141	736,663
Total Gross Unrealized Losses	$ (13,710)	$ (21,326)

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Benefits Payable (Narrative) (Details) (USD $) In Millions	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009
Benefits Payable [Abstract]
Military services benefits payable	$ 255.2	$ 279.2
Prior year favorable reserve releases	$ 231.2

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Acquisitions

12 Months Ended

Dec. 31, 2010

Acquisitions [Abstract]

Acquisitions

3. ACQUISITIONS

On December 21, 2010, we acquired Concentra Inc., or Concentra, a health care company based in Addison, Texas, for cash consideration of $804.7 million. Through its affiliated clinicians, Concentra delivers occupational medicine, urgent care, physical therapy, and wellness services to workers and the general public through its operation of medical centers and worksite medical facilities. The Concentra acquisition provides entry into the primary care space on a national scale, offering additional means for achieving health and wellness solutions and providing an expandable platform for growth with a management team experienced in physician asset management and alternate site care. The preliminary fair values of Concentra's assets acquired and liabilities assumed at the date of the acquisition are summarized as follows:

	Concentra
	(in thousands)
Cash and cash equivalents	$	21,317
Receivables		108,571
Other current assets		20,589
Property and equipment		131,837
Goodwill		531,372
Other intangible assets		188,000
Other long-term assets		12,935
Total assets acquired		1,014,621
Current liabilities		(100,091	)
Other long-term liabilities		(109,811	)
Total liabilities assumed		(209,902	)
Net assets acquired	$	804,719

The other intangible assets, which primarily consist of customer relationships and trade name, have a weighted average useful life of 13.7 years. Approximately $57.9 million of the acquired goodwill is deductible for tax purposes. The purchase price allocation is preliminary, subject to completion of valuation analyses, including, for example, refining assumptions used to calculate the fair value of other intangible assets. The purchase agreement contains provisions under which there may be future consideration paid or received related to the subsequent determination of working capital that existed at the acquisition date. Any payments or receipts for provisional amounts for working capital will be recorded as an adjustment to goodwill when paid or received.

The results of operations and financial condition of Concentra have been included in our consolidated statements of income and consolidated balance sheets from the acquisition date. In connection with the acquisition, we recognized approximately $14.9 million of acquisition-related costs, primarily banker and other professional fees, in operating costs. The proforma financial information assuming the acquisition had occurred as of January 1, 2009 was not material to our results of operations.

On October 31, 2008, we acquired PHP Companies, Inc. (d/b/a Cariten Healthcare), or Cariten, for cash consideration of approximately $291.0 million, including the payment of $34.9 million during 2010 to settle a purchase price contingency. The Cariten acquisition increased our commercial fully-insured and ASO presence as well as our Medicare HMO presence in eastern Tennessee. During 2009, we continued our review of the fair value estimate of certain other intangible and net tangible assets acquired. This review resulted in a decrease of $27.1 million in the fair value of other intangible assets, primarily related to the fair value assigned to the customer contracts acquired. There was a corresponding adjustment to goodwill and deferred income taxes. The total consideration paid exceeded our estimated fair value of the net tangible assets acquired by approximately $145.8 million of which we allocated $52.3 million to other intangible assets and $93.5 million to goodwill. The other intangible assets, which primarily consist of customer contracts, have a weighted-average useful life of 11.6 years. The acquired goodwill is not deductible for tax purposes.

On August 29, 2008, we acquired Metcare Health Plans, Inc., or Metcare, for cash consideration of approximately $14.9 million. The acquisition expanded our Medicare HMO membership in central Florida.

On May 22, 2008, we acquired OSF Health Plans, Inc., or OSF, a managed care company serving both Medicare and commercial members in central Illinois, for cash consideration of approximately $87.3 million, including the payment of $3.3 million during 2009 to settle a purchase price contingency. This acquisition expanded our presence in Illinois, broadening our ability to serve multi-location employers with a wider range of products including our specialty offerings. The total consideration paid exceeded our estimated fair value of the net tangible assets acquired by approximately $31.1 million of which we allocated $10.1 million to other intangible assets and $21.0 million to goodwill. The other intangible assets, which primarily consist of customer contracts, have a weighted-average useful life of 9.9 years. The acquired goodwill is not deductible for tax purposes.

On April 30, 2008, we acquired UnitedHealth Group's Las Vegas, Nevada individual SecureHorizons Medicare Advantage HMO business, or SecureHorizons, for cash consideration of approximately $185.3 million, plus subsidiary capital and surplus requirements of $40 million. The acquisition expanded our presence in the Las Vegas market. The total consideration paid exceeded our estimated fair value of the net tangible assets acquired by approximately $185.3 million of which we allocated $69.3 million to other intangible assets and $116.0 million to goodwill. The other intangible assets, which primarily consist of customer contracts, have a weighted-average useful life of 10.9 years. The acquired goodwill is not deductible for tax purposes.

The purchase agreements for certain of the acquisitions discussed above occurring prior to January 1, 2009 contain provisions under which there may be future contingent consideration paid or received primarily associated with balance sheet settlements. Any contingent consideration paid or received will be recorded as an adjustment to goodwill when the contingencies are resolved. We do not expect these adjustments to be material.

The results of operations and financial condition of Cariten, Metcare, OSF, and SecureHorizons have been included in our consolidated statements of income and consolidated balance sheets since the acquisition dates.

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Employee Benefit Plans (Weighted-Average Fair Value Of Stock Options) (Details) (USD $) In Millions, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Employee Benefit Plans [Abstract]
Weighted-average fair value at grant date	$ 19.58	$ 14.24	$ 17.95
Expected option life (years)	5.2	4.6	5.1
Expected volatility	43.80%	39.20%	28.20%
Risk-free interest rate at grant date	2.70%	1.90%	2.90%
Dividend yield	$ 0	$ 0	$ 0

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Expenses Associated With Long-Duration Insurance Products (Tables)

12 Months Ended

Dec. 31, 2010

Expenses Associated With Long Duration Insurance Products [Abstract]

Schedule Of Deferred Acquisition Cost And Future Policy Benefits Payable With Our Long-Duration Insurance Products

	2010					2009
	Deferred acquisition costs		Future policy benefits payable			Deferred acquisition costs		Future policy benefits payable
	(in thousands)
Other long-term assets	$	73,503	$	0		$	201,431	$	0
Trade accounts payable and accrued expenses		0		(52,936	)		0		(40,249	)
Long-term liabilities		0		(1,492,855	)		0		(1,193,047	)
Total asset (liability)	$	73,503	$	(1,545,791	)	$	201,431	$	(1,233,296	)

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Summary Of Significant Accounting Policies (Policy)

12 Months Ended

Dec. 31, 2010

Summary Of Significant Accounting Policies [Abstract]

Basis Of Presentation

Basis of Presentation

Our financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America. Our consolidated financial statements include the accounts of Humana Inc. and subsidiaries that the Company controls including variable interest entities associated with medical practices for which the Company is the primary beneficiary. Generally, we do not own medical practices but instead enter into exclusive long-term management agreements with the affiliated Professional Associations, or P.A.s, that operate the medical practices. Based upon the provisions of these agreements, these affiliated P.A.s are variable interest entities and we are the primary beneficiary, and accordingly we consolidated the affiliated P.A.s. All significant intercompany balances and transactions have been eliminated.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The areas involving the most significant use of estimates are the estimation of benefits payable, the impact of risk sharing provisions related to our Medicare and TRICARE contracts, the valuation and related impairment recognition of investment securities, and the valuation and related impairment recognition of long-lived assets, including goodwill. These estimates are based on knowledge of current events and anticipated future events, and accordingly, actual results may ultimately differ materially from those estimates.

Realignment Of Business Segments

Realignment of Business Segments

During the first quarter of 2011, we realigned our business segments to reflect our evolving business model. We currently manage and report our operating results using the following segments: Retail, Employer Group, and Health and Well-Being Services. We also disclose results for Other Businesses. All respective amounts related to the segment change have been retrospectively adjusted throughout the financial statements. Our segment information is more fully described in Note 17.

As a result of changing our reportable segments, we also changed the classification of certain revenues and costs. Beginning January 1, 2011, costs of certain health and well-being services were reclassified as benefits expense including costs incurred by our wholly-owned mail order pharmacy from transactions with our members that were historically classified as selling, general and administrative (and now titled operating costs), as well as depreciation and amortization expenses. The effect of this reclassification is to account for the cost of providing these benefits to our members similarly whether the services are provided via a third party provider or internally through a stand-alone subsidiary. Likewise, co-share amounts from our members associated with our wholly-owned mail order pharmacy operations, historically classified as other revenue, are now classified as a reduction of benefits expense. The remaining items previously classified as other revenue, primarily consisting of patient service revenue associated with our recently acquired Concentra Inc. subsidiary, were combined with our previous administrative services fee revenue and are now classified as services revenue. All amounts herein have been reclassified to conform to the new presentation. These adjustments had no impact on net income, cash flows or equity. Further, none of these adjustments impacted our regulated subsidiaries.

Depreciation and amortization expense associated with certain businesses in our Health and Well-Being Services segment delivering benefits to our members, primarily associated with our pharmacy operations, are now included with benefits expense. The amount of this expense was $18.1 million in 2010, $12.9 million in 2009, and $10.0 million in 2008.

Cash And Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents include cash, time deposits, money market funds, commercial paper, other money market instruments, and certain U.S. Government securities with an original maturity of three months or less. Carrying value approximates fair value due to the short-term maturity of the investments.

Investment Securities

Investment Securities

Investment securities, which consist entirely of debt securities, have been categorized as available for sale and, as a result, are stated at fair value. Investment securities available for current operations are classified as current assets. Investment securities available for our long-term insurance product and professional liability funding requirements, as well as restricted statutory deposits and venture capital investments, are classified as long-term assets. For the purpose of determining gross realized gains and losses, which are included as a component of investment income in the consolidated statements of income, the cost of investment securities sold is based upon specific identification. Unrealized holding gains and losses, net of applicable deferred taxes, are included as a component of stockholders' equity and comprehensive income until realized from a sale or other-than-temporary impairment.

In April 2009, the Financial Accounting Standards Board, or the FASB, issued new guidance to address concerns about (1) measuring the fair value of financial instruments when the markets become inactive and quoted prices may reflect distressed transactions and (2) recording impairment charges on investments in debt securities. The new guidance highlighted and expanded on the factors that should be considered in estimating fair value when the volume and level of activity for a financial asset or liability has significantly decreased and required new disclosures relating to fair value measurement inputs and valuation techniques (including changes in inputs and valuation techniques). In addition, new guidance regarding recognition and presentation of other-than-temporary impairments changed (1) the trigger for determining whether an other-than-temporary impairment exists and (2) the amount of an impairment charge to be recorded in earnings. We adopted the provisions of the new guidance for the quarter ended June 30, 2009. Refer to Note 4 and Note 5.

Under the revised other-than-temporary impairment model for debt securities held, we recognize an impairment loss in income in an amount equal to the full difference between the amortized cost basis and the fair value when we have the intent to sell the debt security or it is more likely than not we will be required to sell the debt security before recovery of our amortized cost basis. However, if we do not intend to sell the debt security, we evaluate the expected cash flows to be received as compared to amortized cost and determine if a credit loss has occurred. In the event of a credit loss, only the amount of the impairment associated with the credit loss is recognized currently in income with the remainder of the loss recognized in other comprehensive income. A transition adjustment to reclassify the non-credit portion of any previously recognized impairment from retained earnings to accumulated other comprehensive income was required upon adoption if we did not intend to sell and it was not more likely than not that we would be required to sell the security before recovery of its amortized cost basis. We did not record a transition adjustment for securities previously considered other-than-temporarily impaired because these securities were already sold or we had the intent to sell these securities.

When we do not intend to sell a security in an unrealized loss position, potential other-than-temporary impairment is considered using a variety of factors, including the length of time and extent to which the fair value has been less than cost; adverse conditions specifically related to the industry, geographic area or financial condition of the issuer or underlying collateral of a security; payment structure of the security; changes in credit rating of the security by the rating agencies; the volatility of the fair value changes; and changes in fair value of the security after the balance sheet date. For debt securities, we take into account expectations of relevant market and economic data. For example, with respect to mortgage and asset-backed securities, such data includes underlying loan level data and structural features such as seniority and other forms of credit enhancements. A decline in fair value is considered other-than-temporary when we do not expect to recover the entire amortized cost basis of the security. We estimate the amount of the credit loss component of a debt security as the difference between the amortized cost and the present value of the expected cash flows of the security. The present value is determined using the best estimate of future cash flows discounted at the implicit interest rate at the date of purchase.

We participate in a securities lending program to optimize investment income. We loan certain investment securities for short periods of time in exchange for collateral initially equal to at least 102% of the fair value of the investment securities on loan. The fair value of the loaned investment securities is monitored on a daily basis, with additional collateral obtained or refunded as the fair value of the loaned investment securities fluctuates. The collateral, which may be in the form of cash or U.S. Government securities, is deposited by the borrower with an independent lending agent. Any cash collateral is recorded on our consolidated balance sheets, along with a liability to reflect our obligation to return the collateral. The cash collateral is invested by the lending agent according to our investment guidelines, primarily in money market funds, certificates of deposit, and short-term corporate and asset-backed securities, and accounted for consistent with our investment securities. Collateral received in the form of securities is not recorded in our consolidated balance sheets because, absent default by the borrower, we do not have the right to sell, pledge or otherwise reinvest securities collateral. Loaned securities continue to be carried as investment securities on the consolidated balance sheets. Earnings on the invested cash collateral, net of expense, associated with the securities lending payable are recorded as investment income.

Receivables And Revenue Recognition

Receivables and Revenue Recognition

We generally establish one-year commercial membership contracts with employer groups, subject to cancellation by the employer group on 30-day written notice. Our Medicare contracts with CMS renew annually. Our military services contracts with the federal government and our contracts with various state Medicaid programs generally are multi-year contracts subject to annual renewal provisions.

Premiums

We bill and collect premium remittances from employer groups and members in our Medicare and other individual products monthly. We receive monthly premiums from the federal government and various states according to government specified payment rates and various contractual terms. Changes in revenues from CMS for our Medicare products resulting from the periodic changes in risk-adjustment scores for our membership are recognized when the amounts become determinable and the collectibility is reasonably assured.

Premium revenues are recognized as income in the period members are entitled to receive services, and are net of estimated uncollectible amounts, retroactive membership adjustments, and beginning January 1, 2011, adjustments to recognize rebates to policyholders under the minimum benefit ratios required under Health Insurance Reform Legislation. Retroactive membership adjustments result from enrollment changes not yet processed, or not yet reported by an employer group or the government. We routinely monitor the collectibility of specific accounts, the aging of receivables, historical retroactivity trends, as well as prevailing and anticipated economic conditions, and reflect any required adjustments in current operations. Premiums received prior to the service period are recorded as unearned revenues.

Medicare Part D

We cover prescription drug benefits in accordance with Medicare Part D under multiple contracts with CMS. The payments we receive monthly from CMS and members, which are determined from our annual bid, represent amounts for providing prescription drug insurance coverage. We recognize premium revenues for providing this insurance coverage ratably over the term of our annual contract. Our CMS payment is subject to risk sharing through the Medicare Part D risk corridor provisions. In addition, receipts for reinsurance and low-income cost subsidies represent payments for prescription drug costs for which we are not at risk.

The risk corridor provisions compare costs targeted in our bids to actual prescription drug costs, limited to actual costs that would have been incurred under the standard coverage as defined by CMS. Variances exceeding certain thresholds may result in CMS making additional payments to us or require us to refund to CMS a portion of the premiums we received. We estimate and recognize an adjustment to premium revenues related to these risk corridor provisions based upon pharmacy claims experience to date as if the annual contract were to terminate at the end of the reporting period. Accordingly, this estimate provides no consideration to future pharmacy claims experience. We record a receivable or payable at the contract level and classify the amount as current or long-term in the consolidated balance sheets based on the expected settlement.

Reinsurance and low-income cost subsidies represent funding from CMS in connection with the Medicare Part D program for which we assume no risk. Reinsurance subsidies represent funding from CMS for its portion of prescription drug costs which exceed the member's out-of-pocket threshold, or the catastrophic coverage level. Low-income cost subsidies represent funding from CMS for all or a portion of the deductible, the coinsurance and co-payment amounts above the out-of-pocket threshold for low-income beneficiaries. Monthly prospective payments from CMS for reinsurance and low-income cost subsidies are based on assumptions submitted with our annual bid. A reconciliation and related settlement of CMS's prospective subsidies against actual prescription drug costs we paid is made after the end of the year. We account for these subsidies as a deposit in our consolidated balance sheets and as a financing activity in our consolidated statements of cash flows. We do not recognize premium revenues or benefit expense for these subsidies. Receipt and payment activity is accumulated at the contract level and recorded in our consolidated balance sheets in other current assets or trade accounts payable and accrued expenses depending on the contract balance at the end of the reporting period.

For plans where we provide enhanced benefits and selected the alternative demonstration payment option in lieu of the reinsurance subsidy, we receive a monthly per member capitation amount from CMS determined from our annual bid submissions. The capitation amount we receive from CMS for assuming the government's portion of prescription drug costs in the catastrophic layer of coverage is recorded as premium revenue. The variance between the capitation amount and actual drug costs in the catastrophic layer is subject to risk sharing as part of the risk corridor settlement. The demonstration provision terminated at the end of 2010. See Note 6 for detail regarding amounts recorded to the consolidated balance sheets related to the risk corridor settlement and subsidies from CMS.

Settlement of the reinsurance and low-income cost subsidies as well as the risk corridor payment is based on a reconciliation made approximately 9 months after the close of each calendar year. We continue to revise our estimates with respect to the risk corridor provisions based on subsequent period pharmacy claims data.

Military services

Military services premium and services revenue primarily is derived from our TRICARE South Region contract with the Department of Defense, or DoD. We allocate the consideration to the various components of the contract based on the relative fair value of the components. TRICARE revenues consist generally of (1) an insurance premium for assuming underwriting risk for the cost of civilian health care services delivered to eligible beneficiaries; (2) health care services provided to beneficiaries which are in turn reimbursed by the federal government; and (3) administrative services fees related to claim processing, customer service, enrollment, and other services. We recognize the insurance premium as revenue ratably over the period coverage is provided. Health care services reimbursements are recognized as revenue in the period health services are provided. Administrative services fees are recognized as revenue in the period services are performed. Our TRICARE South Region contract contains provisions to share the risk associated with financing the cost of health benefits with the federal government. We earn more revenue or incur additional costs based on the variance of actual health care costs versus a negotiated target cost. We defer the recognition of any contingent revenues for favorable variances until the end of the contract period when the amount is determinable and the collectibility is reasonably assured. We estimate and recognize contingent benefit expense for unfavorable variances currently in our results of operations. We continually review the contingent benefit expense estimates of future payments to the government for cost overruns relative to our negotiated target cost and make necessary adjustments to our reserves.

Revenues also may include change orders attributable to our military services contracts. Change orders represent equitable adjustments for services not originally specified in the contracts. Revenues for these adjustments are recognized when a settlement amount becomes determinable and the collectibility is reasonably assured.

Administrative Services Fees

Administrative services fees cover the processing of claims, offering access to our provider networks and clinical programs, and responding to customer service inquiries from members of self-funded groups. Revenues from providing administration services, also known as administrative services only, or ASO, are recognized in the period services are performed and are net of estimated uncollectible amounts. Under ASO contracts, self-funded employers retain the risk of financing substantially all of the cost of health benefits. However, many ASO customers purchase stop loss insurance coverage from us to cover catastrophic claims or to limit aggregate annual costs. Accordingly, we have recorded premiums and benefit expenses related to these stop loss insurance contracts. We routinely monitor the collectibility of specific accounts, the aging of receivables, as well as prevailing and anticipated economic conditions, and reflect any required adjustments in current operations. ASO fees received prior to the service period are recorded as unearned revenues.

Other Revenue

Other revenues primarily consist of copay revenues associated with our mail order pharmacy as well as patient services revenue associated with the December 21, 2010 acquisition of Concentra Inc. more fully described in Note 3.

Revenues associated with RightSourceRx^SM, our mail-order pharmacy, are recognized in connection with the shipment of the prescriptions.

Patient services include workers' compensation injury care and related services as well as other healthcare services related to employer needs or statutory requirements. Patient services revenues are recognized in the period services are provided to the customer when the sales price is fixed or determinable, and are net of estimated uncollectible accounts and contractual allowances.

Receivables

Receivables, including premium receivables, patient services revenue receivables, and ASO fee receivables, are shown net of allowances for estimated uncollectible accounts, retroactive membership adjustments, and contractual allowances.

Policy Acquisition Costs

Policy Acquisition Costs

Policy acquisition costs are those costs that vary with and primarily are related to the acquisition of new and renewal business. Such costs include commissions, costs of policy issuance and underwriting, and other costs we incur to acquire new business or renew existing business. We expense policy acquisition costs related to our employer-group prepaid health services policies as incurred. These short-duration employer-group prepaid health services policies typically have a one-year term and may be cancelled upon 30 days notice by the employer group.

Life insurance, annuities, health and other supplemental policies sold to individuals are accounted for as long-duration insurance products because they are expected to remain in force for an extended period beyond one year due to contractual and regulatory requirements. As a result, we defer policy acquisition costs and amortize them over the estimated life of the policies in proportion to premiums earned. Deferred acquisition costs are reviewed to determine if they are recoverable from future income. See Note 18.

Long-Lived Assets

Long-Lived Assets

Property and equipment is recorded at cost. Gains and losses on sales or disposals of property and equipment are included in administrative expense. Certain costs related to the development or purchase of internal-use software are capitalized. Depreciation is computed using the straight-line method over estimated useful lives ranging from 3 to 10 years for equipment, 3 to 7 years for computer software, and 20 to 40 years for buildings. Improvements to leased facilities are depreciated over the shorter of the remaining lease term or the anticipated life of the improvement.

We periodically review long-lived assets, including property and equipment and other intangible assets, for impairment whenever adverse events or changes in circumstances indicate the carrying value of the asset may not be recoverable. Losses are recognized for a long-lived asset to be held and used in our operations when the undiscounted future cash flows expected to result from the use of the asset are less than its carrying value. We recognize an impairment loss based on the excess of the carrying value over the fair value of the asset. A long-lived asset held for sale is reported at the lower of the carrying amount or fair value less costs to sell. Depreciation expense is not recognized on assets held for sale. Losses are recognized for a long-lived asset to be abandoned when the asset ceases to be used. In addition, we periodically review the estimated lives of all long-lived assets for reasonableness.

Goodwill And Other Intangible Assets

Goodwill and Other Intangible Assets

Goodwill represents the unamortized excess of cost over the fair value of the net tangible and other intangible assets acquired. We are required to test at least annually for impairment at a level of reporting referred to as the reporting unit, and more frequently if adverse events or changes in circumstances indicate that the asset may be impaired. A reporting unit either is our operating segments or one level below the operating segments, referred to as a component, which comprise our reportable segments. A component is considered a reporting unit if the component constitutes a business for which discrete financial information is available that is regularly reviewed by management. We aggregate the components of an operating segment into one reporting unit if they have similar economic characteristics. Goodwill is assigned to the reporting unit that is expected to benefit from a specific acquisition.

We use a two-step process to review goodwill for impairment. The first step is a screen for potential impairment, and the second step measures the amount of impairment, if any. Impairment tests are performed, at a minimum, in the fourth quarter of each year supported by our long-range business plan and annual planning process. Impairment tests completed for 2010, 2009 and 2008 did not result in an impairment loss. As discussed previously under Realignment of Business Segments within this Note 2, during the first quarter of 2011, we realigned our business segments to reflect our evolving business model. As a result, we reassigned goodwill to our new reporting units as of January 1, 2011 using the relative fair value approach as discussed in Note 8. We completed an impairment test in the first quarter of 2011 based on the new reporting units which did not result in an impairment loss.

Other intangible assets primarily relate to acquired customer contracts/relationships and are included with other long-term assets in the consolidated balance sheets. Other intangible assets are amortized over the useful life, based upon the pattern of future cash flows attributable to the asset. This sometimes results in an accelerated method of amortization for customer contracts because the asset tends to dissipate at a more rapid rate in earlier periods. Other than customer contracts, other intangible assets generally are amortized using the straight-line method. We review other finite-lived intangible assets for impairment under our long-lived asset policy.

Benefits Payable And Benefit Expense Recognition

Benefits Payable and Benefit Expense Recognition

Benefit expenses include claim payments, capitation payments, pharmacy costs net of rebates, allocations of certain centralized expenses and various other costs incurred to provide health insurance coverage to members, as well as estimates of future payments to hospitals and others for medical care and other supplemental benefits provided prior to the balance sheet date. Capitation payments represent monthly contractual fees disbursed to primary care physicians and other providers who are responsible for providing medical care to members. Pharmacy costs represent payments for members' prescription drug benefits, net of rebates from drug manufacturers. Receivables for such pharmacy rebates are included in other current assets in the consolidated balance sheets. Other supplemental benefits include dental, vision, and other voluntary benefits.

We estimate the costs of our benefit expense payments using actuarial methods and assumptions based upon claim payment patterns, medical cost inflation, historical developments such as claim inventory levels and claim receipt patterns, and other relevant factors, and record benefit reserves for future payments. We continually review estimates of future payments relating to claims costs for services incurred in the current and prior periods and make necessary adjustments to our reserves.

We reassess the profitability of our contracts for providing insurance coverage to our members when current operating results or forecasts indicate probable future losses. We establish a premium deficiency liability in current operations to the extent that the sum of expected future costs, claim adjustment expenses, and maintenance costs exceeds related future premiums under contract without consideration of investment income. For purposes of determining premium deficiencies, contracts are grouped in a manner consistent with our method of acquiring, servicing, and measuring the profitability of such contracts. Losses recognized as a premium deficiency result in a beneficial effect in subsequent periods as operating losses under these contracts are charged to the liability previously established. Because the majority of our member contracts renew annually, we do not anticipate recording a material premium deficiency liability, except when unanticipated adverse events or changes in circumstances indicate otherwise.

We believe our benefits payable are adequate to cover future claims payments required. However, such estimates are based on knowledge of current events and anticipated future events. Therefore, the actual liability could differ materially from the amounts provided.

Future Policy Benefits Payable

Future policy benefits payable

Future policy benefits payable include liabilities for long-duration insurance policies including life insurance, annuities, health, and long-term care policies sold to individuals for which some of the premium received in the earlier years is intended to pay anticipated benefits to be incurred in future years. These reserves are recognized on a net level premium method based on interest, mortality, morbidity, withdrawal and maintenance expense assumptions from published actuarial tables, modified based upon actual experience. Changes in estimates of these reserves are recognized as an adjustment to benefit expenses in the period the changes occur.

Book Overdraft

Book Overdraft

Under our cash management system, checks issued but not yet presented to banks frequently result in overdraft balances for accounting purposes and are classified as a current liability in the consolidated balance sheets. Changes in book overdrafts from period to period are reported in the consolidated statement of cash flows as a financing activity.

Income Taxes

Income Taxes

We recognize an asset or liability for the deferred tax consequences of temporary differences between the tax bases of assets or liabilities and their reported amounts in the consolidated financial statements. These temporary differences will result in taxable or deductible amounts in future years when the reported amounts of the assets or liabilities are recovered or settled. We also recognize the future tax benefits such as net operating and capital loss carryforwards as deferred tax assets. A valuation allowance is provided against these deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized. Future years' tax expense may be increased or decreased by adjustments to the valuation allowance or to the estimated accrual for income taxes.

We record tax benefits when it is more likely than not that the tax return position taken with respect to a particular transaction will be sustained. A liability, if recorded, is not considered resolved until the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired, or the tax position is ultimately settled through examination, negotiation, or litigation. We classify interest and penalties associated with uncertain tax positions in our provision for income taxes.

Derivative Financial Instruments

Derivative Financial Instruments

At times, we may use interest-rate swap agreements to manage our exposure to interest rate risk. The differential between fixed and variable rates to be paid or received is accrued and recognized over the life of the agreements as adjustments to interest expense in the consolidated statements of income. Our interest-rate swap agreements convert the fixed interest rates on our senior notes to a variable rate and are accounted for as fair value hedges. Our interest-rate swap agreements, terminated in 2008, are more fully described in Note 12.

Stock-Based Compensation

Stock-Based Compensation

We recognize stock-based compensation expense, as determined on the date of grant at fair value, straight-line over the period during which an employee is required to provide service in exchange for the award (usually the vesting period). We estimate expected forfeitures and recognize compensation expense only for those awards which are expected to vest. We estimate the grant-date fair value of stock options using the Black-Scholes option-pricing model. In addition, we report certain tax effects of stock-based compensation as a financing activity rather than an operating activity in the consolidated statement of cash flows. Additional detail regarding our stock-based compensation plans is included in Note 13.

Earnings Per Common Share

Earnings Per Common Share

We compute basic earnings per common share on the basis of the weighted-average number of unrestricted common shares outstanding. Diluted earnings per common share is computed on the basis of the weighted-average number of unrestricted common shares outstanding plus the dilutive effect of outstanding employee stock options and restricted shares using the treasury stock method.

Fair Value

Fair Value

Assets and liabilities measured at fair value are categorized into a fair value hierarchy based on whether the inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our own assumptions about the assumptions market participants would use. The fair value hierarchy includes three levels of inputs that may be used to measure fair value as described below.

Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities that are traded in an active exchange market.

Level 2 – Observable inputs other than Level 1 prices such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments as well as debt securities and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.

Level 3 – Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Level 3 includes assets and liabilities whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques reflecting our own assumptions about the assumptions market participants would use as well as those requiring significant management judgment.

Fair value of actively traded debt securities are based on quoted market prices. Fair value of other debt securities are based on quoted market prices of identical or similar securities or based on observable inputs like interest rates generally using a market valuation approach, or, less frequently, an income valuation approach and are generally classified as Level 2. We generally obtain one quoted price for each security from a third party pricing service. These prices are generally derived from recently reported trades for identical or similar securities, including adjustments through the reporting date based upon observable market information. When quoted prices are not available, the third party pricing service may use quoted market prices of comparable securities or discounted cash flow analyses, incorporating inputs that are currently observable in the markets for similar securities. Inputs that are often used in the valuation methodologies include benchmark yields, reported trades, credit spreads, broker quotes, default rates and prepayment speeds. We are responsible for the determination of fair value and as such we perform analysis on the prices received from the third party pricing service to determine whether the prices are reasonable estimates of fair value. Our analysis includes a review of monthly price fluctuations as well as a quarterly comparison of the prices received from the pricing service to prices reported by our third party investment advisor.

Fair value of privately held debt securities, including venture capital investments as well as auction rate securities, are estimated using a variety of valuation methodologies, including both market and income approaches, where an observable quoted market does not exist and are generally classified as Level 3. For privately-held debt securities, such methodologies include reviewing the value ascribed to the most recent financing, comparing the security with securities of publicly-traded companies in similar lines of business, and reviewing the underlying financial performance including estimating discounted cash flows. For auction rate securities, such methodologies include consideration of the quality of the sector and issuer, underlying collateral, underlying final maturity dates, and liquidity.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board, or FASB issued new guidance that expands and clarifies existing disclosures about fair value measurements. Under the new guidance, we are required to disclose additional information about movements of assets among the three-tier fair value hierarchy, present separately (that is, on a gross basis) information about purchases, sales, issuances, and settlements of financial instruments in the reconciliation of fair value measurements using significant unobservable inputs (Level 3), and expand disclosures regarding the determination of fair value measurements. We adopted the new disclosure provisions during the year ended December 31, 2010, except for the gross disclosures regarding purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements which will be effective for us beginning with the filing of our Form 10-Q for the three months ending March 31, 2011.

In October 2010, the FASB issued new guidance that modifies the types of costs that can be capitalized in the acquisition of insurance contracts. We defer policy acquisition costs, primarily commissions, associated with our health, life insurance, annuities, and other supplemental policies sold to individuals and accounted for as long-duration insurance products because they are expected to remain in force for an extended period beyond one year. Premiums under our long-duration insurance products represented approximately 2% of our consolidated premiums and ASO fees for the year ended December 31, 2010. The new guidance specifies that only costs that are related directly to the successful acquisition of insurance contracts qualify for deferral. Commissions representing direct costs of contract acquisitions will continue to qualify for capitalization. The new guidance is effective for us January 1, 2012 with early adoption permitted January 1, 2011. We currently are evaluating the impact of the new guidance on our results of operations and financial position.

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Benefits Payable (Benefit Expenses Excluded From Activity In Benefits Payable) (Details) (USD $) In Thousands	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Benefits Payable [Abstract]
Military services	$ 3,059,492	$ 3,019,655	$ 2,819,787
Future policy benefits	305,875	73,130	64,338
Total	$ 3,365,367	$ 3,092,785	$ 2,884,125

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Expenses Associated With Long-Duration Insurance Products (Narrative) (Details) (USD $)	3 Months Ended		12 Months Ended
	Dec. 31, 2010	Jun. 30, 2010	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Percent Of Consolidated Premiums And Services Revenue Related To Long-Duration Insurance Products			2.00%
Benefit expense with future policy benefits payable			$ 305,875,000	$ 73,130,000	$ 64,338,000
Amortization of deferred acquisition cost			198,100,000	52,400,000	43,000,000
Write-down of deferred acquisition costs		147,500,000	147,500,000
Charge related to closed block of long-term care policies	138,900,000		138,900,000
Increase in future policy benefits payable	170,300,000		170,300,000
Increase in reinsurance recoverable	31,400,000		31,400,000
Deferred acquisition costs associated with our individual major medical policies	36,200,000		36,200,000	165,700,000
Future policy benefits	1,492,855,000		1,492,855,000	1,193,047,000
Coinsurance Agreement [Member]
Future policy benefits	218,900,000		218,900,000	225,000,000
Closed Block Long-Term Care Policies [Member]
Future policy benefits	824,600,000		824,600,000	571,900,000
Individual Major Medical Policies [Member]
Future policy benefits	$ 179,800,000		$ 179,800,000	$ 128,300,000

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Employee Benefit Plans (Weighted-Average Grant Date Fair Value Of Restricted Stock Awards) (Details) (USD $)	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Employee Benefit Plans [Abstract]
Nonvested restricted stock, shares, beginning balance	2,345,555
Nonvested restricted stock, granted	901,660
Nonvested restricted stock, vested	(634,202)
Nonvested restricted stock, forfeited	(150,154)
Nonvested restricted stock, expired	(3,899)
Nonvested restricted stock, shares, ending balance	2,458,960	2,345,555
Nonvested restricted stock, weighted average grant date fair value, beginning balance	$ 55.11
Nonvested restricted stock, weighted average grant date fair value, granted	$ 49.29	$ 41.16	$ 68.10
Nonvested restricted stock, weighted average grant date fair value, vested	$ 62.18
Nonvested restricted stock, weighted average grant date fair value, forfeited	$ 51.35
Nonvested restricted stock, weighted average grant date fair value, expired	$ 59.66
Nonvested restricted stock, weighted average grant date fair value, ending balance	$ 51.38	$ 55.11

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Goodwill And Other Intangible Assets (Detail Of Intangible Assets Classified As Other Long-Term Assets) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2010 years	Dec. 31, 2009
Total Other Intangible Assets [Member]
Weighted Average Life, Years	12.5
Cost	$ 563,483	$ 374,624
Accumulated Amortization	164,009	131,156
Net	399,474	243,468
Customer Contracts/Relationships [Member]
Weighted Average Life, Years	10.7
Cost	413,855	314,885
Accumulated Amortization	145,997	117,748
Net	267,858	197,137
Trade Names [Member]
Weighted Average Life, Years	19.6
Cost	87,400	5,200
Accumulated Amortization	2,268	567
Net	85,132	4,633
Provider Contracts [Member]
Weighted Average Life, Years	16.0
Cost	42,753	42,753
Accumulated Amortization	11,659	8,281
Net	31,094	34,472
Noncompetes and Other [Member]
Weighted Average Life, Years	9.5
Cost	19,475	11,786
Accumulated Amortization	4,085	4,560
Net	$ 15,390	$ 7,226

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Property And Equipment, Net (Tables)

12 Months Ended

Dec. 31, 2010

Property And Equipment, Net [Abstract]

Property And Equipment

	2010			2009
	(in thousands)
Land	$	18,405		$	16,206
Buildings and leasehold improvements		476,057			368,341
Equipment		539,518			536,328
Computer software		1,025,468			1,013,461
		2,059,448			1,934,336
Accumulated depreciation		(1,244,111	)		(1,255,194	)
Property and equipment, net	$	815,337		$	679,142

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Segment Information (Tables)

12 Months Ended

Dec. 31, 2010

Segment Information [Abstract]

Schedule Of Segment Reporting Information, By Segment

	Retail		Employer Group		Health and Well-Being Services		Other Businesses			Eliminations/ Corporate			Consolidated
	(in thousands)
2010
Revenues - external customers
Premiums:
Medicare Advantage	$	16,265,839	$	3,020,282	$	0	$	0		$	0		$	19,286,121
Medicare stand-alone PDP		1,960,063		4,598		0		355,399			0			2,320,060
Total Medicare		18,225,902		3,024,880		0		355,399			0			21,606,181
Fully-insured		745,329		5,168,713		0		0			0			5,914,042
Specialty		81,481		885,310		0		0			0			966,791
Military services		0		0		0		3,462,544			0			3,462,544
Medicaid and other		0		0		0		762,765			0			762,765
Total premiums		19,052,712		9,078,903		0		4,580,708			0			32,712,323
Services revenue:
Provider		0		0		34,104		0			0			34,104
ASO and other		11,105		394,950		0		115,021			0			521,076
Total services revenue		11,105		394,950		34,104		115,021			0			555,180
Total revenues - external customers		19,063,817		9,473,853		34,104		4,695,729			0			33,267,503
Intersegment revenues
Services		0		13,137		7,493,941		0			(7,507,078	)		0
Products		0		0		1,291,572		0			(1,291,572	)		0
Total intersegment revenues		0		13,137		8,785,513		0			(8,798,650	)		0
Investment income		80,525		42,205		0		42,581			164,021			329,332
Total revenues		19,144,342		9,529,195		8,819,617		4,738,310			(8,634,629	)		33,596,835
Operating expenses:
Benefits		15,625,243		7,485,497		0		4,252,333			(246,004	)		27,117,069
Operating costs		2,113,011		1,662,166		8,575,077		475,463			(8,445,398	)		4,380,319
Depreciation and amortization		117,219		93,478		25,622		11,865			(3,359	)		244,825
Total operating expenses		17,855,473		9,241,141		8,600,699		4,739,661			(8,694,761	)		31,742,213
Income from operations		1,288,869		288,054		218,918		(1,351	)		60,132			1,854,622
Interest expense		0		0		0		0			105,060			105,060
Income (loss) before income taxes	$	1,288,869	$	288,054	$	218,918	$	(1,351	)	$	(44,928	)	$	1,749,562

	Retail		Employer Group			Health and Well-Being Services		Other Businesses		Eliminations/ Corporate			Consolidated
	(in thousands)
2009
Revenues - external customers
Premiums:
Medicare Advantage	$	15,333,225	$	1,080,076		$	0	$	0	$	0		$	16,413,301
Medicare stand-alone PDP		2,322,432		4,986			0		0		0			2,327,418
Total Medicare		17,655,657		1,085,062			0		0		0			18,740,719
Fully-insured		638,044		5,547,114			0		0		0			6,185,158
Specialty		54,837		834,413			0		0		0			889,250
Military services		0		0			0		3,426,739		0			3,426,739
Medicaid and other		0		0			0		684,885		0			684,885
Total premiums		18,348,538		7,466,589			0		4,111,624		0			29,926,751
Services revenue:
Provider		0		0			16,412		0		0			16,412
ASO and other		10,049		369,684			0		123,362		0			503,095
Total services revenue		10,049		369,684			16,412		123,362		0			519,507
Total revenues - external customers		18,358,587		7,836,273			16,412		4,234,986		0			30,446,258
Intersegment revenues
Services		0		13,814			8,002,820		0		(8,016,634	)		0
Products		0		0			949,095		0		(949,095	)		0
Total intersegment revenues		0		13,814			8,951,915		0		(8,965,729	)		0
Investment income		88,013		47,573			0		23,361		137,370			296,317
Total revenues		18,446,600		7,897,660			8,968,327		4,258,347		(8,828,359	)		30,742,575
Operating expenses:
Benefits		14,987,915		6,289,033			0		3,704,460		(197,832	)		24,783,576
Operating costs		1,984,817		1,533,069			8,767,686		431,051		(8,702,639	)		4,013,984
Depreciation and amortization		115,102		88,861			18,111		25,001		(9,663	)		237,412
Total operating expenses		17,087,834		7,910,963			8,785,797		4,160,512		(8,910,134	)		29,034,972
Income from operations		1,358,766		(13,303	)		182,530		97,835		81,775			1,707,603
Interest expense		0		0			0		0		105,843			105,843
Income (loss) before income taxes	$	1,358,766	$	(13,303	)	$	182,530	$	97,835	$	(24,068	)	$	1,601,760

	Retail		Employer Group		Health and Well-Being Services		Other Businesses		Eliminations/ Corporate			Consolidated
	(in thousands)
2008
Revenues - external customers
Premiums:
Medicare Advantage	$	12,987,639	$	790,360	$	0	$	0	$	0		$	13,777,999
Medicare stand-alone PDP		3,375,636		4,764		0		0		0			3,380,400
Total Medicare		16,363,275		795,124		0		0		0			17,158,399
Fully-insured		519,077		5,650,326		0		0		0			6,169,403
Specialty		66,338		819,249		0		0		0			885,587
Military services		0		0		0		3,218,270		0			3,218,270
Medicaid and other		0		0		0		633,185		0			633,185
Total premiums		16,948,690		7,264,699		0		3,851,455		0			28,064,844
Services revenue:
Provider		0		0		14,845		0		0			14,845
ASO and other		10,965		352,769		0		89,660		0			453,394
Total services revenue		10,965		352,769		14,845		89,660		0			468,239
Total revenues - external customers		16,959,655		7,617,468		14,845		3,941,115		0			28,533,083
Intersegment revenues
Services		0		12,706		10,505,782		0		(10,518,488	)		0
Products		0		0		836,828		0		(836,828	)		0
Total intersegment revenues		0		12,706		11,342,610		0		(11,355,316	)		0
Investment income		60,399		36,515		0		7,316		115,985			220,215
Total revenues		17,020,054		7,666,689		11,357,455		3,948,431		(11,239,331	)		28,753,298
Operating expenses:
Benefits		14,398,572		6,057,804		0		3,438,619		(164,889	)		23,730,106
Operating costs		1,848,651		1,433,365		11,187,070		420,459		(11,149,890	)		3,739,655
Depreciation and amortization		101,663		78,872		14,343		23,773		(8,251	)		210,400
Total operating expenses		16,348,886		7,570,041		11,201,413		3,882,851		(11,323,030	)		27,680,161
Income from operations		671,168		96,648		156,042		65,580		83,699			1,073,137
Interest expense		0		0		0		0		80,289			80,289
Income before income taxes	$	671,168	$	96,648	$	156,042	$	65,580	$	3,410		$	992,848

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Investment Securities (Tables)

12 Months Ended

Dec. 31, 2010

Investment Securities [Abstract]

Amortized Cost And Fair Value Of Available For Sale Debt Securities

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
December 31, 2010
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	697,816	$	14,412	$	(615	)	$	711,613
Mortgage-backed securities		1,614,569		49,783		(1,173	)		1,663,179
Tax-exempt municipal securities		2,439,659		37,294		(43,619	)		2,433,334
Mortgage-backed securities:
Residential		58,017		545		(2,675	)		55,887
Commercial		306,291		14,911		(171	)		321,031
Asset-backed securities		148,068		1,727		(44	)		149,751
Corporate debt securities		2,906,228		139,793		(13,710	)		3,032,311
Redeemable preferred stock		5,333		0		0			5,333
Total debt securities	$	8,175,981	$	258,465	$	(62,007	)	$	8,372,439
December 31, 2009
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	1,005,203	$	6,683	$	(2,534	)	$	1,009,352
Mortgage-backed securities		1,675,667		24,324		(11,328	)		1,688,663
Tax-exempt municipal securities		2,195,077		52,381		(23,417	)		2,224,041
Mortgage-backed securities:
Residential		106,191		220		(10,999	)		95,412
Commercial		285,014		3,252		(8,640	)		279,626
Asset-backed securities		106,471		824		(107	)		107,188
Corporate debt securities		2,043,721		57,173		(21,326	)		2,079,568
Redeemable preferred stock		8,400		4,900		0			13,300
Total debt securities	$	7,425,744	$	149,757	$	(78,351	)	$	7,497,150

Unrealized Loss Position Investments

	Less than 12 months					12 months or more					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
	(in thousands)
December 31, 2010
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	141,766	$	(615	)	$	0	$	0		$	141,766	$	(615	)
Mortgage-backed securities		110,358		(1,054	)		5,557		(119	)		115,915		(1,173	)
Tax-exempt municipal securities		1,168,221		(33,218	)		97,809		(10,401	)		1,266,030		(43,619	)
Mortgage-backed securities:
Residential		0		0			32,671		(2,675	)		32,671		(2,675	)
Commercial		0		0			2,752		(171	)		2,752		(171	)
Asset-backed securities		17,069		(42	)		283		(2	)		17,352		(44	)
Corporate debt securities		383,677		(9,572	)		31,464		(4,138	)		415,141		(13,710	)
Total debt securities	$	1,821,091	$	(44,501	)	$	170,536	$	(17,506	)	$	1,991,627	$	(62,007	)
December 31, 2009
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	301,843	$	(2,425	)	$	2,970	$	(109	)	$	304,813	$	(2,534	)
Mortgage-backed securities		823,365		(11,005	)		6,834		(323	)		830,199		(11,328	)
Tax-exempt municipal securities		598,520		(14,286	)		198,327		(9,131	)		796,847		(23,417	)
Mortgage-backed securities:
Residential		1,771		(5	)		73,178		(10,994	)		74,949		(10,999	)
Commercial		31,941		(359	)		142,944		(8,281	)		174,885		(8,640	)
Asset-backed securities		1,930		(19	)		2,179		(88	)		4,109		(107	)
Corporate debt securities		636,833		(9,354	)		99,830		(11,972	)		736,663		(21,326	)
Total debt securities	$	2,396,203	$	(37,453	)	$	526,262	$	(40,898	)	$	2,922,465	$	(78,351	)

Realized Investment Gains (Losses), Net

	2010			2009			2008
	(in thousands)
Gross realized gains	$	34,815		$	123,361		$	56,879
Gross realized losses		(29,169	)		(103,878	)		(136,296	)
Net realized capital gains (losses)	$	5,646		$	19,483		$	(79,417	)

Investments Classified By Contractual Maturity Date

	Amortized Cost		Fair Value
	(in thousands)
Due within one year	$	299,861	$	301,630
Due after one year through five years		1,936,215		1,991,966
Due after five years through ten years		2,072,510		2,134,576
Due after ten years		1,740,450		1,754,419
Mortgage and asset-backed securities		2,126,945		2,189,848
Total debt securities	$	8,175,981	$	8,372,439

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Debt

12 Months Ended

Dec. 31, 2010

Debt [Abstract]

Debt

11. DEBT

The carrying value of long-term debt outstanding was as follows at December 31, 2010 and 2009:

	2010		2009
	(in thousands)
Long-term debt:
Senior notes:
$500 million, 6.45% due June 1, 2016	$	535,342	$	540,907
$500 million, 7.20% due June 15, 2018		508,005		508,799
$300 million, 6.30% due August 1, 2018		321,622		323,862
$250 million, 8.15% due June 15, 2038		266,892		267,070
Total senior notes		1,631,861		1,640,638
Other long-term borrowings		36,988		37,528
Total long-term debt	$	1,668,849	$	1,678,166

Senior Notes

Our senior notes, which are unsecured, may be redeemed at our option at any time at 100% of the principal amount plus accrued interest and a specified make-whole amount. The 7.20% and 8.15% senior notes are subject to an interest rate adjustment if the debt ratings assigned to the notes are downgraded (or subsequently upgraded) and contain a change of control provision that may require us to purchase the notes under certain circumstances.

We had been parties to interest-rate swap agreements to exchange the fixed interest rate under our senior notes for a variable interest rate based on LIBOR. As a result, the carrying value of the senior notes had been adjusted to reflect changes in value caused by an increase or decrease in interest rates. During 2008, we terminated all of our swap agreements. The cumulative adjustment to the carrying value of our senior notes was $103.4 million as of the termination date which is being amortized as a reduction to interest expense over the remaining term of the senior notes, resulting in a weighted-average effective interest rate fixed at 6.08%. The unamortized carrying value adjustment was $83.8 million as of December 31, 2010 and $92.9 million as of December 31, 2009.

Credit Agreement

In December 2010, we replaced our 5-year $1.0 billion unsecured revolving credit agreement which was set to expire in July 2011 with a 3-year $1.0 billion unsecured revolving agreement expiring December 2013. Under the new credit agreement, at our option, we can borrow on either a competitive advance basis or a revolving credit basis. The revolving credit portion bears interest at either LIBOR or the base rate plus a spread. The spread, currently 200 basis points, varies depending on our credit ratings ranging from 150 to 262.5 basis points. We also pay an annual facility fee regardless of utilization. This facility fee, currently 37.5 basis points, may fluctuate between 25 and 62.5 basis points, depending upon our credit ratings. The competitive advance portion of any borrowings will bear interest at market rates prevailing at the time of borrowing on either a fixed rate or a floating rate based on LIBOR, at our option.

The terms of the new credit agreement include standard provisions related to conditions of borrowing, including a customary material adverse event clause which could limit our ability to borrow additional funds. In addition, the credit agreement contains customary restrictive and financial covenants as well as customary events of default, including financial covenants regarding the maintenance of a minimum level of net worth of $5,257.9 million at December 31, 2010 and a maximum leverage ratio of 3.0:1. We are in compliance with the financial covenants, with actual net worth of $6,924.1 million and a leverage ratio of 0.8:1, as measured in accordance with the credit agreement as of December 31, 2010.In addition, the new credit agreement includes an uncommitted $250 million incremental loan facility.

At December 31, 2010, we had no borrowings outstanding under the credit agreement. We have outstanding letters of credit of $10.4 million secured under the credit agreement. No amounts have ever been drawn on these letters of credit. Accordingly, as of December 31, 2010, we had $989.6 million of remaining borrowing capacity under the credit agreement, none of which would be restricted by our financial covenant compliance requirement. We have other customary, arms-length relationships, including financial advisory and banking, with some parties to the credit agreement.

Other Long-Term Borrowings

Other long-term borrowings of $37.0 million at December 31, 2010 represent junior subordinated debt of $36.1 million and financing for the renovation of a building of $0.9 million. The junior subordinated debt, which is due in 2037, may be called by us without penalty in 2012 and bears a fixed annual interest rate of 8.02% payable quarterly until 2012, and then payable at a floating rate based on LIBOR plus 310 basis points. The debt associated with the building renovation bears interest at 2.00%, is collateralized by the building, and is payable in various installments through 2014.

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Fair Value (Changes In Fair Value Of Assets Measured Using Significant Unobservable Inputs) (Details) (USD $) In Thousands	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009
Beginning Balance	$ 92,723	$ 91,926
Realized in earnings	6,260	90
Unrealized in other comprehensive income	(2,525)	4,651
Purchases, sales, issuances, and settlements, net	(30,899)	(7,227)
Transfers into Level 3	0	3,283
Ending Balance	65,559	92,723
Auction Rate Securities [Member]
Beginning Balance	68,814	73,654
Realized in earnings	16	16
Unrealized in other comprehensive income	1,901	269
Purchases, sales, issuances, and settlements, net	(18,925)	(5,125)
Transfers into Level 3	0	0
Ending Balance	51,806	68,814
Privates And Venture Capital [Member]
Beginning Balance	23,909	18,272
Realized in earnings	6,244	74
Unrealized in other comprehensive income	(4,426)	4,382
Purchases, sales, issuances, and settlements, net	(11,974)	(2,102)
Transfers into Level 3	0	3,283
Ending Balance	$ 13,753	$ 23,909

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Stockholders' Equity (Narrative) (Details) (USD $)	1 Months Ended	12 Months Ended
	Feb. 04, 2011	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Authorized repurchase amount of common shares exclusive of shares repurchased in connection with employee stock plans				$250 million
Shares repurchased in open market			1,990,000	0	2,100,000
Shares repurchased in open market, value			$ 100,000,000		$ 92,800,000
Shares repurchased in open market, average price			$ 50.17		$ 44.19
Total remaining authorized repurchase amount of common shares exclusive of shares repurchased in connection with employee stock plans	150,000,000
Common shares acquired in connection with employee stock plans, shares			200,000	600,000	200,000
Common shares acquired in connection with employee stock plans, amount			8,500,000	22,800,000	13,300,000
Aggregate statutory capital and surplus in our state regulated subsidiaries			4,300,000,000	3,800,000,000
Dividends to the parent company without prior approval by state regulatory authorities		740,000,000
Regulatory Requirements [Member]
Dividends to the parent company without prior approval by state regulatory authorities			$ 720,000,000

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Employee Benefit Plans (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Employee retirement and savings plan cost	$ 108,600,000	$ 109,500,000	$ 79,600,000
Closing stock price as of December 31, 2010	$ 54.74
Shares of retirement and savings plans invested in company's common stock	4,100,000
Percentage of retirement and savings plan's assets invested in our company common stock	14.00%
Number of shares of our common stock reserved for issuance under our defined contribution and retirement savings plans	7,200,000
Percentage of the retirement and savings plan's assets invested in our common stock as compared to company's outstanding shares at year-end	2.00%
Combination of age and years necessary for retirement provision as related to our equity award program	65
Minimum age required for retirement eligibility as related to our equity award program	55
Minimum number of years of service for retirement eligibility as related to our equity award program	5
Employee service share based compensation tax benefit realized from exercise of stock options and restricted stock vesting	14,900,000	16,300,000	16,900,000
Capitalized stock-based compensation expense	0
Restricted share equivalent to stock options	1.7
Common stock shares reserved for stock award plans	12,375,233
Common stock shares available for future grants if all grants are options	3,225,299
Common stock shares available for future grants if all grants are restricted shares	1,897,235
Outstanding intrinsic value of stock options	62,400,000
Weighted-average remaining contractual term, years	3.8
Exercisable stock options intrinsic value	39,800,000
Exercisable stock options weighted-average remaining contractual term, years	2.9
Total intrinsic value of stock options exercised	11,300,000	23,700,000	18,300,000
Cash received from stock options exercises	17,500,000	18,300,000	12,100,000
Weighted-average grant date fair value of restricted stock awards	$ 49.29	$ 41.16	$ 68.10
Fair value of shares vested	30,000,000	22,300,000	28,700,000
Employee Stock Option [Member]
Award vesting period	1 to 3 years
Option expiration date	7 to 10 years
Total compensation expense not yet recognized related to nonvested options	16,600,000
Compensation expense over a weighted-average period, years	2.0
Restricted Stock [Member]
Award vesting period	3
Total compensation expense not yet recognized related to nonvested options	$ 38,400,000
Compensation expense over a weighted-average period, years	2.0

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Reinsurance (Balance And Financial Rating Related To Reinsurers) (Details) (USD $) In Thousands	Dec. 31, 2010	Dec. 31, 2009
Reinsurance Recoverables	$ 420,696	$ 378,300
All Others [Member]
Reinsurance Recoverables	219,863
Protective Life Insurance Company [Member]
Reinsurance Recoverables	$ 200,833

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Goodwill And Other Intangible Assets (Changes In Carrying Amount Of Goodwill By Reportable Segment) (Details) (USD $) In Thousands	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009
Beginning Balance	$ 1,992,924	$ 1,963,111
Subsequent payments/adjustments related to 2008 acquisitions	36,592	29,813
Acquisitions	538,293
Ending Balance	2,567,809	1,992,924
Retail [Member]
Beginning Balance	564,983	547,896
Subsequent payments/adjustments related to 2008 acquisitions	27,861	17,087
Acquisitions	0
Ending Balance	592,844	564,983
Employer Group [Member]
Beginning Balance	53,259	40,533
Subsequent payments/adjustments related to 2008 acquisitions	8,731	12,726
Acquisitions	0
Ending Balance	61,990	53,259
Health And Well-Being Services [Member]
Beginning Balance	1,317,229	1,317,229
Subsequent payments/adjustments related to 2008 acquisitions	0	0
Acquisitions	538,293
Ending Balance	1,855,522	1,317,229
Other Businesses [Member]
Beginning Balance	57,453	57,453
Subsequent payments/adjustments related to 2008 acquisitions	0	0
Acquisitions	0
Ending Balance	$ 57,453	$ 57,453

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Investment Securities

12 Months Ended

Dec. 31, 2010

Investment Securities [Abstract]

Investment Securities

4. INVESTMENT SECURITIES

Investment securities classified as current and long-term were as follows at December 31, 2010 and 2009, respectively:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
December 31, 2010
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	697,816	$	14,412	$	(615	)	$	711,613
Mortgage-backed securities		1,614,569		49,783		(1,173	)		1,663,179
Tax-exempt municipal securities		2,439,659		37,294		(43,619	)		2,433,334
Mortgage-backed securities:
Residential		58,017		545		(2,675	)		55,887
Commercial		306,291		14,911		(171	)		321,031
Asset-backed securities		148,068		1,727		(44	)		149,751
Corporate debt securities		2,906,228		139,793		(13,710	)		3,032,311
Redeemable preferred stock		5,333		0		0			5,333
Total debt securities	$	8,175,981	$	258,465	$	(62,007	)	$	8,372,439
December 31, 2009
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	1,005,203	$	6,683	$	(2,534	)	$	1,009,352
Mortgage-backed securities		1,675,667		24,324		(11,328	)		1,688,663
Tax-exempt municipal securities		2,195,077		52,381		(23,417	)		2,224,041
Mortgage-backed securities:
Residential		106,191		220		(10,999	)		95,412
Commercial		285,014		3,252		(8,640	)		279,626
Asset-backed securities		106,471		824		(107	)		107,188
Corporate debt securities		2,043,721		57,173		(21,326	)		2,079,568
Redeemable preferred stock		8,400		4,900		0			13,300
Total debt securities	$	7,425,744	$	149,757	$	(78,351	)	$	7,497,150

We participate in a securities lending program where we loan certain investment securities for short periods of time in exchange for collateral, consisting of cash or U.S. Government securities, initially equal to at least 102% of the fair value of the investment securities on loan. Investment securities with a fair value of $54.0 million at December 31, 2010 and $126.1 million at December 31, 2009 were on loan. At December 31, 2010, all collateral from lending our investment securities was in the form of cash which has been reinvested in money market funds and short-term asset-backed securities.

Gross unrealized losses and fair values aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position were as follows at December 31, 2010 and 2009, respectively:

	Less than 12 months					12 months or more					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
	(in thousands)
December 31, 2010
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	141,766	$	(615	)	$	0	$	0		$	141,766	$	(615	)
Mortgage-backed securities		110,358		(1,054	)		5,557		(119	)		115,915		(1,173	)
Tax-exempt municipal securities		1,168,221		(33,218	)		97,809		(10,401	)		1,266,030		(43,619	)
Mortgage-backed securities:
Residential		0		0			32,671		(2,675	)		32,671		(2,675	)
Commercial		0		0			2,752		(171	)		2,752		(171	)
Asset-backed securities		17,069		(42	)		283		(2	)		17,352		(44	)
Corporate debt securities		383,677		(9,572	)		31,464		(4,138	)		415,141		(13,710	)
Total debt securities	$	1,821,091	$	(44,501	)	$	170,536	$	(17,506	)	$	1,991,627	$	(62,007	)
December 31, 2009
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	301,843	$	(2,425	)	$	2,970	$	(109	)	$	304,813	$	(2,534	)
Mortgage-backed securities		823,365		(11,005	)		6,834		(323	)		830,199		(11,328	)
Tax-exempt municipal securities		598,520		(14,286	)		198,327		(9,131	)		796,847		(23,417	)
Mortgage-backed securities:
Residential		1,771		(5	)		73,178		(10,994	)		74,949		(10,999	)
Commercial		31,941		(359	)		142,944		(8,281	)		174,885		(8,640	)
Asset-backed securities		1,930		(19	)		2,179		(88	)		4,109		(107	)
Corporate debt securities		636,833		(9,354	)		99,830		(11,972	)		736,663		(21,326	)
Total debt securities	$	2,396,203	$	(37,453	)	$	526,262	$	(40,898	)	$	2,922,465	$	(78,351	)

Approximately 96% of our debt securities were investment-grade quality, with an average credit rating of AA by S&P at December 31, 2010. Most of the debt securities that were below investment-grade were rated BB, the higher end of the below investment-grade rating scale. At December 31, 2010, 14% of our tax-exempt municipal securities were pre-refunded, generally with U.S. government and agency securities, and 25% of our tax-exempt securities were insured by bond insurers and had an equivalent S&P credit rating of AA exclusive of the bond insurers' guarantee. Our investment policy limits investments in a single issuer and requires diversification among various asset types.

The recoverability of our residential and commercial mortgage-backed securities is supported by factors such as seniority, underlying collateral characteristics and credit enhancements. Our residential and commercial mortgage-backed securities at December 31, 2010 primarily were composed of senior tranches having high credit support, with 99% of the collateral consisting of prime loans. All commercial mortgage-backed securities were rated AA+ at December 31, 2010.

All issuers of securities we own that were trading at an unrealized loss at December 31, 2010 remain current on all contractual payments. After taking into account these and other factors previously described, we believe these unrealized losses primarily were caused by an increase in market interest rates and tighter liquidity conditions in the current markets than when the securities were purchased. At December 31, 2010, we did not intend to sell the securities with an unrealized loss position in accumulated other comprehensive income, and it is not likely that we will be required to sell these securities before recovery of their amortized cost basis. As a result, we believe that the securities with an unrealized loss were not other-than-temporarily impaired at December 31, 2010.

The detail of realized gains (losses) related to investment securities and included within investment income was as follows for the years ended December 31, 2010, 2009, and 2008:

	2010			2009			2008
	(in thousands)
Gross realized gains	$	34,815		$	123,361		$	56,879
Gross realized losses		(29,169	)		(103,878	)		(136,296	)
Net realized capital gains (losses)	$	5,646		$	19,483		$	(79,417	)

There were no material other-than-temporary impairments in 2010 or 2009. Gross realized losses in 2008 included other-than-temporary impairments of $103.1 million, primarily due to investments in Lehman Brothers Holdings Inc. and certain of its subsidiaries, which filed for bankruptcy protection in 2008, as well as declines in the values of securities primarily associated with the financial services industry.

The contractual maturities of debt securities available for sale at December 31, 2010, regardless of their balance sheet classification, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Fair Value
	(in thousands)
Due within one year	$	299,861	$	301,630
Due after one year through five years		1,936,215		1,991,966
Due after five years through ten years		2,072,510		2,134,576
Due after ten years		1,740,450		1,754,419
Mortgage and asset-backed securities		2,126,945		2,189,848
Total debt securities	$	8,175,981	$	8,372,439

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Segment Information (Segment Results) (Details) (USD $) In Thousands	3 Months Ended										12 Months Ended
	Dec. 31, 2010		Sep. 30, 2010	Jun. 30, 2010		Mar. 31, 2010	Dec. 31, 2009	Sep. 30, 2009	Jun. 30, 2009	Mar. 31, 2009	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Revenues-external customer premiums											$ 32,712,323	$ 29,926,751	$ 28,064,844
Revenues, Investment income											329,332	296,317	220,215
Total services revenue											555,180	519,507	468,239
Total revenues	8,276,442	[1]	8,350,812	8,589,243	[2]	8,380,338	7,578,907	7,657,773	7,842,909	7,662,986	33,596,835	30,742,575	28,753,298
Operating expenses, Benefits											27,117,069	24,783,576	23,730,106
Operating expenses, Operating Costs											4,380,319	4,013,984	3,739,655
Operating expenses, Depreciation and amortization											244,825	237,412	210,400
Total operating expenses											31,742,213	29,034,972	27,680,161
Income from operations											1,854,622	1,707,603	1,073,137
Interest expense											105,060	105,843	80,289
Income before income taxes	174,492	[1]	622,290	535,854	[2]	416,926	398,700	469,348	439,950	293,762	1,749,562	1,601,760	992,848
Retail [Member]
Revenues-external customer premiums											19,052,712	18,348,538	16,948,690
Revenues, Investment income											80,525	88,013	60,399
Total services revenue											11,105	10,049	10,965
Total revenues											19,144,342	18,446,600	17,020,054
Operating expenses, Benefits											15,625,243	14,987,915	14,398,572
Operating expenses, Operating Costs											2,113,011	1,984,817	1,848,651
Operating expenses, Depreciation and amortization											117,219	115,102	101,663
Total operating expenses											17,855,473	17,087,834	16,348,886
Income from operations											1,288,869	1,358,766	671,168
Interest expense											0	0	0
Income before income taxes											1,288,869	1,358,766	671,168
Retail [Member] | Medicare Advantage [Member]
Revenues-external customer premiums											16,265,839	15,333,225	12,987,639
Retail [Member] | Medicare Stand-Alone PDP [Member]
Revenues-external customer premiums											1,960,063	2,322,432	3,375,636
Retail [Member] | Medicare [Member]
Revenues-external customer premiums											18,225,902	17,655,657	16,363,275
Retail [Member] | Military Services [Member]
Revenues-external customer premiums											0	0	0
Retail [Member] | Medicaid And Other [Member]
Revenues-external customer premiums											0	0	0
Retail [Member] | Provider [Member]
Total services revenue											0	0	0
Retail [Member] | ASO And Other [Member]
Total services revenue											11,105	10,049	10,965
Retail [Member] | Intersegment Revenues [Member]
Total services revenue											0	0	0
Products											0	0	0
Total intersegment revenues											0	0	0
Retail [Member] | Fully-Insured [Member]
Revenues-external customer premiums											745,329	638,044	519,077
Retail [Member] | Specialty [Member]
Revenues-external customer premiums											81,481	54,837	66,338
Retail [Member] | External Customers [Member]
Total revenues - external customers											19,063,817	18,358,587	16,959,655
Employer Group [Member]
Revenues-external customer premiums											9,078,903	7,466,589	7,264,699
Revenues, Investment income											42,205	47,573	36,515
Total services revenue											394,950	369,684	352,769
Total revenues											9,529,195	7,897,660	7,666,689
Operating expenses, Benefits											7,485,497	6,289,033	6,057,804
Operating expenses, Operating Costs											1,662,166	1,533,069	1,433,365
Operating expenses, Depreciation and amortization											93,478	88,861	78,872
Total operating expenses											9,241,141	7,910,963	7,570,041
Income from operations											288,054	(13,303)	96,648
Interest expense											0	0	0
Income before income taxes											288,054	(13,303)	96,648
Employer Group [Member] | Medicare Advantage [Member]
Revenues-external customer premiums											3,020,282	1,080,076	790,360
Employer Group [Member] | Medicare Stand-Alone PDP [Member]
Revenues-external customer premiums											4,598	4,986	4,764
Employer Group [Member] | Medicare [Member]
Revenues-external customer premiums											3,024,880	1,085,062	795,124
Employer Group [Member] | Military Services [Member]
Revenues-external customer premiums											0	0	0
Employer Group [Member] | Medicaid And Other [Member]
Revenues-external customer premiums											0	0	0
Employer Group [Member] | Provider [Member]
Total services revenue											0	0	0
Employer Group [Member] | ASO And Other [Member]
Total services revenue											394,950	369,684	352,769
Employer Group [Member] | Intersegment Revenues [Member]
Total services revenue											13,137	13,814	12,706
Products											0	0	0
Total intersegment revenues											13,137	13,814	12,706
Employer Group [Member] | Fully-Insured [Member]
Revenues-external customer premiums											5,168,713	5,547,114	5,650,326
Employer Group [Member] | Specialty [Member]
Revenues-external customer premiums											885,310	834,413	819,249
Employer Group [Member] | External Customers [Member]
Total revenues - external customers											9,473,853	7,836,273	7,617,468
Health And Well-Being Services [Member]
Revenues-external customer premiums											0	0	0
Revenues, Investment income											0	0	0
Total services revenue											34,104	16,412	14,845
Total revenues											8,819,617	8,968,327	11,357,455
Operating expenses, Benefits											0	0	0
Operating expenses, Operating Costs											8,575,077	8,767,686	11,187,070
Operating expenses, Depreciation and amortization											25,622	18,111	14,343
Total operating expenses											8,600,699	8,785,797	11,201,413
Income from operations											218,918	182,530	156,042
Interest expense											0	0	0
Income before income taxes											218,918	182,530	156,042
Health And Well-Being Services [Member] | Medicare Advantage [Member]
Revenues-external customer premiums											0	0	0
Health And Well-Being Services [Member] | Medicare Stand-Alone PDP [Member]
Revenues-external customer premiums											0	0	0
Health And Well-Being Services [Member] | Medicare [Member]
Revenues-external customer premiums											0	0	0
Health And Well-Being Services [Member] | Military Services [Member]
Revenues-external customer premiums											0	0	0
Health And Well-Being Services [Member] | Medicaid And Other [Member]
Revenues-external customer premiums											0	0	0
Health And Well-Being Services [Member] | Provider [Member]
Total services revenue											34,104	16,412	14,845
Health And Well-Being Services [Member] | ASO And Other [Member]
Total services revenue											0	0	0
Health And Well-Being Services [Member] | Intersegment Revenues [Member]
Total services revenue											7,493,941	8,002,820	10,505,782
Products											1,291,572	949,095	836,828
Total intersegment revenues											8,785,513	8,951,915	11,342,610
Health And Well-Being Services [Member] | Fully-Insured [Member]
Revenues-external customer premiums											0	0	0
Health And Well-Being Services [Member] | Specialty [Member]
Revenues-external customer premiums											0	0	0
Health And Well-Being Services [Member] | External Customers [Member]
Total revenues - external customers											34,104	16,412	14,845
Other Businesses [Member]
Revenues-external customer premiums											4,580,708	4,111,624	3,851,455
Revenues, Investment income											42,581	23,361	7,316
Total services revenue											115,021	123,362	89,660
Total revenues											4,738,310	4,258,347	3,948,431
Operating expenses, Benefits											4,252,333	3,704,460	3,438,619
Operating expenses, Operating Costs											475,463	431,051	420,459
Operating expenses, Depreciation and amortization											11,865	25,001	23,773
Total operating expenses											4,739,661	4,160,512	3,882,851
Income from operations											(1,351)	97,835	65,580
Interest expense											0	0	0
Income before income taxes											(1,351)	97,835	65,580
Other Businesses [Member] | Medicare Advantage [Member]
Revenues-external customer premiums											0	0	0
Other Businesses [Member] | Medicare Stand-Alone PDP [Member]
Revenues-external customer premiums											355,399	0	0
Other Businesses [Member] | Medicare [Member]
Revenues-external customer premiums											355,399	0	0
Other Businesses [Member] | Military Services [Member]
Revenues-external customer premiums											3,462,544	3,426,739	3,218,270
Other Businesses [Member] | Medicaid And Other [Member]
Revenues-external customer premiums											762,765	684,885	633,185
Other Businesses [Member] | Provider [Member]
Total services revenue											0	0	0
Other Businesses [Member] | ASO And Other [Member]
Total services revenue											115,021	123,362	89,660
Other Businesses [Member] | Intersegment Revenues [Member]
Total services revenue											0	0	0
Products											0	0	0
Total intersegment revenues											0	0	0
Other Businesses [Member] | Fully-Insured [Member]
Revenues-external customer premiums											0	0	0
Other Businesses [Member] | Specialty [Member]
Revenues-external customer premiums											0	0	0
Other Businesses [Member] | External Customers [Member]
Total revenues - external customers											4,695,729	4,234,986	3,941,115
Eliminations/Corporate [Member]
Revenues-external customer premiums											0	0	0
Revenues, Investment income											164,021	137,370	115,985
Total services revenue											0	0	0
Total revenues											(8,634,629)	(8,828,359)	(11,239,331)
Operating expenses, Benefits											(246,004)	(197,832)	(164,889)
Operating expenses, Operating Costs											(8,445,398)	(8,702,639)	(11,149,890)
Operating expenses, Depreciation and amortization											(3,359)	(9,663)	(8,251)
Total operating expenses											(8,694,761)	(8,910,134)	(11,323,030)
Income from operations											60,132	81,775	83,699
Interest expense											105,060	105,843	80,289
Income before income taxes											(44,928)	(24,068)	3,410
Eliminations/Corporate [Member] | Medicare Advantage [Member]
Revenues-external customer premiums											0	0	0
Eliminations/Corporate [Member] | Medicare Stand-Alone PDP [Member]
Revenues-external customer premiums											0	0	0
Eliminations/Corporate [Member] | Medicare [Member]
Revenues-external customer premiums											0	0	0
Eliminations/Corporate [Member] | Military Services [Member]
Revenues-external customer premiums											0	0	0
Eliminations/Corporate [Member] | Medicaid And Other [Member]
Revenues-external customer premiums											0	0	0
Eliminations/Corporate [Member] | Provider [Member]
Total services revenue											0	0	0
Eliminations/Corporate [Member] | ASO And Other [Member]
Total services revenue											0	0	0
Eliminations/Corporate [Member] | Intersegment Revenues [Member]
Total services revenue											(7,507,078)	(8,016,634)	(10,518,488)
Products											(1,291,572)	(949,095)	(836,828)
Total intersegment revenues											(8,798,650)	(8,965,729)	(11,355,316)
Eliminations/Corporate [Member] | Fully-Insured [Member]
Revenues-external customer premiums											0	0	0
Eliminations/Corporate [Member] | Specialty [Member]
Revenues-external customer premiums											0	0	0
Eliminations/Corporate [Member] | External Customers [Member]
Total revenues - external customers											0	0	0
Medicare Advantage [Member]
Revenues-external customer premiums											19,286,121	16,413,301	13,777,999
Medicare Stand-Alone PDP [Member]
Revenues-external customer premiums											2,320,060	2,327,418	3,380,400
Medicare [Member]
Revenues-external customer premiums											21,606,181	18,740,719	17,158,399
Military Services [Member]
Revenues-external customer premiums											3,462,544	3,426,739	3,218,270
Medicaid And Other [Member]
Revenues-external customer premiums											762,765	684,885	633,185
Provider [Member]
Total services revenue											34,104	16,412	14,845
ASO And Other [Member]
Total services revenue											521,076	503,095	453,394
Intersegment Revenues [Member]
Total services revenue											0	0	0
Products											0	0	0
Total intersegment revenues											0	0	0
Fully-Insured [Member]
Revenues-external customer premiums											5,914,042	6,185,158	6,169,403
Specialty [Member]
Revenues-external customer premiums											966,791	889,250	885,587
External Customers [Member]
Total revenues - external customers											$ 33,267,503	$ 30,446,258	$ 28,533,083

[1] Includes an expense of $138.9 million ($88.0 million after tax, or $0.52 per diluted common share) associated with reserve strengthening for our closed block of long-term care policies acquired in connection with the 2007 acquisition of KMG America Corporation as more fully described in Note 18 to the consolidated financial statements.

[2] Includes an expense of $147.5 million ($93.4 million after tax, or $0.55 per diluted common share) for the write-down of deferred acquisition costs associated with our individual major medical policies as more fully described in Note 18 to the consolidated financial statements.

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Earnings Per Common Share Computation

12 Months Ended

Dec. 31, 2010

Earnings Per Common Share Computation [Abstract]

Earnings Per Common Share Computation

14. EARNINGS PER COMMON SHARE COMPUTATION

Detail supporting the computation of basic and diluted earnings per common share was as follows for the years ended December 31, 2010, 2009 and 2008:

	2010		2009		2008
	(in thousands, except per share results)
Net income available for common stockholders	$	1,099,390	$	1,039,675	$	647,154
Weighted-average outstanding shares of common stock used to compute basic earnings per common share		167,782		167,364		167,172
Dilutive effect of:
Employee stock options		676		677		1,173
Restricted stock awards		1,340		1,030		842
Shares used to compute diluted earnings per common share		169,798		169,071		169,187
Basic earnings per common share	$	6.55	$	6.21	$	3.87
Diluted earnings per common share	$	6.47	$	6.15	$	3.83

Restricted stock awards and stock options to purchase 3,819,511 shares in 2010, 5,675,241 shares in 2009, and 3,243,933 shares in 2008 were anti-dilutive and, therefore, were not included in the computations of diluted earnings per common share.

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Benefits Payable (Activity In Benefits Payable) (Details) (USD $) In Thousands	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Benefits Payable [Abstract]
Balances at January 1	$ 2,943,379	$ 2,898,782	$ 2,355,461
Acquisitions	0	0	96,021
Current year, Incurred	24,185,717	21,943,547	21,114,008
Prior years, Incurred	(434,015)	(252,756)	(268,027)
Total incurred	23,751,702	21,690,791	20,845,981
Current year, Paid	(21,671,345)	(19,581,314)	(18,601,120)
Prior years, Paid	(1,809,610)	(2,064,880)	(1,797,561)
Total paid	(23,480,955)	(21,646,194)	(20,398,681)
Balances at December 31	$ 3,214,126	$ 2,943,379	$ 2,898,782

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Goodwill And Other Intangible Assets (Estimate Of Amortization Expense) (Details) (USD $) In Thousands	12 Months Ended
	Dec. 31, 2010
Goodwill And Other Intangible Assets [Abstract]
2011	$ 50,421
2012	48,792
2013	45,537
2014	41,039
2015	$ 35,707

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Earnings Per Common Share Computation (Tables)

12 Months Ended

Dec. 31, 2010

Earnings Per Common Share Computation [Abstract]

Detail Supporting The Computation Of Basic And Diluted Earnings Per Common Share

	2010		2009		2008
	(in thousands, except per share results)
Net income available for common stockholders	$	1,099,390	$	1,039,675	$	647,154
Weighted-average outstanding shares of common stock used to compute basic earnings per common share		167,782		167,364		167,172
Dilutive effect of:
Employee stock options		676		677		1,173
Restricted stock awards		1,340		1,030		842
Shares used to compute diluted earnings per common share		169,798		169,071		169,187
Basic earnings per common share	$	6.55	$	6.21	$	3.87
Diluted earnings per common share	$	6.47	$	6.15	$	3.83

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Income Taxes (Principal Components Of Net Deferred Tax Balances) (Details) (USD $) In Thousands	Dec. 31, 2010	Dec. 31, 2009
Income Taxes [Abstract]
Future policy benefits payable	$ 153,293	$ 103,941
Net operating loss carryforward	136,894	97,398
Compensation and other accrued expenses	127,442	121,516
Benefits payable	88,617	36,996
Deferred acquisition costs	34,044	0
Capital loss carryforward	13,032	13,169
Unearned premiums	9,813	25,528
Other	19,004	24,715
Total deferred income tax assets	582,139	423,263
Valuation allowance	(28,063)	(30,093)
Total deferred income tax assets, net of valuation allowance	554,076	393,170
Depreciable property and intangible assets	(275,569)	(213,291)
Investment securities	(65,921)	(25,077)
Prepaid expenses	(47,185)	(47,290)
Deferred acquisition costs	0	(38,899)
Total deferred income tax liabilities	(388,675)	(324,557)
Total net deferred income tax assets	165,401	68,613
Other current assets	76,598	32,206
Other long-term assets	$ 88,803	$ 36,407

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Acquisitions (Tables)

12 Months Ended

Dec. 31, 2010

Acquisitions [Abstract]

Fair Values Of Assets Acquired And Liabilities Assumed At The Date Of The Acquisition

	Concentra
	(in thousands)
Cash and cash equivalents	$	21,317
Receivables		108,571
Other current assets		20,589
Property and equipment		131,837
Goodwill		531,372
Other intangible assets		188,000
Other long-term assets		12,935
Total assets acquired		1,014,621
Current liabilities		(100,091	)
Other long-term liabilities		(109,811	)
Total liabilities assumed		(209,902	)
Net assets acquired	$	804,719

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Consolidated Statements Of Stockholders' Equity (USD $) In Thousands, except Share data	Common Stock [Member] USD ($)	Issued Shares [Member]	Capital In Excess Of Par Value [Member] USD ($)	Retained Earnings [Member] USD ($)	Accumulated Other Comprehensive Income (Loss) [Member] USD ($)	Treasury Stock [Member] USD ($)	Total USD ($)
Balances at Dec. 31, 2007	$ 31,123		$ 1,497,998	$ 2,742,782	$ 14,021	$ (256,987)	$ 4,028,937
Balances, issued shares at Dec. 31, 2007		186,739,000
Comprehensive income:
Net income				647,154			647,154
Other comprehensive income (loss):
Net unrealized investment gains (losses), net of tax benefit of $136,967 in 2008 and tax expense of $131,229 and $47,383 in 2009 and 2010					(239,591)		(239,591)
Reclassification adjustment for net realized losses/gains included in net earnings, net of tax benefit					50,327		50,327
Comprehensive income							457,890
Common stock repurchases						(106,070)	(106,070)
Stock-based compensation			55,369				55,369
Restricted stock grants and restricted stock unit vesting	111						111
Restricted stock grants and restricted stock unit vesting, issued shares		667,000
Restricted stock forfeitures	(14)		12				(2)
Restricted stock forfeitures, issued shares		(83,000)
Stock option exercises	89		11,331				11,420
Shares under options, exercised		534,000
Stock option and restricted stock tax benefit			9,535				9,535
Balances at Dec. 31, 2008	31,309		1,574,245	3,389,936	(175,243)	(363,057)	4,457,190
Balances, issued shares at Dec. 31, 2008		187,857,000
Comprehensive income:
Net income				1,039,675			1,039,675
Other comprehensive income (loss):
Net unrealized investment gains (losses), net of tax benefit of $136,967 in 2008 and tax expense of $131,229 and $47,383 in 2009 and 2010					229,724		229,724
Reclassification adjustment for net realized losses/gains included in net earnings, net of tax benefit					(12,346)		(12,346)
Comprehensive income							1,257,053
Common stock repurchases						(22,841)	(22,841)
Stock-based compensation			65,870				65,870
Restricted stock grants and restricted stock unit vesting	163						163
Restricted stock grants and restricted stock unit vesting, issued shares		978,000
Restricted stock forfeitures	(14)		14				0
Restricted stock forfeitures, issued shares		(87,000)
Stock option exercises	176		18,173				18,349
Shares under options, exercised		1,053,000
Stock option and restricted stock tax benefit			219				219
Balances at Dec. 31, 2009	31,634		1,658,521	4,429,611	42,135	(385,898)	5,776,003
Balances, issued shares at Dec. 31, 2009		189,801,000
Comprehensive income:
Net income				1,099,390			1,099,390
Other comprehensive income (loss):
Net unrealized investment gains (losses), net of tax benefit of $136,967 in 2008 and tax expense of $131,229 and $47,383 in 2009 and 2010					82,026		82,026
Reclassification adjustment for net realized losses/gains included in net earnings, net of tax benefit					(3,577)		(3,577)
Comprehensive income							1,177,839
Common stock repurchases						(108,545)	(108,545)
Stock-based compensation			62,947				62,947
Restricted stock grants and restricted stock unit vesting	0						0
Restricted stock grants and restricted stock unit vesting, issued shares		5,000
Restricted stock forfeitures	(21)		21				0
Restricted stock forfeitures, issued shares		(127,000)
Stock option exercises	94		17,384				17,478
Shares under options, exercised		566,000					565,500
Stock option and restricted stock tax benefit			(1,666)				(1,666)
Balances at Dec. 31, 2010	$ 31,707		$ 1,737,207	$ 5,529,001	$ 120,584	$ (494,443)	$ 6,924,056
Balances, issued shares at Dec. 31, 2010		190,245,000

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Stockholders' Equity

12 Months Ended

Dec. 31, 2010

Stockholders' Equity [Abstract]

Stockholders' Equity

15. STOCKHOLDERS' EQUITY

In December 2009, the Board of Directors authorized the repurchase of up to $250 million of our common shares exclusive of shares repurchased in connection with employee stock plans. Under this share repurchase authorization, shares may be purchased from time to time at prevailing prices in the open market, by block purchases, or in privately-negotiated transactions, subject to certain regulatory restrictions on volume, pricing, and timing. During 2010, we repurchased 1.99 million common shares in open market transactions for $100.0 million at an average price of $50.17. As of February 4, 2011, the remaining authorized amount totaled $150.0 million and the authorization expires on December 31, 2011.

No shares were repurchased in open market transactions during 2009. During 2008, we repurchased 2.10 million common shares in open market transactions for $92.8 million at an average price of $44.19 under a stock repurchase plan previously authorized by the Board of Directors.

In connection with employee stock plans, we acquired 0.2 million common shares for $8.5 million in 2010, 0.6 million common shares for $22.8 million in 2009, and 0.2 million common shares for $13.3 million in 2008.

Regulatory Requirements

Certain of our subsidiaries operate in states that regulate the payment of dividends, loans, or other cash transfers to Humana Inc., our parent company, and require minimum levels of equity as well as limit investments to approved securities. The amount of dividends that may be paid to Humana Inc. by these subsidiaries, without prior approval by state regulatory authorities, is limited based on the entity's level of statutory income and statutory capital and surplus. In most states, prior notification is provided before paying a dividend even if approval is not required.

Although minimum required levels of equity are largely based on premium volume, product mix, and the quality of assets held, minimum requirements can vary significantly at the state level. Our state regulated subsidiaries had aggregate statutory capital and surplus of approximately $4.3 billion and $3.8 billion as of December 31, 2010 and 2009, respectively, which exceeded aggregate minimum regulatory requirements. The amount of dividends that may be paid to our parent company in 2011 without prior approval by state regulatory authorities is approximately $740 million in the aggregate. This compares to dividends that were able to be paid in 2010 without prior regulatory approval of approximately $720 million.

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Quarterly Financial Information (Tables)

12 Months Ended

Dec. 31, 2010

Quarterly Financial Information

Schedule Summarizing Quarterly Operations Results

2010
	First		Second(1)		Third		Fourth(2)
	(in thousands, except per share results)
Total revenues	$	8,380,338	$	8,589,243	$	8,350,812	$	8,276,442
Income before income taxes		416,926		535,854		622,290		174,492
Net income		258,768		340,076		393,221		107,325
Basic earnings per common share		1.54		2.02		2.35		0.64
Diluted earnings per common share		1.52		2.00		2.32		0.63
	2009
	First		Second		Third		Fourth
	(in thousands, except per share results)
Total revenues	$	7,662,986	$	7,842,909	$	7,657,773	$	7,578,907
Income before income taxes		293,762		439,950		469,348		398,700
Net income		205,717		281,780		301,519		250,659
Basic earnings per common share		1.23		1.68		1.80		1.49
Diluted earnings per common share		1.22		1.67		1.78		1.48

(1) Includes an expense of $147.5 million ($93.4 million after tax, or $0.55 per diluted common share) for the write-down of deferred acquisition costs associated with our individual major medical policies as more fully described in Note 18 to the consolidated financial statements.

(2) Includes an expense of $138.9 million ($88.0 million after tax, or $0.52 per diluted common share) associated with reserve strengthening for our closed block of long-term care policies acquired in connection with the 2007 acquisition of KMG America Corporation as more fully described in Note 18 to the consolidated financial statements.

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Segment Information

12 Months Ended

Dec. 31, 2010

Segment Information [Abstract]

Segment Information

17. SEGMENT INFORMATION

During the first quarter of 2011, we realigned our business segments to reflect our evolving business model. As a result, we reassessed and changed our operating and reportable segments in the first quarter of 2011 to reflect management's new view of the business and to align our external financial reporting with our new operating and internal financial reporting model. All respective amounts related to the segment change have been retrospectively adjusted throughout the financial statements as discussed in Note 2. Our new reportable segments and the basis for determining those segments are discussed below.

We currently manage our business with three reportable segments: Retail, Employer Group, and Health and Well-Being Services. In addition, we include businesses that are not individually reportable because they do not meet the quantitative thresholds required by generally accepted accounting principles in an Other Businesses category. These segments are based on a combination of the type of health plan customer and adjacent businesses centered on well-being solutions for our health plans and other customers, as described below. These segment groupings are consistent with information used by our Chief Executive Officer to assess performance and allocate resources.

The Retail segment consists of Medicare and commercial fully-insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health and financial protection products, marketed directly to individuals. The Employer Group segment consists of Medicare and commercial fully-insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health and financial protection products, as well as administrative services only products marketed to employer groups. The Health and Well-Being Services segment includes services offered to our health plan members as well as to third parties that promote health and wellness, including primary care, pharmacy, integrated wellness, and home care services. The Other Businesses category consists of our Military services, primarily our TRICARE South Region contract, Medicaid, and closed-block long-term care businesses as well as our contract with CMS to administer the LI-NET program.

Our Health and Well-Being Services intersegment revenues primarily relate to managing prescription drug coverage for members of our other segments through Humana Pharmacy Solutions^®, or HPS, and includes the operations of RightSourceRx^®, our mail order pharmacy business. These revenues consist of the prescription price (ingredient cost plus dispensing fee), including the portion to be settled with the member (co-share) or with the government (subsidies), plus any associated administrative fees. Service revenues related to the distribution of prescriptions by third party retail pharmacies in our networks are recognized when the claim is processed and product revenues from dispensing prescriptions from our mail order pharmacies are recorded when the prescription or product is shipped. Our pharmacy operations, which are responsible for designing pharmacy benefits, including defining member co-share responsibilities, determining formulary listings, selecting and establishing prices charged by retail pharmacies, confirming member eligibility, reviewing drug utilization, and processing claims, act as a principal in the arrangement on behalf of members in our other segments. As principal, our Health and Well-Being Services segment reports revenues on a gross basis including co-share amounts from members collected by third party retail pharmacies at the point of service.

We present our consolidated results of operations from the perspective of the health plans. As a result, the cost of providing benefits to our members, whether provided via a third party provider or internally through a stand-alone subsidiary, is classified as benefits expense and excludes the portion of the cost for which the health plans do not bear responsibility, including member co-share amounts and government subsidies of $3.5 billion, $3.5 billion, and $4.6 billion for years ended December 31, 2010, 2009, and 2008, respectively.

Other than those described previously, the accounting policies of each segment are the same and are described in Note 2. Transactions between reportable segments consist of sales of services rendered by our Health and Well-Being Services segment, primarily pharmacy and behavioral health services, to our Retail and Employer Group customers. Intersegment sales and expenses are recorded at fair value and eliminated in consolidation. Members served by our segments often utilize the same provider networks, enabling us in some instances to obtain more favorable contract terms with providers. Our segments also share indirect costs and assets. As a result, the profitability of each segment is interdependent. We do not report total assets by segment since this is not a metric used to assess performance and allocate resources. We allocate most operating expenses to our segments. Certain corporate income and expenses are not allocated to the segments, including investment income not supporting segment operations, interest expense on corporate debt, and certain other corporate expenses. These items are managed at a corporate level. These corporate amounts are reported separately from our reportable segments and included with intersegment eliminations in the tables presenting segment results below.

Our segment results were as follows for the years ended December 31, 2010, 2009, and 2008:

	Retail		Employer Group		Health and Well-Being Services		Other Businesses			Eliminations/ Corporate			Consolidated
	(in thousands)
2010
Revenues - external customers
Premiums:
Medicare Advantage	$	16,265,839	$	3,020,282	$	0	$	0		$	0		$	19,286,121
Medicare stand-alone PDP		1,960,063		4,598		0		355,399			0			2,320,060
Total Medicare		18,225,902		3,024,880		0		355,399			0			21,606,181
Fully-insured		745,329		5,168,713		0		0			0			5,914,042
Specialty		81,481		885,310		0		0			0			966,791
Military services		0		0		0		3,462,544			0			3,462,544
Medicaid and other		0		0		0		762,765			0			762,765
Total premiums		19,052,712		9,078,903		0		4,580,708			0			32,712,323
Services revenue:
Provider		0		0		34,104		0			0			34,104
ASO and other		11,105		394,950		0		115,021			0			521,076
Total services revenue		11,105		394,950		34,104		115,021			0			555,180
Total revenues - external customers		19,063,817		9,473,853		34,104		4,695,729			0			33,267,503
Intersegment revenues
Services		0		13,137		7,493,941		0			(7,507,078	)		0
Products		0		0		1,291,572		0			(1,291,572	)		0
Total intersegment revenues		0		13,137		8,785,513		0			(8,798,650	)		0
Investment income		80,525		42,205		0		42,581			164,021			329,332
Total revenues		19,144,342		9,529,195		8,819,617		4,738,310			(8,634,629	)		33,596,835
Operating expenses:
Benefits		15,625,243		7,485,497		0		4,252,333			(246,004	)		27,117,069
Operating costs		2,113,011		1,662,166		8,575,077		475,463			(8,445,398	)		4,380,319
Depreciation and amortization		117,219		93,478		25,622		11,865			(3,359	)		244,825
Total operating expenses		17,855,473		9,241,141		8,600,699		4,739,661			(8,694,761	)		31,742,213
Income from operations		1,288,869		288,054		218,918		(1,351	)		60,132			1,854,622
Interest expense		0		0		0		0			105,060			105,060
Income (loss) before income taxes	$	1,288,869	$	288,054	$	218,918	$	(1,351	)	$	(44,928	)	$	1,749,562

Premium and services revenues derived from our contracts with the federal government, as a percentage of our total premium and services revenues, were approximately 76% for 2010, 73% for 2009 and 72% for 2008.

Retail segment benefit expenses for 2010 include $198.4 million related to prior year favorable reserve releases not in the ordinary course of business as discussed more fully in Note 9. Retail segment operating costs for 2010 include $147.5 million for the write-down of deferred acquisition costs associated with our individual major medical policies as discussed more fully in Note 18.

Employer Group segment benefit expenses for 2010 include $32.8 million related to prior year favorable reserve releases not in the ordinary course of business as discussed more fully in Note 9.

Benefit expenses for Other Businesses for 2010 include $138.9 million for reserve strengthening associated with our closed block of long-term care policies as discussed more fully in Note 18.

	Retail		Employer Group			Health and Well-Being Services		Other Businesses		Eliminations/ Corporate			Consolidated
	(in thousands)
2009
Revenues - external customers
Premiums:
Medicare Advantage	$	15,333,225	$	1,080,076		$	0	$	0	$	0		$	16,413,301
Medicare stand-alone PDP		2,322,432		4,986			0		0		0			2,327,418
Total Medicare		17,655,657		1,085,062			0		0		0			18,740,719
Fully-insured		638,044		5,547,114			0		0		0			6,185,158
Specialty		54,837		834,413			0		0		0			889,250
Military services		0		0			0		3,426,739		0			3,426,739
Medicaid and other		0		0			0		684,885		0			684,885
Total premiums		18,348,538		7,466,589			0		4,111,624		0			29,926,751
Services revenue:
Provider		0		0			16,412		0		0			16,412
ASO and other		10,049		369,684			0		123,362		0			503,095
Total services revenue		10,049		369,684			16,412		123,362		0			519,507
Total revenues - external customers		18,358,587		7,836,273			16,412		4,234,986		0			30,446,258
Intersegment revenues
Services		0		13,814			8,002,820		0		(8,016,634	)		0
Products		0		0			949,095		0		(949,095	)		0
Total intersegment revenues		0		13,814			8,951,915		0		(8,965,729	)		0
Investment income		88,013		47,573			0		23,361		137,370			296,317
Total revenues		18,446,600		7,897,660			8,968,327		4,258,347		(8,828,359	)		30,742,575
Operating expenses:
Benefits		14,987,915		6,289,033			0		3,704,460		(197,832	)		24,783,576
Operating costs		1,984,817		1,533,069			8,767,686		431,051		(8,702,639	)		4,013,984
Depreciation and amortization		115,102		88,861			18,111		25,001		(9,663	)		237,412
Total operating expenses		17,087,834		7,910,963			8,785,797		4,160,512		(8,910,134	)		29,034,972
Income from operations		1,358,766		(13,303	)		182,530		97,835		81,775			1,707,603
Interest expense		0		0			0		0		105,843			105,843
Income (loss) before income taxes	$	1,358,766	$	(13,303	)	$	182,530	$	97,835	$	(24,068	)	$	1,601,760

	Retail		Employer Group		Health and Well-Being Services		Other Businesses		Eliminations/ Corporate			Consolidated
	(in thousands)
2008
Revenues - external customers
Premiums:
Medicare Advantage	$	12,987,639	$	790,360	$	0	$	0	$	0		$	13,777,999
Medicare stand-alone PDP		3,375,636		4,764		0		0		0			3,380,400
Total Medicare		16,363,275		795,124		0		0		0			17,158,399
Fully-insured		519,077		5,650,326		0		0		0			6,169,403
Specialty		66,338		819,249		0		0		0			885,587
Military services		0		0		0		3,218,270		0			3,218,270
Medicaid and other		0		0		0		633,185		0			633,185
Total premiums		16,948,690		7,264,699		0		3,851,455		0			28,064,844
Services revenue:
Provider		0		0		14,845		0		0			14,845
ASO and other		10,965		352,769		0		89,660		0			453,394
Total services revenue		10,965		352,769		14,845		89,660		0			468,239
Total revenues - external customers		16,959,655		7,617,468		14,845		3,941,115		0			28,533,083
Intersegment revenues
Services		0		12,706		10,505,782		0		(10,518,488	)		0
Products		0		0		836,828		0		(836,828	)		0
Total intersegment revenues		0		12,706		11,342,610		0		(11,355,316	)		0
Investment income		60,399		36,515		0		7,316		115,985			220,215
Total revenues		17,020,054		7,666,689		11,357,455		3,948,431		(11,239,331	)		28,753,298
Operating expenses:
Benefits		14,398,572		6,057,804		0		3,438,619		(164,889	)		23,730,106
Operating costs		1,848,651		1,433,365		11,187,070		420,459		(11,149,890	)		3,739,655
Depreciation and amortization		101,663		78,872		14,343		23,773		(8,251	)		210,400
Total operating expenses		16,348,886		7,570,041		11,201,413		3,882,851		(11,323,030	)		27,680,161
Income from operations		671,168		96,648		156,042		65,580		83,699			1,073,137
Interest expense		0		0		0		0		80,289			80,289
Income before income taxes	$	671,168	$	96,648	$	156,042	$	65,580	$	3,410		$	992,848

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Debt (Carrying Value Of Long-Term Debt Of Outstanding) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009
Senior notes	$ 1,631,861	$ 1,640,638
Other long-term borrowings	36,988	37,528
Total long-term debt	1,668,849	1,678,166
$500 million, 6.45% due June 1, 2016 [Member]
Senior notes	500,000
Senior note interest rate	6.45%
Senior note, carrying amount	535,342	540,907
Debt instrument, maturity date	Jun. 01, 2016
$500 Million, 7.20% Due June 15, 2018 [Member]
Senior notes	500,000
Senior note interest rate	7.20%
Senior note, carrying amount	508,005	508,799
Debt instrument, maturity date	Jun. 15, 2018
$300 million, 6.30% due August 1, 2018 [Member]
Senior notes	300,000
Senior note interest rate	6.30%
Senior note, carrying amount	321,622	323,862
Debt instrument, maturity date	Aug. 01, 2018
$250 Million, 8.15% Due June 15, 2038 [Member]
Senior notes	250,000
Senior note interest rate	8.15%
Senior note, carrying amount	$ 266,892	$ 267,070
Debt instrument, maturity date	Jun. 15, 2038

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Income Taxes (Elements That Comprise Provision For Income Taxes) (Details) (USD $) In Thousands	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Income Taxes [Abstract]
Federal	$ 785,888	$ 532,722	$ 336,870
States and Puerto Rico	63,262	56,155	30,829
Total current provision	849,150	588,877	367,699
Deferred benefit	(198,978)	(26,792)	(22,005)
Provision for income taxes	$ 650,172	$ 562,085	$ 345,694

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Consolidated Statements Of Cash Flows (USD $) In Thousands	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Cash flows from operating activities
Net income	$ 1,099,390	$ 1,039,675	$ 647,154
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	262,910	250,274	220,350
Stock-based compensation	62,947	65,870	55,369
Net realized capital (gains) losses	(5,646)	(19,483)	79,417
(Gain) loss on sale of property and equipment, net	25	(228)	5
Benefit from deferred income taxes	(198,978)	(26,792)	(22,005)
Provision for doubtful accounts	18,708	19,054	5,398
Changes in operating assets and liabilities, net of effect of businesses acquired:
Receivables	(45,535)	(59,966)	(152,893)
Other assets	81,133	112,473	(100,887)
Benefits payable	246,732	16,995	412,725
Other liabilities	721,894	13,682	(170,140)
Unearned revenues	(46,233)	(9,281)	(10,280)
Other	44,497	18,853	18,107
Net cash provided by operating activities	2,241,794	1,421,582	982,310
Cash flows from investing activities
Acquisitions, net of cash acquired	(832,450)	(12,436)	(422,915)
Purchases of property and equipment	(222,302)	(185,450)	(261,572)
Proceeds from sales of property and equipment	66	1,509	6
Purchases of investment securities	(4,589,332)	(7,197,007)	(5,681,103)
Maturities of investment securities	1,749,801	1,270,525	498,650
Proceeds from sales of investment securities	2,012,494	3,951,326	4,496,929
Change in securities lending collateral	70,734	312,272	871,681
Net cash used in investing activities	(1,810,989)	(1,859,261)	(498,324)
Cash flows from financing activities
Receipts from CMS contract deposits	1,757,217	2,354,238	2,761,276
Withdrawals from CMS contract deposits	(1,994,391)	(1,860,748)	(2,572,624)
Borrowings under credit agreement	0	0	1,175,000
Repayments under credit agreement	0	(250,000)	(1,725,000)
Proceeds from issuance of senior notes	0	0	749,247
Debt issue costs	(7,777)	0	(6,696)
Proceeds from swap termination	0	0	93,008
Change in securities lending payable	(70,734)	(312,272)	(898,350)
Change in book overdraft	34,921	149,922	(44,684)
Common stock repurchases	(108,545)	(22,841)	(106,070)
Excess tax benefit from stock-based compensation	1,964	5,339	9,912
Proceeds from stock option exercises and other, net	16,089	17,206	10,965
Net cash (used in) provided by financing activities	(371,256)	80,844	(554,016)
Increase (decrease) in cash and cash equivalents	59,549	(356,835)	(70,030)
Cash and cash equivalents at beginning of year	1,613,588	1,970,423	2,040,453
Cash and cash equivalents at end of year	1,673,137	1,613,588	1,970,423
Supplemental cash flow disclosures:
Interest payments	111,848	112,532	73,813
Income tax payments, net	784,924	627,227	347,353
Details of businesses acquired in purchase transactions:
Fair value of assets acquired, net of cash acquired	1,043,455	12,436	772,811
Less: Fair value of liabilities assumed	(211,005)	0	(349,896)
Cash paid for acquired businesses, net of cash acquired	$ 832,450	$ 12,436	$ 422,915

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Benefits Payable

12 Months Ended

Dec. 31, 2010

Benefits Payable [Abstract]

Benefits Payable

9. BENEFITS PAYABLE

Activity in benefits payable, excluding military services, was as follows for the years ended December 31, 2010, 2009 and 2008:

	2010			2009			2008
	(in thousands)
Balances at January 1	$	2,943,379		$	2,898,782		$	2,355,461
Acquisitions		0			0			96,021
Incurred related to:
Current year		24,185,717			21,943,547			21,114,008
Prior years		(434,015	)		(252,756	)		(268,027	)
Total incurred		23,751,702			21,690,791			20,845,981
Paid related to:
Current year		(21,671,345	)		(19,581,314	)		(18,601,120	)
Prior years		(1,809,610	)		(2,064,880	)		(1,797,561	)
Total paid		(23,480,955	)		(21,646,194	)		(20,398,681	)
Balances at December 31	$	3,214,126		$	2,943,379		$	2,898,782

Amounts incurred related to prior years vary from previously estimated liabilities as the claims ultimately are settled. Negative amounts reported for incurred related to prior years result from claims being ultimately settled for amounts less than originally estimated (favorable development).

Actuarial standards require the use of assumptions based on moderately adverse experience, which generally results in favorable reserve development, or reserves that are considered redundant. The amount of redundancy over the last three years primarily has been impacted by the growth in our Medicare business, coupled with the application of consistent reserving practices. During 2010, we experienced prior year favorable reserve releases not in the ordinary course of business of approximately $231.2 million. This favorable reserve development primarily resulted from improvements in the claims processing environment and, to a lesser extent, better than originally estimated utilization as well as a shortening of the cycle time associated with provider claim submissions. The improvements in the claims processing environment benefited all lines of business, but were most prominent in our Medicare PFFS line of business. These improvements resulted in recoveries from the identification of claims billed at higher cost codes than those documented in the medical records via audits, as well as an improved ability to collect overpayments due to the development of system enhancements to our Commercial claims processing platform.

Military services benefits payable of $255.2 million and $279.2 million at December 31, 2010 and 2009, respectively, primarily consisted of our estimate of incurred healthcare services provided to beneficiaries which are in turn reimbursed by the federal government, as more fully described in Note 2. This amount is generally offset by a corresponding receivable due from the federal government.

Benefit expenses associated with military services and provisions associated with future policy benefits excluded from the previous table were as follows for the years ended December 31, 2010, 2009 and 2008:

	2010		2009		2008
	(in thousands)
Military services	$	3,059,492	$	3,019,655	$	2,819,787
Future policy benefits		305,875		73,130		64,338
Total	$	3,365,367	$	3,092,785	$	2,884,125

The increase in benefit expenses associated with future policy benefits payable during 2010 relates to reserve strengthening for our closed block of long-term care policies acquired in connection with the 2007 KMG America Corporation, or KMG, acquisition more fully described in Note 18.

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Fair Value (Financial Assets Measured At Fair Value On A Recurring Basis) (Details) (USD $) In Thousands	Dec. 31, 2010	Dec. 31, 2009
Cash equivalents	$ 1,606,592	$ 1,507,490
Total debt securities	8,372,439	7,497,150
Securities lending invested collateral	49,636	119,586
Total invested assets	10,028,667	9,124,226
US Treasury And Agency Obligations [Member] | Fair Value, Inputs, Level 1 [Member] | Debt Securities [Member] | US Treasury And Government [Member]
Total debt securities	0	0
Mortgage-Backed Securities [Member] | Fair Value, Inputs, Level 1 [Member] | Debt Securities [Member] | US Treasury And Government [Member]
Total debt securities	0	0
Tax-Exempt Municipal Securities [Member] | Fair Value, Inputs, Level 1 [Member] | Debt Securities [Member]
Total debt securities	0	0
Residential Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 1 [Member] | Debt Securities [Member]
Total debt securities	0	0
Commercial Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 1 [Member] | Debt Securities [Member]
Total debt securities	0	0
Asset-Backed Securities [Member] | Fair Value, Inputs, Level 1 [Member] | Debt Securities [Member]
Total debt securities	0	0
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member] | Debt Securities [Member]
Total debt securities	0	0
Redeemable Preferred Stock [Member] | Fair Value, Inputs, Level 1 [Member] | Debt Securities [Member]
Total debt securities	0	0
Fair Value, Inputs, Level 1 [Member]
Cash equivalents	1,606,592	1,507,490
Total debt securities	0	0
Securities lending invested collateral	24,639	53,569
Total invested assets	1,631,231	1,561,059
US Treasury And Agency Obligations [Member] | Fair Value, Inputs, Level 2 [Member] | Debt Securities [Member] | US Treasury And Government [Member]
Total debt securities	711,613	1,009,352
Mortgage-Backed Securities [Member] | Fair Value, Inputs, Level 2 [Member] | Debt Securities [Member] | US Treasury And Government [Member]
Total debt securities	1,663,179	1,688,663
Tax-Exempt Municipal Securities [Member] | Fair Value, Inputs, Level 2 [Member] | Debt Securities [Member]
Total debt securities	2,381,528	2,155,227
Residential Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 2 [Member] | Debt Securities [Member]
Total debt securities	55,887	95,412
Commercial Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 2 [Member] | Debt Securities [Member]
Total debt securities	321,031	279,626
Asset-Backed Securities [Member] | Fair Value, Inputs, Level 2 [Member] | Debt Securities [Member]
Total debt securities	148,545	105,060
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member] | Debt Securities [Member]
Total debt securities	3,025,097	2,071,087
Redeemable Preferred Stock [Member] | Fair Value, Inputs, Level 2 [Member] | Debt Securities [Member]
Total debt securities	0	0
Fair Value, Inputs, Level 2 [Member]
Cash equivalents	0	0
Total debt securities	8,306,880	7,404,427
Securities lending invested collateral	24,997	66,017
Total invested assets	8,331,877	7,470,444
US Treasury And Agency Obligations [Member] | Fair Value, Inputs, Level 3 [Member] | Debt Securities [Member] | US Treasury And Government [Member]
Total debt securities	0	0
Mortgage-Backed Securities [Member] | Fair Value, Inputs, Level 3 [Member] | Debt Securities [Member] | US Treasury And Government [Member]
Total debt securities	0	0
Tax-Exempt Municipal Securities [Member] | Fair Value, Inputs, Level 3 [Member] | Debt Securities [Member]
Total debt securities	51,806	68,814
Residential Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 3 [Member] | Debt Securities [Member]
Total debt securities	0	0
Commercial Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 3 [Member] | Debt Securities [Member]
Total debt securities	0	0
Asset-Backed Securities [Member] | Fair Value, Inputs, Level 3 [Member] | Debt Securities [Member]
Total debt securities	1,206	2,128
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member] | Debt Securities [Member]
Total debt securities	7,214	8,481
Redeemable Preferred Stock [Member] | Fair Value, Inputs, Level 3 [Member] | Debt Securities [Member]
Total debt securities	5,333	13,300
Fair Value, Inputs, Level 3 [Member]
Cash equivalents	0	0
Total debt securities	65,559	92,723
Securities lending invested collateral	0	0
Total invested assets	65,559	92,723
US Treasury And Agency Obligations [Member] | Debt Securities [Member] | US Treasury And Government [Member]
Total debt securities	711,613	1,009,352
Mortgage-Backed Securities [Member] | Debt Securities [Member] | US Treasury And Government [Member]
Total debt securities	1,663,179	1,688,663
Tax-Exempt Municipal Securities [Member] | Debt Securities [Member]
Total debt securities	2,433,334	2,224,041
Residential Mortgage Backed Securities [Member] | Debt Securities [Member]
Total debt securities	55,887	95,412
Commercial Mortgage Backed Securities [Member] | Debt Securities [Member]
Total debt securities	321,031	279,626
Asset-Backed Securities [Member] | Debt Securities [Member]
Total debt securities	149,751	107,188
Corporate Debt Securities [Member] | Debt Securities [Member]
Total debt securities	3,032,311	2,079,568
Redeemable Preferred Stock [Member] | Debt Securities [Member]
Total debt securities	$ 5,333	$ 13,300

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Property And Equipment, Net (Property And Equipment) (Details) (USD $) In Thousands	Dec. 31, 2010	Dec. 31, 2009
Property And Equipment, Net [Abstract]
Land	$ 18,405	$ 16,206
Buildings and leasehold improvements	476,057	368,341
Equipment	539,518	536,328
Computer software	1,025,468	1,013,461
Property and equipment, gross	2,059,448	1,934,336
Accumulated depreciation	(1,244,111)	(1,255,194)
Property and equipment, net	$ 815,337	$ 679,142

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Income Taxes (Reconciliation Of Provision For Income Taxes And The Amount Computed Using The Federal Statutory Rate) (Details) (USD $) In Thousands	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Income Taxes [Abstract]
Income tax provision at federal statutory rate	$ 612,347	$ 560,616	$ 347,497
States, net of federal benefit and Puerto Rico	30,865	28,968	12,412
Tax exempt investment income	(23,776)	(21,327)	(21,253)
Nondeductible executive compensation	12,655	55	30
Contingent tax benefits	0	(16,781)	0
Other, net	18,081	10,554	7,008
Provision for income taxes	$ 650,172	$ 562,085	$ 345,694

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Goodwill And Other Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2010

Goodwill And Other Intangible Assets [Abstract]

Changes In Carrying Amount Of Goodwill By Reportable Segment

	Retail		Employer Group		Health & Well-Being Services		Other Businesses		Total
	(in thousands)
Balance at December 31, 2008	$	547,896	$	40,533	$	1,317,229	$	57,453	$	1,963,111
Subsequent payments/adjustments related to 2008 acquisitions		17,087		12,726		0		0		29,813
Balance at December 31, 2009		564,983		53,259		1,317,229		57,453		1,992,924
Acquisitions		0		0		538,293		0		538,293
Subsequent payments/adjustments related to 2008 acquisitions		27,861		8,731		0		0		36,592
Balance at December 31, 2010	$	592,844	$	61,990	$	1,855,522	$	57,453	$	2,567,809

Detail Of Intangible Assets Classified As Other Long-Term Assets

	Weighted Average Life		2010						2009
			Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
			(in thousands)
Other intangible assets:
Customer contracts/relationships		10.7 yrs	$	413,855	$	145,997	$	267,858	$	314,885	$	117,748	$	197,137
Trade names		19.6 yrs		87,400		2,268		85,132		5,200		567		4,633
Provider contracts		16.0 yrs		42,753		11,659		31,094		42,753		8,281		34,472
Noncompetes and other		9.5 yrs		19,475		4,085		15,390		11,786		4,560		7,226
Total other intangible assets		12.5 yrs	$	563,483	$	164,009	$	399,474	$	374,624	$	131,156	$	243,468

Estimate Of Amortization Expense

	(in thousands)
For the years ending December 31,:
2011	$	50,421
2012		48,792
2013		45,537
2014		41,039
2015		35,707

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Employee Benefit Plans

12 Months Ended

Dec. 31, 2010

Employee Benefit Plans [Abstract]

Employee Benefit Plans

13. EMPLOYEE BENEFIT PLANS

Employee Savings Plan

We have defined contribution retirement and savings plans covering eligible employees. Our contribution to these plans is based on various percentages of compensation, and in some instances, on the amount of our employees' contributions to the plans. The cost of these plans amounted to approximately $108.6 million in 2010, $109.5 million in 2009, and $79.6 million in 2008, all of which was funded currently to the extent it was deductible for federal income tax purposes. The Company's cash match is invested pursuant to the participant's contribution direction. Based on the closing price of our common stock of $54.74 on December 31, 2010, approximately 14% of the retirement and savings plan's assets were invested in our common stock, or approximately 4.1 million shares, representing 2% of the shares outstanding as of December 31, 2010. At December 31, 2010, approximately 7.2 million shares of our common stock were reserved for issuance under our defined contribution retirement and savings plans.

Stock-Based Compensation

We have plans under which options to purchase our common stock and restricted stock awards have been granted to executive officers, directors and key employees. The terms and vesting schedules for stock-based awards vary by type of grant. Generally, the awards vest upon time-based conditions. The stock awards of retirement-eligible participants granted on or after January 1, 2010 will continue to vest upon retirement from the Company. Our equity award program includes a retirement provision that treats all employees with a combination of age and years of service with the Company totaling 65 or greater, with a minimum required age of 55 and a minimum requirement of 5 years of service, as retirement-eligible. Upon exercise, stock-based compensation awards are settled with authorized but unissued company stock. The compensation expense that has been charged against income for these plans was as follows for the years ended December 31, 2010, 2009, and 2008:

	2010			2009			2008
	(in thousands)
Stock-based compensation expense by type:
Stock options	$	21,757		$	19,555		$	18,202
Restricted stock awards		41,190			46,315			37,167
Total stock-based compensation expense		62,947			65,870			55,369
Tax benefit recognized		(23,057	)		(24,128	)		(20,282	)
Stock-based compensation expense, net of tax	$	39,890		$	41,742		$	35,087

The tax benefit recognized in our consolidated financial statements is based on the amount of compensation expense recorded for book purposes. The actual tax benefit realized in our tax return is based on the intrinsic value, or the excess of the market value over the exercise or purchase price, of stock options exercised and restricted stock awards vested during the period. The actual tax benefit realized for the deductions taken on our tax returns from option exercises and restricted stock award vesting totaled $14.9 million in 2010, $16.3 million in 2009, and $16.9 million in 2008. There was no capitalized stock-based compensation expense.

The stock plans provide that one restricted share is equivalent to 1.7 stock options. At December 31, 2010, there were 12,375,233 shares reserved for stock award plans, including 3,225,299 shares of common stock available for future grants assuming all stock options or 1,897,235 shares available for future grants assuming all restricted shares.

Stock Options

Stock options are granted with an exercise price equal to the fair market value of the underlying common stock on the date of grant. Our stock plans, as approved by the Board of Directors and stockholders, define fair market value as the average of the highest and lowest composite stock prices reported by the New York Stock Exchange on a given date. Exercise provisions vary, but most options vest in whole or in part 1 to 3 years after grant and expire 7 to 10 years after grant. Upon grant, stock options are assigned a fair value based on the Black-Scholes valuation model. Compensation expense is recognized on a straight-line basis over the total requisite service period, generally the total vesting period, for the entire award. For stock options granted on or after January 1, 2010 to retirement eligible employees, the compensation expense is recognized on a straight-line basis over the shorter of the requisite service period or the period from the date of grant to an employee's eligible retirement date.

The weighted-average fair value of each option granted during 2010, 2009, and 2008 is provided below. The fair value was estimated on the date of grant using the Black-Scholes pricing model with the weighted-average assumptions indicated below:

	2010			2009			2008
Weighted-average fair value at grant date	$	19.58		$	14.24		$	17.95
Expected option life (years)		5.2			4.6			5.1
Expected volatility		43.8	%		39.2	%		28.2	%
Risk-free interest rate at grant date		2.7	%		1.9	%		2.9	%
Dividend yield		None			None			None

When valuing employee stock options, we stratify the employee population into three homogenous groups that historically have exhibited similar exercise behaviors. These groups are executive officers, directors, and all other employees. We value the stock options based on the unique assumptions for each of these employee groups.

We calculate the expected term for our employee stock options based on historical employee exercise behavior and base the risk-free interest rate on a traded zero-coupon U.S. Treasury bond with a term substantially equal to the option's expected term.

The volatility used to value employee stock options is based on historical volatility. We calculate historical volatility using a simple-average calculation methodology based on daily price intervals as measured over the expected term of the option.

Activity for our option plans was as follows for the year ended December 31, 2010:

	Shares Under Option			Weighted-Average Exercise Price
Options outstanding at December 31, 2009		6,058,321		$	46.10
Granted		639,989			46.12
Exercised		(565,500	)		30.91
Expired		(250,545	)		62.10
Forfeited		(87,293	)		48.24
Options outstanding at December 31, 2010		5,794,972		$	46.86
Options exercisable at December 31, 2010		3,625,225		$	47.46

As of December 31, 2010, outstanding stock options had an aggregate intrinsic value of $62.4 million, and a weighted-average remaining contractual term of 3.8 years. As of December 31, 2010, exercisable stock options had an aggregate intrinsic value of $39.8 million, and a weighted-average remaining contractual term of 2.9 years. The total intrinsic value of stock options exercised during 2010 was $11.3 million, compared with $23.7 million during 2009 and $18.3 million during 2008. Cash received from stock option exercises totaled $17.5 million in 2010, $18.3 million in 2009, and $12.1 million in 2008.

Total compensation expense not yet recognized related to nonvested options was $16.6 million at December 31, 2010. We expect to recognize this compensation expense over a weighted-average period of approximately 2.0 years.

Restricted Stock Awards

Restricted stock awards, including both restricted stock and restricted stock units, are granted with a fair value equal to the market price of our common stock on the date of grant. Compensation expense is recorded straight-line over the vesting period, generally three years from the date of grant. For restricted stock awards granted on or after January 1, 2010 to retirement eligible employees, the compensation expense is recognized on a straight-line basis over the shorter of the vesting period or the period from the date of grant to an employee's eligible retirement date.

The weighted-average grant date fair value of our restricted stock awards was $49.29 in 2010, $41.16 in 2009, and $68.10 in 2008. Activity for our restricted stock awards was as follows for the year ended December 31, 2010:

	Shares			Weighted- Average Grant-Date Fair Value
Nonvested restricted stock awards at December 31, 2009		2,345,555		$	55.11
Granted		901,660			49.29
Vested		(634,202	)		62.18
Forfeited		(150,154	)		51.35
Expired		(3,899	)		59.66
Nonvested restricted stock awards at December 31, 2010		2,458,960		$	51.38

The fair value of shares vested during the years ended was $30.0 million in 2010, $22.3 million in 2009, and $28.7 million in 2008. Total compensation expense not yet recognized related to nonvested restricted stock awards was $38.4 million at December 31, 2010. We expect to recognize this compensation expense over a weighted-average period of approximately 2.0 years. There are no other contractual terms covering restricted stock awards once vested.

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Consolidated Balance Sheets (USD $) In Thousands	Dec. 31, 2010	Dec. 31, 2009
Current assets:
Cash and cash equivalents	$ 1,673,137	$ 1,613,588
Investment securities	6,872,767	6,190,062
Receivables, less allowance for doubtful accounts of $51,470 in 2010 and $50,832 in 2009:	959,018	823,620
Securities lending invested collateral	49,636	119,586
Other current assets	583,141	505,960
Total current assets	10,137,699	9,252,816
Property and equipment, net	815,337	679,142
Long-term investment securities	1,499,672	1,307,088
Goodwill	2,567,809	1,992,924
Other long-term assets	1,082,736	921,524
Total assets	16,103,253	14,153,494
Current liabilities:
Benefits payable	3,469,306	3,222,574
Trade accounts payable and accrued expenses	1,624,832	1,307,710
Book overdraft	409,385	374,464
Securities lending payable	55,693	126,427
Unearned revenues	185,410	228,817
Total current liabilities	5,744,626	5,259,992
Long-term debt	1,668,849	1,678,166
Future policy benefits payable	1,492,855	1,193,047
Other long-term liabilities	272,867	246,286
Total liabilities	9,179,197	8,377,491
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1 par; 10,000,000 shares authorized; none issued	0	0
Common stock, $0.16 2/3 par; 300,000,000 shares authorized; 190,244,741 shares issued in 2010 and 189,801,119 shares issued in 2009	31,707	31,634
Capital in excess of par value	1,737,207	1,658,521
Retained earnings	5,529,001	4,429,611
Accumulated other comprehensive income	120,584	42,135
Treasury stock, at cost, 21,795,051 shares in 2010 and 19,621,069 shares in 2009	(494,443)	(385,898)
Total stockholders' equity	6,924,056	5,776,003
Total liabilities and stockholders' equity	$ 16,103,253	$ 14,153,494

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2010

Income Taxes [Abstract]

Elements That Comprise Provision For Income Taxes

	2010			2009			2008
	(in thousands)
Current provision:
Federal	$	785,888		$	532,722		$	336,870
States and Puerto Rico		63,262			56,155			30,829
Total current provision		849,150			588,877			367,699
Deferred benefit		(198,978	)		(26,792	)		(22,005	)
Provision for income taxes	$	650,172		$	562,085		$	345,694

Reconciliation Of Provision For Income Taxes And The Amount Computed Using The Federal Statutory Rate

	2010			2009			2008
	(in thousands)
Income tax provision at federal statutory rate	$	612,347		$	560,616		$	347,497
States, net of federal benefit and Puerto Rico		30,865			28,968			12,412
Tax exempt investment income		(23,776	)		(21,327	)		(21,253	)
Nondeductible executive compensation		12,655			55			30
Contingent tax benefits		0			(16,781	)		0
Other, net		18,081			10,554			7,008
Provision for income taxes	$	650,172		$	562,085		$	345,694

Principal Components Of Net Deferred Tax Balances

	Assets (Liabilities)
	2010			2009
	(in thousands)
Future policy benefits payable	$	153,293		$	103,941
Net operating loss carryforward		136,894			97,398
Compensation and other accrued expenses		127,442			121,516
Benefits payable		88,617			36,996
Deferred acquisition costs		34,044			0
Capital loss carryforward		13,032			13,169
Unearned premiums		9,813			25,528
Other		19,004			24,715
Total deferred income tax assets		582,139			423,263
Valuation allowance		(28,063	)		(30,093	)
Total deferred income tax assets, net of valuation allowance		554,076			393,170
Depreciable property and intangible assets		(275,569	)		(213,291	)
Investment securities		(65,921	)		(25,077	)
Prepaid expenses		(47,185	)		(47,290	)
Deferred acquisition costs		0			(38,899	)
Total deferred income tax liabilities		(388,675	)		(324,557	)
Total net deferred income tax assets	$	165,401		$	68,613
Amounts recognized in the consolidated balance sheets:
Other current assets	$	76,598		$	32,206
Other long-term assets		88,803			36,407
Total net deferred income tax assets	$	165,401		$	68,613

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Earnings Per Common Share Computation (Narrative) (Details)	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Earnings Per Common Share Computation [Abstract]
Number of antidilutive stock options and restricted stock excluded from computation	3,819,511	5,675,241	3,243,933

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Quarterly Financial Information (Schedule Summarizing Quarterly Operation Results) (Details) (USD $)	3 Months Ended										12 Months Ended
	Dec. 31, 2010		Sep. 30, 2010	Jun. 30, 2010		Mar. 31, 2010	Dec. 31, 2009	Sep. 30, 2009	Jun. 30, 2009	Mar. 31, 2009	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Quarterly Financial Information
Total revenues	$ 8,276,442,000	[1]	$ 8,350,812,000	$ 8,589,243,000	[2]	$ 8,380,338,000	$ 7,578,907,000	$ 7,657,773,000	$ 7,842,909,000	$ 7,662,986,000	$ 33,596,835,000	$ 30,742,575,000	$ 28,753,298,000
Income before income taxes	174,492,000	[1]	622,290,000	535,854,000	[2]	416,926,000	398,700,000	469,348,000	439,950,000	293,762,000	1,749,562,000	1,601,760,000	992,848,000
Net income	107,325,000	[1]	393,221,000	340,076,000	[2]	258,768,000	250,659,000	301,519,000	281,780,000	205,717,000	1,099,390,000	1,039,675,000	647,154,000
Basic earnings per common share	$ 0.64	[1]	$ 2.35	$ 2.02	[2]	$ 1.54	$ 1.49	$ 1.80	$ 1.68	$ 1.23	$ 6.55	$ 6.21	$ 3.87
Diluted earnings per common share	$ 0.63	[1]	$ 2.32	$ 2.00	[2]	$ 1.52	$ 1.48	$ 1.78	$ 1.67	$ 1.22	$ 6.47	$ 6.15	$ 3.83
Write-down of deferred acquisition costs				147,500,000							147,500,000
Charge related to closed block of long-term care policies	138,900,000										138,900,000
After tax impact of charge	$ 88,000,000			$ 93,400,000
Impact on EPS of charge	$ 0.52			$ 0.55

[1] Includes an expense of $138.9 million ($88.0 million after tax, or $0.52 per diluted common share) associated with reserve strengthening for our closed block of long-term care policies acquired in connection with the 2007 acquisition of KMG America Corporation as more fully described in Note 18 to the consolidated financial statements.

[2] Includes an expense of $147.5 million ($93.4 million after tax, or $0.55 per diluted common share) for the write-down of deferred acquisition costs associated with our individual major medical policies as more fully described in Note 18 to the consolidated financial statements.

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Employee Benefit Plans (Stock-Based Compensation Expense) (Details) (USD $) In Thousands	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Employee Benefit Plans [Abstract]
Stock options, expense	$ 21,757	$ 19,555	$ 18,202
Restricted stock awards, expense	41,190	46,315	37,167
Total stock-based compensation expense	62,947	65,870	55,369
Tax benefit recognized	(23,057)	(24,128)	(20,282)
Stock-based compensation expense, net of tax	$ 39,890	$ 41,742	$ 35,087

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Investment Securities (Narrative) (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Percentage of debt securities considered to be of investment grade	96.00%
Percentage of tax-exempt securities classified as pre-refunded	14.00%
Percentage of tax-exempt securities insured by bond insurers	25.00%
Residential and commercial mortgage-backed securities, percentage of collateral consisting of prime loans	99.00%
Other-than-temporary impairments	$ 0	$ 0	$ 103.1
Securities Lending Program [Member]
Percentage of collateral to fair value of investment securities on loan	102.00%
Fair value of securities on loan	$ 54.0	$ 126.1

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Medicare Part D (Balance Sheet Accounts Associated With Medicare Part D) (Details) (USD $) In Thousands	Dec. 31, 2010	Dec. 31, 2009
Other current assets	$ 583,141	$ 505,960
Trade accounts payable and accrued expenses	(1,624,832)	(1,307,710)
Risk Corridor Settlement [Member]
Other current assets	1,563	2,165
Trade accounts payable and accrued expenses	(389,203)	(146,750)
Net current (liability) asset	(387,640)	(144,585)
CMS Subsidies [Member]
Other current assets	16,211	11,660
Trade accounts payable and accrued expenses	(170,231)	(402,854)
Net current (liability) asset	$ (154,020)	$ (391,194)

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Income Taxes (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008	Dec. 31, 2007
Income Taxes [Abstract]
Nondeductible executive compensation	$ 12,655,000	$ 55,000	$ 30,000
Liability for unrecognized tax benefits			16,800,000	16,000,000
Reduced tax expense relating to liability		16,800,000
Net operating losses to carryforward related to prior acquisitions	373,700,000
Valuation allowance	$ 76,600,000

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Reporting Entity (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended										12 Months Ended
	Dec. 31, 2010		Sep. 30, 2010	Jun. 30, 2010		Mar. 31, 2010	Dec. 31, 2009	Sep. 30, 2009	Jun. 30, 2009	Mar. 31, 2009	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Reporting Entity [Abstract]
Total revenues	$ 8,276,442	[1]	$ 8,350,812	$ 8,589,243	[2]	$ 8,380,338	$ 7,578,907	$ 7,657,773	$ 7,842,909	$ 7,662,986	$ 33,596,835	$ 30,742,575	$ 28,753,298
Percentage of premiums and services revenues fees derived from contracts with Federal Government											76.00%
Percentage of premiums and services revenues related to Florida medicare advantage members											17.00%
Percentage of premiums and services revenues related to TRICARE members											11.00%

[1] Includes an expense of $138.9 million ($88.0 million after tax, or $0.52 per diluted common share) associated with reserve strengthening for our closed block of long-term care policies acquired in connection with the 2007 acquisition of KMG America Corporation as more fully described in Note 18 to the consolidated financial statements.

[2] Includes an expense of $147.5 million ($93.4 million after tax, or $0.55 per diluted common share) for the write-down of deferred acquisition costs associated with our individual major medical policies as more fully described in Note 18 to the consolidated financial statements.

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Summary Of Significant Accounting Policies (Narrative) (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Percent of consolidated premiums and ASO fees related to long-duration insurance products	2.00%
Depreciation and amortization expense	$ 18.1	$ 12.9	$ 10.0
Securities Lending Program [Member]
Percentage of collateral to fair value of investment securities on loan	102.00%
Building [Member]
Useful life, minimum years	20
Useful life, maximum years	40
Equipment [Member]
Useful life, minimum years	3
Useful life, maximum years	10
Computer Software [Member]
Useful life, minimum years	3
Useful life, maximum years	7

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Fair Value (Narrative) (Details) (USD $)	Dec. 31, 2010	Dec. 31, 2009
Long-term debt, noncurrent	$ 1,668,849,000	$ 1,678,166,000
Long-term debt, fair value	1,746,500,000	1,596,400,000
Fair Value, Inputs, Level 3 [Member]
Fair value of auction rate securities owned	$ 51,800,000
Percentage of auction rate securities to total invested assets	1.00%

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Debt (Tables)

12 Months Ended

Dec. 31, 2010

Debt [Abstract]

Carrying Value Of Long-Term Debt Outstanding

	2010		2009
	(in thousands)
Long-term debt:
Senior notes:
$500 million, 6.45% due June 1, 2016	$	535,342	$	540,907
$500 million, 7.20% due June 15, 2018		508,005		508,799
$300 million, 6.30% due August 1, 2018		321,622		323,862
$250 million, 8.15% due June 15, 2038		266,892		267,070
Total senior notes		1,631,861		1,640,638
Other long-term borrowings		36,988		37,528
Total long-term debt	$	1,668,849	$	1,678,166