Humana Health Insurance Partners With Medicare Suspending A Plan

Humana Inc. (NYSE: HUM) yesterday announced that it is partnering with the Centers for Medicare and Medicaid Services (CMS) and other Medicare health plans in temporarily suspending marketing of its non-group Medicare Advantage Private Fee-For-Service (PFFS) product. This voluntary pledge only affects PFFS marketing to individual seniors and comes in response to concerns expressed by CMS regarding marketing practices across the sector. The Medicare Advantage group PFFS and individual HMO and PPO products are not affected by this decision.

"Protecting our nation's seniors through the integrity of the Medicare program is vitally important," said Michael B. McCallister, Humana's president and chief executive officer. "We take very seriously this pledge to partner voluntarily with CMS and our peers as we pause, step back and make necessary changes. It is consistent with our long-standing commitment to continuous quality improvement through our 20 years as a trusted Medicare contractor. We believe first and foremost that seniors will benefit from these changes. Second, due to our unique distribution model with its emphasis on a large employed sales force, we believe Humana's competitive position will be strengthened when we re-enter the individual PFFS market."

Consistent with its dedication to continuous improvement, Humana has already begun making changes to its PFFS marketing and oversight processes, including changes not contained in the voluntary pledge, and expects all changes to be in place and approved by CMS before the beginning of the marketing cycle for the 2008 open enrollment season on October 1, 2007. In the interim, the company anticipates its 2007 gross PFFS sales will be reduced from its previous expectations by approximately 8,000 members each month the voluntary marketing suspension is in place.

The related effect upon the company's diluted earnings per common share for the year ending December 31, 2007 (FY07) is anticipated to approximate no more than $0.02 per share. The company, having now closed the books for May 2007, is additionally raising its guidance for FY07 EPS to at least $4.25, reflecting better than expected operating performance.