By Philip Mattera
Humana started off as a nursing home company, later moved into for-profit hospitals and yet later decided to focus its operations on managed care. The company is now one of the largest providers of health coverage in the United States, with a special emphasis on privatized supplementary Medicare coverage. Like other insurers, Humana has been hit with numerous class action lawsuits over its practices and has also run afoul of state and federal regulators.
In 2015 Aetna announced plans to acquire Humana but the deal was delayed in the face of opposition from the Justice Department and various states.
Medicare and Extendicare
Humana dates back to the early 1960s, when two lawyers in Louisville, Kentucky started a chain of nursing homes to take advantage of the influx of federal money through the new Medicare system. Originally called Extendicare, the company later switched to the hospital business and changed its name to Humana in 1974.
When the for-profit hospital industry began to suffer from declining occupancy rates and reduced Medicare reimbursements in the 1980s, Humana developed its own health insurance plans and a network of participating doctors to steer patients into the company’s facilities. After some initial missteps, this approach began to pay off.
In 1993 Humana decided to spin off its hospitals into a new and separate company called Galen Health Care (which later merged with Columbia Hospital Corp., which in turn merged with Hospital Corporation of America). Now primarily a health insurance company, Humana sought to grow through acquisitions but it had to abandon more than a dozen unprofitable markets. It also faced criticism over the quality of its managed-care plans. In 1998 the company agreed to be acquired by UnitedHealthCare but the deal collapsed.
In 1996 Linda Peeno, a physician who had worked for Humana reviewing medical claims, testified before Congress that the company routinely refused to authorize expensive treatments. She later stated that in one case she denied a heart transplant to a young man, who subsequently died.
While Congress was deliberating over healthcare reform in 2009, Humana was one of the large insurers that went along with the idea but successfully opposed the inclusion of a public option among the choices that would be offered. As part of its effort to influence the debate, the company sent a mailing to its Medicare Advantage members which was criticized by Montana Sen. Max Baucus, among others, as misleading. The company was also taken to task by the Department of Health and Human Services.
In 1994 Humana agreed to pay $6.25 million to its members in Florida to settle allegations that the company systematically required them to pay a greater portion of their hospital bills than their policies required. The company did not admit any wrongdoing, but state officials alleged that in some cases the customers ended up paying the entire cost of their hospital stay.
Starting in the late 1990s, Humana was one of the giant managed care companies hit with a wave of class action suits brought by physician groups and some of the same lawyers who had taken on the tobacco industry. The various lawsuits—which accused the companies of providing improper incentives to doctors to limit treatment or barred them from discussing certain treatment options with patients—were all put under the purview of a single federal judge in Miami. In 2002 the judge granted class-action status to the claims brought by physicians regarding denied or delayed payments but declined to so the same for members of managed care plans. Three years later, Humana agreed to pay $40 million (plus $18 million in attorney fees) to settle its role in the litigation. It later paid another $3.5 million to settle with chiropractors and other non-M.D. providers.
In 2000 Humana agreed to pay $14.5 million to settle Justice Department allegations that it double-billed the federal government by classifying thousands of its members as qualifying for both Medicaid and Medicare.
Also in 2000, Humana reached a settlement with the Texas Medical Association in a lawsuit alleging that the company and PacifiCare had violated the Americans with Disabilities Act by denying access to treatment for people with chronic illnesses. The terms of the settlement were not disclosed.
In 2003 Humana agreed to pay $106 million to settle its role in a class action suit brought by Cincinnati area doctors claiming that various insurers conspired to keep reimbursement rates artificially low.
In 2008 Humana agreed to pay $2.8 million to settle a class action lawsuit brought by Kansas City area doctors alleging that the company violated antitrust laws by refusing to negotiate reasonable reimbursement rates with providers (Kansas City Star, March 20, 2008).
In 2013 a former Humana sales manager pleaded guilty to federal racketeering and bribery charges in connection with the sale of Medicare Advantage and prescription drug policies. The company was not charged in the matter.
State and Federal Regulatory Issues
In 2002 the Georgia Insurance Commissioner fined Humana $400,000 for failing to comply with the state’s prompt payment law.
In 2007 the Oklahoma Insurance Commissioner announced that Humana had paid a $500,000 fine in connection with allegations that it used unlicensed agents to sell Medicare Advantage plans in the state. This was part of an investigation that found Humana was using high-pressure sales tactics to get seniors to sign up for the plans. The following year the company agreed to pay $750,000 to the Wisconsin insurance commissioner to settle similar allegations about the use of unlicensed agents.
In 2008 the Illinois Department of Financial and Professional Regulation fined Humana $500,000 in connection with complaints that the company had sold costly or duplicative Medicare supplementary coverage to seniors.
In 2010 the federal Centers for Medicare and Medicaid Services fined Humana $55,880 for failing to provide accurate beneficiary information to its Medicare Advantage members.
In 2011 Florida’s Agency for Health Care Administration fined Humana $3.3 million for failing to follow regulations relating to the prompt reporting of Medicaid fraud or abuse.
Also in 2011, the Colorado Division of Insurance fined two Humana units a total of $314,000 for various violations of state regulations.
In 2012 the Missouri Department of Insurance announced that Humana would refund $600,000 to healthcare providers from which the company had improperly collect refunds relating to paid claims.
In 2013 the Kentucky Department of Insurance fined Humana $65,430 because it send policyholders a misleading letter about an unapproved opportunity to amend their health coverage.
In 2005 the U.S. Department of Labor announced that Humana would pay more than $1 million in back pay to some 2,500 call center employees after the agency determined that the company had violated the Fair Labor Standards Act by requiring them to perform certain duties off the clock.
Other Information Sources
Violation Tracker summary page
Watchdog Groups and Campaigns
Employee Benefit Research Institute
Physicians for a National Health Program
Key Books and Reports
Deadly Spin by Wendell Potter (Bloomsbury Press, 2010).
One Nation Uninsured by Jill Quadagno (Oxford University Press, 2005).
Private Health Insurance: Research on Competition in the Insurance Industry (U.S. Government Accountability Office, July 31, 2009).
Sick: The Untold Story of America's Health Care Crisis by Jonathan Cohn (HarperCollins, 2007).
The Corporate Transformation of Health Care: Can the Public Interest Still Be Served? by John Geyman (Springer, 2004).
Underpayments to Consumers by the Health Insurance Industry (Office of Oversight & Investigations of U.S. Senate Commerce Committee, June 24, 2009).
Last updated September 14, 2016