DEF 14A 1 d814950ddef14a.htm DEFINITIVE PROXY STATEMENT DEFINITIVE PROXY STATEMENT
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

(Amendment No.    )

 

 

Filed by the Registrant                               Filed by a Party other than the Registrant  

Check the appropriate box:

 

   Preliminary Proxy Statement

   CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14A-6(E)(2))

   Definitive Proxy Statement

   Definitive Additional Materials

   Soliciting Material Pursuant to §240.14a-12

Humana Inc.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

     

  (2)  

Aggregate number of securities to which transaction applies:

 

     

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

     

  (4)  

Proposed maximum aggregate value of transaction:

 

     

  (5)  

Total fee paid:

 

     

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

     

  (2)  

Form, Schedule or Registration Statement No.:

 

     

  (3)  

Filing Party:

 

     

  (4)  

Date Filed:

 

     

 

 

 


Table of Contents
LOGO   

Humana Inc.

500 West Main Street

Louisville, Kentucky 40202

 

 

 

LOGO

 

LOGO

 

(Top Photo: Kurt Hilzinger;

Bottom Photo: Bruce Broussard)

 

Total Stockholder Return

 

LOGO

 

 

Returned to Stockholders

 

LOGO

  

Dear Fellow Stockholders:

 

We would like to invite you to attend the Annual Meeting of Stockholders of Humana Inc., to be held on Thursday, April 23, 2020, at 9:30 a.m., Eastern Time, in the 25th floor Auditorium of the Company’s headquarters, located at 500 West Main Street, in Louisville, Kentucky. The meeting will also be webcast via the Internet at the Investor Relations section of the Company’s website, www.humana.com. This proxy statement contains information about our Company and the three proposals to be voted upon by stockholders at the meeting. Please give this information your careful attention.

 

This year, we will once again be taking advantage of U.S. Securities and Exchange Commission (SEC) rules that allow us to furnish proxy materials to our stockholders on the Internet. These materials will be available on the Internet on or about March 4, 2020. We continue to believe that Internet delivery of our proxy materials allows us to provide our stockholders with the information they need, while lowering the costs of delivery and reducing the environmental impact of our Annual Meeting.

 

We hope you can attend the meeting. However, even if you are unable to join us, we urge you to still exercise your right as a stockholder and vote by telephone, mail or using the Internet. The vote of every stockholder is important.

 

This proxy statement is being mailed or transmitted on or about March 4, 2020, to our stockholders of record as of February 24, 2020.

 

2019 Reflections

 

Humana had a remarkable year of success and growth in 2019. We’re proud of how we performed against our key financial goals for the year, while continuing to advance our strategy and invest in the longer-term aspects of our business. We delivered above target Adjusted earnings per diluted common share (EPS) growth of 23 percent, while growing our individual Medicare Advantage (MA) membership by over a half million members, or 17 percent - our highest in a decade and far exceeding industry growth. We also saw strong improvements in quality as reflected in our Star scores, and as of August 2019, we had approximately 92 percent of MA members in 4-Star or higher plans, as well as an increase in our net promoter scores (NPSt) and improved clinical outcomes, including continued reductions in inpatient hospital admissions per thousand members. During 2019 we also made significant strides in advancing our strategy including, deepening our Medicaid capabilities; expanding our senior-focused, payor-agnostic primary care centers; maturing our home health capabilities; expanding our pharmacy operations; and making significant investments in technology to create an interoperable health ecosystem that improves health outcomes and experience.

 

We attribute this success to our disciplined and committed team’s ability to focus and execute on building a strong value proposition for our members and customers, our continued partnership with providers, and our ongoing successful efforts to improve the Company’s productivity, while making crucial investments in clinical programs and technology integration to advance our strategy. Looking ahead, we are committed to delivering strong short-term performance and EPS growth while investing in transformative capabilities for the long-term sustainability of the Company. We intend to execute our strategic plan with operational excellence while balancing the needs of all stakeholders, including members, associates, clinician partners, governmental partners and our stockholders. We believe what sets us apart from our competitors is the uniqueness of our business model - a consumer, health-focused integrated care model oriented toward seniors. To that end, we will continue to enrich our differentiated model by focusing on the following key priorities: expanding our local presence via primary care centers, the home and value-based partnership models; modernizing our digital and analytics infrastructure; and developing a clinical workflow that integrates our clinical assets and provides patient centered care through technology and analytics.

 

We would like to thank our associates for fully embracing and working to advance our Company’s vision; our members for choosing and trusting us with their healthcare needs; our clinician partners for uniting with us to improve population health with better health outcomes and reduced healthcare costs; our governmental partners for their efforts in driving public healthcare discussion and inspiring innovations to create value for our consumers; and lastly our stockholders, for your belief in and commitment to our Company’s strategies and mission as evidenced through your investment in our organization.

 

Sincerely,

 

  

 

LOGO

Kurt J. Hilzinger

Chairman of the Board

and Stockholder

 

March 4, 2020

 

  

LOGO

 

Bruce D. Broussard

Director, President and Chief Executive Officer

and Stockholder

 

March 4, 2020


Table of Contents

LOGO

Notice of 2020 Annual Meeting of Stockholders

 

 

Time and Date:    9:30 a.m., Eastern Time, on Thursday, April 23, 2020
Location:    25th Floor Auditorium at Humana Inc. headquarters, located at 500 West Main Street, in Louisville, Kentucky 40202
Agenda:   

1.  Elect the twelve (12) director nominees named in the proxy statement.

 

2.  Ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2020.

 

3.  Non-binding advisory vote to approve the compensation of the Company’s Named Executive Officers.

 

4.  Consider any other business properly brought before the meeting.

Record Date:    February 24, 2020. Humana stockholders of record at the close of business on that date will be entitled to vote.
Proxy Voting:   

Your vote is important so that as many Shares as possible will be represented. Please vote by one of the following methods:

 

  BY INTERNET

 

  BY TELEPHONE

 

  BY RETURNING YOUR PROXY CARD (if you elected to receive printed materials)

 

See instructions on your proxy card or at the voting site (www.ProxyVote.com).

By Order of the Board of Directors,

 

 

LOGO

Joseph M. Ruschell

Associate Vice President, Assistant General Counsel & Corporate Secretary

March 4, 2020


Table of Contents

Table of Contents

 

 

 


Table of Contents

Proxy Summary

 

 

General Information

 

Meeting:

   2020 Annual Meeting of Stockholders   Place:    Humana Inc. Headquarters

Date:

   Thursday, April 23, 2020      500 West Main Street

Time:

   9:30 a.m., Eastern Time      25th Floor Auditorium

Record Date:

   February 24, 2020      Louisville, Kentucky 40202

Voting Overview

 

Items of Business

   Board
Recommendation
  

Page

  Reference  

1.

 

  

Elect the twelve (12) director nominees named in the proxy statement.

 

   FOR

 

   24

 

2.

  

Ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2020.

 

   FOR    71

3.

  

Non-binding advisory vote to approve the compensation of the Company’s Named Executive Officers.

 

   FOR    72

4.

 

  

Consider any other business properly brought before the meeting.

 

     

Board Nominees

 

  Name    Position    Age        First Elected Director  

Kurt J. Hilzinger

  

Chairman of the Board, Independent Director

  

59    

  

07/2003

Bruce D. Broussard

  

Director, President and Chief Executive Officer

  

57    

  

01/2013

Frank J. Bisignano

  

Independent Director

  

60    

  

08/2017

Frank A. D’Amelio

  

Independent Director

  

62    

  

09/2003

W. Roy Dunbar

  

Independent Director

  

58    

  

04/2005

Wayne A.I. Frederick, M.D.

  

Independent Director

  

48    

  

02/2020

John W. Garratt

  

Independent Director

  

51    

  

02/2020

David A. Jones, Jr.

  

Independent Director

  

62    

  

05/1993

Karen W. Katz

  

Independent Director

  

63    

  

09/2019

William J. McDonald

  

Independent Director

  

63    

  

10/2007

James J. O’Brien

  

Independent Director

  

65    

  

04/2006

Marissa T. Peterson

  

Independent Director

  

58    

  

08/2008

Performance Highlight

Our EPS results for the year ended December 31, 2019 exceeded management’s expectations driven by continued outperformance in the Company’s Medicare Advantage business. We reported an EPS of $20.10, on a Generally Accepted Accounting Principles (GAAP) basis and an EPS of $17.87* on a non-GAAP basis (Adjusted EPS), an increase of 23% compared to Adjusted EPS of $14.55 in 2018. We paid $291 million in cash dividends to our stockholders during 2019 - having raised our quarterly dividend amount in February 2019 from $0.50 per share to $0.55 per share - resulting in an increase of $26 million over dividends paid in 2018. In addition, we returned $1.1 billion to stockholders over the course of 2019 primarily through an accelerated stock repurchase program. In a year-over-year comparison for 2019, the Company’s GAAP and Adjusted pretax income and EPS results were favorably impacted by the solid performance from both the Medicare Advantage business and the Healthcare Services segment, with further benefit from achieving significant operating cost efficiencies in 2019 as a result of previously implemented productivity initiatives. In addition to our individual MA membership growth, our Medicaid membership grew nearly 38 percent with our statewide Florida contract win for 2019, plus approximately 140,000 additional members on January 1, 2020 under our Kentucky Medicaid contract that was previously fully ceded to CareSource. We are pleased with our 2019 performance, particularly our success in balancing and executing multiple priorities as we grew membership, improved the quality and productivity of our operations, and continued to invest in the long term.

 

*

Please refer to section entitled “Organization & Compensation Committee Report” in this proxy statement for a reconciliation of non-GAAP to GAAP financial measures. We encourage each stockholder to read the full financial analysis for year ended December 31, 2019 contained in our Annual Report on Form 10-K, filed with the SEC on February 20, 2020.



 

Proxy Summary    2020 Proxy Statement  |  Humana         i  


Table of Contents

Frequently Asked Questions

 

Why am I receiving this Proxy Statement?

You are receiving a proxy statement because you owned Humana Inc. common stock, which we refer to as Shares, as of Monday, February 24, 2020, which we refer to as the Record Date, and that entitles you to vote at the Annual Meeting. Our Board of Directors has made these materials available to you on the Internet or, upon your request, has delivered printed versions of these materials to you by mail, in connection with the Board’s solicitation of proxies on behalf of the Company for use at our 2020 Annual Meeting of Stockholders. Your proxy will authorize specified people (proxies) to vote on your behalf at the Annual Meeting. By use of a proxy, you can vote, whether or not you attend the meeting.

This proxy statement describes the matters on which the Company would like you to vote, provides information on those matters, and provides information about the Company that we must disclose when we solicit your proxy.

Why did I receive a one-page notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?

Pursuant to rules adopted by the SEC, we have elected to provide access to our proxy materials over the Internet. We believe that Internet delivery of our proxy materials allows us to provide our stockholders with the information they need, while lowering the costs of delivery and reducing the environmental impact of our Annual Meeting. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials, which we refer to as the Notice, to our stockholders and beneficial owners as of the Record Date. All stockholders will have the ability to access the proxy materials on a website referred to in the Notice or request to receive a printed set of the proxy materials. Instructions on how to access the proxy materials over the Internet or to request a printed copy may be found on the Notice. In addition, stockholders may request to receive proxy materials in printed form by mail or electronically by e-mail on an ongoing basis by calling Broadridge Financial Solutions, Inc., or Broadridge, at 1-800-579-1639.

How can I get electronic access to the proxy materials?

The Notice provides you with instructions regarding how to:

 

   

View our proxy materials for the Annual Meeting on the Internet; and

 

   

Instruct us to send our future proxy materials to you electronically by e-mail.

Choosing to receive your future proxy materials by e-mail will save us the cost of printing and mailing documents to you and will reduce the impact of our Annual Meetings on the environment. If you choose to receive future proxy materials by e-mail, you will receive an e-mail next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by e-mail will remain in effect until you terminate it.

When and where is the Annual Meeting?

The Annual Meeting will be held on Thursday, April 23, 2020, at 9:30 a.m., Eastern Time, in the 25th floor Auditorium at the Company’s headquarters, located at 500 West Main Street, in Louisville, Kentucky.

Who is entitled to vote?

Anyone who owns Shares, as of the close of business on February 24, 2020, the Record Date, is entitled to vote at the Annual Meeting or at any later meeting should the scheduled Annual Meeting be adjourned or postponed for any reason. As of the Record Date, 132,123,850 Shares were outstanding and entitled to vote. Each Share is entitled to one vote on each of the matters to be considered at the Annual Meeting.

 

Frequently Asked Questions    2020 Proxy Statement  |  Humana

 

        1  


Table of Contents

What will I be voting on?

 

   

Election of the twelve (12) director nominees named in this proxy statement to serve on the Board of Directors of the Company;

 

   

Ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2020; and

 

   

A non-binding, advisory vote to approve the compensation of the Company’s Named Executive Officers as disclosed in this proxy statement.

The Board of Directors is not aware of any other matters to be presented for action at the Annual Meeting. However, if other matters are properly presented for a vote, the proxies will be voted for these matters in accordance with the judgment of the persons acting under the proxies.

How does the Board recommend I vote on each proposal?

The Board recommends that you vote your Shares as follows:

 

   

FOR the election of each of the twelve (12) director nominees named in this proxy statement;

 

   

FOR the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2020; and

 

   

FOR the approval of the compensation of the Company’s Named Executive Officers as disclosed in this proxy statement.

All Shares that are represented at the Annual Meeting by properly executed proxies received before or at the Annual Meeting and not revoked will be voted at the Annual Meeting in accordance with the instructions indicated in the proxies.

How will my Shares be voted if I do not specify how they should be voted?

If you sign and return your proxy card without indicating how you want your Shares to be voted, the persons acting under the proxies will vote your Shares as follows:

 

   

FOR the election of each of the twelve (12) director nominees named in this proxy statement;

 

   

FOR the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2020; and

 

   

FOR the approval of the compensation of the Company’s Named Executive Officers as disclosed in this proxy statement.

What if my Shares are not registered in my name?

If you own your Shares in “street name,” meaning that your bank, broker or other nominee is actually the record owner, you should receive the Notice from your bank, broker or other nominee. In addition, stockholders may request, by calling Broadridge at 1-800-579-1639, to receive proxy materials in printed form, by mail or electronically by e-mail, on an ongoing basis. When you own your Shares in street name, you are deemed a beneficial owner or holder for voting purposes.

If you hold Shares through an account with a bank, broker or other nominee and you do not provide voting instructions on your instruction form, your Shares may not be voted by the nominee with respect to certain proposals, including:

 

   

the election of directors;

 

   

the approval of the compensation of the Company’s Named Executive Officers as disclosed in this proxy statement; and

 

   

the frequency with which future non-binding advisory stockholder votes on the compensation of the Company’s Named Executive Officers will be held.

Banks, brokers and other nominees have the authority under the regulations of the New York Stock Exchange, or the NYSE, to vote Shares for which their customers do not provide voting instructions only on certain “routine” matters, including the ratification of the appointment of the Company’s independent registered public accounting firm. However, the proposals listed above are not considered “routine” matters for this purpose, and therefore your Shares will not be voted with respect to such proposals if you do not provide voting instructions on your instruction form.

 

2       Humana  |  2020 Proxy Statement    Frequently Asked Questions


Table of Contents

How many votes are required to approve each proposal, what are the effects of abstentions and unmarked proxy cards, and is broker discretionary voting allowed?

 

Proposal

 

  

Vote Required for

Approval

 

 

Effect of

    Abstentions    

 

 

Broker

    Discretionary    
Voting
Allowed
(2)

 

 

    Unmarked/Signed    

Proxy Cards

 

Election of directors

  

 

The number of votes
cast for a nominee

exceeds the number
of votes cast against
that nominee.(1)

 

  No effect   No   Voted “For”

 

Ratification of the
appointment of the

independent registered

public accounting firm

 

   Majority of shares
present and entitled
to vote
  Counted as “Against”   Yes   Voted “For”

Non-binding advisory vote

to approve executive

compensation

  

 

Majority of shares

present and entitled

to vote

 

  Counted as “Against”   No   Voted “For”
(1)

Under the Company’s Majority Vote Policy, following election to our Board of Directors, a director is required to submit his or her irrevocable resignation to our Board of Directors conditioned upon (a) the director not achieving the requisite stockholder vote at any future meeting at which he or she faces re-election, and (b) acceptance of the resignation by the Board of Directors following that election. The Board of Directors has 90 days after a director fails to achieve the requisite stockholder votes to determine whether or not to accept the director’s resignation and to report this information to our stockholders.

(2)

If you are a beneficial owner whose Shares are held of record by a broker or other NYSE member organization, you must instruct the broker how to vote your Shares. If you do not provide voting instructions, your Shares will not be voted on any proposal on which the broker does not have discretionary authority to vote. This is called a “broker non-vote.” A broker non-vote will not affect the outcome of the vote for the matters being presented for action at the Annual Meeting, because they are not considered to be votes cast.

What is a “broker non-vote”?

A broker non-vote occurs when a broker or other NYSE member organization holding Shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received voting instructions from the beneficial owner, but does have discretionary voting power over other items and submits votes for those matters. As discussed above, if you hold Shares through a broker or other NYSE member organization and do not provide voting instructions to your broker or other NYSE member organization, your Shares may not be voted with respect to certain proposals, including the proposals listed above that are not considered routine.

What is a “quorum”?

A “quorum” is a majority of the outstanding Shares. Shares may be voted at the Annual Meeting by a signed proxy card, by telephone instruction, or electronically on the Internet. There must be a quorum for the Annual Meeting to be held. Abstentions and broker non-votes are counted as present and entitled to vote for purposes of determining whether a quorum exists.

How do I vote?

There are four ways that you can vote your Shares. Voting by any of these methods will supersede any prior vote you made regardless of how that vote was made. PLEASE CHOOSE ONLY ONE OF THE FOLLOWING:

 

  1)

By Internet.   The website for voting is http: //www.ProxyVote.com. In order to vote on the Internet, you need the control number on your proxy card. Each stockholder has a unique control number so we can ensure all voting instructions are genuine

 

Frequently Asked Questions    2020 Proxy Statement  |  Humana

 

        3  


Table of Contents
  and prevent duplicate voting. The Internet voting system is available 24 hours a day, seven days a week, until 11:59 p.m., Eastern Time, on Wednesday, April 22, 2020, the day before the Annual Meeting. Once you are logged on the Internet voting system, you can record and confirm (or change) your voting instructions. If you use the Internet voting system, you do not need to return your proxy card.

 

  2)

By telephone.   If you are a registered holder in the United States or Canada, you may call 1-800-690-6903. The telephone voting system is available 24 hours a day, seven days a week, until 11:59 p.m., Eastern Time, on Wednesday, April 22, 2020, the day before the Annual Meeting. In order to vote by telephone, you need the control number on your proxy card. Each stockholder has a unique control number so we can ensure all voting instructions are genuine and prevent duplicate voting. Once you are logged on the telephone voting system, a series of prompts will tell you how to record and confirm (or change) your voting instructions. If you use the telephone voting system, you do not need to return your proxy card.

 

  3)

By mail.   Mark your voting instructions, sign and date the proxy card and then return it in the postage-paid envelope provided. If you mail your proxy card, we must receive it before 12:00 p.m., Eastern Time, on Friday, April 17, 2020. If you are returning your proxy card to Broadridge, they must receive it before 10:00 a.m., Eastern Time, on Wednesday, April 22, 2020, the day before the Annual Meeting.

 

  4)

In person.   Attend the Annual Meeting. Mark your voting instructions and deliver to the Inspectors of Election. However, you can vote by methods 1, 2 or 3 above prior to the meeting and still attend the Annual Meeting. In all cases, a vote at the Annual Meeting will revoke any prior votes. Please note that if your Shares are held through a bank, broker or other nominee, you will need to bring proof of ownership to the Annual Meeting in order to vote.

How do I vote the share equivalent units held in the Humana Common Stock Fund of the Humana Retirement Savings Plan or the Humana Puerto Rico Retirement Savings Plan?

If you have an interest in the Humana Common Stock Fund of the Humana Retirement Savings Plan or the Humana Puerto Rico Retirement Savings Plan on the Record Date, you may vote. Under the Humana Retirement Savings Plan and the Humana Puerto Rico Retirement Savings Plan, your voting rights are based on your interest, or the amount of money you and the Company have invested in your Humana Common Stock Fund.

You may exercise these voting rights in almost the same way that stockholders may vote their Shares, but you have an earlier deadline, and you should provide your voting instructions to Broadridge. Broadridge will aggregate the votes of all participants and provide voting information to the Trustee for the applicable plan. If your voting instructions are received by 11:59 p.m., Eastern Time, on Wednesday, April 15, 2020, the Trustee will submit a proxy that reflects your instructions. If you do not give voting instructions (or give them later than that time), the Trustee will vote your interest in the Humana Common Stock Fund in the same proportion as the Shares attributed to the Humana Retirement Savings Plan, or the Humana Puerto Rico Retirement Savings Plan, as applicable, are actually voted by the other participants in the applicable plan.

You must provide your instructions to Broadridge by using the Internet, registered holder telephone number (1-800-690-6903) or mail methods described above. Please note that you cannot vote in person at the Annual Meeting. Your voting instructions will be kept confidential under the terms of the Humana Retirement Savings Plan or the Humana Puerto Rico Retirement Savings Plan, as applicable.

Who will count the votes?

Broadridge will tabulate the votes cast by proxy, whether by proxy card, Internet or telephone. Additionally, the Company’s Inspectors of Election will tabulate the votes cast at the Annual Meeting together with the votes cast by proxy.

How do I revoke my proxy?

You have the right to revoke your proxy at any time before the Annual Meeting.

Your method of doing so will depend upon how you originally voted (a later vote will supersede any prior vote you made regardless of how that vote was made):

 

  1)

By Internet — simply log in and resubmit your vote — Broadridge will only count the last instructions;

 

  2)

By Telephone — simply sign in and resubmit your vote — Broadridge will only count the last instructions;

 

4       Humana  |  2020 Proxy Statement    Frequently Asked Questions


Table of Contents
  3)

By Mail — you must give written notice of revocation to Broadridge, 51 Mercedes Way, Edgewood, NY 11717 or by fax at 1-515-254-7733, submit another properly signed proxy with a more recent date, or vote in person at the Annual Meeting. For written and fax notices, you must include the control number that is printed on the upper portion of your proxy card.

What is the due date for stockholder proposals, including stockholder nominees for director, for inclusion in the Company’s proxy materials for the 2021 Annual Meeting?

Stockholder proposals, or stockholder nominees for director at the 2021 Annual Meeting, as permitted by SEC regulations for inclusion in our proxy materials relating to the 2021 Annual Meeting, must be submitted to the Corporate Secretary in writing no later than November 4, 2020. Proposals should be submitted to the attention of the Corporate Secretary, Humana Inc., 500 West Main Street, 21st Floor, Louisville, Kentucky 40202.

May a stockholder present a proposal not included in our Proxy Statement at the April 23, 2020, Annual Meeting?

A stockholder can present a proposal at the Annual Meeting (a so-called “floor resolution”) only if certain notice requirements are met. The SEC does not directly regulate meeting conduct. State law imposes only limited requirements, so meetings are governed by procedures set forth in our Amended and Restated Bylaws (the “Bylaws”). Humana’s Bylaws require that a stockholder provide written notice of intent to bring a proposal no less than 60 days or more than 90 days prior to the scheduled date of the Annual Meeting of stockholders. If less than 70 days’ notice of the Annual Meeting is given, written notice by a stockholder would be deemed timely if made no later than the 10th day following such notice of the Annual Meeting. A proposal must also meet other requirements as to form and content set forth in our Bylaws. Stockholder proposals should be sent to the attention of the Corporate Secretary, Humana Inc., 500 West Main Street, 21st Floor, Louisville, Kentucky 40202. A copy of our Bylaws is available on our website. From the www.humana.com website, click on “Investor Relations,” and then click on “Corporate Governance,” and then click on the link entitled, “Bylaws.”

How will Humana solicit votes and who pays for the solicitation?

We have engaged D. F. King & Co., Inc. to assist in the distribution of proxy materials and solicitation of votes for approximately $12,000 plus expenses. We have also engaged Broadridge to assist in the distribution of proxy materials and the accumulation of votes through the Internet, telephone and coordination of mail votes for approximately $291,000 plus expenses. We will reimburse banks, brokers and other nominees for their reasonable out-of-pocket expenses for forwarding proxy and solicitation material to our stockholders.

How can I obtain additional information about the Company?

Included with this proxy statement (either in printed form or on the Internet) is a copy of our Annual Report on Form 10-K for the year ended December 31, 2019, which also contains the information required in our Annual Report to Stockholders. Our Annual Report on Form 10-K and all our other filings with the SEC also may be accessed via the Investor Relations section on our website at www.humana.com. We encourage you to visit our website. From the www.humana.com website, click on “Investor Relations,” and then click on the report you wish to review under the “SEC Filings and Financial Reports” subcategory.

Where can I find voting results for this Annual Meeting?

The voting results will be published in a current report on Form 8-K which will be filed with the SEC no later than four business days after the Annual Meeting. The Form 8-K will also be available on our website at www.humana.com.

 

Frequently Asked Questions    2020 Proxy Statement  |  Humana

 

        5  


Table of Contents

What is “householding”?

“Householding” occurs when a single copy of our Annual Report, proxy statement and Notice is sent to any household at which two or more stockholders reside if they appear to be members of the same family. Although we do not “household” for registered stockholders, a number of brokerage firms have instituted householding for Shares held in street name. This procedure reduces our printing and mailing costs and fees. Stockholders who participate in householding will continue to receive separate proxy cards, and householding will not affect the mailing of account statements or special notices in any way. If you wish to receive separate copies of our Annual Report, proxy statement or Notice in the future, please contact the bank, broker or other nominee through which you hold your Shares.

 

6       Humana  |  2020 Proxy Statement    Frequently Asked Questions


Table of Contents

Company Overview

 

Headquartered in Louisville, Kentucky, Humana Inc. is a leading (2019 Fortune #56 ranking) health and well-being company focused on making it easy for people to achieve their best health with clinical excellence through coordinated care. Our strategy integrates care delivery, the member experience, and clinical and consumer insights to encourage engagement, behavior change, proactive clinical outreach and wellness for the millions of people we serve across the country. As of December 31, 2019, we had approximately 16.7 million members in our medical benefit plans, as well as approximately 5.4 million members in our specialty products.

Our Strategy

We are committed to helping our millions of medical and specialty members achieve their best health. Our successful history in care delivery and health plan administration is helping us create a new kind of integrated care with the power to improve health and well-being and lower costs. Our efforts are leading to a better quality of life for people with Medicare, families, individuals, military service personnel, and communities at large. To accomplish that, we support physicians and other health care professionals as they work to deliver the right care in the right place for their patients, our members. Our range of clinical capabilities, resources and tools — such as in-home care, behavioral health, pharmacy services, data analytics and wellness solutions — combine to produce a simplified experience that makes health care easier to navigate and more effective.

Humana’s innovative strategy continues to capitalize on industry changes which continue to progress toward our goals of making benefits more affordable while improving the overall cost of care and consumer experience — through our integrated care delivery model. We understand that healthcare is complicated, and dealing with multiple physicians and other healthcare professionals can be a confusing and daunting task. That is one of the principal reasons why Humana continues to enhance its integrated care delivery strategy in key areas to enable a better and more seamless locally delivered health care experience for our members.

One of the areas in which we strive to improve is the health of seniors living with chronic conditions. Our integrated care delivery model brings simplicity and connectivity to the healthcare experience of our senior members. We thrive in this area by (i) partnering with providers to evolve incentives from treating health episodically to managing health holistically; (ii) integrating clinical programs that intersect healthcare and lifestyle- helping people at key moments of need; and (iii) by simplifying processes through leveraging technology, consumer segmentation and analytics.

We offer insurance and non-insurance products to consumers through our various subsidiaries. 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. In addition, we offer services to our health plan members as well as to third parties including pharmacy solutions, provider services, and clinical programs, such as home health and other services and capabilities to promote wellness and advance population health. At the core of our strategy is our integrated care delivery model, which unites quality care, high member engagement, and sophisticated data analytics. Three core elements of the model are to improve the consumer experience by simplifying the interaction with us, engaging members in clinical programs, and offering assistance to providers in transitioning from a fee-for-service to a value-based care arrangement. Our approach to primary, physician-directed care for our members aims to provide quality care that is consistent, integrated, cost-effective, and member-focused. The model is designed to improve health outcomes and affordability for individuals and for the health system as a whole, while offering our members a simple, seamless healthcare experience.

Our Performance

With significant progress made on our strategic initiatives, 2019 was an extremely successful year during which we returned strong financial performance, balanced against investing in transformative capabilities for the long-term sustainability of the Company:

 

   

We reported EPS of $20.10 and Adjusted EPS of $17.87*, exceeding both our initial GAAP EPS guidance of approximately $16.60 to $17.10 and Adjusted EPS guidance of approximately $17.00 to $17.50, as we increased our public Adjusted earnings estimate three times over the course of the year as a result of strong operating performance.

 

   

Our 2019 earnings outperformance was fueled by continued strong Medicare Advantage results.

 

   

We returned over $1.3 billion to our stockholders in the form of share repurchases and in dividends, and also increased our quarterly dividend to $0.55 per share from $0.50 per share in February 2019 (with a further increase to $0.625 per share in February 2020).

 

* 

Please refer to section entitled “Organization & Compensation Committee Report” in this proxy statement for a reconciliation of non-GAAP to GAAP financial measures. We encourage each stockholder to read the full financial analysis for year ended December 31, 2019 contained in our Annual Report on Form 10-K, filed with the SEC on February 20, 2020.

 

Company Overview    2020 Proxy Statement  |  Humana

 

        7  


Table of Contents

Corporate Governance

 

 

 

LOGO

Care for the whole person – emotionally, physically, and spiritually, building inspired communities where health and well-being prosper.

  

Humana is committed to having sound corporate governance principles and operates within a comprehensive plan of governance for the purpose of defining responsibilities, setting high standards of professional and personal conduct, and ensuring compliance with such responsibilities and standards. Sound corporate governance is essential to running our business effectively and to maintaining our reputation of integrity in the marketplace. At the heart of these efforts lie our Company values, the guiding forces behind all our actions — Inspire Health, Cultivate Uniqueness, Rethink Routine, Pioneer Simplicity, and Thrive Together. In addition, our Board of Directors has adopted Corporate Governance Guidelines, which we refer to as the Guidelines, intended to comply with the requirements of Section 303A.09 of the NYSE Listed Company Manual. The Guidelines may be viewed on our website at www.humana.com. From the www.humana.com website, click on “Investor Relations,” then click on “Corporate Governance,” and then click on the link entitled “Corporate Governance Guidelines.”

 

Role of the Board and Board Leadership

 

Role of the Board

 

The business of the Company is managed under the direction of the Board, whose members are elected annually by the Company’s stockholders. The basic responsibility of the Board is to lead the Company by exercising its business judgment to act in what each director reasonably believes to be in the best interests of Humana and its stockholders, while engaging in active and independent oversight of the management of the Company’s business affairs and assets. In order to fulfill its responsibilities to the Company’s stockholders, the Board, both directly and through its committees, regularly engages with management to both evaluate the Company’s current operations and encourage the innovations and strategic imperatives that will drive our success in the future. The Board monitors management performance through reviews of the most critical issues facing the Company, including approval of the Company’s strategy and mission, execution of the Company’s financial and operational goals, oversight of risk management, succession planning, and determination of executive compensation. The Board plans for the future by ensuring management focus on innovation in our strategy to meet the speed of change in our industry and monitoring the Company’s human capital management functions, working closely with the management team to ensure the Company has the correct levels of talent in place – within each business segment – for continued success in present and future states of the Company.

 

Board Oversight of Risk

 

While management is responsible for designing and implementing the Company’s risk management process, controls and oversight, the Board, both as a whole and through its committees, has overall responsibility for oversight of the Company’s risk management. The full Board regularly reviews risks that may be material to the Company, including those detailed in the Audit Committee’s reports and as disclosed in the Company’s quarterly and annual reports filed with the SEC. While the Board has established committees designated for various oversight functions, it is common practice for committees to collaborate on overlapping issues.

 

LOGO

Appreciate individual uniqueness, creating an environment where everyone can fully be themselves, reflecting all of us and the communities we serve.

 

LOGO

Work and learn together, transforming the norm to strengthen operational excellence and outcomes.

 

LOGO

Take personal accountability, working together to create simple, personalized, quality experiences.

 

LOGO

Collaborate openly, building positive relationships to achieve strong, sustainable results for us and the people we serve.

  

 

8       Humana  |  2020 Proxy Statement    Corporate Governance


Table of Contents

BOARD OF DIRECTORS

 

Oversees Management of Major Risks

 Legal/Regulatory

Financial

     

Succession Planning

Strategic

     

Legal/Policy

Reputation

 

      Cyber Security        Investment Objectives

LOGO

 

   

LOGO

 

   

LOGO

 

   

LOGO

 

   

LOGO

 

Audit

Committee

    Organization & Compensation Committee     Nominating & Corporate Governance Committee    

Technology

Committee

   

Investment

Committee

         

 Financial Statement integrity and reporting

 Legal, regulatory and compliance

 Internal controls

 Cyber security risk oversight

 

   

 Executive compensation policies and practices

 Non-executive compensation policies and practices

 Succession planning

 

   

 Governance structure and processes

 Legal and policy matters

 Stockholder concerns

 Board refreshment

   

 Information security, technology and privacy & data protection

 Company IT strategy and consumer facing technology

   

 Investment objectives and policies

 Investment results and performance evaluation

               

Management

Business Units identify and manage business risks; Central functions design risk framework (setting boundaries and monitoring risk appetite); and Internal Audit provides independent assurance on design and effectiveness of internal controls and governance processes.

 

The goal of these processes is to achieve serious and thoughtful board-level attention to the Company’s risk management process and system, the nature of the material risks faced by the Company, and the adequacy of the Company’s risk management process and system designed to respond to and mitigate these risks.

Board Leadership

Leadership of the Board is essential to facilitate the Board acting effectively as a working group to the benefit of the Company and its performance. As Chairman of the Board and our lead independent director, Mr. Kurt J. Hilzinger assumes key duties to ensure effectiveness and collaboration in all aspects of the Board’s role.

 

 

Duties of Our Chairman

 

LOGO    Serves as Chair of regular sessions of the Board and manages the overall Board process.

 

LOGO    Leads the Board in anticipating and responding to crises.

 

LOGO    Oversees and monitors Board engagement, participation and continued education to ensure our directors are in-tune with issues of our dynamic industry and the evolving landscape.

 

LOGO    Supports the Nominating & Corporate Governance Committee with director on-boarding and orientation programs.

 

LOGO    Models culture, philosophy, inclusivity and values expected of all directors.

 

LOGO    Conducts individual meetings with other directors, including the CEO, and management team to encourage open communication, collaboration and differences in perspective.

  

 

LOGO    Evaluates overall Board effectiveness, with emphasis on identifying areas of enhancement, development and/or furtherance and communicating these observances to the Board for discussion.

 

LOGO    Represents the Board on occasions where it is important for the Board to respond on matters independently from the Company’s management team.

 

LOGO    Provides guidance and direction to the CEO and management team.

 

LOGO    Engages with stockholders, through verbal or written communications, and presides over the Company’s Annual Meeting of Stockholders. Also recommends to the Board an agenda to be followed at the Annual Meeting.

 

LOGO    Works with the Organization & Compensation Committee to develop the process for CEO compensation evaluations.

 

Corporate Governance    2020 Proxy Statement  |  Humana

 

        9  


Table of Contents

The Board believes that the advisability of having separate or combined chairman and chief executive officer positions is dependent upon the strengths of the individual or individuals that hold these positions and the most effective means of leveraging these strengths, in light of the challenges and circumstances facing the Company, which may change over time. At this time, given the composition of the Company’s Board, the effective interaction between Mr. Hilzinger, as Chairman, and Mr. Broussard, as Chief Executive Officer, Mr. Hilzinger’s status as an independent director and previous service as our Lead Director, and the current challenges faced by the Company, the Board believes that separating the chief executive officer and board chairman positions provides the Company with the right foundation to pursue the Company’s strategic and operational objectives, while maintaining effective independent oversight and objective evaluation of the performance of the Company.

Board Engagement and Undertakings

The Board holds itself to a high standard of engagement, with a hands-on approach that leads to critical insights regarding our customers, operations and business and enhances their level of governance and oversight. An essential component to the Board’s engagement is communicating with the Company’s internal and external stakeholders. To accomplish this, meetings of the Board may be held in key Company markets where, together with management, the Board will personally meet with associates, customers, providers and other stakeholders to gain direct feedback into the Company’s operations, experiences and overall effectiveness.

Certain other engagement practices of our Board are described below.

 

   

Follows an annual topical calendar used to balance strategic, operational, compliance, and cultural matters, among others, and receives detailed reports on those topics, in addition to ad hoc subjects, throughout the year.

 

   

Utilizes clear and proactive Board meeting agendas to achieve high productivity at each meeting.

 

   

Holds executive sessions during every meeting, with the CEO present and then with only the independent directors. Relevant feedback is then reported to the CEO and the management team, creating a feedback loop from the Board to the management team.

 

   

Maintains regular communication with the CEO and management team, apart from formal Board meetings, to ensure consistent and continuous progress toward established goals.

 

   

Employs Board technology tools to review Board materials and to remain informed of ongoing Company endeavors, to efficiently communicate with the management team and to take formal action when necessary.

 

   

Performs in-depth organizational structure reviews, through the Organization & Compensation Committee, of line and functional teams within the Company to assess leadership bench strength, culture, succession planning, diversity and related matters. In addition, the Organization & Compensation Committee regularly reviews associate engagement scores, which maintained momentum within the 94th percentile during 2019, representing world-class levels of engagement.

 

   

Hosts an annual succession dinner with rising leaders in the Company, whose leadership position is below management team level, to personally engage with them and allow an opportunity for those leaders to offer feedback directly to the Board.

 

   

Receives continued education from external consultants on a wide range of industry topics to keep them apprised of the latest trends and anticipated future trajectories. In addition to our director’s individual pursuits, Board education opportunities during 2019, included, (i) a formal education session with external consultants; (ii) guest speaker attendance during select meetings; and (iii) routine briefings on regulatory developments.

 

 

 

2019 Market Visits

 

  Partners in Primary Care Centers
(Kansas City, MO)

 

  Local Market Office
(Chicago, IL)

 

  Studio_h; Humana’s digital health and
analytics headquarters
(Boston, MA)

 

     

 

2019 Board and Committee Meetings

 

14

Teleconference Meetings

27

In-person Meetings

1

Annual Stockholder Meeting

 

     

 

2019 Director Attendance Average

 

96%

 

(Based on aggregated Board and Committee meeting attendance; includes all directors having served during 2019.)

 

 

10       Humana  |  2020 Proxy Statement    Corporate Governance


Table of Contents

Board Commitment to Corporate Social Responsibility

At Humana, our corporate social responsibility (CSR) efforts are driven by our goals to help our members and our associates achieve their best health and to improve the communities we serve by inspiring health and well-being for each person, each community and the future. From our Bold Goal, to our spirit of volunteerism and philanthropic partnerships, to our commitment to environmental sustainability, inclusion, diversity, and ethics, the Board and management team are committed to improving and advancing the Company’s CSR efforts and empowering our associates to be a positive influence in the workplace and in their communities. We are proud to share a few highlights below.

 

  

 

We promote the value of diversity to the Company and work internally with our Network Resource Groups (NRGs) to help rethink routine in community outreach, talent sourcing, hiring, and on-boarding.

 

  

Well-being for Each Person

 

The Company actively promotes culture, diversity and inclusion to foster a workplace where all associates have the freedom to cultivate uniqueness and thrive together.

 

  We are committed to building positive working relationships with minority, women and small business enterprises. In support of this effort, we set supplier diversity goals and track diversity among our suppliers to measure our achievement.

 

  We have nine employee-led and employee-driven Network Resource Groups (NRGs), open to all employees. Each NRG provides associates with the opportunity to network and grow as a professional while contributing to the Company’s inclusive culture and helping to drive marketplace initiatives. Over 30% of our associates belong to one or more of the nine NRGs.

 

  We also established nine local Inclusion & Diversity (I&D) Councils to foster employee inclusion and belonging within the changing landscape of the workforce.

 

  We believe having a diverse workforce makes us better equipped to engage with members and to develop enhanced products and services. To achieve our hiring goals we proudly partner with local and national advocacy groups to provide information about open roles, assistance with resume preparation and application submission. We have designed programs that enhance our hiring initiatives aimed toward veterans and military spouses, retiree/mature worker populations, and closing the hiring gap of persons with disabilities versus those without disabilities.

      
  

 

 

We achieved a goal to have at least 13% of our total 2019 supplier spend go to diverse supplier groups.

 

 

      
  

 

 

Chaired by our CEO, the Executive Inclusion & Diversity Council leverages leadership to weave Inclusion & Diversity into the fabric of our Company’s culture.

 

 

      
  

 

We’re working to ensure that our health plan products and services are as affordable as possible, as well as, addressing access to healthcare barriers so our members can receive the care that they need.

 

The charts below represent our diverse workforce during 2019, based on the self-identified data of our associates.

 

72% of Humana associates are women   39% of Humana associates are people of color
LOGO   LOGO

 

Corporate Governance    2020 Proxy Statement  |  Humana

 

        11  


Table of Contents
  

 

We track the health of our members by using the U.S. Centers for Disease Control and Prevention (CDC) four-question core assessment tool, Healthy Days, to measure self-reported mentally and physically unhealthy days of an individual over a 30-day period.

 

  

Well-being for Each Community

 

Our Bold Goal is our population health strategy to help the communities we serve be 20% healthier by 2020 and beyond. To reach our goal, we’re focusing on social determinants of health - conditions in the places where people live, learn, work and play that affect a wide range of health risks and outcomes – and have taken steps to make it easier for people to achieve their best health. By honing in on social determinants of health we are working to remove barriers to health upstream from our traditional health care system. We’re pleased that our Bold Goal efforts have led to behavioral changes across our organization and we’re applying what we learn to community populations.

 

For our members, we remain committed to serving our country’s sickest and most vulnerable populations in both MA and Medicaid who are in need of quality care and better health outcomes. Our social determinant capabilities provides us with the experience needed to meaningfully participate in the MA Value-Based Design program and Medicaid procurements. We’ve embedded social determinants into our clinical model for healthcare services, allowing our Humana at Home care managers to screen for social determinants of health to develop enhanced care management and planning for our members. In 2019, we scaled social determinants of health screenings to over 1 million, more than double the number of screenings in 2018, and connected those in need to community resources. Our Go365 wellness and rewards program is also helping to incentivize people to focus on their health every day – and we’ve seen engagement in the program increase year-over-year since 2016.

 

For our associates, we receive significant feedback that the Company’s Bold Goal pursuit inspires them to not only want to continue working for the Company, but to also be part of the team effort that ensures we achieve the Bold Goal together. Following our associates’ early achievement of their Bold Gold in 2018, the Associate Well-being Team announced a new goal – to achieve 500,000 more Healthy Days by the end of 2022. We encourage our associates to give back to their communities by offering each associate up to eight hours of paid time off each year to engage in volunteer activities of their choosing. We’ve seen the generosity of our associates through their tracking of volunteer hours and we are getting close to achieving our goal of fifty percent of associates tracking their volunteer time.

 

      
  

 

We expanded the number of our Bold Goal communities from 7 to 14.

 

Baton Rouge (LA), Broward County (FL), Chicago (IL), Jacksonville (FL), Kansas City (MO), Knoxville (TN), Louisville (KY), New Orleans (LA), Richmond (VA), San Antonio (TX), Tampa Bay (FL), Houston (TX), Atlanta (GA), Humana Military

 

      
  

 

Social Determinants of Health help us address the needs of the whole person – food insecurity, loneliness, social isolation, access to transportation – to improve their overall health and well-being.

 

      
  

 

Our Neighborhood Centers - which are available to all members of the community, regardless of insurance – and SilverSneakers® program are helping to reduce social isolation and loneliness of our Medicare Advantage members and communities.

 

For our Company and the communities we serve, success with the Bold Goal means that our members are achieving lifelong well-being. We’re helping members to address loneliness, social isolation and food insecurity because we know that each of these factors has a direct impact on healthy days. We have developed social determinant predictive models for internal use and informative tool kits to help physician practices screen and refer their patients to community resources. In addition, we have neighborhood locations that offer classes and activities to promote health behaviors and peer engagements that directly address social determinants at a community level. Through community, clinical and business integration we are taking the Bold Goal beyond 2020 because we know that improving population health is a long-term commitment and takes all of us working together to reduce medical costs and improve health outcomes. Our community initiatives have also led to a strategic advantage in under-served markets and demographics.

Well-being for the Future

Environmental sustainability is important for our Company as environmental factors impact health outcomes for our customers. Because we provide services instead of products, the largest opportunity to decrease our environmental impact in areas of energy consumption, greenhouse gas (GHG) emissions, waste and water practices, is through our internal operations.

Additionally, climate change impacts, such as increased frequency of extreme weather events, higher costs of energy, and consumer and investor interest in our sustainability efforts, pose both risks and opportunities for our business. We manage these impacts by continually strengthening our already robust business continuity program, investing in energy management and efficiency projects, and pursuing financial incentives in support of efforts to reduce our environmental footprint. We set challenging environmental targets, collaborating with vendors and associates to achieve them; these efforts both mitigate risk and demonstrate our Company’s commitment to our members, associates and stockholders by validating the intrinsic link between environment and well-being.

Our future sustainability is also dependent upon our Company’s continued focus on ethics, regulatory compliance and data privacy, for each of which we currently have stringent controls in force. Through conducting business ethically and proactively managing toward environmental efficiency, our Company is positioned to offer reliable and cost-effective services to our customers.

 

12       Humana  |  2020 Proxy Statement    Corporate Governance


Table of Contents

ENVIRONMENTAL SUSTAINABILITY INITIATIVES

 

Reduce Greenhouse Gas Emissions

   LOGO          

ETHICAL SUSTAINABILITY INITIATIVES

 

Ethics & Compliance

   LOGO

 

  Our goal is to reduce greenhouse gases 2.1 percent year-over-year (from a 2017 baseline).

 

  Efforts to accomplish this goal include our nontraditional workstyle options, offering associates alternative transportation options, partnerships and programs to decrease office energy consumption and to reduce emissions.

 

  We calculate GHG emissions in accordance with the methodologies outlined by the GHG Protocol.

 

  We provide a full report of our yearly energy consumption and reduction efforts within the Global Reporting Initiative (GRI) Content Index of our CSR report.

    

 

  Our associates are the key to ethics and compliance.

 

  We have an Enterprise Compliance team that regularly communicates and engages with associates on ethics and compliance topics throughout the year.

 

  We require all associates (including executive officers and independent directors) and contractors to complete an annual training course on ethics and compliance matters.

Waste Reduction    LOGO      Data Privacy    LOGO

  Our goal is to increase our waste diversion rate to 60 percent.

 

  We promote and track our reduction and recycling efforts and make it convenient for our associates to recycle at all of our facilities.

    

  We are committed to continuously enhancing and strengthening our technology infrastructure and security protocols.

 

  We employ best-practice precautions to safeguard information and protect our members’ data.

 

 

For more information about the Company’s CSR efforts,

including our CSR Report, go to www.humana.com,

then click on “Corporate Responsibility”

 

 

Corporate Governance    2020 Proxy Statement  |  Humana

 

        13  


Table of Contents

Qualifications and Process for Nominating Directors

Identifying Nominees for Directors

 

LOGO

The Board has delegated an established screening process for director nominees to the Nominating & Corporate Governance Committee (“Committee”), with counsel from our Chairman, our Chief Executive Officer, and outside consultants as appropriate. The goal of the screening process is to assemble a group of potential board members with deep, varied experience, sound judgment, and commitment to the Company’s success.

The Committee receives notice of potential candidates through any of the following avenues: (i) Board self-identification; (ii) third-party recommendations; and (iii) stockholder nominations. While director nominees may be presented to the Board for consideration by the Committee through any of these methods, the Board is ultimately responsible for selecting its own members — with annual stockholder voting thereafter for a director’s continued tenure on the Board. Once the Committee has compiled its group of suitable candidates and conducted appropriate diligence, it then meets with the Board to review the candidates for further consideration.

Board Self-Identification. The Committee regularly assesses the appropriate size of the Board, the areas of expertise required to effectively contribute to the Board process, and whether any vacancies are anticipated. It also annually assesses the director qualification criteria to ensure the Board has appropriate skill composition aimed at the Company’s long-term business strategy, operations, risks, thought and perspective. As a result, the Committee may recommend to the Board a need for an additional director, Board refreshment for certain requisite skills and qualifications, and/or suggest the replacement of an existing director for other credible reasons. The self-identification process may also incorporate responses, as appropriate, from the Board’s annual individual self-evaluations. Such evaluations require each director to honestly reflect upon and recount their personal contributions to the Board in the prior year and to provide feedback regarding their performance, the overall Board performance and the performance of certain other key Board positions. The self-evaluations are provided to the Chairman of the Board and to the CEO for their review.

Third-Party Recommendations. From time to time, we engage a professional third-party search firm to assist the Board of Directors and the Committee in identifying and recruiting candidates for Board membership. Under its charter, the Committee has committed to include, and requires any third-party search firm that it engages to include, candidates with diversity of race, ethnicity and gender in the pool considered by the Committee and/or the Board for nomination to the Board.

Stockholder Nominees. The policy of the Committee is to consider properly submitted stockholder nominations for candidates for membership on the Board as described above under “Identifying Nominees for Directors.” Stockholder nominations for election to the Board of Directors are governed by specific provisions in our Bylaws, a copy of which is available on our website at www.humana.com. From the www.humana.com website, click on “Investor Relations,” and then click on “Corporate Governance,” and then click on the link entitled, “Bylaws.” The Bylaws require that a stockholder provide written notice of intent to nominate a candidate for director no less than 60 days or more than 90 days prior to the scheduled date of the Annual Meeting of stockholders. If less than 70 days’ notice of the Annual Meeting is given, written notice by a stockholder would be deemed timely if made no later than the 10th day following such notice of the Annual Meeting. Any stockholder nominations proposed for consideration by the Committee should include, among other information required by the Bylaws, the nominee’s name, qualifications for Board membership and compliance with our Director Resignation Policy discussed in this proxy statement and should be sent to the attention of the Corporate Secretary, Humana Inc., 500 West Main Street, 21st Floor, Louisville, Kentucky 40202.

Director Skills and Qualifications

 

LOGO

In assessing a director nominee, the Committee considers the appropriate balance of experience, skills and other qualifications required for service on our Board, including (i) qualifications or characteristics that are expected and befitting of all directors, and (ii) specific skills, experience or qualifications that should be represented collectively on our Board. Our Guidelines contain Board membership criteria that apply to all nominees recommended for a position on the Board.

Our director nominee screening process is designed to ensure that the Board includes members with diverse backgrounds, including race, ethnicity, gender, skills, thought, perspective and experience, as well as appropriate financial and other expertise relevant to the Company’s business. The Committee further assesses each director nominee’s ability to devote sufficient time and effort to his or her duties as a potential director, his or her willingness to consider all strategic proposals, and any core competencies or technical expertise necessary to staff Board committees. The director nominee analysis also helps to determine whether a nominee would meet the criteria for independence set forth in the Guidelines established by the Board and in accordance with independence requirements of the NYSE and the SEC.

 

14       Humana  |  2020 Proxy Statement    Corporate Governance


Table of Contents

 

The Committee recognizes that our Board should represent a diverse group of experience, skills and other qualities, and as a collective group should have expertise in certain substantive areas including: corporate governance, finance/capital markets, board of directors experience, health care industry experience, clinical practice CEO or other C-suite experience with significant business acumen, direct to consumer marketing, diversity, experience with complex organizations, technology/business processes, government relations and/or public policy and regulatory knowledge and other skills and expertise that are likely to enhance the Board’s ability to manage and direct the affairs and business of the Company. Certain directors or director nominees may possess expertise in the designated areas however a director or director nominee need not individually possess the experience, skill or other requisite qualification in all areas.

 

The Committee has determined that our Board collectively satisfies all of the above criteria, complementing each other’s skills, background and perspectives to create a collection of diverse, knowledgeable and experienced directors. Please refer to the section entitled, “Proposal One: Election of Directors” in this proxy statement for biographical information, including skills and qualifications, of our individual Board members.

 

 

Director Attributes

  LOGO   

Independent under our Guidelines, as well as meeting the independence requirements of, as applicable, the NYSE, SEC and Internal Revenue Code (IRS);

 

  LOGO    External public company board service is limited (maximum of three);
  LOGO    High integrity and ethical standards;
  LOGO    Standing and reputation in the individual’s field;
  LOGO    Risk oversight ability with respect to the particular skills of the individual director;
  LOGO    Understanding of and experience with complex public companies or like organizations; and
  LOGO   

Ability to work collegially and collaboratively with other directors and our management team.

 

 

 

 

Board Composition and Refreshment

To meet the changing needs and strategic direction of our business, and as a result of certain director departures, we changed our Board’s composition during 2019 and 2020. The charts below represent certain demographics represented in the current composition of our director nominees.

 

Age
LOGO
Diversity
LOGO
 

 

Tenure
LOGO

 

Independence
LOGO
 

 

Corporate Governance    2020 Proxy Statement  |  Humana

 

        15  


Table of Contents

Board Evaluation Practices

 

LOGO

The Board is committed to a rigorous self-evaluation process. Through evaluation, directors annually review the Board’s performance and their own individual contributions, including areas where the Board feels it functions effectively, and most importantly, areas where the Board can improve. The Committee, with participation from our Chairman and Chief Executive Officer, initiates the annual Board evaluation process. We believe that having a review process for each group helps to (i) ensure an adequate representation of requisite skills; (ii) encourage high levels of engagement from directors; and (iii) strengthen the overall effectiveness of our Board. These evaluations may be in written or oral questionnaire form and may be administered by Board members, management or third-party consultants. Results of the evaluations are shared with the Chairman of the Board and the Chairman of the Nominating & Corporate Governance Committee and then later discussed with the entire Board in an aggregated manner.

 

       

 

Board Evaluation

 

      
  

 

The Board evaluation typically consists of a written questionnaire containing qualitative scaled and open-ended questions related to the effectiveness of the Board during the prior year. The questionnaire hones in on specific areas of responsibility and critical attributes of the Board in order to solicit candid feedback from each director. The questionnaire also seeks practical input as to what the Board is doing well, areas in which the Board could improve and any undertakings that the Board should commence or terminate. Another benefit of the questionnaire is that it allows each board member to evaluate the effectiveness of the Chairman of the Board.

 

 
  

 

Director Self-Evaluation

 

 
  

 

The director self-evaluation requires each director to honestly reflect upon and carefully consider his or her performance based on key characteristics that are expected of all board members. The self-evaluation also allows each director to provide additional or updated information regarding their skills and qualifications which in turn helps the Nominating & Corporate Governance Committee make future assessments and determinations regarding Board composition. The Company encourages directors to participate in continuing education programs focused on the Company’s business and industry, their committee roles and responsibilities, as well as legal and ethical matters. Annually, the Board will meet for purpose of furthering their education through external guest speakers to gain insights into key issues facing the industry and the Company, to supplement management’s views and perspectives.

 

 
  

 

Committee Evaluation

 

 
  

 

Each of our Board committees engages in an annual performance evaluation and a general charter adequacy review. Each committee is responsible for determining the manner of evaluation and for carrying out the evaluation. Further, the Board evaluation questionnaire includes a section specifically concerning Board committee structure and performance, which is an opportunity for board members to provide feedback on each committee, regardless of their individual committee membership.

 

 
    

Director Independence

The Guidelines contain standards to assist the Board in its determination of director independence. In addition, to qualify as independent under the Guidelines, the Board of Directors must affirmatively determine that a director has no material relationship with the Company, other than as a director.

Pursuant to the Guidelines, the Board undertakes an annual review of director independence. During this review, the Board considers transactions and relationships between each director or any member of his or her immediate family and the Company and its subsidiaries and affiliates, including transactions or relationships that are reported under “Certain Transactions with Management and Others” in this proxy statement. As provided in the Guidelines, the purpose of this review is to determine whether any such transactions or relationships are inconsistent with a determination that a director is independent.

In the course of this review for the current year, the Board specifically analyzed and discussed several matters:

 

(1)

a relationship between the Company and Pfizer Inc., or Pfizer, for which Frank A. D’Amelio, one of our current directors, serves as an executive officer;

 

(2)

a relationship between the Company and Chrysalis Ventures, LLC, or Chrysalis, for which David A. Jones, Jr., one of our current directors, serves as Chairman and Managing Partner and in which Mr. Jones, Jr. has a financial interest;

 

(3)

a relationship between the Company and Foundation Radiology Group PC, for which Mr. Jones, Jr., one of our current directors, serves as a director, and of which Chrysalis Ventures, LLC has an investment interest;

 

16       Humana  |  2020 Proxy Statement    Corporate Governance


Table of Contents
(4)

a relationship between the Company and JAPC, Inc., or JAPC, which was owned by the late father of Mr. Jones (who was a cofounder of our Company);

 

(5)

a relationship between the Company and Thomas Jefferson University or Thomas Jefferson Health System, for which David B. Nash, M.D., one of our former directors, is Founding Dean Emeritus of the Jefferson College of Population Health;

 

(6)

a relationship between the Company and Fiserv Solutions, Inc., a subsidiary of Fiserv, Inc., or Fiserv, for which Frank J. Bisignano, one of our current directors, serves as an executive officer and a director;

 

(7)

a relationship between the Company and Escape Velocity Holdings, Inc. d/b/a Trace3, Inc., or Trace3, for which William E. Mitchell, one of our former directors, serves as a director;

 

(8)

a relationship between the Company and Veritiv Corporation, or Veritiv, for which William E. Mitchell, serves as presiding director; and

 

(9)

relationships between the Company and certain of our healthcare customers affiliated with one or more of our current directors or a relative of that director.

Pfizer. The relationship between the Company, and Pfizer consists of a negotiated rebate based on the volume of prescriptions of Pfizer drugs obtained by Humana members, which volume includes claims paid by Humana for our members and the co-payments paid by our members. Payments to Humana from Pfizer result from activity with many intermediaries over whom Humana exercises no control (i.e., the providers who prescribe these medications, the distributors who sell to the retailers, and the retailers from which our members get prescriptions). In 2019, the Pfizer rebates amounted to approximately $227.1 million, substantially all of which were passed through to our members in the form of lower premiums and/or higher benefits. In addition, Pfizer is a contracted vendor of a certain Company subsidiary for which Pfizer provided prescription drug supplies and for which the subsidiary paid approximately $2.1 million during 2019. This amount is comparable to other non-affiliated providers for the provision of similar services, is not material to the Company, and does not represent a direct or indirect material interest for Mr. D’Amelio.

Chrysalis. In 2019, we contracted for services to be provided by certain companies in Chrysalis’ investment portfolio. In each case, the amounts paid under these arrangements were comparable to those for other non-affiliated vendors, were not material to the Company, and did not represent a direct or indirect material interest for Mr. Jones.

Foundation Radiology Group PC. Foundation Radiology Group PC, a multi-institutional radiology services group, serves as a provider in our network, for which services we paid approximately $1.3 million in medical claims during 2019, which is an amount that is comparable to other non-affiliated providers for the provision of similar services, is not material to the Company, and does not represent a direct or indirect material interest for Mr. Jones.

JAPC. In 2019, we provided hangar space, pilot services and maintenance for an airplane owned by JAPC, for which we were fully reimbursed by JAPC in the aggregate amount of approximately $615,968, at a rate we believe to be at least as favorable to the Company as market rates.

Thomas Jefferson Health System. Thomas Jefferson Health System serves as a provider in our network, for which services during 2019 we paid approximately $18.7 million in medical claims related expenses. In addition, we paid Thomas Jefferson University, through its Jefferson College of Population Health, $100,000 as an annual retainer fee related to certain consulting services performed by Dr. Nash to the Company’s Chief Medical Officer. In each case, the amount is comparable to other non-affiliated vendors for the provision of similar services, are not material to the Company, and do not represent a direct or indirect material interest for Dr. Nash. Dr. Nash was not a nominee for re-election to our Board in April 2019.

Fiserv. In 2019, we contracted for certain marketing and advertising services from Fiserv in connection with member communication materials for which we paid approximately $7.9 million, which is comparable to other non-affiliated vendors for the provision of similar services, is not material to the Company, and does not represent a direct or indirect material interest for Mr. Bisignano.

Trace3. In 2019, we contracted for certain information technology services, from Trace3, for which we paid approximately $1.8 million, which is comparable to other non-affiliated vendors for the provision of similar services, is not material to the Company, and does not represent a direct or indirect material interest for Mr. Mitchell. Mr. Mitchell was not a nominee for re-election to our Board in April 2019.

Veritiv. In 2019, we contracted for certain packaging and supply services from Veritiv in connection with our pharmacy business, for which we paid approximately $7.4 million, which is comparable to other non-affiliated vendors for the provision of similar services, is not material to the Company, and does not represent a direct or indirect material interest for Mr. Mitchell.

Healthcare Customers. In 2019, we received health care premium payments, healthcare administration fee payments (associated with our self-funded ASO plan offerings) and/or made certain claims funding payments, from certain customers with whom one of our current directors or a relative of that director has a relationship. Under each such arrangement, the premiums or administrative fees charged and benefits provided, including claims funding arrangements, are comparable to those extended to our other non-affiliated customers. The following relationships were included in this review:

 

   

Main Street Realty, Inc. or Main Street, which was previously owned by the late father of Mr. Jones, one of our current directors, from which we received approximately $184,986 in payments for administrative service fees associated with Main Street’s level funded ASO plan.

 

Corporate Governance    2020 Proxy Statement  |  Humana

 

        17  


Table of Contents
   

Lucina Health, Inc. or Lucina, which is part of the Chrysalis investment portfolio for which Mr. Jones, serves as Chairman and Managing Partner, from which we received approximately $140,200 in payments for administrative service fees associated with Lucina’s level funded ASO plan.

At the conclusion of its review for the current year, the Board affirmatively determined that in each case the relationship between the Company or its affiliate and each director-related entity was not material, was below the thresholds for independence prescribed by the NYSE, and did not impact the independence of any of our directors. Each director recused themselves from the independence assessment relative to himself or herself. Consistent with these considerations, and based on its review of director independence in light of the standards contained in the Guidelines, the Board determined that each member of the Board of Directors (except Mr. Broussard, as a current employee of the Company) is independent.

Committee Membership and Attendance

The Board of Directors has the following standing committees: Audit; Organization & Compensation; Nominating & Corporate Governance; Executive; Technology and Investment. Only directors meeting the applicable SEC and NYSE director independence standards and Internal Revenue Code “outside director” criteria may serve on the Audit Committee, the Organization & Compensation Committee, and the Nominating & Corporate Governance Committee. Each standing Board committee operates pursuant to a charter, which may be viewed on our website at www.humana.com. From the www.humana.com website, click on “Investor Relations,” then click on “Corporate Governance,” and then you will see a link to the Committee Charters. The number of Board committee meetings (telephonic and in-person) held in 2019 and membership as of March 1, 2020, were as follows:

 

Director

  Audit        

 

Organization      

&      

Compensation      

 

 

Nominating &      
Corporate      
Governance      

  Executive         Technology         Investment      

Frank J. Bisignano

     

 

LOGO       

 

         

 

LOGO       

   

Bruce D. Broussard

             

 

LOGO       

       

Frank A. D’Amelio

 

 

LOGO       

 

     

 

LOGO       

           

W. Roy Dunbar

     

 

LOGO       

 

 

 

LOGO       

           

Wayne A.I. Frederick, M.D.1

                       

John W. Garratt2

                       
           

Kurt J. Hilzinger

              LOGO       

       

David A. Jones, Jr.

     

 

LOGO       

 

 

 

LOGO       

 

 

 

LOGO       

       

Karen W. Katz3

                       

William J. McDonald

 

 

LOGO       

 

                 

 

LOGO       

 

James J. O’Brien

 

 

LOGO       

 

                 

 

LOGO       

 

Marissa T. Peterson

               

 

LOGO       

   

 

Number of Meetings in 2019

 

  8         6         7         0         5         4      

LOGO  = Chair         LOGO  = Member

1 

Elected to the Board effective February 19, 2020.

2

Elected to the Board effective February 19, 2020.

3

Elected to the Board effective September 20, 2019.

 

18       Humana  |  2020 Proxy Statement    Corporate Governance


Table of Contents

Audit Committee

Committee Responsibilities

Pursuant to its charter, the Audit Committee:

 

   

assists the Board of Directors with the oversight of the integrity of our financial statements and disclosures and internal controls, our compliance with legal and regulatory requirements, the independent registered public accounting firm’s qualifications and independence and the performance of our internal audit function and the independent registered public accounting firm;

 

   

bears responsibility for the appointment, compensation, retention and oversight of the work of the independent registered public accounting firm engaged to prepare the audit report or perform other audit, review or attest services;

 

   

reviews with the independent registered public accounting firm, our internal audit department, and our financial and accounting personnel, the effectiveness of our accounting and financial controls and, where appropriate, makes recommendations for the improvement of these internal control procedures;

 

   

reviews the scope, funding and results of our internal audit function, including the independence and authority of our reporting obligations, the proposed audit plans for the year, and the coordination of these plans with the independent registered public accounting firm;

 

   

reviews the scope, funding and results of our Enterprise Risk Management program and compliance program, including receiving, at least quarterly, an update from our Chief Risk Office and internal compliance department regarding any significant matters regarding our risk management and compliance with regulatory requirements and contracts with government entities, respectively;

 

   

collaborates with the Technology Committee to regularly receive updates on risks, and risk mitigation measures, related to Company’s information technology, internal controls, information security, cyber security, business continuity and disaster recovery programs;

 

   

reviews the financial statements and other information contained in our Annual Report and other reports to stockholders with management and the independent registered public accounting firm to determine that the independent registered public accounting firm is satisfied with the disclosure and content of the financial statements to be presented to the stockholders and reviews any changes in accounting principles;

 

   

confers independently with our internal auditors, Chief Risk Officer, internal compliance department, key members of management, and the independent registered public accounting firm;

 

   

determines and approves the appropriateness of the fees for audit and permissible non-audit services performed by the independent registered public accounting firm;

 

   

discusses with management our compliance with applicable legal requirements and with our internal policies regarding related party transactions and conflicts of interest;

 

   

discusses our policies with respect to risk assessment and risk management;

 

   

maintains free and open means of communication between the members of our Board of Directors, the independent registered public accounting firm, our internal audit department, our Chief Risk Officer, our internal compliance department, and our financial management; and

 

   

annually evaluates its performance.

Corporate Governance Determinations

The Board of Directors has determined that each of the members of the Audit Committee at February 19, 2020 is independent according to SEC and NYSE requirements, and each is financially literate, as defined in the NYSE listing standards. The Board of Directors has determined further that Messrs. D’Amelio and O’Brien meet the definition of “audit committee financial expert.” PricewaterhouseCoopers LLP, our independent registered public accounting firm, reports directly to the Audit Committee. No member of the Board’s Audit Committee serves on the audit committees of more than three publicly traded companies. The Report of the Audit Committee for the year ended December 31, 2019, is set forth in this proxy statement under the caption “Audit Committee Report.”

Organization & Compensation Committee

Committee Responsibilities

Pursuant to its charter, the Organization & Compensation Committee:

 

   

reviews and approves our goals and objectives relevant to the compensation of our CEO, evaluates the CEO’s performance in light of those goals and objectives, and, either as a Committee or together with the other independent directors, determines and approves the CEO’s compensation level based on this evaluation;

 

Corporate Governance    2020 Proxy Statement  |  Humana

 

        19  


Table of Contents
   

review and approves all elements of compensation paid to our current or prospective executive officers, including without limitation, base compensation, incentive-compensation plans and equity-based plans, employment, change in control or severance programs and agreements, and any special compensation or benefits, including supplemental retirement benefits and any perquisites;

 

   

approves equity-based grants to our executive officers and other associates;

 

   

reviews and discusses with management the Company’s compensation plans and policies for all employees (including the Named Executive Officers) with respect to risk management and risk-inducing incentives;

 

   

ensures preparation of the Compensation Discussion and Analysis and the Compensation Committee Report as required by SEC regulations;

 

   

monitors compliance of executive officers and non-employee directors with relevant stock ownership guidelines;

 

   

reviews with management periodically, as it deems appropriate, management succession and inclusion and diversity practices;

 

   

administers our Executive Management Incentive Compensation Plan and other substantially similar or successor incentive compensation plans; and

 

   

annually evaluates its performance.

Scope of Authority, Processes and Procedures

The Organization & Compensation Committee acts on behalf of the Board of Directors to establish the compensation of our executive officers and provides oversight of our compensation philosophy, as described in this proxy statement under the caption “Compensation Discussion and Analysis.” The role of the executive officers and the outside compensation consultant in establishing executive compensation is discussed in this proxy statement under the caption “Compensation Discussion and Analysis.” Other than routine administrative matters and the ability of our CEO to approve grants of equity awards subject to certain individual and annual thresholds, no executive compensation decisions are delegated to management.

Compensation Committee Interlocks and Insider Participation

No member of the Organization & Compensation Committee: (i) is or has ever been an officer or employee of the Company; or (ii) is or was, during the last fiscal year, a participant in a “related person” transaction requiring disclosure under Item 404 of the SEC’s regulations (see discussion in this proxy statement under the caption “Certain Transactions with Management and Others”); or (iii) is an executive officer of another entity at which one of our executive officers serves either as a director or on its compensation committee.

Corporate Governance Determinations

During 2019, W. Roy Dunbar (Chair), Frank J. Bisignano and David A. Jones, Jr. served as members of our Organization & Compensation Committee. Considering (i) the source of each director’s compensation, including any consulting, advisory or other compensatory fees paid by the Company; and (ii) whether each director has an affiliate relationship with the Company, a subsidiary of the Company or an affiliate of a subsidiary of the Company, the Board has determined that each member of the Organization & Compensation Committee at February 19, 2020, is independent, as defined by the SEC and the NYSE, and is considered to be an “outside director” under Section 162(m) of the Internal Revenue Code.

Compensation Risk Determination

In 2019, the Organization & Compensation Committee reviewed management’s assessment of the risks associated with the Company’s compensation practices and policies for employees, including a consideration of the counterbalance of risk-taking incentives and risk-mitigating factors in Company practices and policies. Following a review of this assessment, the Organization & Compensation Committee determined that the risks arising from the Company’s compensation practices and policies are not reasonably likely to have a material adverse effect on the Company.

Nominating & Corporate Governance Committee

Committee Responsibilities

Pursuant to its charter, the Nominating & Corporate Governance Committee:

 

   

recommends to the full Board criteria for the selection and qualification of the members of the Board;

 

   

evaluates and recommends for nomination by the Board candidates to be proposed for election by the stockholders at each annual meeting;

 

   

seeks out and assists in the recruitment of highly qualified candidates to serve on the Board;

 

   

recommends for Board approval candidates to fill vacancies on the Board which occur between annual meetings;

 

   

develops, periodically reviews and recommends to the Board revisions to the Guidelines;

 

20       Humana  |  2020 Proxy Statement    Corporate Governance


Table of Contents
   

studies and reviews with management the overall effectiveness of the organization of the Board and the conduct of its business, and makes appropriate recommendations to the Board;

 

   

reviews the overall relationship of the Board and management;

 

   

reviews issues and developments pertaining to corporate governance;

 

   

reviews our public policy and political spending practices through regular reviews of our policy on political expenditures, expenditures and payments made with corporate funds, and overall political activity, including review of our Political Contributions and Related Activity Report; and

 

   

annually evaluates its performance.

Executive Committee

Pursuant to its charter, the Executive Committee possesses the authority to exercise all the powers of the Board of Directors except as otherwise provided by Delaware law and our Bylaws during intervals between meetings of the Board. The Executive Committee does not have the power, to, among other things, declare a dividend, issue stock, adopt a certificate of merger or sell substantially all of the Company’s business.

Investment Committee

Pursuant to its charter, the Investment Committee establishes investment objectives and policies for our various investment portfolios and investment options available under various employee benefit plans, reviews investment results, and annually evaluates its performance.

Technology Committee

Pursuant to its charter, the Technology Committee represents and assists the Board of Directors with the oversight of:

 

   

our process, awareness, evaluation and perspective on potentially disruptive technologies and convergences that may represent threats or opportunities for our business operations;

 

   

our process and perspective on strategic technology capabilities that enable transformational business capabilities;

 

   

our process, execution roadmaps, requisite capital, progress in delivering technology-enabled transformational capabilities and their related outcomes; and

 

   

management’s focus on organizational, talent and cultural enablers required to ensure achievement of those outcomes.

The Technology Committee may also assist the Audit Committee in its oversight of our information technology internal controls, cyber security, business continuity and disaster recovery programs.

Corporate Governance Policies

Majority Vote Policy

Under our Bylaws, a director nominee will be elected if the number of votes cast for the nominee exceeds the number of votes cast against the nominee. In contested elections, those in which a stockholder has nominated a person for election to the Board, the voting standard is a plurality of votes cast. The Board has also adopted a policy to require the Board to nominate for election only nominees who agree that, if they are elected to the Board, they will tender an irrevocable resignation conditioned on, first, the failure to achieve the required vote for re-election at any future meeting at which they face re-election, and second, the Board’s acceptance of their resignation following that election. In addition, the Board may fill director vacancies and new directorships only with candidates who agree to tender, promptly following their appointment to the Board, the same form of resignation tendered by other directors, as described above. The Nominating & Corporate Governance Committee will submit a recommendation for prompt consideration by the Board whether to accept the resignation. Any director whose resignation is under consideration will abstain from participating in any decision regarding that resignation. The Bylaws also require stockholder nominees for director election to notify the Company whether or not such nominees intend to tender the same type of resignation required of the Board’s director nominees.

Change in Director’s Primary Position

The Board has adopted a policy requiring that a director whose primary position or affiliation changes must promptly notify the Board and the Nominating & Corporate Governance Committee of the change so that a determination may be made as to the value of his or her continued service on the Board.

 

Corporate Governance    2020 Proxy Statement  |  Humana

 

        21  


Table of Contents

Director Stock Ownership Policy

Our Board believes that directors should be stockholders and have a significant personal financial stake in the Company. Consequently, the Board has adopted the following stock ownership guidelines:

 

   

Each non-employee director must maintain a minimum equity ownership level of five times the annual cash retainer.

 

   

Shares deferred at the election of the director are considered owned for purposes of the calculation of the ownership requirement.

 

   

Any Shares owned by a non-employee director (or Shares received upon the exercise of options or vesting of restricted stock or restricted stock units, less an amount to cover the exercise price and/or current tax liabilities) must be held by the director until the minimum equity ownership level is reached and thereafter maintained.

 

   

Once the minimum equity ownership level has been achieved, any Shares received upon the vesting of restricted stock or restricted stock units, less an amount to cover current tax liabilities, must be held by the director until one year following the vesting date.

Compliance with these guidelines is monitored by the Organization & Compensation Committee.

Director Attendance

The Board has developed a number of specific expectations of directors to define their responsibilities and to promote the efficient conduct of the Board’s business. With respect to the level of commitment expected of directors and related attendance protocols, as part of the Guidelines, the Board formally adopted a policy that all directors should make every effort to attend all meetings of the Board and the Committees of which they are members, and the Company’s Annual Meeting of Stockholders. Attendance by telephone or video conference may be used to facilitate a Director’s attendance.

During 2019, apart from Committee meetings, the Board of Directors met 10 times. All directors attended at least 75% of the scheduled Board of Directors’ meetings and meetings held by Committees of which they were members. All director nominees serving as directors at that time attended the Annual Meeting of Stockholders held on April 18, 2019.

Executive Sessions of Non-Management Directors

In 2019, our non-management directors held regularly scheduled, formal executive meetings, separate from management and led by our Chairman. Additional executive sessions of the Board are held as necessary or appropriate or upon the request of the Chairman, the Nominating & Corporate Governance Committee or any two other non-management directors. In addition, our non-management directors who qualify as independent within the meaning of our director independence guidelines meet in executive session at least once annually, and, in fact, met in 2019 in connection with each regularly scheduled Board of Directors meeting.

Code of Ethics and Code of Business Conduct

The Company has adopted the “Code of Conduct for the Chief Executive Officer and Senior Financial Officers,” which we refer to as the Executive Code of Ethics, violations of which are reported to the Audit Committee. In addition, we operate under the omnibus Humana Inc. Ethics Every Day, which we refer to as the Code of Ethics, which applies to all associates (including executive officers) and directors. The Humana Ethics Office is responsible for the design and enforcement of our ethics policies, the goal of which is to create a workplace climate in which ethics is so integral to day-to-day operations that ethical behavior is self-enforcing. All employees are required annually to review and affirm in writing their acceptance of the Code of Ethics. The Code of Ethics and the Executive Code of Ethics may be viewed on our website at www.humana.com. Any waiver for directors or executive officers from the provisions of the Code of Ethics or the Executive Code of Ethics must be made by the Board of Directors, and will be disclosed within four days of the waiver on our website at www.humana.com. To see either the Code of Ethics or the Executive Code of Ethics or any waivers to either policy, go to www.humana.com, then click on “Investor Relations,” then click on “Corporate Governance,” and then click on the relevant link.

Policy Regarding Employee, Officer and Director Hedging

The Company has a policy prohibiting all associates (including executive officers and independent directors) from hedging or pledging transactions using Company stock, including: (1) engaging in short sales of Company securities; (2) engaging in transactions in puts, calls or other derivative securities designed to hedge or offset any decrease in the market value of the Company’s equity securities, on an exchange or in any other organized market; or (3) engaging in certain monetization transactions, including holding Company securities in margin accounts or pledging Company securities as collateral.

Public Policy

Our Company has an active voice on healthcare policy issues that matter most to the people we serve. From Medicare, TRICARE and home health; to integrated care, Medicaid and healthcare reform – we are committed to advancing public policy that moves us toward a future in which everyone can enjoy lifelong health and well-being.

 

22       Humana  |  2020 Proxy Statement    Corporate Governance


Table of Contents

The Company has also established and sponsors a Political Action Committee (PAC), for which Company associates may voluntarily contribute. The PAC is registered with the Federal Election Commission (FEC) and certain states nationwide as required by applicable law. As a matter of policy, all Company political activities must promote the interests of the Company, and must be made without regard for the private political preferences of Company officers or executives. Furthermore, Humana does not make independent expenditures nor does it contribute to ballot measure committees. Distributions from the PAC are made to election committees of federal and state office candidates or to other PACs on a non-partisan basis. While the PAC has its own separate board of directors to oversee its operations, the Company’s Board - through its Audit Committee - has responsibility for (i) reviewing the political contributions and political activities of the Company and the PAC and (ii) overseeing compliance with the overall policy, process and contribution criteria with respect to such contributions and activities. The Board reviews occur semi-annually, along with semi-annual publication of a Contributions and Related Activity Report (PAC Report). To learn more about our public policy and to review the most recent PAC Report, visit our web site at www.humana.com, then click on “About Humana,” then click on “Public Policy.”

Communication with Directors

Stockholders and other interested parties may communicate directly with our Chairman, non-management directors as a group, or any other individual director by writing to the special e-mail address published on our website at www.humana.com. Specifically, interested parties may visit our website at https://www.humana.com/about/contact-bod, where instructions for contacting these persons are available. All directors have access to this e-mail address. We use the staff of our Corporate Secretary to review correspondence received in this manner, and to filter advertisements, solicitations, spam, and other such items. Concerns related to accounting, internal controls or auditing matters are required to be brought immediately to the attention of our Chief Legal Officer and the Board and handled in accordance with procedures established by the Audit Committee with respect to such matters.

 

Corporate Governance    2020 Proxy Statement  |  Humana

 

        23  


Table of Contents

Proposal One

Election of Directors

 

 

The Board of Directors of the Company, in accordance with the provisions of the Company’s Articles of Incorporation and Bylaws, has determined that the number of directors to be elected at the Annual Meeting of the Company shall be twelve (12). The directors are elected to hold office until the Annual Meeting of Stockholders in 2021 and until a successor is elected and qualified.

Each of the nominees has consented to be named as a nominee and agreed to serve if elected. If any nominee becomes unable to serve for any reason (which is not anticipated), the Shares represented by the proxy granted to Messrs. Hilzinger and Broussard may be voted for the substituted nominee as may be designated by the Board of Directors. The Board has established a policy that non-employee directors must retire at the first annual meeting following his or her seventy-third birthday.

The following table shows certain information concerning the nominees at March 1, 2020.

 

Name

    Age         Position

First Elected

Director

Kurt J. Hilzinger

59

Chairman of the Board, Independent Director

07/2003

Bruce D. Broussard

57

Director, President and Chief Executive Officer

01/2013

Frank J. Bisignano

60

Independent Director

08/2017

Frank A. D’Amelio

62

Independent Director

09/2003

W. Roy Dunbar

58

Independent Director

04/2005

Wayne A.I. Frederick, M.D.

48

Independent Director

02/2020

John W. Garratt

51

Independent Director

02/2020

David A. Jones, Jr.

62

Independent Director

05/1993

Karen W. Katz

63

Independent Director

09/2019

William J. McDonald

63

Independent Director

10/2007

James J. O’Brien

65

Independent Director

04/2006

Marissa T. Peterson

58

Independent Director

08/2008

Board of Directors Nominee Determination

At the recommendation of the Nominating & Corporate Governance Committee, the Board has determined that each director nominee possesses and demonstrates the character, integrity, independence, business judgment and all other requisite skills, qualifications and attributes necessary to effectively (i) act in the best interests of the Company and its stockholders and (ii) exercise active and independent oversight of the of the Company’s management team, business affairs and assets.

We believe that the current Board members have a deep commitment to the Company’s success, as evidenced by the key qualifications, skills, experiences and diversity of backgrounds of each director described below. For additional information, please refer to the section entitled, “Qualifications and Process for Nominating Directors” in this proxy statement. The information given in this proxy statement concerning the nominees is based upon statements made or confirmed to the Company by or on behalf of the nominees.

 

24       Humana  |  2020 Proxy Statement    Proposal One


Table of Contents

Director Nominees’ Biographies

 

 

Kurt J. Hilzinger

   

 

Age 59    Director since 2003

      
 

LOGO

Chairman of the Board

 

Committees:

  Executive

 

 

 

    

 

Kurt J. Hilzinger was initially elected to the Board in July 2003, and was elected Chairman of the Board effective January 1, 2014. Mr. Hilzinger served as Lead Director from August 2010 until his appointment as Chairman. Mr. Hilzinger is a Partner at Court Square Capital Partners, an independent private equity firm, having held this position since November 2007. At Court Square Mr. Hilzinger focuses principally on investments in the healthcare industry. Prior to that, he was a Director of AmerisourceBergen Corporation from March 2004 to November 2007; having previously served as President and Chief Operating Officer of AmerisourceBergen Corporation from October 2002 to November 2007, and as Executive Vice President and Chief Operating Officer from August 2001 to October 2002. Mr. Hilzinger also serves on the Board of Directors of Outlook Therapeutics, Inc. and several privately held companies.

 

 
   

 

Skills and Qualifications    

 

   
   

 

The Board believes that Mr. Hilzinger is a strong operating executive with a finance and strategic background, whose operational experience and financial expertise in the health care sector contributes valuable insight to the Board.

 

 
       
       

 

Bruce D. Broussard

   

 

Age 57    Director since 2013

      
 

LOGO

Director, President and

Chief Executive Officer

 

Committees:

  Executive (Chair)

 

 

 

    

 

Bruce D. Broussard, President and CEO, joined Humana in 2011. Under his leadership, Humana has created an integrated care delivery model centered on improving health outcomes, driving lower costs, enhancing quality, and providing a simple and personalized member experience. With its holistic approach, Humana is dedicated to improving the health of the communities it serves by making it easy for people to achieve their best health.

 

Bruce brings to Humana a wide range of executive leadership experience in publicly traded and private organizations within a variety of healthcare sectors, including oncology, pharmaceuticals, assisted living/senior housing, home care, physician practice management, surgical centers and dental networks. Prior to joining Humana, Bruce was Chief Executive Officer of McKesson Specialty/US Oncology, Inc. US Oncology was purchased by McKesson in December 2010. At US Oncology, Bruce served in a number of senior executive roles, including Chief Financial Officer, President, Chief Executive Officer and Chairman of the Board.

 

Bruce plays a leadership role in key business advocacy organizations such as The Business Council and the American Heart Association CEO Roundtable. He is also a member of the Board of Directors of KeyCorp, America’s Health Insurance Plans (AHIP) and the World Economic Forum Health Governors Board.

 

 
   

 

Skills and Qualifications    

 

   
   

 

The Board believes that Mr. Broussard’s wide range of executive leadership experience in publicly traded and private organizations within a variety of healthcare sectors, including oncology, pharmaceuticals, assisted living/senior housing, home care, physician practice management, surgical centers, and dental networks, as well as his in-depth knowledge of the Company’s operations, finances and strategy, brings valuable insight to the Board.

 

 
       

 

Proposal One    2020 Proxy Statement  |  Humana

 

        25  


Table of Contents

 

Frank J. Bisignano

 

   

 

Age 60    Director since 2017

 

      
 

LOGO

Independent Director

 

Committees:

  Technology

  Organization & Compensation

 

 

    

 

Frank J. Bisignano was initially elected to the Board in August 2017. He is the President, Chief Operating Officer and a Director of Fiserv, Inc., which acquired First Data Corporation Inc. in 2019, where Mr. Bisignano previously served as the Chairman of the Board and Chief Executive Officer. During his tenure at First Data, Mr. Bisignano transformed the 48-year-old company from the world’s largest traditional payment processor into a technology innovator, industry collaborator, and commerce enabler for the 21st century. He also improved the company’s balance sheet, leading a $3.5 billion private placement in the company and its $2.6 billion initial public offering in 2015, the largest U.S. IPO of the year. Prior to joining First Data, Mr. Bisignano was the co-chief operating officer for J.P. Morgan Chase and the chief executive officer of its Mortgage Banking unit. Born and raised in Brooklyn, Mr. Bisignano serves on the Board of Directors of Fiserv, Inc. and several privately held companies and charitable organizations.

 

 
    Skills and Qualifications      

 

 

  

 

 
   

 

The Board believes that Mr. Bisignano is a proven business leader who understands the importance of technology as a solution to complex problems, which is a key part of the Company’s strategy to integrate a fragmented health care system through leveraging technology. This integration sits at the heart of a health care system that considers and cares for the ‘whole person’ while delivering true value, and the Board believes that the depth and breadth of Mr. Bisignano’s experiences and insights are valuable to the Board’s function.

 

 
       
       

 

Frank A. D’Amelio

 

   

 

Age 62    Director since 2003

 

      
 

LOGO

Independent Director

 

Committees:

  Audit (Chair)

  Nominating & Corporate Governance

 

 

    

 

Frank A. D’Amelio was initially elected to the Board in September 2003. He is Executive Vice President, Business Operations and Chief Financial Officer of Pfizer Inc., having held this position since December 2010, and having served as Chief Financial Officer since September 2007. Prior to that, Mr. D’Amelio was Senior Executive Vice President of Integration and Chief Administrative Officer at Alcatel-Lucent from December 2006 to August 2007, and Chief Operating Officer of Lucent Technologies Inc. from February 2006 to November 2006. From May 2001 until January 2006, he was Executive Vice President, Administration and Chief Financial Officer of Lucent. Mr. D’Amelio also serves on the Board of Directors of Zoetis, Inc. and on the board of the Independent College Fund of New Jersey.

 

 
    Skills and Qualifications      

 

 

  

 

 
   

 

The Board believes that Mr. D’Amelio’s skills, global experience and proven leadership in both financial and operational roles contribute greatly to the Board’s composition. As a senior executive at various global companies undergoing the kind of rapid and complex changes that the Company has undertaken in response to the rapidly changing markets and regulatory environment, Mr. D’Amelio has extensive knowledge of the capital markets as well as broad experience working with the investment community, regulatory bodies and rating agencies.

 

 
       

 

26       Humana  |  2020 Proxy Statement    Proposal One


Table of Contents

 

W. Roy Dunbar

   

 

Age 58    Director since 2005

      
 

LOGO

Independent Director

 

Committees:

  Organization/ Compensation (Chair)

  Nominating & Corporate Governance

 

 

    

 

W. Roy Dunbar was initially elected to the Board in April 2005. Mr. Dunbar was the Chairman of the Board of NetworkSolutions, and was the Chief Executive Officer from January 2008 to November 2009. Mr. Dunbar also served as the President of Global Technology and Operations for MasterCard Incorporated from September 2004 until January 2008. Mr. Dunbar worked at Eli Lilly and Company for 14 years, latterly as President of Intercontinental Operations from 2003 until he joined MasterCard, and Chief Information Officer from 1999 to 2003. Mr. Dunbar was named to NACD Directorship 100 in 2015 and is a NACD Board Leadership Fellow. Mr. Dunbar also serves on the Board of Directors of Johnson Controls International plc and SiteOne Landscape Supply, Inc.

 

 
    Skills and Qualifications      

 

 

  

 

 
   

 

The Board believes that Mr. Dunbar’s innovative, consumer-focused approach to information technology at a variety of global companies brings a valuable advantage to the Board. The Board benefits from Mr. Dunbar’s expertise in leading companies focused on the development of information systems that are easy for consumers to understand and use effectively, which is critical to the Company’s extension of its position as a leader in health care information technology. Mr. Dunbar’s extensive experience in health care over three decades further contributes to the strategic composition of the Board.

 

 
       
       

 

Wayne A.I. Frederick, M.D.

   

 

Age 48    Director since 2020

      
 

LOGO

Independent Director

 

No Current Committees

 

    

 

Wayne A. I. Frederick, M.D., was initially elected to the Board in February 2020. He is the President of Howard University, having held this position since July 2014. Prior to that Dr. Frederick served as Howard University’s Interim President (elected October 2013) after serving as Provost and Chief Academic Officer for more than a year. Following his post-doctoral research and surgical oncology fellowships at the University of Texas MD Anderson Cancer Center, Dr. Frederick began his academic career as Associate Director of the Cancer Center at the University of Connecticut. Upon his return to Howard University, his academic positions included Associate Dean in the College of Medicine, Division Chief in the Department of Surgery, Director of the Cancer Center and Deputy Provost for Health Sciences. He also earned a Master of Business Administration degree from Howard University’s School of Business in 2011. Dr. Frederick continues to operate and lectures to the medical students and residents of Howard University’s College of Medicine. Dr. Frederick is a fellow of the American College of Surgeons and belongs to numerous surgical organizations, including, the American Surgical Association. Dr. Frederick also serves on the Board of Directors of Mutual of America Life Insurance Co. in addition to a few other privately held companies and charitable organizations.

 

 
    Skills and Qualifications      

 

 

  

 

 
   

 

The Board believes that Dr. Frederick’s exemplary career as a leader in medical research, healthcare academics and business administration brings valuable insights to the Board to assist in the advancement of its strategic healthcare goals. Dr. Frederick’s extensive healthcare and disease management background will be instrumental to our company’s relationships with our members and our physician partners, as Humana continues to innovate in the area of health data analytics.

 

 
       

 

Proposal One    2020 Proxy Statement  |  Humana

 

        27  


Table of Contents

 

John W. Garratt

   

 

Age 51    Director since 2020

      
 

LOGO

Independent Director

 

No Current Committees

 

 

 

    

 

John W. Garratt was initially elected to the Board in February 2020. He is the Executive Vice President and Chief Financial Officer of Dollar General Corporation, having held this position since December 2015. Mr. Garratt joined Dollar General in October 2014 as Senior Vice President, Finance & Strategy and subsequently served as Interim Chief Financial Officer from July 2015 to December 2015. Prior to joining Dollar General, Mr. Garratt held various positions of increasing responsibility with Yum! Brands, Inc., one of the world’s largest restaurant companies, between May 2004 and October 2014, holding leadership positions in corporate strategy and financial planning. Mr. Garratt served as Vice President, Finance and Division Controller for the KFC division and earlier for the Pizza Hut division and for Yum Restaurants International between October 2013 and October 2014. Mr. Garratt also served as the Senior Director, Yum Corporate Strategy, from March 2010 to October 2013, reporting directly to the corporate Chief Financial Officer and leading corporate strategy as well as driving key cross-divisional initiatives. Mr. Garratt served in various other financial positions at Yum from May 2004 to March 2010. Prior to his career at Yum! Brands, Mr. Garratt served as Plant Controller for Alcoa Inc. between April 2002 and May 2004, and held various financial management positions at General Electric from March 1999 to April 2002. He began his career in May 1990 at Alcoa, where he served for approximately nine years.

 

 
   

 

Skills and Qualifications    

 

 

 

 

  

 

 
   

 

The Board believes that Mr. Garratt’s substantial executive leadership at large public companies, combined with his extensive experience in key areas of finance, accounting, strategic planning and business analytics, supplement existing expertise essential to the Board‘s oversight function as Humana continues to evolve its population health and care delivery strategies. Mr. Garratt’s contributions to organizations across varied consumer-based industries further qualifies him to offer key perspectives as the Company enhances products and capabilities for our members.

 

 
       
       

 

David A. Jones, Jr.

   

 

Age 62    Director since 1993

      
 

LOGO

Independent Director

 

Committees:

  Nominating & Corporate Governance (Chair)

  Organization & Compensation

  Executive

 

 

 

    

 

David A. Jones, Jr. was initially elected to the Board in May 1993 and served as Chairman of the Board of the Company from April 2005 through August 2010, and Vice Chairman of the Board from September 1996 through April 2005. He is Chairman of Chrysalis Ventures, LLC, headquartered in Louisville, Kentucky, and also serves on the board of directors of several charitable, civic and privately held companies.

 

 
   

 

Skills and Qualifications    

 

 

 

 

  

 

 
   

 

As a successful venture capitalist, the Board believes that Mr. Jones brings strategic insight and leadership and a wealth of experience in health care to the Board, both in the Company’s core businesses as well as in emerging technologies and business models.

 

 
       

 

28       Humana  |  2020 Proxy Statement    Proposal One


Table of Contents

 

Karen W. Katz

   

 

Age 63    Director since 2019

      
 

LOGO

Independent Director

 

No Current Committees

 

 

 

    

 

Karen W. Katz was initially elected to the Board in September 2019. Ms. Katz was formerly the President and CEO of Neiman Marcus Group LTD LLC from 2010 to February 2018. Neiman Marcus Group is an international multibrand omni-channel retailer whose portfolio of brands includes Neiman Marcus, Bergdorf Goodman and MyTheresa. Having joined Neiman Marcus in 1985, Ms. Katz served in key executive and leadership roles in the company’s merchant, stores and eCommerce organizations as Executive Vice President—Stores, a member of the Office of the Chairman of Neiman Marcus Group, and President, Neiman Marcus Online, and President and CEO, Neiman Marcus Stores. Ms. Katz currently serves on the Board of Directors of Under Armour, Inc. and Casper Sleep, Inc. and a few privately held companies.

 

 
   

 

Skills and Qualifications    

 

 

 

 

  

 

 
   

 

The Board believes that Ms. Katz is an extremely accomplished executive with deep experience and a demonstrated commitment to understanding, and meeting, the needs of customers by maintaining a personalized experience enabled by digital transformation. She brings a holistic approach to customer service, including acumen for employing technology to advance service delivery, combined with demonstrated success in growing business through forward thinking leadership, providing valuable perspective and expertise to the Board.

 

 
       
       

 

William J. McDonald

   

 

Age 63    Director since 2007

      
 

LOGO

Independent Director

 

Committees:

  Audit

  Investment

 

 

 

    

 

William J. McDonald was initially elected to the Board in October 2007. Mr. McDonald is the managing partner of Wild Irishman Advisory, LLC, a marketing consulting firm. Prior to that, he was Executive Vice President, Brand Management of Capital One Financial Corporation, having held that position from 1998 until his retirement in 2013. Mr. McDonald also serves on the advisory board of The University of Texas at Austin Longhorn Family Leadership Council.

 

 
   

 

Skills and Qualifications    

 

 

 

 

  

 

 
   

 

The Board believes that Mr. McDonald’s service in various senior executive marketing positions contributes significant experience and expertise in brand development, marketing and related disciplines.

 

 
       

 

 

Proposal One    2020 Proxy Statement  |  Humana

 

        29  


Table of Contents

 

James J. O’Brien

   

 

Age 65    Director since 2006

      
 

LOGO

Independent Director

 

Committees:

  Investment (Chair)

  Audit

 

 

 

    

 

James J. O’Brien was initially elected to the Board in April 2006. Until his retirement on December 31, 2014, Mr. O’Brien was the Chairman of the Board and Chief Executive Officer of Ashland Inc. Prior to being named to this position, Mr. O’Brien was President and Chief Operating Officer of Ashland Inc., and before that, Senior Vice President and Group Operating Officer. He also serves on the board of directors of Albemarle Corporation and Eastman Chemical Company.

 

 
   

 

Skills and Qualifications    

 

 

 

 

  

 

 
   

 

As a highly respected leader in the global business community with an extraordinary track record of success, the Board believes that Mr. O’Brien’s breadth of management experience adds valuable expertise and insight to the Board.

 

 
       

 

 

Marissa T. Peterson

   

 

Age 58    Director since 2008

      
 

LOGO

Independent Director

 

Committees:

  Technology (Chair)

 

 

 

    

 

Marissa T. Peterson was initially elected to the Board in August 2008. Ms. Peterson is President and Chief Executive Officer of Mission Peak Executive Consulting, which provides client-focused executive coaching and management consulting services. Ms. Peterson was formerly Executive Vice President, Worldwide Operations, Services & Customer Advocacy for Sun Microsystems Inc. in Santa Clara, California, until her retirement in 2005 after 17 years with the company. Ms. Peterson currently serves on the Board of Directors of Ansell Limited and previously served on the board of directors of Oclaro, Inc., SUPERVALU INC., Quantros and Lucile Packard Children’s Hospital at Stanford, and the board of trustees of Kettering University. Ms. Peterson holds an honorary doctorate in management and a bachelor’s degree in engineering from Kettering University where she graduated magna cum laude. She received her MBA from Harvard Business School with the distinction of being a GM Fellow.

 

 
   

 

Skills and Qualifications    

 

 

 

 

  

 

 
   

 

The Board believes that Ms. Peterson’s operating and consumer-focused leadership, and experience developing and managing programs designed to help companies reduce the time, cost and risk of transforming their businesses by leveraging technology to architect, implement and maintain customers’ network computing infrastructures, bring valuable insights to the Board. Her commitment to a “customer first” ethic at Sun Microsystems Inc. established an industry leadership position for high quality and cost-effective product execution to a global customer base, a commitment that aligns with the Company’s focus on consumerism.

 

 
       

Vote Required and Recommendation of the Board of Directors

A director nominee will be elected if the number of votes cast for the nominee exceeds the number of votes cast against the nominee. Shares not present at the Annual Meeting and Shares voting “abstain” or broker non-votes have no effect on the election of directors. Under the Company’s Majority Vote Policy, following election to our Board of Directors, a director is required to submit his or her irrevocable resignation to our Board of Directors, conditioned upon (i) the director not achieving the requisite stockholder vote at any future meeting at which they face re-election, and (ii) acceptance of the resignation by the Board of Directors following that election. The Board of Directors has 90 days to determine whether or not to accept the director’s resignation and to report this information to our stockholders.

FOR THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR ALL NOMINEES.

 

30       Humana  |  2020 Proxy Statement    Proposal One


Table of Contents

Director Compensation

 

 

2019 Director Compensation Program

During 2019, our directors were compensated pursuant to the following schedule:

 

   

 

Annual Retainer (1)

 

  

 

$115,000  

 

 

 

Non-Employee Chairman of the Board

Additional Annual Retainer

 

  

 

$210,000  

 

 

 

Committee Chairman fee per year:

1. Audit Committee Chair

2. Organization & Compensation Committee Chair

3. All other Committee Chairs

  

 

$25,000  

$20,000  

$15,000  

 

 

Executive Committee Member fee per year

 

  

 

$12,000  

 

 

 

Common Stock per year

(1st Business Day of January)(1)(2)

 

  

 

$165,000 in common stock  

(variable # of shares)  

 

 

 

Charitable Contributions Annual Match

 

  

 

up to $40,000  

 

 

 

Group Life and Accidental Death Insurance —

(except Chairman)(3)

 

  

 

$150,000 of coverage  

 

 

 

Group Life and Accidental Death Insurance — Chairman

 

  

 

$400,000 of coverage  

 

 

 

Business Travel Accident Insurance

 

  

 

$250,000 of coverage  

 

 

 

Restricted Stock Units

Granted Initial Date of Election(4)

 

  

 

Restricted Stock Unit grant equal to the dollar value  

of the then current annual stock grant for directors  

 

(1)

As an employee director elected to our Board, Mr. Broussard does not receive the annual retainer or annual stock grant for service as a director. For all other directors, the annual common stock retainer is paid in the form of restricted stock units, vests at the end of the year of service related to the retainer. Notwithstanding anything to the contrary in the applicable equity award agreement evidencing such award, the equity and cash-based retainers will be pro-rated based on months of service (defined as any month in which the director serves for at least one day) for any service of less than the full year in respect of which the award is granted.

(2)

Pursuant to our revised Directors Stock Retention Policy, each non-employee director must maintain a minimum equity ownership level of five times the annual cash retainer. As of March 1, 2020, all of our non-employee directors who have served for at least one year satisfy this requirement. For additional information, please refer to “Corporate Governance — Corporate Governance Policies — Director Stock Ownership Policy” in this proxy statement.

(3)

Coverage amount decreases 50% at age 70.

(4)

This initial award of restricted stock units is forfeited if the director serves less than one year on our Board of Directors.

 

Director Compensation    2020 Proxy Statement  |  Humana

 

        31  


Table of Contents

2019 Compensation of Our Directors

The following table shows the compensation earned by our non-employee directors in connection with their service on our Board of Directors during all or a portion of the 2019 fiscal year:

 

Name(1)

(a)

Fees
Earned
or

Paid in

Cash

($)(3)

(b)

Stock

Awards

($)(3)(4)(5)
(c)

Option

  Awards  

($)

(d)

Non-Equity

Incentive Plan

 Compensation 

($)

(e)

Change in
Pension

Value and
Nonqualified
Deferred

 Compensation 

Earnings($)(7)

(f)

All Other

 Compensation 

($)(8)

(g)

Total

($)

(h)

Frank J. Bisignano

 

115,000

 

164,960

 

 

 

—  

 

44,405

 

324,365

Frank A. D’Amelio

 

140,000

 

164,960

 

 

 

—  

 

3,566

 

308,526

Karen B. DeSalvo, M.D.(2)

 

93,333

 

137,467

(6)

 

 

 

 

—  

 

21,717

 

252,517

W. Roy Dunbar

 

135,000

 

164,960

 

 

 

—  

 

16,371

 

316,331

Kurt J. Hilzinger

 

337,000

 

164,960

 

 

 

—  

 

42,084

 

544,044

David A. Jones, Jr.

 

142,000

 

164,960

 

 

 

76,063

 

44,382

 

427,405

Karen W. Katz

 

115,000

 

164,949

 

 

 

—  

 

41,412

 

321,361

William J. McDonald

 

115,000

 

164,960

 

 

 

—  

 

42,884

 

322,844

William E. Mitchell(2)

 

38,333

 

54,987

(6)

 

 

 

 

—  

 

101,477

 

194,797

David B. Nash, M.D.(2)

 

38,333

 

54,987

(6)

 

 

 

 

—  

 

85,819

 

179,139

James J. O’Brien

 

130,000

 

164,960

 

 

 

—  

 

43,577

 

338,537

Marissa T. Peterson

 

130,000

 

164,960

 

 

 

—  

 

4,322

 

299,282

(1)

During 2019, Mr. Broussard served as President and Chief Executive Officer of the Company, and therefore, as an employee director, did not earn compensation in connection with his service on our Board. Mr. Broussard’s compensation as our Chief Executive Officer is discussed under “Executive Compensation” in this proxy statement.

(2)

Mr. Mitchell and Dr. Nash were not included as nominees for re-election at the April 18, 2019 Annual Meeting of Stockholders. In addition, Dr. DeSalvo resigned from the Board effective as of October 15, 2019. Compensation disclosed represents amounts earned for service during 2019 prior to their respective departures from our Board.

(3)

Under the Humana Inc. Deferred Compensation Plan for Non-Employee Directors, which we refer to as the Deferred Compensation Plan, non-employee directors may make an irrevocable election each year to defer compensation paid to them by the Company in the form of cash or stock for services rendered as Board members. For 2019, Messrs. D’Amelio, Hilzinger, McDonald and O’Brien and Drs. Nash and DeSalvo each deferred their stock compensation. Refer to footnote 1(c) to the section entitled “Stock Ownership Information — Security Ownership of Directors and Executive Officers” for a disclosure of the number of Shares of our common stock that have been deferred by each director. A director electing to defer cash can choose any of the investment options offered in the Deferred Compensation Plan using Charles Schwab’s Retirement Plan Services (other than the Humana Common Stock Fund) or can invest in stock units that have a value relative to that of our common stock. For 2019, Messrs. Hilzinger, Jones, McDonald and Dr. Nash each elected to defer a portion or all of their cash compensation under the Deferred Compensation Plan.

(4)

On January 2, 2019, when the fair market value of our common stock was $280.545, each director in office at that time, other than Mr. Broussard, was granted a restricted stock unit award of 588 Shares, representing the annual grant of approximately $165,000 in common stock. Ms. Katz received a restricted stock unit award representing approximately $165,000 upon her election date, using the fair market value of our common stock on that date ($279.575) to determine the 590 Shares awarded. The amount shown in column (c) (“Stock Awards”) above is the grant-date fair market value times the number of Shares awarded calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) Topic 718.

(5)

Vested restricted stock units with a payout deferral election made by the director accrue quarterly dividend equivalent rights that are reinvested into the director’s account as additional restricted stock units and will be included in the final restricted stock unit payment when the Shares are issued in accordance with the director’s payout election. This column does not include dividend equivalent units that have accrued through December 31, 2019 nor includes dividend equivalent rights paid on any such deferred Shares.

(6)

Pursuant to equity award agreements, unvested restricted stock units will be prorated upon vesting for any portion of the year that the director did not serve. Mr. Mitchell and Drs. Nash and DeSalvo each received a prorated number of restricted stock units upon vesting. The value represented above in column (c) is the prorated value of the number of Shares that vested on December 31, 2019, using the grant date fair market value of $280.545.

 

32       Humana  |  2020 Proxy Statement    Director Compensation


Table of Contents
(7)

Non-employee directors elected subsequent to 1997 do not receive any retirement benefits. As he was first elected to the board in 1993, Mr. Jones is the only director that will have retirement benefits under this former retirement policy, including: (A) at the director’s election, either: (x) an annual retirement benefit for the life of the director in the amount of $38,000, the annual retainer fee in effect for 1997; or (y) in lieu thereof, an actuarially equivalent joint and survivor annuity payment; and (B) an annual matching charitable contribution benefit of $19,000 for the life of the director.

(8)

We pay for or reimburse our directors’ travel, lodging and other reasonable out-of-pocket expenses in connection with attendance at board, committee and stockholder meetings. From time to time, we may transport one or more directors and members of their immediate family to and from such meetings or other Company business on Company aircraft. Directors may elect to participate in the medical and dental benefit programs offered to all our employees at a rate comparable to the rate paid by employees. In 2019, Messrs. Dunbar, McDonald and Mitchell, and Dr. DeSalvo and Ms. Peterson, elected to participate. Under the terms of our director compensation policy, each non-employee director who participates in medical and dental plans provided by the Company will, for two years following the date of completion of a change in control, be eligible to participate in medical and dental plans on substantially the same terms as immediately prior to the change in control, including the requirement to pay premiums at the same rates as our associates. We also reimburse directors for other reasonable expenses related to board service, such as director education, which amounts are not included in the table above. In addition, we paid certain local occupational taxes and life and accidental death insurance premiums per outside director, in each case as disclosed below, and provided a matching charitable gift program. The “All Other Compensation” amount above includes the following amounts earned in connection with service on our Board of Directors:

 

Director

 

Matching
Charitable Gift

($)

   

Occupational
Tax

($)

   

Life
Insurance

($)

   

Other

($)

   

Total –

All Other
Compensation

($)

 

Frank J. Bisignano

 

 

40,000

 

 

 

3,217

 

 

 

1,188

 

 

 

0

 

 

 

44,405

 

Frank A. D’Amelio

 

 

1,000

 

 

 

1,378

 

 

 

1,188

 

 

 

0

 

 

 

3,566

 

Karen B. DeSalvo, M.D.

 

 

5,000

 

 

 

1,372

 

 

 

345

 

 

 

15,000

(1) 

 

 

21,717

 

W. Roy Dunbar

 

 

12,000

 

 

 

3,597

 

 

 

774

 

 

 

0

 

 

 

16,371

 

Kurt J. Hilzinger

 

 

40,000

 

 

 

20

 

 

 

2,064

 

 

 

0

 

 

 

42,084

 

David A. Jones, Jr.

 

 

40,000

 

 

 

3,194

 

 

 

1,188

 

 

 

0

 

 

 

44,382

 

Karen W. Katz

 

 

40,000

 

 

 

1,115

 

 

 

297

 

 

 

0

 

 

 

41,412

 

William J. McDonald

 

 

40,000

 

 

 

217

 

 

 

1,188

 

 

 

1,479

 

 

 

42,884

 

William E. Mitchell

 

 

40,000

 

 

 

58,729

 

 

 

618

 

 

 

2,130

 

 

 

101,477

 

David B. Nash, M.D.

 

 

25,000

 

 

 

60,423

 

 

 

396

 

 

 

0

 

 

 

85,819

 

James J. O’Brien

 

 

40,000

 

 

 

1,291

 

 

 

2,286

 

 

 

0

 

 

 

43,577

 

Marissa T. Peterson

 

 

0

 

 

 

3,548

 

 

 

774

 

 

 

0

 

 

 

4,322

 

  (1)

Prior to resigning from the Board effective on October 15, 2019, Dr. DeSalvo served as an internal advisory board member for one of our product lines, for which she received an annual retainer.

 

Director Compensation    2020 Proxy Statement  |  Humana

 

        33  


Table of Contents

Stock Ownership Information

 

 

Security Ownership of Certain Beneficial Owners of Company Common Stock

We know of no person or entity that may be deemed to own beneficially more than 5% of our outstanding common stock except for:

 

  Number of Shares

 

Percent of  Class
Outstanding
(1)

 

BlackRock, Inc.

55 East 52nd Street

New York, New York 10055

 

 

 

12,106,841 Shares

 

 

9.1%(2)

 

 

Capital International Investors

11100 Santa Monica Boulevard, 16th Floor

Los Angeles, California 90025

 

 

 

10,143,825 Shares

 

 

7.6%(3)

 

Capital Research Global Investors

333 South Hope Street

Los Angeles, California 90071

  7,829,472 Shares 5.9%(4)  

 

The Vanguard Group

100 Vanguard Boulevard

Malvern, Pennsylvania 19355

 

 

 

10,192,558 Shares

 

 

7.7%(5)

 

(1)

The percentage of ownership is based on 132,105,221 Shares of our common stock outstanding as of December 31, 2019.

(2)

Based upon a Schedule 13G filed with the SEC for the period ended December 31, 2019, BlackRock, Inc. reports that through various subsidiaries, it has sole power to vote 10,601,850 Shares and has sole dispositive power over 12,106,841 Shares.

(3)

Based upon a Schedule 13G filed with the SEC for the period ended December 31, 2019, Capital International Investors reports that as a result of Capital Research and Management Company acting as investor adviser to various investment companies registered under Section 8 of the Investment Company Act of 1940, Capital International Investors is deemed to be the beneficial owner of 10,143,825 Shares over which it has sole power to vote 10,120,525 Shares and sole dispositive power over 10,143,825 Shares.

(4)

Based upon a Schedule 13G filed with the SEC for the period ended December 31, 2019, Capital Research Global Investors reports that as a result of Capital Research and Management Company acting as investor adviser to various investment companies registered under Section 8 of the Investment Company Act of 1940, Capital Research Global Investors is deemed to be the beneficial owner of 7,829,472 Shares over which it has sole power to vote 7,829,276 Shares and sole dispositive power over 7,829,472 Shares.

(5)

Based upon a Schedule 13G filed with the SEC for the period ended December 31, 2019, The Vanguard Group reports that through various subsidiaries, it has sole power to vote 201,134 Shares, shared power to vote 40,492 Shares, sole dispositive power over 9,963,155 Shares, and shared dispositive power over 229,403 Shares.

 

34       Humana  |  2020 Proxy Statement    Stock Ownership Information


Table of Contents

Security Ownership of Directors and Executive Officers

The following table shows stock ownership as of January 15, 2020, by (i) each of our director nominees, (ii) Bruce D. Broussard, our President and Chief Executive Officer, (iii) Brian A. Kane, our Chief Financial Officer, (iv) each of our three other highest compensated executive officers serving at December 31, 2019, (we collectively refer to these officers in this proxy statement as our Named Executive Officers, or NEOs), and (v) by all our director nominees and executive officers as a group, including those named above.

 

    

 

Company Common    

Stock Beneficially    

Owned as of    

January 15, 2020    

(1)(2)    

  

 

Percent
of
Class as of
December 31, 2019
(3)

 

 

Frank J. Bisignano

 

  

 

    1,871

 

        

 

Frank A. D’Amelio

 

  

 

  20,634

 

        

 

W. Roy Dunbar

 

  

 

    2,427

 

        

 

Wayne A.I. Frederick, M.D.

 

  

 

          0

 

        

 

John W. Garratt

 

  

 

          0

 

        

 

Kurt J. Hilzinger

 

  

 

  19,448

 

        

 

David A. Jones, Jr.

 

  

 

  88,872

 

        

 

Karen W. Katz

 

  

 

          0

 

        

 

William J. McDonald

 

  

 

    2,276

 

        

 

James J. O’Brien

 

  

 

      146

 

        

 

Marissa T. Peterson

 

  

 

    2,022

 

        

 

Bruce D. Broussard

 

  

 

168,836

 

        

 

Brian A. Kane

 

  

 

108,297

 

        

 

T. Alan Wheatley

 

  

 

  26,641

 

        

 

Timothy S. Huval

 

  

 

  26,933

 

        

 

William K. Fleming

 

  

 

  28,490

 

        

 

All directors and executive officers as a group (24 in number, including those named above)

 

  

 

560,536

 

  

 

 

 

 

0.42%

 

 

 

 

(1)

Beneficial ownership of Shares, for purposes of this proxy statement, includes Shares as to which a person has or Shares voting and/or investment power. Therefore, any restricted stock for which a person has voting power and all share equivalents in the Humana Retirement Savings Plan are included. These footnotes describe whenever an individual Shares voting and/or investment power over the Shares beneficially owned by them.

The number of Shares listed:

 

  (a)

Includes certain Share equivalents held for the benefit of the individuals in the Humana Retirement Savings Plan as of December 31, 2019, over which the employee participant has voting power and investment power. As of December 31, 2019, our Named Executive Officers held 965 of such Share equivalents in the Humana Retirement Savings Plan, while all of our executive officers as a group (13 in number, including our NEOs) held 2,416 of such Share equivalents.

 

  (b)

Includes unvested restricted stock unit awards which are scheduled to vest within 60 days after January 15, 2020, as follows (no performance-based restricted stock units are scheduled to vest during this period):

 

 

Bruce D. Broussard

 

  

 

 

 

 

0

 

 

 

 

 

Brian A. Kane

 

  

 

 

 

 

2,299

 

 

 

 

 

T. Alan Wheatley

 

  

 

 

 

 

1,724

 

 

 

 

 

Timothy S. Huval

 

  

 

 

 

 

1,782

 

 

 

 

 

William K. Fleming

 

  

 

 

 

 

1,724

 

 

 

 

 

All executive officers as a group (13 in number, including our NEOs)

 

  

 

 

 

 

11,976

 

 

 

 

 

Stock Ownership Information    2020 Proxy Statement  |  Humana

 

        35  


Table of Contents
  (c)

Includes Shares which may be acquired by these individuals through the exercise of options, which are exercisable currently or within 60 days after January 15, 2020. As of January 15, 2020, none of our non-employee directors held exercisable options. Exercisable options held by our NEOs and other executive officers as of January 15, 2020, or exercisable within 60 days thereof, were as follows:

 

 

Bruce D. Broussard

 

  

 

 

 

 

78,539

 

 

 

 

 

Brian A. Kane

 

  

 

 

 

 

83,731

 

 

 

 

 

T. Alan Wheatley

 

  

 

 

 

 

17,138

 

 

 

 

 

Timothy S. Huval

 

  

 

 

 

 

17,159

 

 

 

 

 

William K. Fleming

 

  

 

 

 

 

20,486

 

 

 

 

 

All executive officers as a group (13 in number, including our NEOs)

 

  

 

 

 

 

254,837

 

 

 

 

 

  (d)

Does not include stock awards to certain of our directors that have been deferred pursuant to our Deferred Compensation Plan for Non-Employee Directors. These deferred stock awards include the initial award of 7,500 restricted stock units to each of Messrs. McDonald and O’Brien and Ms. Peterson when first elected as a director, which by its terms must be held until the recipient is no longer serving on our Board of Directors. As of January 15, 2020, the Shares deferred were as follows (includes accrued dividend equivalent units on deferred Shares and deferred cash that was invested in the Humana Common Stock Fund):

 

 

Frank J. Bisignano

 

  

 

 

 

 

0

 

 

 

 

 

Frank A. D’Amelio

 

  

 

 

 

 

25,984

 

 

 

 

 

W. Roy Dunbar

 

  

 

 

 

 

21,438

 

 

 

 

 

Wayne A.I. Frederick, M.D.

 

  

 

 

 

 

0

 

 

 

 

 

John W. Garratt

 

  

 

 

 

 

0

 

 

 

 

 

Kurt J. Hilzinger

 

  

 

 

 

 

31,983

 

 

 

 

 

David A. Jones, Jr.

 

  

 

 

 

 

5,987

 

 

 

 

 

Karen W. Katz

 

  

 

 

 

 

0

 

 

 

 

 

William J. McDonald

 

  

 

 

 

 

36,514

 

 

 

 

 

James J. O’Brien

 

  

 

 

 

 

29,662

 

 

 

 

 

Marissa T. Peterson

 

  

 

 

 

 

17,856

 

 

 

 

 

  (e)

Does not include the January 2, 2020 annual stock retainer of 453 restricted stock units granted to each of our directors (other than Mr. Broussard) pursuant to our director compensation program, which restricted stock units are expected to vest in full on December 31, 2020.

  (f)

Does not include the annual stock retainer of 440 restricted stock units granted to Dr. Frederick and Mr. Garratt on February 19, 2020 pursuant to our director compensation program. The restricted stock units represent approximately $165,000 and were determined using the grant date fair market value of our common stock ($375.115). The restricted stock units are expected to vest in full on February 19, 2021, unless service on the Board is less than one year in which case the restricted stock units will be forfeited in their entirety.

 

(2)

As of March 1, 2020, no Shares are pledged by any of our executive officers or directors in accordance with our policy prohibiting pledging or hedging transactions.

 

(3)

Based on 132,105,221 Shares outstanding as of December 31, 2019. Unless indicated, ownership is less than 1% of the class.

 

36       Humana  |  2020 Proxy Statement    Stock Ownership Information


Table of Contents

Compensation Discussion and Analysis

 

This Compensation Discussion and Analysis (CD&A) presents in detail our executive compensation policies and practices, describing each element of compensation and the decision-making process by our Organization & Compensation Committee (“Committee”) that supports it. We encourage you to read this CD&A in conjunction with the compensation tables that follow for additional context to the Committee’s decisions with respect to the 2019 compensation of our Named Executive Officers (“NEOs”), as listed below.

 

2019 Named Executive

Officers

 

Bruce D. Broussard

President and Chief Executive Officer

 

Brian A. Kane

Chief Financial Officer

 

T. Alan Wheatley

Segment President, Retail

 

Timothy S. Huval

Chief Administrative Officer

 

William K. Fleming, PharmD

Segment President, Clinical and Pharmacy Solutions

CD&A Table of Contents

 

LOGO

   Executive Summary     38 
   Summary of Performance     38 
   Key Strategic Accomplishments     39 
   Corporate Responsibility Awards and Recognition     41 
   Compensation Program Highlights     42 

LOGO

   Compensation Framework     43 
   Compensation Program Design Principles     43 
   Key Program Design Components     43 
   Overview of Compensation Elements     44 
   Inputs into Compensation Decisions     45 
   Independent Compensation Consultant     45 
   Stockholder Engagement and Say-on-Pay     46 
   Peer Group     48 

LOGO

   Plan Design and Award Decisions     49 
   Base Salary     49 
   Short-Term and Long-Term Incentive Plan Design     49 
   Associate Incentive Plan     50 
   A Closer Look at AIP Strategic Measures     51 
   2019 AIP Performance Results     51 
   Long-Term Incentives     52 
   Other Benefits and Perquisites     53 

LOGO

   Compensation Risk Management, Policies and Practices     54 
   Clawback Policy     54 
   Hedging and Pledging Policy     54 
   Stock Ownership Guidelines     54 
   Insider Trading Policy     54 
  

Organization & Compensation Committee Report

 

  

 55 

 

 

Compensation Discussion and Analysis    2020 Proxy Statement  |  Humana

 

        37  


Table of Contents

Executive Summary

We continue to strengthen our consumer-centric strategic approach, moving from an insurance company with elements of health to a health company with elements of insurance. Our solid 2019 can be attributed in part to our balance of short-term results with long-term investments in the sustainability of the Company – as evidenced through our strong financial performance, advancements in providing quality healthcare to our members, the substantial progress made within our Bold Goal communities and the strategic partnerships we forged with like-minded companies, as we together enhance our health and well-being initiatives.

Summary of Performance

Our 2019 results demonstrate the value of our products and services, the strength of our brand with consumers and our progress in simplifying the health care experience for our members, providers, broker partners and associates. The Board and the executive management team are committed to maintaining operational excellence, so that the Company is well positioned to achieve operating results despite potential headwinds. Highlights of our financial performance during 2019 are illustrated below.

 

Financial Strength

 

   

Total Stockholder Return

 

 Delivered significant stock price appreciation over the past 5 years

 

 Outperformed S&P 500 and DJ Peer Group during the same period

   

 Returned over $1.3B to stockholders in 2019 through dividends and stock repurchases

 

Adjusted Earnings Per Share

 

 23% increase over 2018, driven by continued strong Medicare Advantage results.

 

LOGO

 

 

LOGO

 

LOGO

 

 

LOGO

 

Additional increase to $0.625 per share in February 2020.

  LOGO

 

38       Humana  |  2020 Proxy Statement    Compensation Discussion and Analysis


Table of Contents

Key Strategic Accomplishments

The continued evolution of healthcare and technology will require an ongoing balance between improving productivity while innovating for long-term sustainability. We are making concerted efforts as an industry leader in this evolution by heavily investing in technology to modernize our infrastructure and improve interoperability, deployment of innovative digital platforms, integrated clinical operations, and a sharp focus on health outcomes of our members. Featured below are some of the strategic advancements we made during 2019.

 

   

Member Experience

 

Member satisfaction is an integral component of our business strategy and overall sustainability, as such, we have processes in place to monitor and review member satisfaction, keeping a concentrated effort on delivering perfect service. Through the execution of certain quality improvement strategies, during 2019 we exceeded our Net Promoter Score (NPSt) goal and achieved a performance increase of 9.4% over 2018.

 

We are improving the experience for our members, providers and other partners through targeted investments and initiatives that bring quality to the forefront of our daily routines and these efforts are helping to advance our NPSt. The decrease in call transfers, increase in digital self-service and the consistency and stability of our IT infrastructure give light to our efforts.

LOGO                   LOGO   LOGO

 

9.4% year-over-year                  

increase in NPSt                   

 

 

 

Individual MA membership growth of 17% (523,200 new members); Group MA membership growth of 6%

(27,500 new members)

 

 

 

6.0 million active service members, retirees
and their families, representing an
increase of 1% over 2018

 

Commitment to Quality

 

Our Medicare Advantage (MA) health plans surpassed our Star-rating goals. Ratings achieved represent a victory for our members in that higher ratings enable us to improve their benefits, such as enhancing clinical programs that encourage positive lifestyle changes.

 

We made progress in our journey of building an omni-channel senior-focused consumer platform with value-based care through a joint venture with Welsh, Carson, Anderson and Stowe (WCAS), which allows us to accelerate our payor-agnostic primary care center expansion - in a capital efficient approach - giving more seniors access to quality primary care built around their unique health needs, especially in geographies that lack access. Together, we expect to open a minimum of 50 payor-agnostic, senior-focused primary care centers over the next three years, beginning in 2020, which will be managed by Partners in Primary Care under its brand.

67%     

 

Individual MA members in         

value-based care relationships         

 

 

5 out of 5

 

Star rating for one of

our Florida contracts

 

 

92%

 

Industry top-tier
MA membership in
4-Star or higher plans.

 

  

262

 

Total primary care
centers; 29 new senior-
focused primary care
centers opened during
2019.

 

 

Compensation Discussion and Analysis    2020 Proxy Statement  |  Humana

 

        39  


Table of Contents
   

Pharmacy Services

  

Our clinical programs have advanced medication adherence and medication reviews for our Medicare Advantage Part D (MAPD) members. By tracking the proportion of days covered, we know when a member needs a reminder to refill a prescription – and we send them an alert.

 

We acquired Enclara Healthcare, one of the nation’s largest hospice pharmacy benefit management organizations, allows us to extend our comprehensive care continuum strategy to cover the pharmacy-related needs associated with hospice care, simplify the mail order pharmacy experience, and advance the technology stack for in-home pharmacy through such areas as enhanced mobile medication management and improved electronic medical record (EMR) connectivity.

 

 

LOGO

 

  

 

LOGO

 

  

 

LOGO

 

MA members with chronic conditions show higher medication adherence rates with value-based care compared to MA fee-for-service members.

 

 

Home Health Capabilities

 

1M    

 

In-home assessments        
completed        

 

  

 

We advanced our transformational home health initiative with Kindred at Home (KAH) and Curo through the implementation of a company-wide EMR and the extrapolation of best practices from our value-based care pilots to over 20,000 home health episodes. In 2020, we aim to provide more care services in the home, including acute care and primary care, so that we may generate meaningful trend benders for use by our health plans in the future, while improving clinical outcomes for our members.

 

 

20,000+

 

Home health episodes

 

  

 

 

LOGO

 

 

 

Phase II

 

Expanding in-home care

services to include acute
care and primary care

 

 

 

Reimagining Care

 

LOGO                     

  

 

 

We are making it easier for our members to interact with us and others in the health care system through leveraging technology to develop a healthcare ecosystem. An important element of our strategy includes establishing partnerships with key organizations. Our multi-partnership approach allows us to minimize risk, move faster and use our capital efficiently.

IBM Watson virtual agent pilot utilizing voice recognition and artificial intelligence (AI) capabilities to perform eligibility and benefits verification and claims status inquiries.

   Strategic partnership with Microsoft Corp. focused on building modern health care solutions for Humana members aimed at improving their health outcomes and making their health care experiences simpler to navigate.   Partnered with Accolade, Inc. to integrate our capabilities to create a differentiated healthcare and benefits experience for individuals and their employers. Together, we will continue to create personalized and simplified member experiences and leverage new opportunities around solution flexibility, service delivery, partner integration and economic value in healthcare.
    

Joint partnership with EPIC to integrate patient information into provider’s EMR at point of care to improve clinical accuracy and reduce administrative burden.

 

 

40       Humana  |  2020 Proxy Statement    Compensation Discussion and Analysis


Table of Contents

Corporate Responsibility Awards and Recognition

We are pleased to have received recognition for our 2019 corporate responsibility efforts and we appreciate the acknowledgement of our commitment to inspiring health and well-being. Highlighted below are just a few of our valued achievements, however a complete list of awards and recognition is available on our website at www.humana.com – from there click “Corporate Responsibility” and then click “See Our Awards.”

 

 

LOGO

 

  LOGO   LOGO   LOGO   LOGO
     

JUST Capital and Forbes Just 100:

“America’s Best Corporate Citizens”

 

Humana ranked No. 1 out of health care providers on the JUST Capital list for its treatment of customers.

 

Humana ranked No. 4 among JUST Capital Companies Supporting

Healthy Communities and Families

 

Humana ranked No. 1 as JUST Capital Top Company for Workers by Industry

 

 

 

 

LOGO

 

 

LOGO

 

Humana received an A- from CDP – improving from a B grade in 2018 – for the depth and comprehensiveness of our disclosure.

 

 

Humana received 2019 “Trendsetter” designation from CPA-Zicklin for Corporate Political Disclosure and Accountability.

  LOGO   Humana Pharmacy won the 2019 Surescripts White Coat Award.  

LOGO

 

No. 1 in customer service among health insurance companies

 

   

LOGO

 

Perfect score in Human Rights Campaign Foundation’s “Best Places to Work for LGBTQ Equality”

 

 

 

LOGO

 

 

Humana qualified for inclusion in the FTSE4Good Index. The FTSE4Good Index Series is designed to measure the performance of companies demonstrating strong Environmental, Social and Governance (ESG) practices.

For more information, please visit:

https://www.ftserussell.com/products/indices/ftse4good

 

Compensation Discussion and Analysis    2020 Proxy Statement  |  Humana

 

        41  


Table of Contents

Compensation Program Highlights

The Committee is dedicated to maintaining a robust, structured and balanced compensation program that is designed to motivate and reward the Company’s executives to drive the Company’s performance. Our maturing compensation program is a testament to the Committee’s thoughtful consideration and progressive approach to evolve and align with market best practices and stockholders’ interests. The chart below identifies certain elements of our compensation program.

 

 

PROGRAM HIGHLIGHTS

 

   

 

    

  

 

Incentive Plans. Our incentive plans are appropriately split between short-term incentive (STI) measures and long-term incentive (LTI) measures to balance short-term decisions with long-term stockholder value creation.

 

   

 

    

  

 

Equity Awards. We offer our Executive Officers a combination of incentive stock options (ISO), non-qualified stock options (NQ) and both time-based and performance-based restricted stock units (RSU) to align their interests with the creation of long-term stockholder value.

 

   

 

    

  

 

Vesting Periods. We offer time-based equity awards under which vesting occurs annually in one-third increments over a period of three years, and performance-based equity awards which vest in full on the third anniversary of the grant date – based on achievement of performance measures.

 

   

 

    

  

 

Performance Measures. For our executive officers, at least 50% of their LTI awards are performance-based. Performance is measured against the Company’s three-year aggregated return on invested capital (ROIC) with a total stockholder return modifier (rTSR) relative to the Company’s peer group over the same period.

 

   

 

    

  

 

Stock Ownership Guidelines. We require our CEO, Executive Officers and Senior Vice Presidents to maintain minimum stock ownership levels (6x, 3x and 1x of base salary, respectively). These requirements illustrate our belief in aligning the interests of our executives with the interests of our stockholders.

 

   

 

    

  

 

Market-based Compensation. We perform on-going market compensation analysis to ensure that the total compensation packages offered to our executives are in a competitive range.

 

   

 

    

  

 

Peer Group. We leverage a robust peer group comprised of companies within the managed care industry, health care services and facilities industry, and financial and other insurance related industries to benchmark and assess our compensation programs and practices.

 

   

 

    

  

 

Change in Control and Executive Severance Policies. We have a company-wide Severance Policy and Change in Control Policy, applicable to the CEO and other Executive Officers with restrictive covenants that align with the applicable severance period for any benefits.

 

   

 

    

  

 

Clawback Policy. We administer a clawback policy that includes all incentive-based compensation.

 

 

42       Humana  |  2020 Proxy Statement    Compensation Discussion and Analysis


Table of Contents

Compensation Framework

Compensation Program Design Principles

Our executive compensation programs support our philosophy of attracting, retaining and motivating leaders that align with and will help us deliver on our strategy of creating an integrated care-delivery model that will generate strong operating results and long-term stockholder value. We design our executive compensation programs to challenge participants as well as reward them for superior performance for our Company and our stockholders. We believe that our compensation program must include three design principles:

 

 

LOGO

Key Program Design Components

Our robust and structured compensation program reflects the Committee’s belief that strong corporate governance is imperative for prudent compensation decision-making. Below are key elements of our compensation programs. We also identify certain pay practices that are not followed because we believe they do not serve the long-term interest of our stockholders.

 

WHAT WE DO

       WHAT WE DON’T DO
  Design incentive plans with the majority of NEO pay at risk      ×   No stock option repricing without stockholder approval
  Maintain a Clawback Policy that includes all incentive-based compensation      ×   No single trigger vesting of equity or cash severance payments upon change in control
  Include double-trigger provisions under our Change in Control Policy and equity agreements applicable to our NEOs      ×   No hedging or pledging of Humana securities by associates (including executive officers and directors)
  Require minimum stock ownership levels for senior leadership      ×   No tax gross-ups for our NEOs
  Ongoing commitment to stockholder engagement      ×   No excessive perquisites for senior leaders; all perquisites require specific business rationale
  Conduct an annual compensation risk assessment      ×   No positive discretion for incentive-based awards
  Utilize an independent compensation consultant hired and overseen by the Committee      ×   No dividends or dividend equivalents on unearned PSUs or RSUs
       ×   No employment contracts with CEO, NEOs or other senior leaders
                

 

Compensation Discussion and Analysis    2020 Proxy Statement  |  Humana

 

        43  


Table of Contents

Overview of Compensation Elements

The material components of our executive compensation programs are: (i) base salary; (ii) short-term cash incentives; and (iii) long-term equity incentives. We believe that having a combination of pay elements motivates and challenges our executives to achieve positive results for our Company and our stockholders. Each element of compensation is summarized as follows:

 

Fixed

Compensation

   Base Salary    Cash      Market competitive fixed compensation, reflecting executive’s scope of
   responsibility

 

  Annually reviewed for market alignment, with adjustments as appropriate

At Risk Compensation    Short-Term
Incentives
   Cash   

  Cash-based incentive compensation to reward performance for achievement of short-term business objectives

 

  Measures aim to optimize the level of year-over-year profitability while balancing the short-term and long-term success of the organization

   Long-Term
Incentives
   Humana Equity   

  Promotes retention of our executive talent

 

  Motivates executives to optimize the long-term success of the organization

 

  Mitigates excessive risk taking by encouraging executives to act in the long-term interest of the organization

 

LOGO

 

44       Humana  |  2020 Proxy Statement    Compensation Discussion and Analysis


Table of Contents

Inputs into Compensation Decisions

For 2019, the Committee received input from a number of sources and reference points to guide its design of the Company’s executive compensation programs and individual pay decisions. These various perspectives allow the Committee to have visibility into our peer companies’ practices, investor viewpoints, changes in external market practices and each executive’s individual performance, as part of its review of compensation. The Committee regularly reviews input and data received from its independent compensation consultant, our stockholders, external market practice surveys and individual performance assessments to make informed compensation decisions for our NEOs. In addition, the Committee reviews tally sheet information that provides a comprehensive look at total compensation for each of our NEO’s. The chart below further describes the primary sources contributing to the Committee’s decision-making process.

 

 

LOGO

Independent Compensation Consultant

For 2019, the independent compensation consultant for the Committee was Willis Towers Watson, or WTW, and a representative of WTW attended all of the regularly scheduled Committee meetings in 2019, including, when invited, executive sessions. In accordance with the Committee’s Charter, the Committee has the sole authority to determine the compensation for, and to terminate the services of, the independent compensation consultant.

The Committee considered certain factors to determine whether WTW’s service as a compensation consultant raised a conflict of interest, including, among other things:

 

   

Whether the firm provided other services to the Company;

 

   

The amount of fees received by the firm from the Company, as a percentage of such firm’s total revenue;

 

   

The firm’s policies and procedures that are designed to prevent conflicts of interest;

 

   

Whether the firm’s representatives providing services to the Committee have any business or personal relationship with a member of the Committee;

 

   

Whether the firm’s representatives providing services to the Committee own Company stock; and

 

   

Whether the firm’s representatives providing services to the Committee, or the firm itself, have any business or personal relationship with any of our executive officers.

In 2019, we paid WTW approximately $283,900 for executive compensation advisory support services provided to the Committee. In addition, the Committee considered certain advisory services provided by WTW, including corporate risk and broking, and investment risk and reinsurance, for which services we paid approximately $1,662,500. The Committee also considered benefits delivery and administration services, relating to certain fees and commissions, for which we paid approximately $112.6 million, collectively, through the WTW individual marketplace Extend Health and TRANZACT, subsequent to WTW’s acquisition of TRANZACT on August 1, 2019.

 

Compensation Discussion and Analysis    2020 Proxy Statement  |  Humana

 

        45  


Table of Contents

After considering all of the above factors, the Committee determined that the service provided to the Committee as an independent compensation consultant of WTW in 2019 did not raise any conflict of interest. However, the Committee determined that the acquisition of TRANZACT by WTW creates an appearance of a conflict of interest, and therefore the Committee determined to terminate its relationship with WTW and subsequently conduct a “request for proposal” process to hire a new independent compensation consultant firm beginning in February 2020.

Stockholder Engagement and Say-on-Pay

The Board, together with its committees and management team, routinely review the feedback received from our stockholders – through formal stockholder engagements, stockholder voting results and routine communication during the year – creating a feedback loop of transparency into our compensation and governance practices. The continuous dialog supplements the Board’s customary review of our governance and compensation programs, policies and/or practices as it considers areas for enhancement or improvement. The illustration below further details our stockholder engagement and feedback consideration methods:

 

LOGO

 

   

Fall 2019 Outreach

 

In the fall of 2019 we solicited engagements with our stockholders, representing approximately 67% of our outstanding Shares as of July 31, 2019, to discuss areas of interest in various topics of governance and oversight.

   20

Invited Stockholders

 
Members of the Board and the executive management team made themselves available to attend all meetings upon request. In response, the Chairman of the Board, the Chair of the Organization & Compensation Committee and/or the Chair of the Nominating & Corporate Governance Committee, each participated in one or more meetings as requested by certain of our stockholders.    67%

Outstanding Stock

 
Eleven engagements were held in response to our outreach, representing approximately 31% of our outstanding Shares as of July 31, 2019, through which we received valuable feedback regarding the Company’s current practices. The feedback, as described in greater detail below, was overwhelmingly positive regarding our programs and governance. We believe the lower level of engagement interest from our stockholders represents our successful effort into on-going communications with stockholders throughout the year on matters concerning the Company generally or the Board’s oversight.    11

Engagements Held

 
The Board believes that having on-going communication with the Company’s stockholders provides valuable insight to ensure the Board is acting in the best interests of Humana and its stockholders.    31%

Outstanding Stock

 

46       Humana  |  2020 Proxy Statement    Compensation Discussion and Analysis


Table of Contents

 

What We Heard During Our 2019 Stockholder Outreach

 

•  Stockholders commended our skills-based approach to Board composition and refreshment and our deliberate process for director succession planning.

 

•  Stockholders appreciated the Committee’s return to granting performance-based long-term incentive awards, including ROIC as the primary measure with a rTSR modifier, and were generally supportive of our compensation programs and overall design.

 

•  Stockholders appreciated the opportunity to engage with members of our Board, and hearing directly from them regarding our Board’s oversight of the Company’s strategy, compensation practices, director search practices, and corporate governance matters.

 

•  Stockholders were interested in the culture of our Board and how directors influence management’s execution of our Company’s values and risk management practices.

 

•  Stockholders were generally pleased with our approach of aligning environmental and social initiatives – Bold Goal and Corporate Social Responsibility (CSR) – to the Company’s strategy rather than engaging in independent “check the box” exercises. Refer to the section entitled, Corporate Governance - Board Commitment to Corporate Social Responsibility in this proxy statement for additional information regarding CSR.

 

•  Stockholders offered additional factors for Committee consideration when evaluating the Company’s peer group.

 

 

 

What We Did In Response to What We Heard

 

As part of our Board’s commitment to engagement with our stockholders, we evaluate and respond to the views voiced by our stockholders on a regular basis. This dialogue with our stockholders has led to the reaffirmation of, or enhancements to, certain of our corporate governance, ESG, and executive compensation practices, which our Board believes are in the best interest of our Company and our stockholders, including:

 

•  Ongoing reviews are performed by the Board in assessment of composition and refreshment.

 

•  Reaffirming our commitment to pay-for-performance by granting performance-based long-term incentive awards and avoiding exceptions to performance-based compensation elements.

 

•  Offering attendance by Board and management team members during the engagement process to connect directly with our stockholders.

 

•  Acting in accordance with its adoption of the “Rooney Rule,” during 2019 our Nominating & Corporate Governance Committee included, and required third-party search firms that it engaged to include, candidates with diversity of race, ethnicity and gender in the pool considered by the Nominating & Corporate Governance Committee and/or the Board for nomination to the Board.

 

•  Providing additional disclosure in our proxy statement regarding our ESG practices.

 

•  Committing to a continued multi-factor peer group review and analysis process performed by the Committee.

 

 

Additionally, our 2019 say-on-pay proposal returned to a normalized high level of approval
with 94% of our stockholders voting in favor of the Company’s compensation strategy. We are
pleased with the turnaround in say-on-pay support since the uncharacteristically low approval
we received in 2018, and largely credit the positive return to having listened and responded to
the concerns of our stockholders. We believe that the result of our 2019 say-on-pay proposal
indicates that stockholders are generally supportive of our executive compensation program,
and therefore the Committee made no material changes to the executive compensation
program as a result of this vote.
  LOGO

 

Compensation Discussion and Analysis    2020 Proxy Statement  |  Humana

 

        47  


Table of Contents

Peer Group

Our peer group is used as a reference point in making compensation decisions, such as developing base salary ranges, developing short-term and long-term incentive award ranges, determining competitiveness of the total compensation package for our NEO’s and comparing our performance in order to validate if our compensation programs are informed by market practices.

The Committee uses the framework below, in consultation with its independent compensation consultant, to filter and select a broad group of potential peers. This framework yields multiple perspectives that enrich our understanding of competitive executive pay practices while also ensuring that our peer group is comprised of companies with whom we may compete for talent and whose revenues, market capitalization, and business focus are similar to our own.

 

LOGO

For 2019 compensation decisions, based on its review along with advice from its independent compensation consultant, the Committee reapproved the following peer group:

 

 

Managed Care Peers

      

 

Healthcare Services &

Facilities

 

     

 

Financial & Insurance

   Aetna1

    

   AmerisourceBergen Corporation

   

   Aflac, Inc.

   Anthem

    

   CVS Health Corporation

   

   The Allstate Corporation

   Centene Corporation

    

   Cardinal Health, Inc.

   

   MetLife, Inc.

   Cigna Corporation

    

   DaVita Healthcare Partners

   

   The Progressive Corporation

   UnitedHealth Group Inc.

    

   Express Scripts Holding Company2

   

   Prudential Financial, Inc.

    

   HCA Healthcare, Inc.

   

   The Travelers Companies, Inc.

    

   Laboratory Corporation of America Holdings, Inc.

   

 

 

1 On November 28, 2018 CVS Health, Inc. completed its acquisition of Aetna Inc.

2 On December 20, 2018 Cigna Corporation completed its acquisition of Express Scripts Holding Company.

Prior to the above acquisitions, Aetna and Express Scripts were included in the peer group approved by the Committee for the 2019 analysis period.

 

 

48       Humana  |  2020 Proxy Statement    Compensation Discussion and Analysis


Table of Contents

Humana’s 2019 Peer Group Financial Comparison

 

 

LOGO

The above illustration represents Humana’s position relative to the Revenue, Market Cap and Net Income position of our peer group.

Plan Design and Award Decisions

Base Salary

On an annual basis the Committee, in consultation with its independent compensation consultant, reviews the market data and current base salaries for our executives, considering adjustments as deemed appropriate. Salary increases, if any, must receive advance approval from the Committee. While the Committee approved no increases in 2018, the 2019 evaluation revealed that base salary increases were necessary for our NEOs in order to maintain competitive market pay levels. In addition to market data, 2019 determinations took into account demonstration of enterprise value along with certain expansions of responsibilities. The table below represents base salaries for our CEO and other NEOs as of March 1, 2019, when base salary increases went into effect, compared to 2018.

 

Named Executive Officer

   2019 Base Salary      2018 Base Salary  

 

Bruce D. Broussard

 

  

 

$

 

 

1,349,465

 

 

 

 

  

 

$

 

 

1,273,080

 

 

 

 

 

Brian A. Kane

 

  

 

$

 

 

750,000

 

 

 

 

  

 

$

 

 

700,000

 

 

 

 

 

T. Alan Wheatley

 

  

 

$

 

 

625,000

 

 

 

 

  

 

$

 

 

475,000

 

 

 

 

 

Timothy S. Huval

 

  

 

$

 

 

650,000

 

 

 

 

  

 

$

 

 

590,921

 

 

 

 

 

William K. Fleming

 

  

 

$

 

 

550,000

 

 

 

 

  

 

$

 

 

475,000

 

 

 

 

Short-Term and Long-Term Incentive Plan Design

For 2019 compensation decisions, the Committee, in consultation with its independent compensation consultant, evaluated our short-term incentive (STI) and long-term incentive (LTI) plan design to ensure alignment with our strategy, sustainability, external market practices and an appropriate balance of risk and reward to retain, motivate and engage our executives. The evaluation included consideration of the following elements:

 

   

Alignment to our long-term strategic plan and correlation to stockholder value creation;

 

   

Measures to include the holistic performance of the organization;

 

   

Measures in our STI and LTI plans that provide a balance between short-term results and long-term stockholder value creation;

 

   

Practices used by top performing companies in our peer group;

 

   

Feedback from our stockholders; and

 

   

Establishing targets that demonstrate year-over-year improvement, with over performance resulting in additional payout opportunity.

 

Compensation Discussion and Analysis    2020 Proxy Statement  |  Humana

 

        49  


Table of Contents

Associate Incentive Plan

The Associate Incentive Plan (AIP) is a discretionary, annual cash-based incentive plan that recognizes and rewards all of our full-time and part-time associates, including our executives, who contribute to our Company’s overall performance. Associates who participate in other Company incentive plans, such as Sales Incentive/Commission Plans and Targeted Incentive Plans, are not dually eligible to participate in the AIP – associates may not participate in more than one incentive plan. For our executives, the AIP is administered through the Executive Incentive Compensation Plan, as filed with the SEC on annual and quarterly reports on Form 10-K and Form 10-Q, respectively, and can be accessed on our website. From the www.humana.com website, click on “Investor Relations,” then click on “SEC Filings and Financial Reports,” and then click on “SEC Filings.”

On an annual basis the Committee, in consultation with its independent compensation consultant, reviews and approves the AIP as outlined below:

 

 

LOGO

The Committee selected the following performance measures for the 2019 AIP, aligning our executives to the key financial and operational objectives of our overall strategy:

 

 

LOGO

 

50       Humana  |  2020 Proxy Statement    Compensation Discussion and Analysis


Table of Contents

A Closer Look at AIP Strategic Measures

The Company has a set of strategic initiatives that, if achieved, will improve member health, improve relationships with our providers and position us for long-term sustainable growth. The Committee believes that having strategic measures embedded within the AIP targets is critical to help drive organizational focus and prioritization in advancing our long-term strategy. The 2019 strategic measures directly align to our integrated care approach. As discussed within the section entitled “Key Strategic Accomplishments” of this CD&A, we saw encouraging progress in 2019 related to each strategic measure which has a positive, direct impact on our members.

 

 

LOGO

 

  Build out applications that leverage platform capability to provide additional analytics and inform Care Delivery Model.

 

  Expand use of Population Health platform for additional analytics driven insights.

 

  By meeting the goals set for expanding our digital platform, we have increased our ability to provide a holistic view of member data to key stakeholders.

  

  Define and develop enterprise-wide care models, integrated across behavioral health, physical health and pharmacy.

 

  We have created eight care cohort models that foster an integrated, collaborative environment to care that did not exist previously, and are now able to use advanced analytics to help determine how certain conditions are best cared for.

  

  Grow Humana MA membership across business lines and care delivery channels.

 

  Increase the number of primary care centers to serve more of our members.

 

  Through an expanded clinic footprint we now have more opportunity to market plans and increase strategic partnerships, creating competitive advantages across the footprint.

  

  Embed clinical resources in Kindred at Home operations to address social determinants needs.

 

  Integrate clinical information systems to improve timeliness of care.

 

  Steps taken during 2019 to better integrate care across the Kindred at Home clinician team and Humana is driving improved outcomes for members and cost-saving efficiencies at both organizations.

2019 AIP Performance Results

In consideration of 2019 AIP payout results, the Committee established a funding gate for our executive officers, whereby no AIP would be paid unless the Company achieves threshold Adjusted EPS performance. In addition, the Committee retains the ability to exercise negative (but not positive) judgement with respect to the payout results. For 2019, based on our performance, the Committee approved a funding rate of 154.6% of target for the CEO and other NEOs as follows:

 

Measure

  

Weighting

  

Minimum

(50%)

 

  

Target

(100%)

 

  

Maximum

(200%)

 

  

Results

 

  

Funding Rate

  

Total Payout  

 

Adjusted EPS

  

50%

  

$15.96

  

$17.25

  

$18.54

  

$17.87

  

148.1%

  

74.0%

 

Net Promoter Score (NPSt)

  

20%

  

50%

  

100%

  

200%

  

140.7%

  

140.7%

  

28.1%

 

Membership Growth

  

20%

  

100,000

  

200,000

  

300,000

  

523,200

  

200.0%

  

40.0%

 

Strategic Measures

(See “A Closer Look

at Strategic Measures”)

  

10%

  

0%

  

10%

  

20%

  

125.0%

  

125.0%

  

12.5%

                             

Total Payout

  

154.6%

 

Compensation Discussion and Analysis    2020 Proxy Statement  |  Humana

 

        51  


Table of Contents

Named Executive Officer

   2019 Earnings     

 

2019 Target
Opportunity

 

     Payout Rate      Actual Payout  

 

Bruce D. Broussard

 

  

 

 

 

 

$1,335,069

 

 

 

 

  

 

 

175

 

 

     

 

$

 

 

3,612,030

 

 

 

 

 

Brian A. Kane

 

  

 

 

 

 

$740,577

 

 

 

 

  

 

 

 

 

 

 

100

 

 

 

 

     

 

$

 

 

1,144,933

 

 

 

 

 

T. Alan Wheatley

 

  

 

 

 

 

$596,731

 

 

 

 

  

 

 

 

 

100

 

 

 

  

 

 

154.6%

 

 

 

  

 

$

 

 

922,546

 

 

 

 

 

 

Timothy S. Huval

  

 

 

 

 

 

 

$638,866

 

 

 

 

 

  

 

 

 

 

100

 

 

 

     

 

$

 

 

987,687

 

 

 

 

 

William K. Fleming

 

  

 

 

 

 

$535,866

 

 

 

 

  

 

 

 

 

100

 

 

 

           

 

$

 

 

828,448

 

 

 

 

Long-Term Incentives

Long-Term Incentives provide a vital link between the long-term results achieved for our stockholders and the financial rewards provided to our NEOs. In February 2019, our Committee reaffirmed its commitment to performance-based compensation by approving the following mix of long-term incentive awards for our NEOs.

 

 

LOGO

The Committee believes that the combination of award ratio, performance measures and the inclusion of the TSR modifier:

 

   

Aligns executives with the interests of our stockholders;

 

   

Allows executives to focus on measures they have the ability to influence while also satisfying stockholder expectations of using a relative measure;

 

   

Ensures that our long-term incentive compensation program is not overly dependent upon rTSR as an independent measure; and

 

   

Adjusts to general economic conditions that would impact all companies in our peer group.

The Committee, in consultation with its independent compensation consultant, determined the 2019 aggregate amounts and terms of equity compensation awards for each NEO. The Committee performed a review of stock programs and competitive practices of peer companies, as well as the outstanding equity information for each executive officer using tally sheets to examine the value of prior compensation decisions. The 2019 approved equity awards for the CEO and other NEOs are as follows:

 

Named Executive Officer

 

  

 

PSUs

50%

 

    

 

RSUs

25%

 

    

 

Options

25%

 

    

 

Total 2019
LTI Award

 

 

 

Bruce D. Broussard

 

  

 

$

 

 

5,625,000

 

 

 

 

  

 

$

 

 

2,812,500

 

 

 

 

  

 

$

 

 

2,812,500

 

 

 

 

  

 

$

 

 

11,250,000

 

 

 

 

 

Brian A. Kane

 

  

 

$

 

 

1,625,000

 

 

 

 

  

 

$

 

 

812,500

 

 

 

 

  

 

$

 

 

812,500

 

 

 

 

  

 

$

 

 

3,250,000

 

 

 

 

 

T. Alan Wheatley

 

  

 

$

 

 

1,100,000

 

 

 

 

  

 

$

 

 

550,000

 

 

 

 

  

 

$

 

 

550,000

 

 

 

 

  

 

$

 

 

2,200,000

 

 

 

 

 

Timothy S. Huval

 

  

 

$

 

 

850,000

 

 

 

 

  

 

$

 

 

425,000

 

 

 

 

  

 

$

 

 

425,000

 

 

 

 

  

 

$

 

 

1,700,000

 

 

 

 

 

William K. Fleming

 

  

 

$

 

 

1,000,000

 

 

 

 

  

 

$

 

 

500,000

 

 

 

 

  

 

$

 

 

500,000

 

 

 

 

  

 

$

 

 

2,000,000

 

 

 

 

 

52       Humana  |  2020 Proxy Statement    Compensation Discussion and Analysis


Table of Contents

Other Benefits and Perquisites

We operate in a highly competitive, complex and consolidating industry and offer certain benefits that we believe are critical to attract and retain talent. In general, our NEO’s are eligible for the same benefits as our associate population. In addition, we offer a limited number of perquisites to attract and retain our executives but we do not provide any tax reimbursements or “gross-ups” for these benefits.

 

     

      Health and Retirement Benefits

 

         

                

 

            

                                                                          
 
 

•  Our NEO’s participate in the broad-based employee health and retirement programs under the same terms and conditions as other associates.

   

 
 
 

•  Such benefits include: medical, dental, vision, disability, wellness, life and AD&D insurance, as well as 401(k) retirement plan, supplemental 401(k) plan and the option to participate in our Nonqualified Deferred Compensation Plan.

 

   

 
            
     

      Perquisites

 

         

                

 

            

                                                                          
 
 

•  We provide limited perquisites to our NEOs, which are aligned with market practices and are reviewed on a regular basis.

   

 
 
 

•  Perquisites may include limited personal use of the Company aircraft, an annual physical, a matching charitable gift program, a supplemental life insurance benefit, financial planning assistance and, if applicable, relocation assistance.

 

   

 
            
     

      Executive Severance and Change in Control

 

         

                

 

            

                                                                          
 
 

•  The Severance Policy provides for benefits in the event employment is terminated without cause, for a defined severance period during which certain restrictive covenants would apply (e.g., non-compete, non-solicit and non-disparagement covenants).

 

-  CEO: 24 months base salary and target bonus, with two year restrictive covenants;

 

-  Other NEOs: 18 months base salary only, with 18 month restrictive covenants.

   

   

   

 
 
 

•  The Change in Control Policy (CIC Policy) provides for benefits in the event that employment is terminated under certain circumstances in connection with a Change in Control transaction, with restrictive covenants binding the executive during the applicable severance period.

 

-  CEO: lump sum payment of 30 months base salary and target bonus, with 30 month restrictive covenants;

 

-  Other NEOs: lump sum payment of 24 months base salary and target bonus, with 24 month restrictive covenants.

 

   

   

   

 
       

 

Compensation Discussion and Analysis    2020 Proxy Statement  |  Humana

 

        53  


Table of Contents

Compensation Risk Management, Policies and Practices

We review our compensation programs to ensure appropriate governance and risk management practices. We believe that our policies and practices align with evolving best practices, while ensuring appropriate balance of risk and reward. Certain key risk management policies that pertain to executive compensation are as follows:

 

     

      Clawback Policy

 

         

                

 

            

                                                                          
 
 

•  Our Board has adopted a Compensation Recoupment Policy that covers each of our Executive Officers (including our Named Executive Officers) and applies to incentive compensation, including any cash incentive or equity award paid or awarded during the period in which he or she is designated as an Executive Officer. For all Executive Officers, the Company may recoup such incentive compensation in the event of: (a) a material restatement of the Company’s financial statements; or (b) certain specified conduct that in the discretion of the Committee, is likely to cause or has caused material financial, operational or reputational harm to the Company.

 

   

 
            
     

      Hedging and Pledging Policy

 

         

                

 

            

                                                                          
 
 

•  Our Board has adopted a policy prohibiting all employees, including NEOs and Directors, from engaging in short-term, speculative transactions in Company securities and therefore prohibits any hedging or pledging of Company securities, including puts, calls or other derivative securities.

 

   

 
            
     

      Stock Ownership Guidelines

 

         

                

 

            

                                                                          
 
 

•  Our stock ownership guidelines link a significant amount of our executives’ current and potential net worth to the Company’s success in alignment with the interests of our stockholders.

   

 
 
 

•  Ownership guidelines are expressed as a multiple of base salary and must be held until the relevant multiple is reached and maintained thereafter, as follows:

 

-  Chief Executive Officer: 6x base salary

 

-  CEO Direct Reports (including all NEOs): 3x base salary

 

-  Senior Vice Presidents: 1x base salary

 

   

   

   

   

 
            
     

      Insider Trading Policy

 

         

                

 

            

                                                                          
 
 

•  Our Board has adopted a policy prohibiting all employees, including NEOs and Directors, from “tipping” or trading on inside information.

   

 
 
 

•  The policy expressly prohibits purchasing or selling any securities of the Company (including, without limitation, a stock plan transaction such as an option exercise, transfer in the Company’s Retirement and Savings Plan, gift, loan, pledge or hedge, contribution to a trust, or any other sale or transfer, regardless of how the securities are held), while aware of material, non-public information concerning the Company.

 

   

 

 

54       Humana  |  2020 Proxy Statement    Compensation Discussion and Analysis


Table of Contents

Organization & Compensation Committee Report

 

The Organization & Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis for the year ended December 31, 2019 with management. In reliance on these reviews and discussions, the Organization & Compensation Committee recommended to the Company’s Board of Directors, and the Board of Directors has approved, the inclusion of this Compensation Discussion and Analysis in this proxy statement.

All members of the Organization & Compensation Committee of the Company whose names follow submit the foregoing report:

ORGANIZATION & COMPENSATION COMMITTEE

W. Roy Dunbar, Chairman

Frank J. Bisignano

David A. Jones, Jr.

 

*

We have included an Adjusted EPS financial measure (not in accordance with Generally Accepted Accounting Principles (GAAP)) in our proxy statement as we believe that this measure, when presented in conjunction with the comparable GAAP measure, is useful to both management and our investors in analyzing our ongoing business and operating performance. The following excluded items are not recurring parts of our operating plan: (i) put/call valuation adjustments of approximately $506 million associated with the Company’s 40% minority interest in Kindred at Home (Kindred), with GAAP measures affected including consolidated pretax and EPS; (ii) amortization expense for identifiable intangibles of approximately $70 million pretax, with GAAP measures affected including consolidated pretax income, EPS, and segment earnings (for respective amortization expense for the Retail and Group and Specialty segments); and (iii) expense associated with involuntary workforce reduction of approximately $47 million pretax, with GAAP measures affected, including consolidated pretax income, EPS and consolidated operating cost ratio. Consequently, we use this non-GAAP financial measure as an indicator of business performance, as well as for operational planning and decision making purposes. Non-GAAP financial measures should be considered in addition to, but not as a substitute for, or superior to, financial measures prepared in accordance with GAAP. To reconcile the non-GAAP to the GAAP amount each of the following should each be considered, to arrive at GAAP EPS of $17.87:(i) put/call valuation adjustments associated with the 40% minority interest in Kindred of $2.89; (ii) amortization associated with identifiable intangibles of $0.40; and (iii) expense associated with involuntary workforce reduction of approximately $47 million pretax, with GAAP measures affected, including consolidated pretax income, EPS and consolidated operating cost ratio $0.26. We encourage each stockholder to read the full financial analysis for year ended December 31, 2019 contained in our Annual Report on Form 10-K, filed with the SEC on February 20, 2020.

 

Organization & Compensation Committee Report    2020 Proxy Statement  |  Humana

 

        55  


Table of Contents

Executive Compensation

 

 

Summary Compensation Table

The following Summary Compensation Table shows the compensation earned for the time period served as an executive officer during the last three fiscal years by (i) Bruce D. Broussard, our President and Chief Executive Officer, (ii) Brian A. Kane, our Chief Financial Officer, and (iii) each of our three other highest compensated executive officers serving at December 31, 2019 (we collectively refer to these officers in this proxy statement as our “Named Executive Officers”).

 

Name and Principal

Position

  Year    

Salary

($)

   

 Bonus 

($)

 

Stock

Awards

($)(1)(3)

   

Option

Awards

($)(2)

   

Non-Equity

Incentive

Plan

 Compensation 

($)(3)

 

Change in

Pension Value

and

Nonqualified

Deferred

 Compensation 

Earnings

($)

 

All

Other

 Compensation 

($)(4)

 

Total

($)

 

 

Bruce D. Broussard,
President and Chief
Executive Officer

 

 

 

 

2019

 

 

 

 

 

 

1,335,069

 

 

 

 

—  

 

 

 

 

8,479,360

 

 

 

 

 

 

2,814,192

 

 

 

 

3,612,030

 

 

—  

 

 

485,804

 

 

 

 

16,726,455

 

 

 

 

 

 

2018

 

 

 

 

 

 

1,273,080

 

 

 

 

—  

 

 

 

 

8,610,778

 

 

 

 

 

 

2,740,664

 

 

 

 

3,232,669

 

 

—  

 

 

455,326

 

 

 

 

16,312,517

 

 

 

 

 

 

2017

 

 

 

 

 

 

1,272,367

 

 

 

 

—  

 

 

 

 

10,196,821

 

 

 

 

 

 

5,279,241

 

 

 

 

2,671,970

 

 

—  

 

 

348,124

 

 

 

 

19,768,525

 

 

 

Brian A. Kane,
Chief Financial Officer

 

 

 

 

2019

 

 

 

 

 

 

740,577

 

 

 

 

—  

 

 

 

 

2,449,601

 

 

 

 

 

 

813,009

 

 

 

 

1,144,933

 

 

—  

 

 

233,004

 

 

 

 

5,381,124

 

 

 

 

 

 

2018

 

 

 

 

 

 

700,000

 

 

 

 

—  

 

 

 

 

2,348,490

 

 

 

 

 

 

747,426

 

 

 

 

1,015,700

 

 

—  

 

 

193,409

 

 

 

 

5,005,025

 

 

 

 

 

 

2017

 

 

 

 

 

 

698,779

 

 

 

 

—  

 

 

 

 

2,367,097

 

 

 

 

 

 

1,494,046

 

 

 

 

   978,291

 

 

—  

 

 

120,261

 

 

 

 

5,658,476

 

 

 

T. Alan Wheatley,
Segment President, Retail

 

 

 

 

2019

 

 

 

 

 

 

596,731

 

 

 

 

—  

 

 

 

 

1,658,238

 

 

 

 

 

 

542,620

 

 

 

 

   922,546

 

 

—  

 

 

121,454