Humana serves the health care insurance needs of more than 6.2 million people in the United States, with a heavy concentration in Florida, Texas and Illinois. Humana offers a wealth of different health insurance options, from PPOs to HMOs to Medicare supplement insurance, and is the managed health care provider to the U.S. Department of Defense.
Formation
Humana started as an investment of four friends in a nursing home in Louisville, Kentucky, in 1961. Wendell Cherry and David Jones, the co-founders of Heritage House, soon found themselves buying and building nursing homes. Their rapid climb found them owning and operating nursing homes in three states by 1968, helped partly by the formation and expansion of Medicare insurance benefits to senior citizens. The company eventually became a publicly traded company called Extendicare, Inc., and at one time was the largest nursing home company in the United States.
Hospitals
Extendicare purchased its first hospital in 1968 and quickly found that its model for success worked in that business as well. By 1972 Extendicare owned 10 hospitals and found there was more long-term gain to be had in the hospital business. By the end of 1972, Extendicare sold its interest in the nursing homes that allowed it to first achieve success.
The Humana Name
In January 1974, Extendicare became Humana Inc., with an exclusive focus on hospitals. Humana pioneered advances in the management of hospitals, including the refusal to overpay for purchasing hospitals and to manage hospitals it did not own, along with cost-control measures. At the time it was remarkable for the industry, but it eventually drew complaints from doctors about excessive control of costs. But it did make Humana highly profitable. In 1978 it was the No. 3 hospital chain in the United States, and it purchased the No. 2 chain, American Medicorp Inc., that same year.
Offering Insurance
In 1984 Humana began offering health plans with low premiums and punitive deductibles for patients that used non-Humana hospitals. The low premiums actually cost Humana money at first, until it started requiring doctors to recommend Humana hospitals to their patients or risk losing medical reimbursements. This was the forerunner of the HMO plan. By 1990 Humana's health plans were finally turning a profit, enough for it to start acquiring other health plans. By 1993, Humana's hospitals were in their own corporate division, and Humana was only dealing with health plans.
