Edgar Filing: HUMANA INC

Preliminary Proxy Statement

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Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to §240.14a-12

Definitive Proxy Statement

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

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Humana Inc.

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LOGO

March 7, 2011

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 21, 2011, at 10:00 a.m., EDT at the Company’s headquarters, 500 West Main Street, 25th Floor Auditorium, Louisville, Kentucky and to be webcast via the Internet at the Investor Relations section of the Company’s website at www.humana.com, Investor Relations section. This Proxy Statement contains information about our Company and the five 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 Securities and Exchange Commission rules that allow issuers to furnish proxy materials to their stockholders on the Internet. These materials will be available on the Internet on or about March 7, 2011. 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, if you are unable to join us, we urge you to exercise your right as a stockholder and vote. The vote of every stockholder is important.

This Proxy Statement is being mailed or transmitted on or about March 7, 2011 to the Company’s stockholders of record as of February 25, 2011.


		Sincerely,


		Michael B. McCallister Chairman of the Board and Chief Executive Officer, and Significant Stockholder

Humana Inc.

March 7, 2011

Notice of Annual Meeting of Stockholders

Thursday, April 21, 2011

10:00 a.m., EDT

Humana Building

25^th Floor Auditorium

500 West Main Street

Louisville, Kentucky 40202

AGENDA

Elect ten (10) directors;

Ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2011;

Approve the Humana Inc. 2011 Stock Incentive Plan;

To hold a non-binding, advisory vote with respect to the compensation of the Company’s Named Executive Officers;

To hold a non-binding, advisory vote regarding the frequency of the voting with respect to the compensation of the Company’s Named Executive Officers; and

Transact any other business properly brought before the meeting.

Stockholders of record at the close of business on February 25, 2011 will be entitled to vote.

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 proxy card or at the voting site).

By Order of the Board of Directors,

LOGO

Joan O. Lenahan

Vice President and Corporate Secretary

Table of Contents


Frequently Asked Questions			1

Corporate Governance			9

Proposal One: Election of Directors			19

Director Compensation			23

Stock Ownership Information			27

Compensation Discussion and Analysis			30

Organization & Compensation Committee Report			44

Executive Compensation			45

Certain Transactions with Management and Others			60

Equity Compensation Plan Information			61

Audit Committee Report			63

Proposal Two: Ratification of Appointment of Independent Registered Public Accounting Firm			65

Proposal Three: Approval of the Humana Inc. 2011 Stock Incentive Plan			66

Proposal Four: Non-binding Advisory Vote With Respect to the Compensation of the Company’s Named Executive Officers			77

Proposal Five: Non-binding Advisory Vote Regarding the Frequency of the Voting With Respect to the Compensation of the Company’s Named Executive Officers			78

Incorporation by Reference			80

Additional Information			80

Appendix A: Humana Inc. 2011 Stock Incentive Plan			A-1

FREQUENTLY ASKED QUESTIONS

1. Q:

When will this Proxy Statement be transmitted to stockholders?

This Proxy Statement is being transmitted on or about March 7, 2011 to stockholders of record as of February 25, 2011. 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 2011 Annual Meeting of Stockholders.

2. Q:

When and where is the annual meeting?

The Annual Meeting will be held on Thursday, April 21, 2011 at 10:00 a.m. EDT at 500 W. Main Street, Louisville, Kentucky 40202 at The Humana Building, 25^th Floor Auditorium.

3. Q:

Who is entitled to vote?

Anyone who owns Humana Inc. common stock, which we refer to as Shares, as of the close of business on February 25, 2011, which we refer to as the Record Date, is entitled to vote at the Annual Meeting or any adjournment or postponement of the Annual Meeting.

4. Q:

How many Shares are eligible to vote?

As of the Record Date, February 25, 2011, 168,620,907 Shares were outstanding and entitled to vote. Every stockholder is entitled to one vote for each Share held.

5. Q:

What am I voting on?

You are being asked to:

Elect ten (10) individuals to serve on the Board of Directors of the Company, which we refer to as the Board or the Board of Directors;

Ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2011;

Approve the Humana Inc. 2011 Stock Incentive Plan;

Approve a non-binding, advisory vote with respect to the compensation of the Company’s Named Executive Officers; and

Approve a non-binding, advisory vote on the frequency of voting with respect to the compensation of the Company’s Named Executive Officers.

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 presented for a vote, the proxies will be voted for these matters in accordance with the judgment of the persons acting under the proxies.

6. Q:

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 U.S. Securities and Exchange Commission, or 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.

7. Q:

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.

8. Q:

How does the Board recommend I vote on each proposal?

The Board recommends that you vote your Shares as follows:

Proposal 1 – FOR each of the director nominees;

Proposal 2 – FOR the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2011;

Proposal 3 – FOR the approval of the Humana Inc. 2011 Stock Incentive Plan;

Proposal 4 – FOR the approval of the non-binding, advisory vote with respect to the compensation of the Company’s Named Executive Officers; and

Proposal 5 – FOR ONE YEAR with respect to the frequency with which future non-binding, advisory stockholder votes on the compensation of the Company’s Named Executive Officers will be held.

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.

9. Q:

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, our representatives will vote your Shares as follows:

Proposal 1 – FOR each of the director nominees;

Proposal 2 – FOR the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2011;

Proposal 3 – FOR the approval of the Humana Inc. 2011 Stock Incentive Plan;

Proposal 4 – FOR the approval of the non-binding, advisory vote with respect to the compensation of the Company’s Named Executive Officers; and

Proposal 5 – FOR ONE YEAR with respect to the frequency with which future non-binding, advisory stockholder votes on the compensation of the Company’s Named Executive Officers will be held.

10. Q:

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 instructions form, your Shares may not be voted by the nominee with respect to certain proposals, including:

•

the election of directors;

•

the approval of the stock incentive plan;

•

the approval of a non-binding, advisory vote with respect to the compensation of the Company’s Named Executive Officers; or

•

the approval of a non-binding, advisory vote with respect to the frequency of the voting on the compensation of the Company’s Named Executive Officers.

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 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, and therefore your Shares will not be voted with respect to such proposals if you do not provide voting instructions on your instruction form.

11. Q:

What is a “broker non-vote”?

A broker “non-vote” occurs when a nominee 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 bank, broker or other nominee and do not provide voting instructions to your bank, broker or other nominee, your Shares may not be voted with respect to certain proposals, such as the proposals listed in Question 10. Therefore, we expect to have broker “non-votes” at the Annual Meeting with respect to:

•

Proposal 1 (election of the Company’s Board of Directors);

•

Proposal 3 (approval of the Humana Inc. 2011 Stock Incentive Plan);

•

Proposal 4 (approval of a non-binding advisory vote with respect to the compensation of the Company’s Named Executive Officers); and

•

Proposal 5 (approval of a non-binding advisory vote with respect to the frequency of the voting on the compensation of the Company’s Named Executive Officers).

We do not, however, expect to have any broker “non-votes” with respect to Proposal 2 (ratification of the appointment of PricewaterhouseCoopers LLP).

12. Q:

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.

13. Q:

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:

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 Notice card. Each stockholder has a unique control number so we can ensure all voting instructions are genuine 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 20, 2011.

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.

By telephone. If you are a registered holder in the United States or Canada, you should 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 20, 2011.

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.

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 10:00 a.m. Eastern Time on Thursday, April 21, 2011, the day of the Annual Meeting.

If you are returning your proxy card to Broadridge, they must receive it before 10:00 a.m. Eastern Time on Wednesday, April 20, 2011, the day before the Annual Meeting.

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.

14. Q:

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 1165(e) Retirement Plan?

If you have an interest in the Humana Common Stock Fund of the Humana Retirement Savings Plan or the Humana Puerto Rico 1165(e) Retirement Plan on the Record Date, you may vote. Under the Humana Retirement Savings Plan and the Humana Puerto Rico 1165(e) Retirement Plan, your voting rights are based on your interest — 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. If your voting instructions are received by 11:59 p.m. EDT on Thursday, April 14, 2011, the Trustee will submit a proxy that reflects your instructions. If you do not give voting instructions (or give them late), 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 1165(e) Retirement Plan, as applicable, are actually voted by the other participants in the applicable plan.

You should provide your instructions to Broadridge by using the Internet, registered holder telephone number (1-800-690-6903) or mail methods described above. However, 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 1165(e) Retirement Plan, as applicable.

15. Q:

How many votes are required to approve each proposal?


A:	Proposal 1:	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 meeting and Shares voting “abstain” or broker “non-votes” have no effect on the election of directors. Under the Company’s Majority Vote Policy adopted in January 2007, 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 (1) the director not achieving the requisite stockholder vote at any future meeting at which they face re-election, and (2) 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. Pursuant to current NYSE regulations, brokers do not have discretionary voting power over the election of directors.

	Proposal 2:	The affirmative vote of a majority of the votes cast on the proposal is required for the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm. Shares not present at the meeting and Shares voting “abstain” or broker non-votes have no effect on the ratification of the appointment of PricewaterhouseCoopers LLP. Pursuant to current NYSE regulations, brokers have discretionary voting power over the ratification of the appointment of the Company’s independent registered public accounting firm.

	Proposal 3:	The affirmative vote of a majority of the votes cast on the proposal is required for the approval of the Humana Inc. 2011 Stock Incentive Plan. Shares not present at the meeting and Shares voting “abstain” or broker non-votes have no effect on the approval of the Humana Inc. 2011 Stock Incentive Plan. Pursuant to current NYSE regulations, brokers do not have discretionary voting power over the approval of stock incentive plans.

	Proposal 4:	The affirmative vote of a majority of the votes cast on the proposal is required for the approval of the non-binding, advisory vote with respect to the compensation of the Company’s Named Executive Officers. Shares not present at the meeting and Shares voting “abstain” or broker non-votes have no effect on the approval of this non-binding advisory vote. Pursuant to current NYSE regulations, brokers do not have discretionary voting power over the approval of the non-binding, advisory vote with respect to the compensation of the Company’s Named Executive Officers.

	Proposal 5:	The frequency (every one, two, or three years) receiving the highest number of votes will be deemed to be the choice of the stockholders with respect to the non-binding, advisory vote on the frequency of voting with respect to the compensation of the Company’s Named Executive Officers. Shares not present at the meeting and Shares voting “abstain” or broker non-votes have no effect on the approval of this non-binding advisory vote. Pursuant to current NYSE regulations, brokers do not have discretionary voting power over the approval of the non-binding, advisory vote on the frequency of voting with respect to the compensation of the Company’s Named Executive Officers.

16. Q:

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.

17. Q:

How do I revoke my proxy?

You have the right to revoke your proxy at any time before the 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):

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

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

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 meeting. For written and fax notices, you must include the control number that is printed on the upper portion of the proxy card.

18. Q:

When are the stockholder proposals for inclusion in the Company’s proxy materials for the 2012 Annual Meeting due?

Stockholder proposals as permitted by SEC regulations for inclusion in our proxy materials relating to the 2012 annual meeting of stockholders must be submitted to the Corporate Secretary in writing no later than November 14, 2011. Proposals should be submitted to Joan O. Lenahan, Vice President and Corporate Secretary, Humana Inc., 500 W. Main Street, 27^th Floor, Louisville, KY 40202.

19. Q:

May a stockholder present a proposal not included in our Proxy Statement at the April 21, 2011 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 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 Joan O. Lenahan, Vice President and Corporate Secretary, Humana Inc., 500 West Main Street, 27th 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” on the left side of the page, and then click on the link entitled, “Bylaws” on the right side of the page.

20. Q:

How much did this proxy solicitation cost?

D. F. King & Co., Inc. has been hired to assist in the distribution of proxy materials and solicitation of votes for approximately $15,000 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 $190,000 plus expenses.

We will reimburse stockbrokers, other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation material to our stockholders.

21. Q:

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, 2010, which also contains the information required in our Annual Report to Stockholders. Our Annual Report on Form 10-K and all 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 & Financial Reports” subcategory on the left side of the page.

22. Q:

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 on or before April 27, 2011. The voting results will also be published on our website at www.humana.com at the same time. From the www.humana.com website, click on “Investor Relations,” and then click on “Corporate Governance” on the left side of the page, and then click on the link entitled “Voting Results of Annual Stockholders Meeting” on the left side of the page.

23. Q:

What is “householding”?

“Householding” occurs when a single copy of our Annual Report, Proxy Statement or 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.

CORPORATE GOVERNANCE

Humana is committed to having sound corporate governance principles and operates within a comprehensive plan of corporate governance for the purpose of defining responsibilities, setting high standards of professional and personal conduct, and assuring 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. 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” on the left side of the page, and then click on the link entitled “Corporate Governance Guidelines” on the right side of the page.

Independent Directors

The Guidelines contain independence 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 which could have been 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 relationships or transactions 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 JAPC, Inc., or JAPC, which is owned by the father of David A. Jones, Jr., one of our current directors;

(3)

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 Director; and

(4)

a relationship between the Company and Main Street Realty, Inc., or Main Street Realty, which is owned by the father of David A. Jones, Jr., one of our current directors.

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, an amount that includes Humana claims paid and the co-payments paid by our members for Pfizer drugs. These rebate amounts are significant. However, these 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 2010, the rebate amounted to approximately $136 million. We have also agreed to complete various research studies for Pfizer, for which we were paid an immaterial amount of fees by Pfizer in 2010.

JAPC, Inc. In 2010, we provided hangar space, pilot services and maintenance for an airplane owned by JAPC, for which we were fully reimbursed by JAPC at a rate at least as favorable to the Company as market rates, which amounts were not material.

Chrysalis. In 2010, we received health care premium payments from Chrysalis in the aggregate amount of approximately $152,000, and from one other company in the investment portfolio of Chrysalis. The premiums charged and benefits provided under these arrangements are comparable to those extended to our other non-affiliated customers in the area. We also reimbursed Chrysalis for the cost of certain office expenses for David A. Jones, Jr. incurred in his former position as Chairman of our Board of Directors, which amounts were not material.

Main Street Realty. In 2010, we received health care premium payments from Main Street Realty in the aggregate amount of approximately $217,752. The premiums charged and benefits provided under the arrangement are comparable to those extended to our other non-affiliated customers in the area.

At the conclusion of its review, the Board affirmatively determined that in each case the relationship between the Company and Pfizer, the Company and JAPC, the Company and Chrysalis, and the Company and Main Street Realty was not material, was below the thresholds for independence prescribed by the NYSE, and did not impact the independence of Mr. D’Amelio or Mr. Jones, respectively. Messrs. D’Amelio and Jones each recused themselves from the independence assessment relative to himself.

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. McCallister, who is an employee of the Company) is independent.

Company Leadership Structure

The business of the Company is managed under the direction of the Board, which is 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 the best interests of Humana and its stockholders. 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. The Board believes that the advisability of having a 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 and the current challenges faced by the Company, the Board believes that the appropriate leadership structure for our Board is a combined Chairman and Chief Executive Officer, complemented by a strong independent Lead Director. The role of the Chairman includes serving as Chair of regular sessions of the Board, running the Board process and ensuring effectiveness in all aspects of the Board’s role, and leading the Board in anticipating and responding to crises. The role of Lead Director is held by an independent director selected by the Board, and includes responsibility for:

•

coordinating the activities of the independent directors and acting as the principal liaison to the Chairman and Chief Executive Officer (although all directors continue to have access to management) for the view of, and any concerns and issues raised by, the independent directors;

•

convening, setting the agenda for, and presiding over all non-management executive sessions held by the Board;

•

presiding at all meetings of the Board when the Chairman is not present;

•

approving Board meeting agendas as well as the quality, quantity and timeliness of information sent to the Board;

•

approving Board meeting schedules to assure that there is sufficient time for discussion of all agenda items; and

•

leading the Board in its annual CEO evaluation (in conjunction with the recommendations of the Organization & Compensation Committee),

The Board believes that this separation of duties between a combined Chairman/Chief Executive Officer and independent Lead Director provides the right foundation to pursue the Company’s strategic and operational objectives, while maintaining effective oversight and objective evaluation of the Company’s performance.

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 Board implements this risk oversight function both as a whole and through various committees. 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.

Audit Committee. Pursuant to its charter, and in compliance with applicable NYSE listed company rules, the Audit Committee is responsible for discussing the Company’s policies with respect to overall risk assessment and risk management, with primary responsibility for monitoring risks with respect to the Company’s accounting and financial reporting principles and policies and internal audit controls and procedures. To accomplish this, the Audit Committee regularly reviews with both internal Company personnel and independent auditors the risks that may be material to the Company, as well as major legislative and regulatory developments which could materially impact the Company’s risks. The members of the Audit Committee meet separately with representatives of our independent audit firm and members of management in charge of internal controls and procedures with respect to financial reporting. The Company has also instituted a management Enterprise Risk Management Committee to assess the risks of the Company and coordinate with and report to the Audit Committee.

Organization & Compensation Committee. The Board of Directors has delegated to the Organization & Compensation Committee the responsibility of assessing 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.

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.

Composition of Board Committees

The Board of Directors has the following committees: Audit; Executive; Investment; Nominating & Corporate Governance; and Organization & Compensation. Only directors meeting SEC and NYSE director independence standards may serve on the Audit Committee,

the Nominating & Corporate Governance Committee, and the Organization & Compensation Committee. Additional information regarding the Audit Committee is included in this Proxy Statement under the caption “Audit Committee Report” and additional information regarding the Organization & Compensation Committee is included in this Proxy Statement under the captions “Compensation Discussion and Analysis” and “Organization & Compensation Committee Report”.

The number of Board committee meetings held in 2010 and membership as of February 25, 2011, were as follows:

Audit

Executive

Investment

Nominating
& Corporate
Governance

Organization &
Compensation

Number of Meetings

in 2010

NAME

Frank A. D’Amelio

W. Roy Dunbar

Kurt J. Hilzinger

David A. Jones, Jr.

Michael B. McCallister

William J. McDonald

William E. Mitchell

David B. Nash, M.D.

James J. O’Brien

Marissa T. Peterson

W. Ann Reynolds, Ph.D.

= Chair

= Member

Each 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” on the left side of the page, and then you will see a link to the Committee Charters on the left side of the page.

Audit Committee

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 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 financial statements and other information contained in the 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 the internal auditors, 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 the Company’s policies with respect to risk assessment and risk 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 25, 2011 are independent according to SEC and NYSE requirements, and each are financially literate, as defined in the NYSE listing standards. The Board of Directors has determined further that Mr. D’Amelio, Mr. O’Brien, Mr. Mitchell and Dr. Reynolds each meet the definition of “audit committee financial expert.”

•

The Report of the Audit Committee for the year ended December 31, 2010 is set forth in this Proxy Statement under the caption “Audit Committee Report.”

•

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.

Organization & Compensation Committee

Pursuant to its charter, the Organization & Compensation Committee:

•

reviews and approves our goals and objectives relevant to the compensation of our Chief Executive Officer, or 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;

•

makes recommendations to the Board with respect to the CEO’s and other executive officers’ base compensation, incentive-compensation plans and equity-based plans and approves programs for our executive officers;

•

approves equity-based grants to executive officers, and grants to other employees where Board approval is required under our applicable equity compensation program.

•

approves material elements of all employment, severance and Change in Control agreements for the executive officers;

•

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; 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, no executive compensation decisions are delegated to management.

Compensation Committee Interlocks and Insider Participation

None of the Organization & Compensation Committee members:

•

is or has ever been an officer or employee of the Company; or

•

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

•

is an executive officer of another entity, at which one of our executive officers serves either as a director or on its compensation committee.

Compensation Risk Determination

In 2010, the Organization & Compensation Committee assessed 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 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.

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.

Nominating & Corporate Governance Committee

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;

•

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; and

•

annually evaluates its performance.

Consideration of Director Nominees

Stockholder Nominees

The policy of the Nominating & Corporate Governance Committee is to consider properly submitted stockholder nominations for candidates for membership on the Board as described below under “Identifying Nominees for Directors.” In the course of evaluating nominations for Board membership, the Nominating & Corporate Governance Committee will look for individuals who have displayed high ethical standards, integrity, and sound business judgment, taking into account the current make-up of the Board and the specific needs of the Company and the Board. 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” on the left side of the page, and then click on the link entitled, “Bylaws” on the right side of the page. 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 Nominating & Corporate Governance 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: Joan O. Lenahan, Vice President and Corporate Secretary, Humana Inc., 500 West Main Street, 27^th Floor, Louisville, Kentucky 40202.

Identifying Nominees for Directors

The Board is responsible for selecting its own members and delegates the screening process for new directors to the Nominating & Corporate Governance Committee, with counsel from the Chairman and Chief Executive Officer, the Lead Director, and outside consultants as appropriate. The Committee utilizes a number of methods for identifying and evaluating nominees for Board membership. The Committee regularly assesses the appropriate size of the Board, and whether any vacancies are anticipated. The Committee considers potential candidates for director, which may come to the attention of the Committee through current Board members, professional search firms, stockholders, or other persons. The Nominating & Corporate Governance Committee selects candidates who possess a reputation and hold positions or affiliations befitting a director of a large publicly-held company, and are actively engaged in their occupations or professions or are otherwise regularly involved in the business, professional or academic community. In addition, from time to time, we engage a third-party search firm to assist the Board of Directors and the Nominating & Corporate Governance Committee in identifying and recruiting candidates for Board membership.

Director Qualifications

The Guidelines contain Board membership criteria that apply to nominees recommended by the Nominating & Corporate Governance Committee for a position on the Board. The Board has determined that each member of the Board (except Mr. McCallister, who is an employee of the Company) is independent according to criteria established in the Guidelines by the Board, and in accordance with requirements of the NYSE and the SEC. The members of the Organization & Compensation Committee must also meet the independence criteria of the Internal Revenue Code. The Nominating & Corporate Governance Committee reviews with the Board the requisite skills and characteristics for Board members. This assessment includes the desired experience, mix of skills and other qualities to assure appropriate Board composition, taking into account other Board members and the specific needs of the Company and the Board. Although the Board and the Nominating & Corporate Governance Committee do not have a policy with regard to the consideration of diversity in identifying director nominees, the director nomination process is designed to ensure that the Board includes members with diverse backgrounds, including race, ethnicity, gender, skills and experience, including appropriate financial and other expertise relevant to the Company’s business. The goal of this process is to assemble a group of board members with deep, varied experience, sound judgment, and commitment to the Company’s success. For a discussion of the individual experience and qualifications of our board members, please refer to the section entitled, “Proposal One: Election of Directors” in this proxy statement.

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 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 Board further amended the Bylaws to 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 affiliations change 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 their continued service on the Board.

Director Stock Ownership Policy

The Board has adopted a retention policy requiring that any director compensation received in the form of Humana Inc. restricted stock or restricted stock units must be held until the director no longer serves as a member of the Board.

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 2010, the Board of Directors met seven 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 who were directors in April 2010, attended the Annual Meeting of Stockholders held April 20, 2010, except Mr. D’Amelio, Chief Financial Officer for Pfizer, Inc., who had a conflict with the Pfizer, Inc. Annual Shareholders’ meeting.

Executive Sessions of Non-Management Directors

In 2010, our non-management directors held regularly scheduled, formal executive meetings, separate from management. Additional executive sessions of the Board are held as necessary or appropriate or upon the request of the Lead Director, 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 2010 in connection with each regularly scheduled Board of Directors meeting. Executive sessions are led by the Lead Director, who is required by our Corporate Governance Guidelines to be an independent director.

Code of Ethics and Code of Business Conduct

The Company has adopted the “Code of Ethics for the Chief Executive Officer and Senior Financial Officers,” which we refer to as the Executive Code of Ethics, violations of which should be reported to the Audit Committee. The Executive Code of Ethics may be viewed on our website at www.humana.com. Any amendment to or waiver of the application of the Executive Code of Ethics will be disclosed within four days of the waiver on our website at www.humana.com. To see either the Executive Code of Ethics or any amendments or waivers, go to www.humana.com website, then click on “Investor Relations,” then click on “Corporate Governance” on the left side of the page, and then click on the relevant links on the right side of that page.

In addition, we operate under the omnibus Humana Inc. Principles of Business Ethics, which we refer to as the Principles of Business Ethics, which includes provisions ranging from restrictions on gifts to conflicts of interest and applies to employees, officers and directors. The Humana Ethics Office is responsible for the design and enforcement of our ethics policies. The Humana Ethics Office has created an Ethics Plan, 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 Principles of Business Ethics. The Principles of Business Ethics may be viewed on our website at www.humana.com. Any waiver for directors or executive officers from the provisions of the Principles of Business 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 Principles of Business Ethics or any waivers, go to www.humana.com, then click on “Investor Relations,” then click on “Corporate Governance” on the left side of the page, and then click on the relevant links on the right side of that page.

Policy Regarding Transactions in Company Securities

The Company has historically prohibited executive officers from engaging in hedging transactions using Company stock. In 2010, the Board determined that it would be improper for any Company personnel to engage in short-term or speculative transactions in the Company’s securities. Therefore, the Board adopted a policy prohibiting all associates (including executive officers) from: (1) engaging in short sales of Company securities; or (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. This policy also applies to all directors.

Communication with Directors

Stockholders and other interested parties may communicate directly with our Chairman, Lead Director, 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 http://apps.humana.com/bod/contact.asp, 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 brought immediately to the attention of our General Counsel and the Board and handled in accordance with procedures established by the Audit Committee with respect to such matters.

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 ten (10). The directors are elected to hold office until the Annual Meeting of Stockholders in 2012 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 proxy may be voted for the substituted nominee as may be designated by the Board of Directors.

The following table shows certain information concerning the nominees at March 1, 2011.


Name	Age		Position	First Elected Director
Frank A. D’Amelio		53	Director		09/03
W. Roy Dunbar		49	Director		04/05
Kurt J. Hilzinger		50	Lead Director		07/03
David A. Jones, Jr.		53	Director		05/93
Michael B. McCallister		58	Chairman of the Board & Chief Executive Officer		02/00
William J. McDonald		54	Director		10/07
William E. Mitchell		66	Director		04/09
David B. Nash, M.D.		55	Director		01/10
James J. O’Brien		56	Director		04/06
Marissa T. Peterson		49	Director		08/08

In evaluating a director candidate, the Committee considers factors that are in the best interests of the Company and its stockholders, including the knowledge, experience, integrity and judgment of each candidate, the potential contribution of each candidate to the diversity of backgrounds, experience and competencies which the Board desires to have represented, each candidate’s ability to devote sufficient time and effort to his or her duties as a director, independence and willingness to consider all strategic proposals, and any core competencies or technical expertise necessary to staff Board committees. In addition, the Committee assesses whether a candidate possesses the integrity, business judgment, knowledge, experience, skills and expertise that are likely to enhance the Board’s ability to manage and direct the affairs and business of the Company. We believe that the current Board members not only have and demonstrate these attributes, but also have a deep commitment to the Company’s success, as evidenced by the qualifications of each director described below:

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 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 Director and Chief Operating Officer of Lucent Technologies Inc. from March 2006 to November 2006. From May 2001 until February 2006, he was Executive Vice President, Administration and Chief Financial Officer of Lucent. Mr. D’Amelio also serves on the board of directors of the Independent College Fund of New Jersey. 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.

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 Chairman and 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 also serves on the Board of Directors of iGate Corporation. 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.

Kurt J. Hilzinger was initially elected to the Board in July 2003, and was elected as Lead Director in August 2010. Mr. Hilzinger is a Partner at Court Square Capital Partners, LP, having held this position since November 2007. Prior to that, he was a Director of AmerisourceBergen Corporation from March 2004 to November 2007; and was also President and Chief Operating Officer of AmerisourceBergen Corporation from October 2002 to November 2007, having previously served as Executive Vice President and Chief Operating Officer of AmerisourceBergen Corporation from August 2001 to October 2002. 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.

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 and Managing Director of Chrysalis Ventures, LLC, headquartered in Louisville, Kentucky. 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.

Michael B. McCallister was appointed as President and Chief Executive Officer of the Company and to the Board of Directors of the Company in February 2000, and was elected Chairman of the Board of Directors in August 2010. Mr. McCallister joined the Company in June 1974. In 2008, Mr. McCallister also served on the Board of Directors of National City Corporation until its merger with PNC Financial Services Group on December 31, 2008. As a 37-year veteran of the Company, the Board believes that Mr. McCallister brings an unparalleled depth of experience in the health care sector combined with an intimate knowledge of the operational, financial and strategic development of the Company.

William J. McDonald was initially elected to the Board in October 2007. Mr. McDonald is Executive Vice President, Brand Management of Capital One Financial Corporation, having held that position since 1998. The Board believes that Mr. McDonald’s service in various senior executive marketing positions contributes significant successful experience and expertise in marketing and related disciplines.

William E. Mitchell was initially elected to the Board in April 2009. Mr. Mitchell is the managing partner of Sequel Capital Management, LLC. Prior to that, Mr. Mitchell served as the Chairman of the Board of Directors of Arrow Electronics, Inc. from May 2006 until December 31, 2009, and also served as President and Chief Executive Officer of Arrow Electronics, Inc. from February 2003 to May 1, 2009. Mr. Mitchell also serves on the Board of Directors of Brown-Forman Corporation, Rogers Corporation, and National Semiconductor Corp. The Board believes that Mr. Mitchell’s insights and experience running a complex global public company, as well as his significant experience in the governance of large publicly-traded corporations, will be valuable in helping to guide the Company in the years ahead.

David B. Nash, M.D. was initially elected to the Board in December 2009, effective January 1, 2010. He is the founding dean of the Jefferson School of Population Health, located on the campus of Thomas Jefferson University in Philadelphia, Pennsylvania, having taken that position in 2008. Previously, Dr. Nash was the Chairman of the Department of Health Policy of the Jefferson Medical College from 2003 until 2008. Dr. Nash previously served on the board of directors of Itrax Corporation and InforMedix. The Board believes that Dr. Nash brings a unique and compelling set of attributes that enhance the Company’s ability to help people achieve lifelong well-being. As a widely recognized innovator in an emerging medical discipline that unites population health, health policy, and individual health, Dr. Nash is internationally recognized for his work in outcomes management, medical staff development and quality-of-care improvement.

James J. O’Brien was initially elected to the Board in April 2006. Since 2002, Mr. O’Brien has been 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 currently serves on the Board of Directors of Ashland Inc. 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 and international perspective adds valuable expertise and insight to the Board.

Marissa T. Peterson was initially elected to the Board in August 2008. 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 for Ansell Limited, and the Lucile Packard Children’s Hospital at Stanford and previously served on the board of directors of SUPERVALU INC. and the board of trustees of Kettering University. She also runs an executive coaching practice focused on helping grow and develop leaders in the high-technology space. 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.

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.

Vote Required and Recommendation of 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 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.

DIRECTOR COMPENSATION

During 2010, the directors were compensated pursuant to the following schedule:


Annual Retainer (1)		$75,000
Non-Employee Chairman of the Board Additional Annual Retainer (1)		$160,000
Lead Independent Director Additional Annual Retainer (1)		$25,000
Committee Chairman fee per year: 1. Audit Committee Chair 2. Organization & Compensation Committee Chair 3. All other Committee Chairs		$25,000 $18,000 $12,000
Executive Committee Member fee per year		$12,000
Common Stock per year (1st Business Day of January) (2)		$125,000 in common stock (variable # of shares)
Charitable Contributions Annual Match		up to $25,000
Group Life and Accidental Death Insurance— (except Chairman)		$150,000 of coverage
Group Life and Accidental Death Insurance—Chairman (1)		$400,000 of coverage
Business Travel Accident Insurance		$250,000 of coverage
Restricted Stock Units Granted Initial Date of Election (1)		Restricted Stock Unit grant equal to the dollar value of the then current annual stock grant for directors(3)

(1)

On August 26, 2010, Mr. McCallister replaced Mr. Jones as our Chairman of the Board. Mr. Jones’ additional annual retainer as Chairman of the Board was therefore prorated in 2010. As an employee director, Mr. McCallister does not receive (i) the additional annual retainer for service as Chairman of the Board, (ii) the annual retainer for service as a director, or (iii) the higher level of group life and accidental death insurance that would otherwise be provided for the Chairman of the Board. Also on August 26, 2010, the Board of Directors elected Kurt J. Hilzinger as Lead Director, and established an additional annual retainer for service in that role.

(2)

Pursuant to our Directors Stock Retention Policy, any director compensation received in the form of restricted stock or restricted stock units must be held by the director until he or she no longer serves as a member of the Board.

(3)

Effective December 9, 2010, this initial award of Restricted Stock Units is forfeited if the director serves less than one year on the Company’s Board of Directors. Prior to December 9, 2010, each director received a grant of 7,500 restricted stock units upon his or her initial date of election to the Board.

The following table shows the compensation earned for non-employee directors in 2010:


Name (a)	Fees Earned or Paid in Cash ($)(1) (b)		Stock Awards ($)(1)(2) (c)		Option Awards ($)(3) (d)		Non-Equity Incentive Plan Compensation ($)(4) (e)		Change in Pension Value and Nonqualified Deferred Compensation Earnings($)(5) (f)		All Other Compensation ($)(6) (g)		Total ($) (h)
Frank A. D’Amelio		99,999		124,555		—		—		—		14,653		239,207
W. Roy Dunbar		87,000		124,555		—		—		—		7,220		218,775
Kurt J. Hilzinger		113,333		124,555		—		—		—		27,063		264,951
David A. Jones, Jr.		193,664		124,555		—		—		13,719		28,633		360,571
William J. McDonald		75,000		124,555		—		—		—		19,410		218,965
William E. Mitchell		75,000		124,555		—		—		—		27,237		226,792
David B. Nash, M.D.		75,000		461,555		—		—		—		25,785		562,340
James J. O’Brien		75,000		124,555		—		—		—		26,873		226,428
Marissa T. Peterson		75,000		124,555		—		—		—		12,961		212,516
W. Ann Reynolds, Ph.D. (7)		87,000		124,555		—		—		23,484		28,398		263,437

(1)

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 a Board member. Messrs. D’Amelio, Dunbar, Hilzinger, McDonald, Mitchell, O’Brien, Dr. Nash, Ms. Peterson and Dr. Reynolds each deferred their stock compensation for 2010. Since January 1, 2009, 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, including the Humana Common Stock Fund. Messrs. Jones, McDonald and Mitchell, and Dr. Nash elected to defer their cash compensation, and Mr. Dunbar elected to defer 25% of his cash compensation, in each case under the Schwab program in 2010.

(2)

On January 4, 2010, when the fair market value of our common stock was $45.10, each director in office at that time, other than Mr. McCallister, was granted a stock award of 2,772 shares, representing the annual grant of $125,000 in common stock. On January 4, 2010, the first business day after the effective date of Dr. Nash’s election to the Board and on which date the fair market value of our common stock was $45.10, Dr. Nash was awarded 7,500 restricted stock units. The amount shown in column (c) above is the grant-date fair market value less the par value of $0.1667 per share times the number of shares awarded, as further discussed under “Compensation Policies Based on Certain Tax and Accounting Rules”.

(3)

Outside Directors did not receive any stock options as part of the 2010 Directors Compensation Program.

(4)

Outside Directors did not receive any non-equity incentive plan compensation as part of the 2010 Directors Compensation Program.

(5)

A director who is not an employee must retire at the annual meeting following his or her seventy-third birthday. Non-employee directors elected subsequent to 1997 do not receive any retirement benefits. David A. Jones, Jr. and W. Ann Reynolds, Ph.D. are the only current directors that will have retirement benefits since they are grandfathered under our former Retirement Policy. Under the Retirement Policy a retiring director is entitled to elect to receive either: (1) 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 (2) in lieu thereof, an actuarially equivalent joint and survivor annuity payment. In addition, under the Retirement Policy, each retiring director also receives an annual matching charitable contribution benefit of $19,000 for the life of the director. Under the Retirement Policy, the amount was prorated for service less than ten years. Mr. Jones and Dr. Reynolds have been members of our Board of Directors for over ten years.

The Retirement Plan present values were determined based on a discount rate of 5.25% and a post-retirement mortality assumption using the RP-2000 Mortality Tables for males and females projected to 2011, with 100% white collar adjustment. No pre-retirement mortality is assumed.

(6)

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 to and from such meetings or other Company business on company aircraft. We also reimburse the director 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 that averaged approximately $1,344 per outside director, and life and accidental death insurance premiums that averaged approximately $1,020 per outside director. These amounts are included in the table above. Directors may elect to participate in the medical and dental benefit programs offered to all our employees at a comparable rate as paid by employees. In 2010, Messrs. Dunbar and Mitchell, and Ms. Peterson, elected to participate. The “All Other Compensation” amount above includes the following amounts:


Director	Matching Gift		Occupational Tax		Life Insurance		Total – All Other Compensation
Frank A. D’Amelio	$	12,783	$	1,456	$	414	$	14,653
W. Roy Dunbar	$	6,000	$	950	$	270	$	7,220
Kurt J. Hilzinger	$	25,000	$	1,649	$	414	$	27,063
David A. Jones, Jr.	$	25,000	$	2,759	$	874	$	28,633
William J. McDonald	$	18,990	$	6	$	414	$	19,410
William E. Mitchell	$	24,918	$	33	$	2,286	$	27,237
David B. Nash, M.D.	$	25,000	$	11	$	774	$	25,785
James J. O’Brien	$	25,000	$	1,099	$	774	$	26,873
Marissa T. Peterson	$	11,600	$	1,091	$	270	$	12,961
W. Ann Reynolds, Ph.D.	$	20,300	$	4,390	$	3,708	$	28,398

(7)

We expect that Dr. Reynolds will retire from the Humana Inc. Board of Directors effective April 21, 2011.

OUTSTANDING OPTIONS

OUTSIDE DIRECTORS

December 31, 2010

The following table provides information as of December 31, 2010 on the stock options held by non-employee directors in 2010. The Company’s Director Compensation Program currently does not award stock options to non-employee directors.


	Option Awards
Name (a)	Number of Securities Underlying Unexercised Options (#) Exercisable (b)		Number of Securities Underlying Unexercised Options (#) Unexercisable (c)	Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) (d)	Option Exercise Price ($/Sh) (e)		Option Expiration Date (f)
Frank A. D’Amelio		15,000 2,500				18.0300 23.0500		09/11/13 01/02/14	(1) (2)
W. Roy Dunbar		0				—		—
Kurt J. Hilzinger		15,000 2,500				16.4550 23.0500		07/10/13 01/02/14	(5) (2)
David A. Jones, Jr.		5,000 5,000 2,500				11.5500 10.1900 23.0500		01/02/12 01/02/13 01/02/14	(3) (4) (2)
William J. McDonald		0				—		—
William E. Mitchell		0				—		—
David B. Nash, M.D.		0				—		—
James J. O’Brien		0				—		—
Marissa T. Peterson		0				—		—
W. Ann Reynolds, Ph.D.		5,000 5,000 2,500				11.5500 10.1900 23.0500		01/02/12 01/02/13 01/02/14	(3) (4) (2)

(1)

Options granted on 09/11/03 pursuant to the Company’s 2003 Stock Incentive Plan, shares are fully vested

(2)

Options granted on 01/02/04 pursuant to the Company’s 2003 Stock Incentive Plan, shares are fully vested

(3)

Options granted on 01/02/02 pursuant to the Company’s 1996 Stock Incentive Plan, shares are fully vested

(4)

Options granted on 01/02/03 pursuant to the Company’s 1996 Stock Incentive Plan, shares are fully vested

(5)

Options granted on 07/10/03 pursuant to the Company’s 2003 Stock Incentive Plan, shares are fully vested

The following Restricted Stock Units have been deferred by the directors, as of the dates indicated (see the discussion under the Director Compensation Table — Footnote 1):


	December 31, 2010		February 25, 2011
Frank A. D’Amelio		14,275		16,530
W. Roy Dunbar		14,394		16,649
Kurt J. Hilzinger		11,808		14,063
David A. Jones, Jr.		5,022		5,022
William J. McDonald		21,299		23,768
William E. Mitchell		13,625		15,880
David B. Nash, M.D.		10,272		12,527
James J. O’Brien		19,180		21,435
Marissa T. Peterson		13,649		15,904
W. Ann Reynolds, Ph.D.		7,756		7,756

STOCK OWNERSHIP INFORMATION

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, or the Exchange Act, requires our directors and executive officers, and persons who beneficially own more than ten percent of a registered class of our equity securities, to file with the SEC and the NYSE, reports of ownership and reports of changes in ownership of our common stock and our other equity securities. These reports generally are due within two business days of the transaction. Executive officers, directors, and greater than ten percent stockholders are required to furnish us with copies of all the forms they file.

During the year ended December 31, 2010, based upon our knowledge of stock transfers, a review of copies of these reports and written representations by persons subject to Section 16(a) as furnished to us, all executive officers, directors, and greater than ten percent beneficial owners of our common stock complied with Section 16(a) filing requirements applicable to us. We have a program to oversee the compliance of our executive officers and directors in their reporting obligations.

Security Ownership of Certain Beneficial Owners of Company Common Stock

Principal Stockholders of the Company

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
BlackRock, Inc. 40 East 52^nd Street New York, New York 10022		13,155,358 shares		7.81%(1)(2)

The Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, Pennsylvania 19355		9,013,737 shares		5.35%(1)(3)

(1)

The percentage of ownership is based on 168,449,690 shares of our common stock outstanding as of December 31, 2010.

(2)

Based upon a Schedule 13G filed with the SEC for the period ended December 31, 2010, BlackRock, Inc. reports that it has sole power to vote 13,155,358 shares and has dispositive power over 13,155,358 shares. On December 1, 2009, BlackRock, Inc. completed its acquisition of Barclays Global Investors, NA and certain of its affiliates (the “BGI Entities”) from Barclays Bank PLC. As a result, this amount includes shares held by substantially all of the BGI Entities.

(3)

Based upon a Schedule 13G filed with the SEC for the period ended December 31, 2010, The Vanguard Group, Inc. reports that it has sole power to vote 211,792 shares (Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 211,792 shares as a result of its serving as investment manager of collective trust accounts), sole dispositive power over 8,801,945 shares, and shared dispositive power over 211,792 shares.

Security Ownership of Directors and Executive Officers

The following table shows stock ownership by (i) each of our directors, (ii) our Chairman and Chief Executive Officer, our Chief Financial Officer, and each of our three other highest compensated executive officers serving at December 31, 2010 (which we refer to in these proxy materials as our Named Executive Officers), and (iii) by the directors and all executive officers as a group as of February 25, 2011, unless otherwise indicated.


	Company Common Stock Beneficially Owned as of February 25, 2011 (1)(2)(3)		Percent of Class as of February 25, 2011 (4)

Frank A. D’Amelio		26,777

W. Roy Dunbar		9,687

Kurt J. Hilzinger		24,702

David A. Jones, Jr.		222,765

Michael B. McCallister		1,232,992

William J. McDonald		250

William E. Mitchell		—

David B. Nash, M.D.		—

James J. O’Brien		1,000

Marissa T. Peterson		1,347

W. Ann Reynolds, Ph.D.		52,227

James H. Bloem		73,463

James E. Murray		564,104

V. Rajamannar Madabhushi		35,579

Bonita C. Hathcock		195,666

All directors and executive officers as a group (21 in number, including those named above)		3,146,935		1.87

(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 January 31, 2011, over which the employee participant has voting power and investment power. They are as follows:


Michael B. McCallister		39,555
James H. Bloem		0
James E. Murray		49,769
V. Rajamannar Madabhushi		0
Bonita C. Hathcock		0
All executive officers as a group (numbering 11, including those named herein)		107,047

(b)

Includes Shares which may be acquired by these individuals through the exercise of options, which are exercisable currently or within 60 days after February 25, 2011 under the 1996 Stock Incentive Plan or the 2003 Stock Incentive Plan. They are as follows:


Frank A. D’Amelio		17,500
W. Roy Dunbar		0
Kurt J. Hilzinger		17,500
David A. Jones, Jr.		12,500
Michael B. McCallister		633,125
William J. McDonald		0
William E. Mitchell		0
David B. Nash, M.D.		0
James J. O’Brien		0
Marissa T. Peterson		0
W. Ann Reynolds, Ph.D.		12,500
James H. Bloem		144,237
James E. Murray		431,814
V. Rajamannar Madabhushi		15,579
Bonita C. Hathcock		161,686
All directors and executive officers as a group (numbering 21, including those named herein)		1,927,049

(2)

Certain directors have deferred the stock awards pursuant to our Deferred Compensation Plan for Non-Employee Directors. These Shares are not included in the totals reported above. The initial award of 7,500 restricted stock units to each of Messrs. McDonald, Mitchell and O’Brien, Dr. Nash and Ms. Peterson is also not included in the totals reported above. As of February 25, 2011, which includes the awards in January 2011, the Shares deferred were as follows:


Frank A. D’Amelio		16,530
W. Roy Dunbar		16,649
Kurt J. Hilzinger		14,063
David A. Jones, Jr.		5,022
William J. McDonald		23,768
William E. Mitchell		15,880
David B. Nash, M.D.		12,527
James J. O’Brien		21,435
Marissa T. Peterson		15,904
W. Ann Reynolds, Ph.D.		7,756

(3)

As of February 25, 2011, no shares of stock are pledged by any of our Executive Officers or Directors.

(4)

Unless indicated, less than 1% of the class.

COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

Setting the Compensation of Named Executive Officers

Components of Compensation for Named Executive Officers

Other Compensation Considerations

Organization & Compensation Committee

Compensation Consultants

Executive Summary

The compensation program for our Named Executive Officers supports our philosophy that compensation should be market-based, competency-paced and contribution-driven. Our compensation programs are designed to challenge participants as well as reward them for superior performance for our Company and our stockholders. In furtherance of this philosophy, we believe that our compensation program must:

•

Be competitive to attract, motivate and retain highly qualified executives;

•

Provide significant rewards for outstanding financial and individual performance in support of our business strategy; and

•

Align executives’ interests with those of our stockholders by including a significant portion of executive pay that is “at risk” in the form of both annual incentive awards that are paid, if at all, based on Company performance, and, in the case of longer term incentive awards, tied closely to increases in the Company’s stock price.

Highlighted below are some of the key elements of our compensation program that the Board’s Organization & Compensation Committee, which we refer to as the Committee, believes evidence strong corporate governance and prudent compensation decisions:

•

Pay for Performance. The key elements of direct executive compensation — salary, cash incentives, and equity awards — are designed to put a substantial portion of executive pay at risk to motivate and challenge our executives to achieve positive returns for our stockholders. In 2010, 78% of the direct compensation of our named executive officers was at risk, in the form of annual incentive and long-term incentive compensation. For the fiscal year ended December 31, 2010, our earnings per share increased to $6.47, resulting in performance approximately 23% above the target earnings per share goal of $5.25 under our annual cash incentive program.

•

Internal and External Benchmarking. We benchmark our executive compensation both against other publicly traded companies that are comparable to us and within our company to ensure relativity of competitive pay between all executive officers.

•

Recoupment. Our “clawback” provision allows us to recoup cash-based incentives earned by an executive officer in the event of a material restatement of the Company’s financials as a result of misconduct or fraud on the part of that executive officer.

•

Committee Independence. All members of the Committee are independent according to Securities and Exchange Commission and New York Stock Exchange independence standards. Our independent compensation consultant, Frederic W. Cook & Co., Inc., or Cook, is retained directly by and reports to the Committee, and provides no additional services to the Company.

•

Stock Ownership Guidelines. Our stock ownership guidelines for executive officers links a significant amount of each executive’s current and potential future net worth to the Company’s success, as reflected in the stock price, to give the executive a stake similar to that of our stockholders. According to the guidelines, any shares owned by an executive officer (or shares received upon the exercise of options or vesting of restricted stock, less an amount to cover current tax liabilities) must be held by the executive officer until the relevant ownership level is reached and thereafter maintained.

•

Hedging. The Company has historically prohibited executive officers from engaging in hedging transactions using Company stock. In 2010, the Board extended this prohibition to preclude all associates, including executive officers, from: (1) engaging in short sales of Company securities; or (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.

This Compensation Discussion and Analysis discusses in greater detail our compensation policies and practices, describing each element of compensation and the decision-making process that supports it. It addresses how we compensate our Named Executive Officers, and how we uphold our compensation philosophy through a governance system that includes internal oversight as well as expert independent outside review. We believe that our compensation programs, policies and practices for 2010, disclosed in this report and in the tables that follow, demonstrate that our compensation philosophy and program achieve our compensation goals, and that the total mix of compensation provided to our Named Executive Officers is consistent with a philosophy of motivation and reward.

For a discussion of the assessment performed by our Organization & Compensation Committee of the risks associated with our compensation practices and policies, including a consideration of the counterbalance of risk-taking incentives and risk-mitigating factors in Company practices and policies, please see the section entitled, “Corporate Governance — Organization & Compensation Committee — Compensation Risk Determination” in this proxy statement.

Setting the Compensation of Named Executive Officers

Our Named Executive Officer compensation includes direct compensation that is:

•

Market-based — Competitive with our peer group and general industry standards; targeted on average at market medians, but typically ranging from the 25^th to 75^th percentiles, depending on the level of competency and contribution;

•

Competency-paced — Flexible enough to match the progress of fast-rising performers but resistant to salary advancement for those whose competency level has remained static;

•

Contribution-driven — Reward those who make a difference, creating meaningful compensation distinctions among different levels of performance and achievement, while avoiding annual compensation actions that foster an “entitlement mentality.”

Named Executive Officer compensation also includes indirect compensation in the form of a mix of cost-effective benefit programs that promote security and well-being, including health benefits, life and disability coverage that provides income protection, retirement plans, and services accessed or purchased on a group basis to assist in the maintenance of an appropriate work/life balance.

In determining compensation for our Named Executive Officers, other than our Chief Executive Officer, the Committee solicits input from the Chief Executive Officer regarding the duties and responsibilities of the other Named Executive Officers and the results of his evaluations of their performance. The Chief Executive Officer, with guidance from the Chief Human Resources Officer, discusses with the Committee his recommendations for the compensation of his direct reports and the rationale for those recommendations. The Committee’s independent consultant, Cook, provides guidance to the Committee when determining the compensation of the Chief Executive Officer and the other Named Executive Officers. The Committee independently makes all compensation decisions.

Setting Compensation — External Benchmarking

We benchmark our compensation and benefits practices to other publicly traded companies that are comparable to us in significant ways. For Named Executive Officers, we use comparisons from competitors within our peer group, based on revenue size and profitability, as well as our closest industry competitors. Using different screening criteria (e.g., line of business, industry, market cap, etc.) yields multiple perspectives that enrich our understanding of competitive executive pay practices. Company comparators are reviewed every year to ensure continued appropriateness of our compensation program. We believe benchmarking with reference to comparable companies provides the Company with the most comprehensive means of ensuring that our senior-level compensation is market-competitive.

For 2010, companies included in our peer group are those:

(i)

with whom we compete for talent; and

(ii)

whose revenues, market capitalization, and business focus are similar to Humana’s.

In February 2010, the Committee approved the following peer group of public companies, with no changes from 2009, to serve as our benchmark:



Aetna Inc.	Express Scripts, Inc.	Progressive Corp.

AFLAC Inc.	Genworth Financial Corp.	The Travelers Companies, Inc.

Allstate Corp.	Hartford Financial Services Group, Inc.	UnitedHealth Group, Inc.

CIGNA Corporation	Health Net, Inc.	Unum Group

CNA Financial Corporation	MedcoHealth Solutions, Inc.	Wellpoint, Inc.

Coventry Health Care, Inc.	Principal Financial Group, Inc.

We use this competitive market data as a starting point for our analysis, conducted with the assistance of the Committee’s independent consultant, Cook. In addition, the Committee takes into consideration an executive’s overall performance, his or her potential, the presence of any unique or hard-to-replace skills, as well as the executive’s judgment, leadership ability and competencies. The performance of the executive’s business function and his or her ability to build teams and develop talent are also important factors. Finally, the Committee considers the overall performance of the Company.

Ultimately, the Committee must consider all of these factors and apply its best judgment when determining executive pay to produce a total compensation package that is reasonable as

compared to the Company’s business prospects, based on its long-term business plans. This allows the Committee to set a compensation package that it believes will:

(i)

appropriately motivate and challenge our Named Executive Officers without encouraging undue risk to the Company; and

(ii)

achieve an appropriate alignment between the prospects for the Company and our stockholders and the compensation of our Named Executive Officers.

Setting Compensation — Internal Benchmarking

The Committee reviews and approves the total compensation of each Named Executive Officer based in part on an internal benchmarking that considers the relativity of pay between all the Named Executive Officers and the total compensation of the Chief Executive Officer. The Company believes that appropriate internal pay equity:

(i)

leads to better employee relations and a stronger company, as it avoids a disconnect in compensation across a group of Named Executive Officers that must work together as a cohesive team;

(ii)

is economical, as it provides the Committee with a more balanced “check” of total compensation, rather than relying solely on external benchmarking data that may only compare each pay element independently; and

(iii)

mitigates market bias that may favor certain positions but does not reflect their relative importance to the Company.

Each year, our Chief Executive Officer conducts an informal analysis of internal pay equity, taking into account each Named Executive Officer’s individual contributions, performance, potential, skills, judgment, leadership ability and competencies, and makes a recommendation to the Committee regarding relativity of compensation. Although the Committee does not have established target ratios or a formula for calculating the relative compensation of the Chief Executive Officer as compared to each Named Executive Officer, or for each Named Executive Officer as compared to any other, the Committee does, in its discretion, review historical pay ratios to ensure that the compensation of one Named Executive Officer has not unintentionally risen in a disproportionate manner relative to the others. Following a subjective discussion among the Committee, the Chief Executive Officer and Cook, the Committee’s independent compensation consultant, the Committee considers this informal analysis of internal pay equity in making executive compensation decisions. For 2010, the Committee concluded that the relative levels of compensation among the Named Executive Officers were appropriate.

Components of Compensation for Named Executive Officers

The components of our compensation program for Named Executive Officers in 2010 were:

•

Base salary, targeted at market medians, but typically ranging from the 25^th to the 75^th percentile, with the actual levels of base salary based primarily upon the experience, competency and contributions of individual executives;

•

Annual cash incentives, with target opportunity set at specified percentages of each Named Executive Officer’s base salary, and actual payout dependent upon the achievement of financial performance targets;

•

Equity awards, incentivizing through competitive levels of long-term equity compensation designed to motivate leaders to achieve attractive long-term stockholder returns;

•

Retirement Plans, providing the opportunity for retirement income that will motivate high-potential leaders to pursue a long-term career with the Company;

•

Severance, providing for certain payments in the event of termination of employment in certain circumstances; and

•

Perquisites, including a matching annual charitable gift program; life insurance benefits; financial planning assistance; and limited personal use of Company aircraft.

Base Salary

Base compensation for our Named Executive Officers is determined by an assessment of:

•

overall Company performance;

•

individual Named Executive Officer performance;

•

internal pay equity;

•

changes in individual Named Executive Officer responsibilities; and

•

relevant external benchmarking.

While vital aspects of performance can be measured in financial terms, we also evaluate executive management in areas that must be assessed more subjectively. These areas include the development and execution of strategic plans, the exercise of leadership in the development of management talent, innovation and improvement in our products and processes, as well as the executive’s involvement in industry groups and in the communities that we serve.

Base salary levels are established to ensure the attraction, development and retention of superior talent while also taking into account an individual executive’s performance. For Messrs. McCallister, Bloem and Murray, and Ms. Hathcock, base salaries were established, in conjunction with other components of total compensation, to approximate the market median. Mr. Rajamannar, who was hired in 2009, received an initial base salary above the market median percentile in order to retain his services in our highly competitive market.

As in prior years, the Committee reviewed base salary information developed by our human resources associates and Cook to establish market median data. We generally target the market median when establishing individual salaries, and they typically range from the 25^th to the 75^th percentile. The information reviewed by the Committee suggested that the market median data for competitive base salaries in our peer group had increased by approximately 1.9% from 2009 to 2010, and by approximately 5.3% from 2010 to 2011. In February 2010, the Committee awarded an average base salary increase of 1% to our Named Executive Officers, with the exception of Mr. McCallister. At Mr. McCallister’s request, despite the performance of the Company during 2009, the Committee did not grant Mr. McCallister an increase in base salary for 2010. For 2011, our Named Executive Officers have been awarded an average base salary increase of 3%. Base salaries of the Named Executive Officers in 2010, and their relationship to market medians, are listed in the table below.


Named Executive Officer	2010 Base Salary	2010 Market Median(1)
Michael B. McCallister	$1,025,000	$1,104,950
James H. Bloem	$550,000	$596,500
James E. Murray	$676,000	$701,033
V. Rajamannar Madabhushi	$542,500⁽²⁾	$440,650
Bonita C. Hathcock	$480,000	$465,400

(1)

Based on relevant external benchmarking and the proxy statements of the peer group in February 2010.

(2)

As previously disclosed, on August 26, 2010, the Committee approved an increase of $37,500 in Mr. Rajamannar’s base salary from $505,000 to the new base salary shown above.

Annual Cash Incentives

Incentive Plan Objectives

Our annual incentive compensation plans ensure a portion of each Named Executive Officer’s compensation is “at risk” by linking such portion of compensation to certain key performance objectives and rewarding them, when appropriate, for their efforts in optimizing our profitability and growth consistent with sound and ethical business practices and appropriate risk-taking.

Description of the Plan for Named Executive Officers

The Humana Inc. Executive Management Incentive Compensation Plan, which we refer to as the Management Incentive Plan, is administered by the Committee. The Committee annually selects those executive officers and other key executives eligible to participate in the Management Incentive Plan and establishes specific performance targets based on predetermined business goals, and an objective formula or standard to determine the minimum and maximum awards payable to each participating executive. The Committee has sole discretion to determine the form, amount and terms of each award, which need not be uniform among the persons eligible to receive awards. The Committee may determine at the time the performance targets are established that certain adjustments will be made in evaluating whether the performance targets have been met (e.g., disposition or acquisition of a business, gains or losses resulting from material litigation, or the effect of changes in accounting principles during the performance period). During 2010, our Named Executive Officers participated in the Management Incentive Plan.

2010 Management Incentive Plan Compensation

For all Named Executive Officers, the 2010 performance target was based on the attainment of a pre-established earnings per share, or EPS, objective. The Committee selected this single performance target because it believed that those individuals with the greatest responsibility for the strategy, implementation and success of the organization should have a substantial portion of their compensation linked to the achievement of this financial goal. The Committee felt that attainment of an EPS goal was the best reflection of the success of our business plan, and the goal was therefore established to provide a direct link between executive compensation and this key performance objective of the Company.

For the EPS objective in 2010, there were threshold, target and maximum achievement payout levels that impacted the final value of the award. The EPS target for 2010 of $5.25 was based on our business plans and reflected the initial earnings per share guidance that we

provided to our stockholders. The target was considered a challenging goal, based on the prospects of our government and commercial businesses, including the impact of health care reform, and an uncertain economy. Performance below the threshold of $4.73 EPS would yield no award. The maximum EPS of $5.62 was set to encourage increased performance within a tolerable risk.

The percentages of 2010 base earnings paid at each of the threshold, target and maximum levels were established through a process of external benchmarking of total compensation against our external peer group. These percentages furthermore reflect our philosophy of targeting total compensation at the median, while recognizing that a significant percentage of total compensation should be performance-based. The uniform target percentages (with the exception of Mr. McCallister) and performance measures also emphasize the importance of a teamwork approach among our Named Executive Officers.

The following summarizes the results of the Company’s external benchmarking of the 17 companies comprising the Company’s peer group with respect to annual incentive compensation:


Named Executive Officer	Median Target Bonus Opportunity (as a percentage of base salary)			Maximum Bonus Opportunity as a percentage of base salary
Humana CEO¹		150	%		200	%
Peer Group CEOs²		150	%		301	%
Humana Other NEOs¹		100	%		150	%
Peer Group Other NEOs²		99	%		200	%

Percentages based on 2010 compensation, as reported in the Proxy Statement.

Percentages based on 2009 compensation, as used by the Committee in external benchmarking to set 2010 compensation.

The following table sets forth the potential range of payments our Named Executive Officers could have earned under the Management Incentive Plan, expressed in total dollars and as a percentage of 2010 base salary:


Named Executive Officer	2010 Base Salary		Threshold EPS of $4.73					Target EPS of $5.25				Maximum EPS of $5.62
Named Executive Officer	2010 Base Salary		% of Base			MIP Payment		% of Base		MIP Payment		% of Base		MIP Payment
Michael B. McCallister	$	1,025,000		75	%	$	768,750		150%	$	1,537,500		200%	$	2,050,000
James H. Bloem	$	550,000		50	%	$	275,000		100%	$	550,000		150%	$	825,000
James E. Murray	$	676,000		50	%	$	338,000		100%	$	676,000		150%	$	1,014,000
V. Rajamannar Madabhushi	$	542,500		50	%	$	271,250		100%	$	542,500		150%	$	813,750
Bonita C. Hathcock	$	475,000		50	%	$	237,500		100%	$	475,000		150%	$	712,500

Our EPS for 2010 increased to $6.47, resulting in performance above the maximum level (approximately 23% above the target EPS of $5.25). Payments for the Named Executive Officers consequently reached the maximum level and ranged from 150%-200% of annual base earnings, as provided in the table above. See the Summary Compensation Table in the Executive Compensation section of this proxy statement for the specific amounts paid to the Named Executive Officers.

Equity Awards

In 2010, we used only stock options to compensate our Named Executive Officers, an equity compensation vehicle which we believe provides an appropriate balance between inducement, retention and motivation of executives and the creation of stockholder value. Equity-based compensation provides a vital link between the long-term results achieved for our stockholders and the financial rewards provided to our Named Executive Officers. We use stock options to motivate and challenge our executives to achieve positive returns for our stockholders by placing key elements of executive compensation at risk, with a secondary benefit of retention derived from vesting conditions imposed on the stock options and a non-compete covenant embedded in our stock option agreements.

All stock options are granted at meetings of our Board of Directors, or of the Committee. The Committee, with the assistance of Cook and management, determines the aggregate amounts and terms of stock options to be awarded to each Named Executive Officer following a review of stock programs and competitive practices at peer companies, along with an analysis of equity cost.

The value of each award reflects the executive’s level of responsibility and contributions to the Company’s performance. The Committee reviews and approves the dollar value of the equity award to be granted to each Named Executive Officer based on the internal and external benchmarking of total compensation discussed above. The number of Shares subject to the award is then determined using the fair market value of the option on the grant date, which, in the case of stock options, is determined by the Black-Scholes methodology.

With respect to external benchmarking, the Committee uses competitive market data as a starting point for its analysis of the compensation of the Company’s Named Executive Officers. The companies in our peer group utilize a mix of stock options, restricted stock, performance shares/units, and cash incentive plans for long-term incentive compensation. The following summarizes the results of the Committee’s external benchmarking with respect to long-term incentive compensation:


	Market ($000)¹
Named Executive Officer	25^th Percentile		Median		75^th Percentile		Humana² ($000)		Percentile of Market²
Chief Executive Officer		6,180		7,500		9,981		2,800		10	^th
Second Highest-Paid Executive		2,487		3,636		5,076		1,100		11	^th
Third Highest-Paid Executive		1,599		2,072		2,675		900		13	^th
Fourth Highest-Paid Executive		1,013		1,800		2,008		700		10	^th
Fifth Highest-Paid Executive		618		1,226		1,645		700		29	^th

Represents 2009 long-term incentive compensation, as used by the Committee in external benchmarking to set 2010 compensation.

Represents actual 2010 long-term incentive compensation, as reported in this proxy statement.

The stockholder-approved “2003 Stock Incentive Plan” provides that all stock options are granted at the average of the high and low stock trading price on the NYSE composite tape (fair market value) on the date of grant. For the last several years, the annual Company-wide option and restricted share awards have been made at the Committee meeting held in the first quarter of the year, following the announcement of our annual results for the prior year. The Board and Committee schedules are determined more than a year in advance. In addition to the annual grant, options and/or restricted stock are granted for promotions, new hires, retention purposes, or increases in responsibilities at the six regularly scheduled meetings of the Board or the Committee.

2010 Awards

In 2010, our Named Executive Officers were awarded stock options designed, in conjunction with other components of total compensation, to be competitive in relation to the market median, as described above.

The table that follows this report entitled, “Grants of Plan-Based Awards,” shows the number of stock options awarded to each Named Executive Officer and the aggregate grant date fair value for each award. The table that follows this report entitled, “Summary Compensation Table,” reports the aggregate grant date fair value of awards for each fiscal year, in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, “Compensation — Stock Compensation.”

The table that follows this report entitled, “Outstanding Equity Awards at Fiscal Year-End,” lists the options and restricted stock outstanding by grant date and price for each Named Executive Officer. These awards reflect the years of service of each Named Executive Officer and the frequency with which an individual exercises the options granted.

The Committee routinely reviews the outstanding equity information for each executive officer to examine the value of prior compensation decisions. The value of outstanding equity awards may be taken into account in establishing the level of equity awards to be made.

Retirement Plans

During 2010, we had two retirement plans covering our Named Executive Officers:

•

The Humana Retirement Savings Plan, (available to all associates) is a qualified, 401(k) plan (and during 2010 was a combined retirement plan and 401(k) plan) providing for both participant and Company contributions; and

•

The Humana Retirement Equalization Plan (formerly known as the Supplemental Executive Retirement and Savings Plan), which we refer to as the HREP, is a nonqualified plan that restores Company contributions to the Humana Retirement Savings Plan, which are restricted by Internal Revenue Code, or IRC, compensation limits.

Effective January 1, 2011, the Committee has also approved and adopted the Humana Inc. Deferred Compensation Plan, or the Deferred Compensation Plan, an unfunded plan maintained for the purpose of providing deferred compensation to a select group of highly compensated executives. This plan was adopted to provide these executives with a vehicle to defer a portion of their annual performance-based cash income for purposes of personal savings and tax planning.

The Deferred Compensation Plan provides that each participant may elect to defer the payment of up to 80% of his or her performance based compensation pursuant to annual incentive plans that we sponsor, subject to certain limitations provided in the plan. Participants’ deferral accounts are credited with a notional interest rate as determined by the Committee from time to time or notional gains and losses based on hypothetical investments selected by the participant among those that the Committee may make available from time to time under the Deferred Compensation Plan. Other than the notional interest and deemed investment returns, no Company contributions will be made under the Deferred Compensation Plan, and participants are vested at all times in the amounts deferred under the Deferred Compensation Plan. Distributions from the Deferred Compensation Plan are generally made, depending on each participant’s election, on a date elected by the participant, the date of a participant’s termination of employment, or the earlier of the two. Earlier distributions are also made upon a change in control of the Company or a participant’s death.

For additional details on our retirement plans see the table entitled “Nonqualified Deferred Compensation” which covers the HREP, and the section entitled “Potential Payments Upon Termination or Change in Control,” which discusses all of our retirement plans.

We believe that our retirement programs will provide our executives with competitive levels of income replacement upon retirement, reflecting the executive’s years of service with our Company, and provide us with a package that will both attract and retain key talent in the Company.

Severance/Change in Control

Mr. McCallister

On May 16, 2008, we entered into an amended and restated employment agreement with Michael B. McCallister, our President and Chief Executive Officer, which we refer to as the McCallister Employment Agreement. The McCallister Employment Agreement was renewed on January 1, 2011 for a one year period, and will be automatically renewed for additional successive periods of one year unless terminated by either party upon sixty days written notice. Mr. McCallister is the only executive officer who would be entitled to a tax gross-up payment in the event he is subject to an excise tax pursuant to Section 4999 of the Internal Revenue Code on “parachute payments” to which he is entitled to receive in connection with a Change in Control. The effect of this gross-up would be to maintain Mr. McCallister in the same financial position that he would have been in had no tax under Section 4999 of the Code been imposed. Notwithstanding the above, in the event that a reduction of Mr. McCallister’s Change in Control payments by 10% or less, but not more than $200,000, would cause none of the payments to be considered “excess parachute payments,” Mr. McCallister would not be entitled to a gross-up payment and the payments would be reduced to the extent necessary so that none of the payments would be considered “excess parachute payments.”

We believe that the excise tax gross-up provided for in the McCallister Employment Agreement is appropriate in order to avoid a possible discriminatory impact of the excise tax rules. We believe it appropriate for Mr. McCallister to retain the same payment that he would have retained had the excise tax not been imposed, allowing him to recognize the full intended economic benefit of the severance provisions of the McCallister Employment Agreement. However, in March 2009, the Committee determined that the Company will not enter into any new or materially amended agreements with executive officers that include excise tax gross-up provisions with respect to payments contingent upon a change in control. This determination will have no effect on the McCallister Employment Agreement unless that agreement is materially modified or amended.

For a more detailed discussion of the McCallister Employment Agreement and the benefits payable to Mr. McCallister in the event of a Change in Control of the Company, please refer to footnote 1 to the table entitled, “Potential Payments Upon Termination or Change in Control of the Company.”

Other Named Executive Officers

We operate in a highly competitive, complex and consolidating industry. Therefore, we have entered into Change in Control severance agreements, which we refer to as CIC Agreements, with all executive officers, including our Named Executive Officers (except for Mr. McCallister, whose severance is governed by the McCallister Employment Agreement, as described above). Pursuant to the CIC Agreements, for a two-year period following a Change in Control of the Company, certain benefits will be provided to these executives upon termination (whether involuntary or due to a resignation as a result of a change in responsibilities, location, or compensation).

Under the CIC Agreements, these individuals would be entitled to receive severance pay which generally is determined by multiplying the sum of each individual’s annual base salary and the maximum target incentive compensation payable to him or her, by a multiple ranging from one to one and one-half. Each of the Named Executive Officers would receive a payment in the amount of one and one-half times the sum of their base salary and maximum target incentive payment in the event of a qualified termination of employment within a two year period following a Change in Control. In addition, in the event of a Change in Control, generally all unvested Company options and all unvested restricted stock immediately vest. Health, life and disability insurance coverage would be provided, generally for a two-year period following termination unless the participant dies or is eligible for comparable coverage from another source.

All of the CIC Agreements (including the Change in Control provisions of the McCallister Employment Agreement) provide for a “double trigger” (i.e., two events must occur before any severance payment is made: the executive officer must be terminated or constructively terminated as described in the CIC Agreement, and such termination must have occurred after the Company entered into a definitive agreement, the consummation of which would result in a Change in Control, or the Change in Control has occurred). The Committee opted for a “double-trigger,” rather than providing for payments solely on the basis of a Change in Control, because we believe this to be more consistent with the purpose of encouraging the continued employment of our Named Executive Officers following a Change in Control. In the health benefits industry, mergers and acquisitions resulting in a Change in Control are common. We believe that the CIC Agreements for our Named Executive Officers allow our executives to devote their time to the duties of running our Company without being distracted by a potential Change in Control. Furthermore, the CIC Agreements have a significant retention value to the Company with respect to our Named Executive Officers. We believe that the severance multiples provided for in the CIC Agreements are appropriate because they are comparable to similarly situated senior executives across U.S. industries. For a discussion of the payments each of our Named Executive Officers would receive in the event of a termination of employment in connection with a Change in Control or in the event of a termination of employment in other circumstances, see the section entitled “Potential Payments Upon Termination or Change in Control of the Company” that follows this report.

Perquisites

We also provide certain other benefits to our Named Executive Officers as part of our competitive compensation program. The amounts expended through these programs are explained in detail in the footnotes that follow the Summary Compensation Table. As noted, not all Named Executive Officers participate in each benefit. The benefits include limited personal use of Company aircraft for the Named Executive Officers, an annual physical, a matching charitable gift program, supplemental life insurance benefits, financial planning assistance, commuting and local housing allowances, and club memberships (used for business purposes; if from time to time used for personal reasons, the executive must reimburse the Company).

Other Compensation Considerations

Compensation Mix

The key elements of direct executive compensation — salary, cash incentives, and equity awards — are designed to place a substantial portion of executive pay at risk. While salaries are intended to be assured, the other two elements only have value if certain key performance results are achieved. Cash incentives are paid only upon the achievement of defined financial objectives. Grants of stock options only have value to executives if the value of the Company

increases through common stock price appreciation and any applicable vesting conditions are satisfied, providing a retention benefit to the Company.

We believe that having a larger measure of key pay elements at risk motivates and challenges our executives to achieve positive returns for our stockholders, reflecting our philosophy that, in addition to being market-based, the total compensation of our Named Executive Officers should be competency-paced and contribution-driven. The chart and table below illustrate the relative mix of pay at risk in 2010 for our Named Executive Officers, comprised of base salary, the potential value of the target annual cash incentive earned in 2010 though paid in 2011, and the aggregate grant date fair value of the 2010 grants of stock options (based on a Black-Scholes valuation at the time of grant). See the tables entitled “Summary Compensation Table” and “Grants of Plan-Based Awards” that follow this report for greater detail.

LOGO


				*Compensation At-Risk-2010*						Total
Named Executive Officer	Base Salary			Annual Incentive			Long-Term Incentive (1)			Total
Michael B. McCallister		17	%		35	%		48	%		100%
James H. Bloem		27	%		40	%		34	%		100%
James E. Murray		24	%		36	%		39	%		100%
V. Rajamannar Madabhushi		24	%		36	%		40	%		100%
Bonita C. Hathcock		25	%		38	%		37	%		100%
Average:		22	%		36	%		42	%		100%

(1)

Includes aggregate grant date fair value of stock option awards.

Clawbacks

In 2009, the Committee adopted a clawback policy to supplement those provisions set forth in the Sarbanes-Oxley Act of 2002 and related regulations.

The clawback policy:

•

applies to all executive officers;

•

permits the recoupment of compensation in the event of a material restatement of the Company’s financials as a result of the misconduct or fraud on the part of the executive officer;

•

permits the recoupment of all cash-based incentives earned by the executive officer involved in the misconduct or fraud during the twelve month period following the first public issuance of the financials that are the subject of the restatement; and

•

grants discretion to the Committee with respect to the application of the clawback provision.

Stock Ownership Guidelines

The Board believes that linking a significant amount of an executive’s current and potential future net worth to the Company’s success, as reflected in the stock price, gives the executive a stake similar to that of our stockholders. Consistent with this philosophy, in 2005 the Board of Directors established stock ownership guidelines for the Company’s executive officers.

Expressed as a multiple of base salary, minimum levels of Humana common stock ownership, excluding shares held in retirement accounts and unexercised stock options, are:


• Chief Executive Officer:		Five times base salary

• Direct reports to the Chief Executive Officer (including all Named Executive Officers):		Three times base salary

• All other Section 16 officers:		Two times base salary

In 2009, the Committee added a further condition to the stock ownership guidelines to provide that any shares owned by an executive officer (or shares received upon the exercise of options or vesting of restricted stock, less an amount to cover current tax liabilities) must be held by the executive officer until the relevant multiple is reached and thereafter maintained.

In 2010, the Committee granted a one-time waiver of the stock ownership guidelines for Mr. Rajamannar in connection with certain relocation expenses.

Compensation Policies Based on Certain Tax Rules

Section 162 (m) of the Internal Revenue Code includes potential limitations on the deductibility of compensation in excess of $1 million paid to the Named Executive Officers (other than our Chief Financial Officer) serving on the last day of the year. Based on regulations issued by the IRS, we have taken the necessary actions to provide for the deductibility of payments under the Management Incentive Plan, including submitting the Management Incentive Plan to our stockholders for approval. The Management Incentive Plan was approved by our stockholders in April 2008, and became effective as of January 1, 2008, for awards earned during the five-year period ending December 31, 2012.

We view preserving tax deductibility as a contributing objective in establishing executive compensation. In specific instances we have authorized — and may continue to authorize from time to time — compensation arrangements that are not fully tax deductible, but which promote other important objectives of the Company. The Committee believes that all compensation paid for 2010 will be deductible for federal income tax purposes, except $74,646.

The Patient Protection and Affordable Care Act amended Section 162(m) to provide that, in general, for compensation which is paid or would otherwise become deductible after 2012, no deduction will be allowed to the extent total compensation for an individual exceeds $500,000 for the year. This limitation will apply to most individuals compensated by a health insurance provider such as Humana, and when effective will replace the limitation described above. This new rule includes compensation earned for services after 2009 but which is paid or would otherwise become deductible after 2012.

The American Jobs Creation Act of 2004 materially changed the tax rules applicable to nonqualified deferred compensation arrangements, codified in Section 409A of the Internal Revenue Code (“Section 409A”). Section 409A provides that compensation deferrals under nonqualified deferred compensation plans, like the Company’s Supplemental Plan, are currently counted as gross income for all taxable years to the extent that the amounts are not subject to a substantial risk of forfeiture and have not previously been included in gross income, unless certain requirements are met. We believe that the HREP, the CIC Agreements, the Management Incentive Plan, the Deferred Compensation Plan, and our severance program are in compliance with the statutory provisions currently in effect so that any compensation payable under the plans is properly deferred.

Organization & Compensation Committee

All of the members of the Committee are independent, as defined by the NYSE, the SEC and the IRS. The current members of the Committee are Kurt J. Hilzinger, Chairman, W. Roy Dunbar, William J. McDonald, and Marissa T. Peterson. During 2010, the Committee met eight times.

The Committee operates pursuant to a charter which is reviewed and approved each year. There were no changes to the Committee’s charter during 2010. The full text of the Committee charter may be viewed on our corporate website. From the www.humana.com website, click on “Investor Relations,” then click on “Corporate Governance” on the left side of the page, and then you will see a link to the Committee Charters on the left side of the page.

Compensation Consultants

Since August 2004, the Committee has retained Cook as its independent compensation consultant. Cook’s role is to ensure that the Committee has objective information needed to make informed decisions in the best interests of stockholders based on compensation trends and practices in public companies, and to provide assistance to the Committee in evaluating our executive compensation policy and programs. As the Committee’s independent consultant, Cook advises on the interpretation of various rules and regulations impacting executive compensation, reviews with the Committee management’s proposals and initiatives, provides certain data on competitive pay levels, and undertakes special projects on behalf of the Committee. In 2010, a representative of Cook attended all of the Committee meetings, 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, Cook. For services provided to the Committee in 2010, we paid Cook approximately $175,000.

We have a practice that Cook, as an independent compensation consultant, may not provide any other services to the Company without the prior authorization of the Committee. In 2010, Cook provided no additional services to the Company.

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, 2010 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

Kurt J. Hilzinger, Chairman

W. Roy Dunbar

William J. McDonald

Marissa T. Peterson

EXECUTIVE COMPENSATION

Executive Compensation of the Company

The following Summary Compensation Table shows the compensation earned for the time period served as an executive officer during the last fiscal year by: (1) our Chairman and Chief Executive Officer, (2) our Chief Financial Officer, and (3) each of the three other highest compensated executive officers of the Company serving at December 31, 2010 (collectively, the “Named Executive Officers”).

As described in our Compensation Discussion and Analysis, for each Named Executive Officer, base salary represented approximately 22%; the potential value of the annual cash incentive in 2010 represented approximately 36% and the aggregate fair value of the 2010 grant of stock options and restricted stock represented approximately 42% of the total compensation as listed below, based on the aggregate fair value of equity awards granted to the Named Executive Officers in 2010.

Summary Compensation Table


Name and Principal Position (a)	Year (b)		Salary ($) (c)		Bonus ($) (d)		Stock Awards ($) (e)(1)		Option Awards($) (f)(1)		Non-Equity Incentive Plan Compensation ($) (g)(2)		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (h)		All Other Compensation ($) (i)(3)		Total ($) (j)
Michael B. McCallister, Chairman & Chief Executive Officer (4)		2010		1,026,182		—		—		2,500,097		2,052,364		—		569,274		6,147,917
		2009		1,025,000		—		—		3,393,474		1,793,750		—		297,228		6,509,452
		2008		1,017,308		—		—		3,500,002		0		—		668,104		5,185,414
James H. Bloem, Senior Vice President & Chief Financial Officer & Treasurer		2010		550,057		—		—		700,019		825,085		—		170,398		2,245,559
		2009		545,000		—		—		1,018,047		681,250		—		81,670		2,325,967
		2008		539,665		—		—		1,049,990		0		—		169,624		1,759,279
James E. Murray, Chief Operating Officer		2010		676,087		—		—		1,100,038		1,014,131		—		212,944		3,003,201
		2009		670,000		—		—		1,502,824		837,500		—		125,466		3,135,790
		2008		663,846		—		—		1,549,993		0		—		245,071		2,458,910
V. Rajamannar Madabhushi, Senior Vice President & Chief Innovation and Marketing Officer (5)		2010		516,587(5)		—		—		900,038		774,880		—		147,835		2,339,341
		2009		342,466		218,667		587,266		1,136,660		428,082		—		95,193		2,808,334
		2008		—		—		—		—		—		—		—		—
Bonita C. Hathcock, Senior Vice President & Chief Human Resources Officer		2010		479,977		—		—		700,019		719,966		—		163,990		2,063,952
		2009		475,000		—		—		872,603		0		—		97,712		1,445,315
		2008		471,154		—		—		899,997		675,000		—		174,903		2,221,054

(1)

The amounts listed under the columns “Stock Awards” and “Option Awards” in the Summary Compensation Table above disclose the aggregate grant date fair value of stock awards and options awards granted in the fiscal year, as well as in prior periods, calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, “Compensation — Stock Compensation.” Note 13 to the Notes to Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2010, describes the assumptions used to determine the grant date fair value for overall Company options. The assumptions used for valuing the Named Executive Officers’ options as a group, applying the Black-Scholes methodology, were as follows:


	2010			2009			2008
Weighted Average Fair Value at Grant Date	$	19.26		$	14.18		$	21.93
Expected Option Life (Years)		4.9			4.9			5.4
Expected Volatility		44.3	%		38.9	%		28.1	%
Risk Free Interest Rate		2.53	%		1.94	%		3.0	%
Dividend Yield		N/A			N/A			N/A

(2)

For a discussion of the potential ranges that could have been paid in 2010 under the Management Incentive Plan, see the Grants of Plan-Based Awards table.

(3)

The amounts listed under the column entitled “All Other Compensation” in the Summary Compensation Table above include: Company contributions to the Humana Retirement Equalization Plan (formerly the Supplemental Executive Retirement & Savings Plan) and the Humana Retirement Savings Plan; personal use of Company aircraft for the Named Executive Officers and in some cases members of their families; a matching charitable gift program; life insurance benefits; and financial planning assistance. In addition, we pay for club memberships for certain Named Executive Officers. These are used for business purposes, and if used from time to time for personal reasons, the Named Executive Officer must reimburse us for any expense.

Company Contributions to the Humana Retirement Equalization Plan (this amount is also listed in the Nonqualified Deferred Compensation table):


Michael B. McCallister	$	296,118
James H. Bloem	$	113,426
James E. Murray	$	145,888
V. Rajamannar Madabhushi	$	24,488
Bonita C. Hathcock	$	95,303

Personal Use of Company Aircraft: The costs of personal use of Company aircraft was based on the aggregate incremental costs to the Company, including the lost tax deduction to the Company and personal deadhead hours.


Michael B. McCallister	$	212,333
James H. Bloem	$	0
James E. Murray	$	29,616
V. Rajamannar Madabhushi	$	27,236
Bonita C. Hathcock	$	0

Matching Charitable Contributions:


Michael B. McCallister	$	0
James H. Bloem	$	20,000
James E. Murray	$	500
V. Rajamannar Madabhushi	$	0
Bonita C. Hathcock	$	11,100

Financial Planning:


Michael B. McCallister	$	19,503
James H. Bloem	$	0
James E. Murray	$	0
V. Rajamannar Madabhushi	$	0
Bonita C. Hathcock	$	19,456

Company Contributions to the Humana Retirement Savings Plan:


Michael B. McCallister	$	23,903
James H. Bloem	$	23,903
James E. Murray	$	23,903
V. Rajamannar Madabhushi	$	8,575
Bonita C. Hathcock	$	23,903

Other (Includes life insurance, reimbursement for relocation expenses, security systems, physicals, commuting and housing allowances, and guest expenses while on business travel):


Michael B. McCallister	$	17,417
James H. Bloem	$	13,069
James E. Murray	$	13,037
V. Rajamannar Madabhushi	$	87,536
Bonita C. Hathcock	$	14,228

(4)

On May 16, 2008, we entered into an amended and restated employment agreement with Michael B. McCallister, or Mr. McCallister, which we refer to as the McCallister Employment Agreement, pursuant to which Mr. McCallister serves as our Chairman and Chief Executive Officer. The McCallister Employment Agreement was renewed on January 1, 2011, for a one-year period, and will be automatically renewed for additional successive periods of one year unless terminated by either party upon sixty days written notice prior to December 31 of each year. Pursuant to the McCallister Employment Agreement, Mr. McCallister will be paid an annual base salary of not less than $1,025,000 and will be eligible to participate in all benefit plans and programs made available by us to our employees, including participation in bonus and incentive compensation plans and programs on terms determined by the Organization & Compensation Committee. The McCallister Employment Agreement also provides for payments in the event Mr. McCallister terminates his employment. For a description of these payment provisions see the section entitled “Potential Payments Upon Termination or Change in Control of the Company” in this Proxy Statement.

(5)

Mr. Rajamannar was hired by the Company during 2009, and therefore received no compensation in 2008. As previously disclosed, on August 26, 2010 the Committee approved an increase of $37,500 in Mr. Rajamannar’s base salary from $505,000 to $542,500, prorated for the remainder of 2010.

Grants of Plan-Based Awards

The following table provides information about stock options and restricted stock granted in 2010 under our Amended and Restated 2003 Stock Incentive Plan, which we refer to as the 2003 Stock Plan, and the range of potential payments in 2010 under the Humana Inc. Executive Management Incentive Compensation Plan, which we refer to as the Management Incentive Plan. A discussion of the features of each type of award is included in the footnotes that follow the table.


Name	Grant Date		Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1)						Estimated Future Payouts Under Equity Incentive Plan Awards N/A			All Other Stock Awards: Number of Shares of Stock or Units (#)	All Other Option Awards: Number of Securities Underlying Options (#)(2)		Exercise or Base Price of Option Awards ($/Sh)(3)		Closing Market Price on Grant Date ($/Sh)		Grant Date Fair Value of Stock and Option Awards ($)
Name			Threshold ($)		Target ($)		Maximum ($)		Threshold ($)	Target ($)	Maximum ($)
(a)	(b)		(c)		(d)		(e)		(f)	(g)	(h)	(i)	(j)		(k-1)		(k-2)		(l)
Michael B. McCallister		01/01/2010		768,750		1,537,000		2,050,000
		02/18/2010												129,830		46.40		46.20		2,500,097
James H. Bloem		01/01/2010		275,000		550,000		825,000
		02/18/2010												36,352		46.40		46.20		700,019
James E. Murray		01/01/2010		338,000		676,000		1,014,000
		02/18/2010												57,125		46.40		46.20		1,100,038
V. Rajamannar Madabhushi		01/01/2010		271,250		542,500		813,750
		02/18/2010												46,739		46.40		46.20		900,038
Bonita C. Hathcock		01/01/2010		237,500		475,000		712,500
		02/18/2010												36,352		46.40		46.20		700,019

(1)

The actual payment of incentive compensation is shown in the Summary Compensation Table. For the EPS objective, there are threshold, target and maximum achievement payout levels that impact the final value of the award. Performance below the threshold yields no award. Eighty-six percent of the EPS goal must be achieved to reach its threshold payment; the threshold pays at approximately 50 percent of salary for all Named Executive Officers except Mr. McCallister whose threshold payment is 75 percent of salary. See the Compensation Discussion and Analysis contained herein for a discussion of incentive compensation for the Named Executive Officers. The Committee has sole discretion to determine whether to actually pay the entire permissible award, to decrease an award, or to defer payment of any award. The Committee is also authorized to establish additional conditions and terms of payment for awards, including the achievement of other or additional financial, strategic or individual goals, which may be objective or subjective, as it deems appropriate. The Committee may not waive the basic performance targets as to the business criteria chosen for any performance period.

(2)

The above options were all granted pursuant to the 2003 Stock Plan. The options are incentive stock options to the extent allowed by regulation and the balance are nonqualified stock options. The options vest and become exercisable in equal annual one-third installments from the date of grant. The above options expire seven years from the date of grant. In the event of a Change in Control of the Company, as defined in the 2003 Stock Plan, all outstanding stock options become fully vested and immediately exercisable in their entirety. In addition, during the 60-day period following the Change in Control, any stock option (or portion thereof) may generally be surrendered for cancellation for a payment of the difference between the adjusted fair market value and option price as more fully described in the 2003 Stock Plan. (See the section entitled “Potential Payments Upon Termination or Change in Control of the Company” herein for a quantification of the acceleration of stock options upon a Change in Control.) The exercise price may be paid in cash or, at the discretion of the Organization & Compensation Committee, in Shares valued at the fair market value on the date of exercise or any combination thereof. Under the 2003 Stock Plan, the Board may not reduce the exercise price for options or stock appreciation rights by repricing or replacing any option award. The options were granted by the Organization & Compensation Committee at a regularly scheduled meeting thereof. All Named Executive Officers equity awards contain a non-compete provision.

(3)

Options under the 2003 Stock Plan cannot be granted at less than the Fair Market Value. The Fair Market Value, as defined in the 2003 Stock Plan, is the average of the highest and lowest reported sales prices of our Shares in transactions reported on the NYSE composite tape on the grant date. The 2003 Stock Plan was approved by our Board of Directors and by our stockholders.

Outstanding Equity Awards at Fiscal Year-End

The following table provides information on the stock option and restricted stock holdings of our Named Executive Officers as of December 31, 2010.


			Option Awards							Stock Awards
Name (a)	Number of Securities Underlying Unexercised Options (#) Exercisable (b)		Number of Securities Underlying Unexercised Options (#) Unexercisable (c)		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) (d)	Option Exercise Price ($/Sh) (e)		Option Expiration Date (f)		Number of Shares or Units of Stock That Have Not Vested (#) (g)		Market Value of Shares or Units of Stock That Have Not Vested ($) N/A (h)			Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) N/A (i)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) N/A (j)
Michael B. McCallister		250,000		—			32.7000		02/24/12⁽³⁾
		150,000		—			53.9600		02/23/13⁽⁷⁾
		129,758		—			62.1000		02/22/14⁽⁴⁾
		106,390		53,195			69.4750		02/21/15⁽¹⁾
		75,253		150,506			41.8300		02/19/16⁽²⁾
		—		129,830			46.4000		02/18/17⁽¹⁰⁾
James H. Bloem		26,666		—			32.7000		02/24/12⁽⁸⁾
		38,830		—			53.9600		02/23/13⁽⁷⁾
		45,415		—			62.1000		02/22/14⁽⁴⁾
		31,917		15,958			69.4750		02/21/15⁽¹⁾
		22,576		45,152			41.8300		02/19/16⁽²⁾
		—		36,352			46.4000		02/18/17⁽¹⁰⁾
James E. Murray		110,000		—			32.7000		02/24/12⁽³⁾
		84,720		—			53.9600		02/23/13⁽⁷⁾
		13,686		—			9.2600		03/13/13⁽⁵⁾
		67,042		—			62.1000		02/22/14⁽⁴⁾
		47,116		23,557			69.4750		02/21/15⁽¹⁾
		33,326		66,653			41.8300		02/19/16⁽²⁾
		—		57,125			46.4000		02/18/17⁽¹⁰⁾
V. Rajamannar Madabhushi		—		66,667			29.5300		04/28/16⁽⁶⁾
											20,000		1,094,800	⁽⁹⁾
		—		46,739			46.4000		02/18/17⁽¹⁰⁾
Bonita C. Hathcock		31,770		—			53.9600		02/23/13⁽⁷⁾
		38,062		—			62.1000		02/22/14⁽⁴⁾
		27,358		13,678			69.4750		02/21/15⁽¹⁾
		19,350		38,702			41.8300		02/19/16⁽²⁾
		—		36,352			46.4000		02/18/17⁽¹⁰⁾

(1)

Options granted on 2/21/08 pursuant to the Company’s 2003 Stock Incentive Plan, vesting ratably over three years, with full vesting on 2/21/11.

(2)

Options granted on 2/19/09 pursuant to the Company’s 2003 Stock Incentive Plan, vesting ratably over three years, with full vesting on 2/19/12.

(3)

Options granted on 2/24/05 pursuant to the Company’s 2003 Stock Incentive Plan, fully vested.

(4)

Options granted on 2/22/07 pursuant to the Company’s 2003 Stock Incentive Plan, fully vested.

(5)

Options granted on 3/13/03 pursuant to the Company’s 1996 Stock Incentive Plan, fully vested.

(6)

Options granted on 4/28/09 pursuant to the Company’s 2003 Stock Incentive Plan, vesting ratably over three years, with full vesting on 4/28/12.

(7)

Options granted on 2/23/06 pursuant to the Company’s 2003 Stock Incentive Plan, fully vested.

(8)

Options granted on 2/24/05 pursuant to the Company’s 1996 Stock Incentive Plan, fully vested.

(9)

Based on the closing stock price on December 31, 2010 of $54.74. Restricted stock awards granted, with respect to Mr. Rajamannar on 4/28/09, will fully vest three years from the date of grant.

(10)

Options granted on 2/18/10 pursuant to the Company’s 2003 Stock Incentive Plan, vesting ratably over three years, with full vesting on 2/18/13.

Option Exercises and Stock Vested

The following table provides information on the stock options exercised by the Named Executive Officers in 2010.


	Option Awards				Stock Awards
Name (a)	Number of Shares Acquired on Exercise (#) (b)		Value Realized on Exercise ($)(1) (c)		Number of Shares Acquired on Vesting (#)(2) (d)		Value Realized on Vesting ($) (e)
Michael B. McCallister		—		—		—		—
James H. Bloem		—		—		—		—
James E. Murray		—		—		—		—
V. Rajamannar Madabhushi		33,333		564,994		—		—
Bonita C. Hathcock		5,195		189,279		—		—

(1)

The Value Realized on Exercise is based on the difference between the Fair Market Value of our common stock as reported by the New York Stock Exchange Composite System and the exercise price of the options on the date of exercise. Options exercised may or may not have been sold by a particular Named Executive Officer, and the inclusion in this table of such information should not be understood to imply that such Named Executive Officer is or was in actual receipt of such monies.

(2)

No restricted stock vested for the Named Executive Officers in 2010.

Nonqualified Deferred Compensation

The following table and narrative that follows provides information on the Humana Retirement Equalization Plan contributions and earnings for the Named Executive Officers in 2010.


Name (a)	Executive Contributions in Last FY ($) (b)		Registrant Contributions in Last FY ($) (c)(1)		Aggregate Earnings in Last FY ($) (d)		Aggregate Withdrawals/ Distributions ($) (e)		Aggregate Balance at Last FYE ($) (f)
Michael B. McCallister		—		296,118		1,025,185		—		9,586,081
James H. Bloem		—		113,426		123,431		—		1,310,159
James E. Murray		—		145,888		444,509		—		3,264,018
V. Rajamannar Madabhushi		—		24,488		0		—		24,488
Bonita C. Hathcock		—		95,303		153,642		—		1,470,166

(1)

The amounts listed above under Registrant Contributions in Last Fiscal Year (column c) are also included under the All Other Compensation column of the Summary Compensation Table herein.

In 2010, we had a qualified combined retirement plan and 401(k) plan (which effective January 1, 2011 became only a 401(k) plan), the Humana Retirement Savings Plan, and a nonqualified, unfunded, defined contribution plan, the Humana Retirement Equalization Plan

(formerly known as the Supplemental Executive Retirement & Savings Plan). The Internal Revenue Code imposes limitations on the contributions that may be made to a qualified plan, like our Humana Retirement Savings Plan. In 2010, once an individual is paid $245,000 in compensation, both individual and Company contributions to the Pretax Savings Account of the Humana Retirement Savings Plan must cease. Any Company matching contributions that would have been made to the Pretax Savings Account of the Humana Retirement Savings Plan are credited to the Pretax Savings Account of the Humana Retirement Equalization Plan.

Additionally, in 2010, any earnings over $245,000 are excluded when determining retirement benefits as a percentage of income. Any Company contributions that would have been made to the retirement account of the Humana Retirement Savings Plan due to this limitation are credited to the Retirement Account of the Humana Retirement Equalization Plan.

The benefits accrued under the Humana Retirement Equalization Plan are those Company contributions that cannot be made to the qualified Humana Retirement Savings Plan because of the IRS limitations. The maximum percentage of compensation (base salary and incentive compensation) that can be contributed by a highly compensated employee to the Humana Retirement Savings Plan is 35% for 2010. In 2010, the Company matched 100% of the first 1%, plus 50% of the next 5% of employee salary deferrals. Effective January 1, 2011, the Company matches 125% of the first 6% of employee salary deferrals. In addition, for 2010, the Company made a contribution in an amount equal to 4% of eligible compensation, plus 4% of the amount of eligible compensation that is in excess of the Social Security wage base. This retirement contribution ceased to accrue effective January 1, 2011. Accruals under the Humana Retirement Equalization Plan, which is unfunded, are deemed to be invested in the accounts selected by the participants. The Humana Retirement Equalization Plan allows daily rebalancing of funds and allows direction of investment elections. Benefits in the Humana Retirement Equalization Plan, as directed by the participants, are distributable upon termination of employment, death, total disability, retirement or a Change in Control of the Company. Distribution of benefits may take the form of a lump sum, periodic installments not to exceed twenty (20) years, or (solely with respect to distributions elected on or before December 31, 2010) an annuity — if the Humana Retirement Equalization Plan balance exceeds $100,000.

All of the Named Executive Officers eligible for a contribution under the Humana Retirement Equalization Plan in 2010 have elected a lump sum payment upon termination.

Potential Payments Upon Termination or Change in Control of the Company

The Named Executive Officers would each receive certain payments upon termination from the Company which vary in amount depending on the reason for termination. Each Named Executive Officer would also receive a specified payment in connection with a Change in Control of the Company. The table below provides dollar amounts for all potential payments that would be paid by us to each Named Executive Officer under various scenarios involving either a termination or a Change in Control. The amounts disclosed assume the Named Executive Officer’s termination under the various scenarios occurred on December 31, 2010. The payments to our Named Executive Officers are governed by the various agreements or arrangements described in the footnotes to the table (with the exception of Mr. McCallister, whose payments are governed by the McCallister Employment Agreement). The timing of the payments described below to the Named Executive Officers may also be subject to the provisions of Section 409A which may delay payment.


Name and Form of Payment	Voluntary Termination (a)		Involuntary Termination without Cause (b)		Involuntary Termination for Cause (c)		Retirement(6) (d)		Death or Disability(7) (e)		Change in Control(4) (f)
Michael B. McCallister (1)
• Severance	$	1,055,750	$	2,111,500	$	0	$	0	$	2,111,500	$	6,598,438
• Life, Health & Other Benefits (7)		22,340		22,340		0		22,340		22,340		46,913
• Stock Options (accelerated) (3)		0		3,030,019		0		0		3,030,019		3,030,019
• Excise Tax Gross up (8)		0		0		0		0		0		0

Subtotal: Termination Related Payments	$	1,078,090	$	5,163,859	$	0	$	22,340	$	5,163,859	$	9,675,370

• Stock Options (vested) (3)		1,091,895		1,091,895		0		1,091,895		1,091,895		1,091,895
• Supplemental Retirement Plan (5)		9,586,081		9,586,081		9,586,081		9,586,081		9,586,081		9,586,081

Subtotal: Currently Vested Amounts	$	10,677,976	$	10,677,976	$	9,586,081	$	10,677,976	$	10,677,976	$	10,677,976

Mr. McCallister’s Totals	$	11,756,066	$	15,841,835	$	9,586,081	$	10,700,316	$	15,841,835	$	20,353,346

James H. Bloem
• Severance (2)	$	0	$	849,750	$	0	$	0	$	0	$	2,124,375
• Life, Health & Other Benefits (7)		19,830		19,830		0		19,830		19,830		41,642
• Stock Options (accelerated) (3)		0		0		0		0		887,310		887,310

Subtotal: Termination Related Payments	$	19,830	$	869,580	$	0	$	19,830	$	907,140	$	3,053,327

• Stock Options (vested) (3)		322,664		322,664		0		322,664		322,664		322,664
• Supplemental Retirement Plan (5)		1,310,159		1,310,159		1,310,159		1,310,159		1,310,159		1,310,159

Subtotal: Currently Vested Amounts	$	1,632,823	$	1,632,823	$	1,310,159	$	1,632,823	$	1,632,823	$	1,632,823

Mr. Bloem’s Totals	$	1,652,653	$	2,502,403	$	1,310,159	$	1,652,653	$	2,539,963	$	4,686,150


Name and Form of Payment	Voluntary Termination (a)		Involuntary Termination without Cause (b)		Involuntary Termination for Cause (c)		Retirement(6) (d)		Death or Disability(7) (e)		Change in Control(4) (f)
James E. Murray
• Severance (2)	$	0	$	1,044,420	$	0	$	0	$	0	$	2,611,050
• Life, Health & Other Benefits (7)		15,235		15,235		0		15,235		15,235		31,993
• Stock Options (accelerated) (3)		0		0		0		0		1,338,769		1,338,769

Subtotal: Termination Related Payments	$	15,235	$	1,059,655	$	0	$	15,235	$	1,354,004	$	3,981,812

• Stock Options (vested) (3)		3,546,785		3,546,785		0		3,546,785		3,546,785		3,546,785
• Supplemental Retirement Plan (5)		3,264,018		3,264,018		3,264,018		3,264,018		3,264,018		3,264,018

Subtotal: Currently Vested Amounts	$	6,810,803	$	6,810,803	$	3,264,018	$	6,810,803	$	6,810,803	$	6,810,803

Mr. Murray’s Totals	$	6,826,038	$	7,870,458	$	3,264,018	$	6,826,038	$	8,164,807	$	10,792,615

V. Rajamannar Madabhushi
• Severance (2)	$	0	$	558,775	$	0	$	0	$	0	$	2,095,406
• Life, Health & Other Benefits (7)		19,740		19,740		0		19,740		19,740		41,454
• Stock Options and Restricted Stock (accelerated) (3)		0		0		0		0		2,072,179		2,072,179

Subtotal: Termination Related Payments	$	19,740</