500 West Main Street
Louisville, Kentucky 40202
(Address of principal executive offices, including zip code)

(502) 580-1000
(Registrant's telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.
Yes X No ______

     Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date.

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     The preparation of our condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although our estimates are based on knowledge of current events and anticipated future events, actual results may ultimately differ from those estimates.

     The financial information has been prepared in accordance with our customary accounting practices and has not been audited. In our opinion, the information presented reflects all adjustments necessary for a fair statement of interim results. All such adjustments are of a normal and recurring nature.

     On May 31, 2001, we acquired for $45 million cash plus transaction costs of approximately $2 million, the outstanding shares of common stock of a newly formed Anthem Health Insurance Company subsidiary responsible for administering TRICARE benefits to approximately 1.2 million eligible members. We provide ASO services for 592,000 of the total 1.2 million eligible members. We accounted for this acquisition under the purchase method of accounting and accordingly, our consolidated results of operations include the results of the acquired TRICARE business from the date of acquisition. We allocated the purchase price to net tangible and identifiable intangible assets based on their fair value. Any remaining value not assigned to net tangible and identifiable intangible assets was then allocated to goodwill. We allocated $12 million to identifiable intangible assets representing the value assigned to an acquired contract, amortized on a straight-line basis over approximately 2 years. We allocated $35 million to goodwill, amortized on a straight-line basis over 20 years. The purchase price and allocation is subject to adjustment based upon completion of a final balance sheet as of May 31, 2001, no later than January 2002. Any adjustment to the purchase price will be reflected in goodwill.

     In June 2001, the Financial Accounting Standards Board issued Statement No. 141, Business Combinations, and Statement No. 142, Goodwill and Other Intangible Assets.

     Statement 141 requires that all business combinations be accounted for using the purchase method. Use of the pooling-of-interest method is no longer permitted. Statement 141 requires that the purchase method be used for business combinations initiated after June 30, 2001.

     Statement 142 requires that goodwill no longer be amortized to earnings, but instead be reviewed for impairment at least annually. Impairment losses that arise from completing a transitional impairment test during 2002 are to be reported as resulting from a change in accounting principle. The amortization of existing goodwill ceases upon adoption of the Statement, which we intend to adopt effective January 1, 2002. Goodwill acquired after June 30, 2001 will not be subject to amortization. In the second quarter of 2001, goodwill amortization expense of $14 million decreased earnings per common share by $0.08.

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     Our Medicare+Choice contracts with the federal government are renewed for a one-year term each December 31 unless terminated 90 days prior thereto. Increased funding beginning March 1, 2001 under Medicare, Medicaid and the State Children's Health Insurance Benefits Improvement and Protection Act, or BIPA, is being used to provide additional reimbursement under our contracts with providers and lower member premiums in certain markets. Legislative proposals are being considered which may revise the Medicare program's current support of the use of managed health care for Medicare beneficiaries and future reimbursement rates thereunder. Management is unable to predict the outcome of these proposals or the impact they may have on our financial position, results of operations or cash flows.

     Our Medicaid contracts are generally annual contracts with various states except for our two regional contracts with the Health Insurance Administration in Puerto Rico, which have two year terms. These contracts, which were recently extended, are set to expire on August 31, 2001. The Health Insurance Administration in Puerto Rico is currently designing the future health care insurance benefits structure. We submitted bids in response to a request from The Health Insurance Administration in Puerto Rico. We expect that our current contracts will be further extended until the new contracts are awarded. We are unable to predict if we will be awarded any new contracts, or what form these contracts may take.

     Effective July 1, 2001, we renewed our TRICARE contract for Regions 3 and 4 for up to two additional years subject to annual renewal at the option of the Department of Defense. The TRICARE contract for Regions 2 and 5 that we recently acquired from Anthem is scheduled to expire on May 1, 2003, subject to the right of the Department of Defense to terminate the final year of this contract.

     The loss of any of these government contracts or significant changes in these programs as a result of legislative action, including reductions in payments or increases in benefits without corresponding increases in payments, may have a material adverse effect on our revenues, profitability, and business prospects.

     Legal Proceedings

     Six purported class action complaints were filed in 1999 in the United States District Court for the Western District of Kentucky at Louisville by purported stockholders against us and certain of our current and former directors and officers. The complaints contained the same or substantially similar allegations, namely, that we and the individual defendants knowingly or recklessly made false or misleading statements in press releases and public filings concerning our financial condition, primarily with respect to the impact of negotiations over renewal of our contract with HCA-The Healthcare Company, formerly Columbia/HCA Healthcare Corporation, which took effect April 1, 1999. The complaints allege violations of Section 10(b) of the Securities Exchange Act of 1934, or the 1934 Act, Rule 10b-5 and Section 20(a) of the 1934 Act, and seek certification of a class of stockholders who purchased shares of our common stock starting either (in four complaints) in late October 1 998 or (in two complaints) on February 9, 1999, and ending (in all complaints) on April 8, 1999. Plaintiffs moved for consolidation of the actions, now styled In re Humana Inc. Securities Litigation, and filed a consolidated complaint. On April 28, 2000, the defendants filed a motion requesting dismissal of the consolidated complaint. On November 7, 2000, the United States District Court for the Western District of Kentucky issued a memorandum opinion and order dismissing the action. On November 30, 2000, the plaintiffs filed a notice of appeal to the United States Court of Appeals for the Sixth Circuit. We believe the above allegations are without merit and intend to continue to pursue defense of the action.

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     In late 1997, three purported class action complaints were filed in the United States District Court for the Southern District of Florida by former stockholders of Physician Corporation of America, or PCA, and certain of its former directors and officers. We acquired PCA by a merger that became effective on September 8, 1997. The three actions were consolidated into a single action entitled In re Physician Corporation of America Securities Litigation. The consolidated complaint alleges that PCA and the individual defendants knowingly or recklessly made false and misleading statements in press releases and public filings with respect to the financial and regulatory difficulties of PCA's workers' compensation business. On May 5, 1999, plaintiffs moved for certification of the purported class, and on August 25, 2000, the defendants moved for summary judgment. On January 31, 2001, defendants were granted leave to file a third-party complaint for declaratory ju dgment on insurance coverage, seeking a determination that the defense costs and liability, if any, resulting from the class action defense are covered by an insurance policy issued by one insurer and, in the alternative, declaring that there is coverage under policies issued by two other insurers. Defendants have moved for summary judgment on the third-party complaint.

     We are involved in several purported class action lawsuits that are part of a wave of generally similar actions that target the health care payor industry and particularly target managed care companies. As a result of action by the Judicial Panel on Multi District Litigation, most of the cases against us, as well as similar cases against other companies in the industry, have been consolidated in the United States District Court for the Southern District of Florida, and are now styled In re Managed Care Litigation. The cases include separate suits against us and six other managed care companies that purport to have been brought on behalf of members, which are referred to as the subscriber track cases, and a single action against us and seven other companies that purport to have been brought on behalf of providers, which is referred to as the provider track case.

     In the subscriber track cases, the plaintiffs seek a recovery under RICO for all persons who are or were subscribers at any time during the four-year period prior to the filing of the complaints. Plaintiffs also seek to represent a subclass of policyholders who purchased insurance through their employers' health benefit plans governed by ERISA, and who are or were subscribers at any time during the six-year period prior to the filing of the complaints. The complaint alleges, among other things, that we intentionally concealed from members certain information concerning the way in which we conduct business, including the methods by which we pay providers. The plaintiffs do not allege that any of the purported practices resulted in denial of any claim for a particular benefit, but instead, claim that we provided the purported class with health insurance benefits of lesser value than promised. The complaint also alleges an industry-wide conspiracy to engage in the various allege d improper practices. We filed a motion to dismiss the complaint on July 14, 2000. On August 15, 2000, the plaintiffs filed their amended motion for class certification, seeking a class consisting of all members of our medical plans, excluding Medicare and Medicaid plans, for the period from 1990 to 1999. We filed our opposition to the motion for class certification on November 15, 2000.

     On June 12, 2001, the federal district court rendered its decision with respect to the motions to dismiss. The court dismissed the ERISA claims against us and the other defendants on the grounds that the plaintiffs had failed to exhaust administrative remedies, but permitted the plaintiffs to file amended complaints no later than June 29, 2001. The court declined to dismiss all of the RICO fraud claims against Humana. In the subscriber track cases against other companies, the court dismissed all RICO fraud claims against the other defendants for lack of specificity in their allegations but permitted the plaintiffs to refile all dismissed RICO claims. The plaintiffs filed amended complaints against some of the other defendants realleging RICO and ERISA claims on June 29, 2001. Following the district court's June 12, 2001 ruling, we and other defendants requested that the court amend its ruling to allow us to ask the United States Court of Appeals for the Eleventh Circuit to re view the court's refusal to follow the decision by the Third Circuit in Maio v. Aetna that would have resulted in dismissal of the RICO claims. The district court has not yet ruled on this request. Additionally, a hearing on the class certification issue was conducted on July 24, 2001. No ruling has been issued as of August 13, 2001.

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     In the provider track case, the plaintiffs assert that we and other defendants improperly (i) paid providers' claims and (ii) "downcoded" their claims by paying lesser amounts than they submitted. The complaint alleges, among other things, multiple violations under RICO as well as various breaches of contract and violations of regulations governing the timeliness of claim payments. We moved to dismiss the provider track complaint on September 8, 2000, and the other defendants filed similar motions thereafter. On March 2, 2001, the court dismissed certain of the plaintiffs' claims, including the RICO claim, pursuant to the defendants' several motions to dismiss. However, the court allowed the plaintiffs to attempt to correct the deficiencies in their complaint with an amended pleading with respect to all of the allegations except the claim under the federal Medicare regulations, which was dismissed with prejudice. The court also left undisturbed the plaintiffs' cl aims for breach of contract. On March 26, 2001, the plaintiffs filed their amended complaint which, among other things, added four state or county medical associations as additional plaintiffs. Two of those, the Denton County Medical Society and the Texas Medical Association, purport to bring their actions against us, as well as against several other defendant companies. The Medical Association of Georgia and the California Medical Association purport to bring their actions against various other defendant companies. The associations seek injunctive relief only. On October 27, 2000, the provider track plaintiffs filed a motion for class certification. We filed our opposition to that motion on November 17, 2000. Oral argument on the motion for class certification was conducted May 7, 2001. Some defendants have filed appeals to the United States Court of Appeals for the Eleventh Circuit from a ruling by the district court that refused to enforce several arbitration clauses in the provider agreements with the de fendants. On June 25, 2001, the Eleventh Circuit stayed all proceedings in the district court pending these appeals. Other defendants, including us, have filed similar motions to enforce arbitration agreements which have not yet been ruled on by the district court.

     We intend to continue to defend these actions vigorously.

     On January 4, 2000, a jury in Palm Beach County, Florida, rendered an approximately $80 million verdict against us in a case arising from removal of an insured from a special case management program. The award included approximately $78.5 million of punitive damages, $1 million of damages for emotional distress and $29,000 of damages for contractual benefits. The defendant, Humana Health Insurance Company of Florida, Inc., one of our subsidiaries, filed its notice of appeal to the Fourth District Court of Appeals in Florida on March 13, 2000. Oral argument was held on May 1, 2001.

     In July 2000, the Office of the Florida Attorney General initiated an investigation, apparently relating to some of the same matters that are involved in the purported class action lawsuits described above. While the Attorney General has filed no action against us, he has indicated that he may do so in the future. In a separate matter, in June 2001, our Florida subsidiary, Humana Medical Plan, Inc., reached an agreement with the Florida Attorney General's office to reimburse $8 million in overpayments in connection with members who were enrolled in both Medicaid and Medicare managed care plans. The overpayments resulted from enrollments by Physician Corporation of America, or PCA, a health plan that we acquired in 1997, in its Medicaid program of persons enrolled in Medicare HMOs operated by PCA and other companies.

     On May 31, 2000, we entered into a five-year Corporate Integrity Agreement, or CIA, with the Office of Inspector General, or OIG, of the Department of Health and Human Services. Under the CIA, we are obligated to, among other things, provide training, conduct periodic audits and make periodic reports to the OIG.

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     In addition, our business practices are subject to review by various state insurance and health care regulatory authorities and federal regulatory authorities. Recently, there has been increased scrutiny by these regulators of the managed health care companies' business practices, including claims payment practices and utilization management. We have been and continue to be subject to such reviews. Some of these could require changes in some of our practices and could also result in fines or other sanctions.

     We also are involved in other lawsuits that arise in the ordinary course of our business operations, including claims of medical malpractice, bad faith, failure to properly pay claims, nonacceptance or termination of providers, failure to disclose network discounts and various provider arrangements, challenges to subrogation practices, and claims relating to performance of contractual obligations to providers and others. Recent court decisions and pending state and federal legislative activity may increase our exposure for any of these types of claims.

     We do not believe that any pending or threatened legal actions against us or audits by agencies will have a material adverse effect on our financial position, results of operations or cash flows. However, the likelihood or outcome of current or future suits, like the purported class action lawsuits described above and the appeal of the Chipps case, cannot be accurately predicted with certainty. In addition, the increased litigation which has accompanied the recent negative publicity and public perception of our industry adds to this uncertainty. Therefore, such legal actions could have a material adverse effect on our financial position, results of operations and cash flows.

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     There were no adjustments required to be made to net income for purposes of computing basic or diluted earnings per common share. The following table presents reconciliations of the average number of unrestricted common shares outstanding used in the calculation of basic earnings per common share and diluted earnings per common share for the three and six months ended June 30, 2001 and 2000:

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     We are in the process of replacing our credit facility with a new credit facility. On June 29, 2001, we executed a commitment letter with J.P. Morgan Securities Inc. for a proposed new credit facility consisting of an up to $300 million 4-year credit facility and an up to $300 million 364-day revolving commercial paper facility. As of August 13, 2001, we have received commitments under this facility for an aggregate principal amount of $465 million. We expect that the proposed new credit facility would contain customary restrictive and financial covenants as well as customary events of defaults. In particular, we expect the facility to include financial covenants regarding minimum consolidated net worth, maximum leverage and minimum interest coverage amounts substantially similar to those in our existing credit facility.

     We also maintain and issue short-term debt securities under a commercial paper program. The program is backed by our $1.0 billion credit facility described above. Aggregate borrowings under both the credit facility and the commercial paper program cannot exceed $1.0 billion. As discussed above, we expect our existing commercial paper program to be backed by our new credit facility up to an aggregate of $600 million. We had $60 million of commercial paper borrowings outstanding at June 30, 2001, and $80 million outstanding at December 31, 2000. Our weighted average effective interest rate on all borrowings outstanding at June 30, 2001 was 4.64%. The carrying value of our borrowings approximates fair value as the interest rate on our borrowings varies at market rates.

     During the first quarter of 2001, we realigned our management to better reflect our focus on the consumer. As part of this management realignment, we redefined our business into two segments, Commercial and Government. The Commercial segment includes three lines of business: fully insured medical, administrative services only, or ASO, and specialty. The Government segment includes three lines of business: Medicare+Choice, Medicaid, and TRICARE. Results of each segment are measured based upon income from operations before income taxes. We allocate administrative expenses, investment income, and interest expense, but not assets, to our segments. Members served by the two segments share overhead costs and generally utilize the same medical provider networks, enabling us to obtain more favorable contract terms with providers. Our segments also share overhead costs. As a result, the profitability of each segment is interdependent.

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     The following tables present financial information for our Commercial and Government segments for the three and six months ended June 30, 2001 and 2000:

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     We are one of the largest publicly traded health benefits companies, based on our 2000 revenues of $10.5 billion. We offer coordinated health insurance coverage and related services principally through traditional and Internet-based plans to employer groups and government-sponsored plans. As of June 30, 2001, we had approximately 6.5 million members in our medical insurance programs, including approximately 1.2 million new members as a result of a recent acquisition. In addition, we have approximately 2.2 million members in our specialty products programs. We contract directly with more than 400,000 physicians, hospitals, dentists and other providers to provide health care to our members. For the first six months of 2001, over 70% of our premium revenues was derived from members located in Florida, Illinois, Texas, Kentucky and Ohio.

     During the first quarter of 2001, we realigned our management to better reflect our focus on the consumer. As part of this management realignment, we redefined our business into two segments, Commercial and Government. The Commercial segment includes three lines of business: fully insured medical, administrative services only, or ASO, and specialty. The Government segment includes three lines of business: Medicare+Choice, Medicaid, and TRICARE. Results of each segment are measured based upon income from operations before income taxes. We allocate administrative expenses, investment income, and interest expense, but not assets, to our segments. Members served by the two segments share overhead costs and generally utilize the same medical provider networks, enabling us to obtain more favorable contract terms with providers. As a result, the profitability of each segment is interdependent.

     Throughout 2000 and to date in 2001, we continued to implement a strategy targeted at improving our financial results while simultaneously positioning ourselves for future growth. Part of our strategy involved eliminating non-core businesses and focusing on improving the infrastructure related to our core businesses. Our core businesses are those that are profitable or have the potential to be profitable, have sufficient membership to allow us to contract with an adequate network of medical providers at appropriate rates or have steady performance.

     During 2000 and to date in 2001, we completed transactions to divest our workers' compensation business and portions of our Medicaid businesses in north Florida, Milwaukee, Wisconsin, and Austin, Houston and San Antonio, Texas. We also reinsured with third parties substantially all of our Medicare supplement business. As of January 1, 2001, we exited 45 non-core counties in our Medicare+Choice business and discontinued aspects of our product line focusing on small group commercial businesses in 17 states.

     Premium revenues are recognized as income in the period members are entitled to receive services. Premiums received prior to such period are recorded as unearned premium revenues.

     Medical costs include claim payments, capitation payments, allocations of certain centralized expenses and various other costs incurred to provide health insurance coverage to members, as well as estimates of future payments to hospitals and others for medical care provided prior to the balance sheet date. Capitation payments represent monthly prepaid fees disbursed to participating primary care physicians and other providers who are responsible for providing medical care to members. We estimate the costs of our future medical claims and other expense payments using actuarial methods and assumptions based upon payment patterns, medical inflation, historical developments and other relevant factors, and create medical claims reserves for future payments. We continually review estimates of future payments relating to medical claims costs for services incurred in the current and prior periods and make necessary adjustments to our reserves.

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     We reassess the profitability of our contracts for providing health insurance coverage to our members when current market operating results or forecasts indicate probable future losses. We record a premium deficiency in current operations to the extent that the sum of expected medical costs, claim adjustment expenses and maintenance costs exceeds related future premiums. Anticipated investment income is not considered for purposes of computing the premium deficiency. Because the majority of our member contracts renew annually, we do not anticipate premium deficiencies, except when unanticipated adverse events or changes in circumstances indicate otherwise.

     We believe our medical and other expenses payable are adequate to cover future claims payments required. However, such estimates are based on knowledge of current events and anticipated future events, and, therefore, the actual liability could differ from amounts provided.

     On May 31, 2001, we acquired for $45 million cash plus transaction costs of approximately $2 million, the outstanding shares of common stock of a newly formed Anthem Health Insurance Company subsidiary responsible for administering TRICARE benefits to approximately 1.2 million eligible members. We provide ASO services for 592,000 of the total 1.2 million eligible members.

     Upon becoming Medicare eligible, which is normally at age 65, TRICARE beneficiaries generally stop receiving benefits under the TRICARE program and begin receiving benefits under a Medicare program. However, effective April 1, 2001, a new government program allows beneficiaries to continue in the TRICARE program after becoming eligible for Medicare. As of June 30, 2001, we provided pharmacy benefits in an administrative capacity under this new program to approximately 555,000 members under our two TRICARE contracts. Effective October 1, 2001, the benefits under this administrative services program will be expanded to include medical benefits.

     The following discussion deals primarily with our results of operations for the three months ended June 30, 2001, or the 2001 quarter, and the three months ended June 30, 2000, or the 2000 quarter, as well as the six months ended June 30, 2001, or the 2001 period, and the six months ended June 30, 2000, or the 2000 period. For a discussion of our results of operations for the fiscal year ended December 31, 2000, see "Management's Discussion and Analysis of Financial Conditions and Results of Operations" in our Form S-3 Registration Statement which we filed with the Securities and Exchange Commission on August 2, 2001.

     The following table presents certain consolidated financial data as well as data for our two segments for the three and six months ended June 30, 2001 and 2000:

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     The following table presents our medical membership at June 30, 2001 and 2000:

     Our net income was $25 million, or $0.15 per diluted share in the 2001 quarter compared to $19 million, or $0.11 per diluted share in the 2000 quarter and $52 million, or $0.31 per diluted share for the 2001 period compared to $40 million, or $0.24 for the 2000 period. The earnings improvements resulted from actions taken to eliminate non-core businesses, significant Medicare+Choice benefit reductions, and improvements in determining premiums for our fully insured commercial medical membership, a process we refer to as pricing discipline.

     Our premium revenues decreased 8.2% to $2.45 billion for the 2001 quarter, compared to $2.67 billion for the 2000 quarter and decreased 7.9% to $4.86 billion for the 2001 period compared to $5.28 billion for the 2000 period. These decreases were due to medical membership reductions from exiting numerous non-core markets and products, partially offset by higher premium yields. Premium yield represents the percentage increase in the average premium per member over the comparable period in the prior year. Items impacting premium yield include changes in premium rates, changes in government reimbursement rates, changes in the geographic mix of membership, and changes in the mix of benefit plans selected by our membership.

     Our Commercial segment's premium revenues decreased 8.6% to $1.29 billion for the 2001 quarter, compared to $1.41 billion for the 2000 quarter and decreased 8.5% to $2.60 billion for the 2001 period compared to $2.85 billion for the 2000 period. These decreases were due to membership reductions partially offset by higher premium yields. Our fully insured commercial medical membership decreased 17.6% to 2,343,300 at June 30, 2001 compared to 2,844,500 at June 30, 2000, as we continued to focus on opportunities that satisfy our pricing criteria and exit non-core business. Fully insured commercial medical premium yields improved to 12.7% for the 2001 quarter compared to 12.0% for the 2000 quarter from a disciplined effort to set premium rates at an appropriate level.

     Our Government segment's premium revenues decreased 7.7% to $1.16 billion for the 2001 quarter, compared to $1.25 billion for the 2000 quarter and decreased 7.2% to $2.26 billion for the 2001 period compared to $2.43 billion for the 2000 period. These decreases were primarily due to membership reductions from market exits and divestitures. Medicare+Choice membership was 418,000 at June 30, 2001 compared to 522,100 at June 30, 2000, a decline of 104,100 members, or 19.9%, primarily attributable to the exits from 45 Medicare counties on January 1, 2001. Medicare+Choice premium yields were 8.8% for the 2001 quarter compared to 6.3% for the 2000 quarter primarily from higher government reimbursement rates. Our Medicaid membership was 488,400 at June 30, 2001 compared to 675,100 for the 2000 quarter. This decline resulted primarily from the divestiture of the north Florida, Milwaukee, Wisconsin, and Austin and San Antonio, Texas Medicaid businesses. The completion of the Houston M edicaid sale on August 1, 2001 will reduce Medicaid membership by approximately 24,000 members during the third quarter of 2001.

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     Our Commercial segment's medical expense ratio for the 2001 quarter was 83.3%, increasing 40 basis points from 82.9% for the 2000 quarter; however, the ratio for the 2001 period of 82.4% decreased 80 basis points when compared to the ratio of 83.2% for the 2000 period. We experienced increased inpatient and outpatient hospital utilization during the second quarter of 2001 compared to 2000, driving this ratio slightly higher. When comparing this ratio for the 2001 period to the 2000 period, we had more non-core, higher cost fully insured commercial members in 2000 than in 2001 driving the prior year cost trend higher.

     Our Government segment's medical expense ratio for the 2001 quarter was 84.1%, decreasing 320 basis points from the 2000 quarter of 87.3%, and 84.5% for the 2001 period, decreasing 260 basis points from the 2000 period of 87.1%. This decrease primarily resulted from exiting 45 non-core counties in our Medicare+Choice business with higher medical expense ratios on January 1, 2001, coupled with significant benefit design changes that also became effective January 1, 2001.

     Our selling, general and administrative, or SG&A, expense as a percentage of premium revenues, or SG&A expense ratio, for the 2001 quarter was 14.2% compared to 13.6% in the 2000 quarter. This ratio was 14.3% for the 2001 period compared to 13.6% in the 2000 period. Similar upward trends were noted in the SG&A expense ratios of our segments as indicated in the preceding table. These increases were the result of planned spending on infrastructure and technology initiatives combined with a lower ratio of members to employees. Depreciation and amortization increased $2 million to $39 million in the 2001 quarter and $7 million to $78 million in the 2001 period. These increases were the result of increased capital expenditures primarily related to our technology initiatives.

     Our investment income totaled $29 million for the 2001 quarter, an increase of $2 million from the 2000 quarter. For the 2001 period, our investment income was $58 million, an increase of $2 million from the 2000 period. The increased investment income resulted from higher average invested balances partially offset by lower interest rates.

     Our interest expense was $7 million for both the 2001 quarter and 2000 quarter, and $14 million for the 2001 period compared to $15 million for the 2000 period. During these periods, the impact from higher daily average outstanding borrowings was offset by lower interest rates. A greater proportion of total debt outstanding during 2001 resulted from borrowings under our credit facility. These borrowings have longer maturities than borrowings under our commercial paper program, resulting in higher daily average outstanding borrowings in 2001 compared to 2000. As a by-product of this changing debt mix, our daily cash in excess of our funding requirements was invested, causing higher average invested balances discussed above.

     On an interim basis, the provision for income taxes is provided for at the anticipated effective tax rate for the year. Our effective tax rate for the three and six months ended June 30, 2001 was approximately 36% compared to 21% for the comparable periods of 2000. The lower effective tax rate in 2000 includes the benefit recognized for available capital loss carryforwards resulting from the sale of our workers' compensation business.

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     The following table presents our medical and specialty membership at the end of each quarter ended in 2001 and 2000: