| SEGMENT INFORMATION | SEGMENT INFORMATION On January 1, 2015, we realigned certain of our businesses among our reportable segments to correspond with internal management reporting changes and renamed our Employer Group segment to the Group segment. Our three reportable segments remain Retail, Group, and Healthcare Services. The more significant realignments included reclassifying Medicare benefits offered to groups to the Retail segment from the Group segment, bringing all of our Medicare offerings, which are now managed collectively, together in one segment, recognizing that in some instances we market directly to individuals that are part of a group Medicare account. In addition, we realigned our military services business, primarily consisting of our TRICARE South Region contract previously included in the Other Businesses category, to our Group segment as we consider this contract with the government to be a group account. Prior period segment financial information has been recast to conform to the 2015 presentation. We manage our business with three reportable segments: Retail, Group, and Healthcare Services. In addition, the Other Businesses category includes businesses that are not individually reportable because they do not meet the quantitative thresholds required by generally accepted accounting principles. These segments are based on a combination of the type of health plan customer and adjacent businesses centered on well-being solutions for our health plans and other customers, as described below. These segment groupings are consistent with information used by our Chief Executive Officer to assess performance and allocate resources. The Retail segment consists of Medicare benefits, marketed to individuals or directly via group accounts, as well as individual commercial fully-insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health and financial protection products. In addition, the Retail segment also includes our contract with CMS to administer the LI-NET prescription drug plan program and contracts with various states to provide Medicaid, dual eligible, and Long-Term Support Services benefits, collectively our state-based contracts. The Group segment consists of employer group commercial fully-insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health and voluntary insurance benefits, as well as administrative services only, or ASO products. In addition, our Group segment includes our health and wellness products (primarily marketed to employer groups) and military services business, primarily our TRICARE South Region contract. The Healthcare Services segment includes services offered to our health plan members as well as to third parties, including pharmacy solutions, provider services, home based services, and clinical programs, as well as services and capabilities to advance population health. We will continue to report under the category of Other Businesses those businesses which do not align with the reportable segments described above, primarily our closed-block long-term care insurance policies. Our Healthcare Services intersegment revenues primarily relate to managing prescription drug coverage for members of our other segments through Humana Pharmacy Solutions ® , or HPS, and includes the operations of Humana Pharmacy, Inc., our mail order pharmacy business. These revenues consist of the prescription price (ingredient cost plus dispensing fee), including the portion to be settled with the member (co-share) or with the government (subsidies), plus any associated administrative fees. Services revenues related to the distribution of prescriptions by third party retail pharmacies in our networks are recognized when the claim is processed and product revenues from dispensing prescriptions from our mail order pharmacies are recorded when the prescription or product is shipped. Our pharmacy operations, which are responsible for designing pharmacy benefits, including defining member co-share responsibilities, determining formulary listings, contracting with retail pharmacies, confirming member eligibility, reviewing drug utilization, and processing claims, act as a principal in the arrangement on behalf of members in our other segments. As principal, our Healthcare Services segment reports revenues on a gross basis including co-share amounts from members collected by third party retail pharmacies at the point of service. In addition, our Healthcare Services intersegment revenues include revenues earned by certain owned providers derived from risk-based managed care agreements with our health plans. Under these agreements, the provider receives a monthly capitated fee that varies depending on the demographics and health status of the member, for each member assigned to these owned providers by our health plans. The owned provider assumes the economic risk of funding the assigned members’ healthcare services and related administrative costs. Accordingly, our Healthcare Services segment reports provider services related revenues on a gross basis. Capitation fee revenue is recognized in the period in which the assigned members are entitled to receive healthcare services. We present our consolidated results of operations from the perspective of the health plans. As a result, the cost of providing benefits to our members, whether provided via a third party provider or internally through a stand-alone subsidiary, is classified as benefits expense and excludes the portion of the cost for which the health plans do not bear responsibility, including member co-share amounts and government subsidies of $3.0 billion and $2.3 billion for the three months ended June 30, 2015 and 2014 , respectively. For the six months ended June 30, 2015 and 2014 these amounts were $5.5 billion and $4.1 billion , respectively. In addition, depreciation and amortization expense associated with certain businesses in our Healthcare Services segment delivering benefits to our members, primarily associated with our provider services and pharmacy operations, are included with benefits expense. The amount of this expense was $24 million and $27 million for the three months ended June 30, 2015 and 2014 , respectively. For the six months ended June 30, 2015 and 2014 , the amount of this expense was $45 million and $52 million , respectively. Other than those described previously, the accounting policies of each segment are the same and are described in Note 2 to the consolidated financial statements included in our 2014 Form 10-K. Transactions between reportable segments primarily consist of sales of services rendered by our Healthcare Services segment, primarily pharmacy, provider, and home based services as well as clinical programs, to our Retail and Group customers . Intersegment sales and expenses are recorded at fair value and eliminated in consolidation. Members served by our segments often use the same provider networks, enabling us in some instances to obtain more favorable contract terms with providers. Our segments also share indirect costs and assets. As a result, the profitability of each segment is interdependent. We allocate most operating expenses to our segments. Assets and certain corporate income and expenses are not allocated to the segments, including the portion of investment income not supporting segment operations, interest expense on corporate debt, and certain other corporate expenses. These items are managed at a corporate level. These corporate amounts are reported separately from our reportable segments and are included with intersegment eliminations in the tables presenting segment results below. Our segment results were as follows for the three and six months ended June 30, 2015 and 2014 : Retail Group Healthcare Other Eliminations/ Consolidated (in millions) Three months ended June 30, 2015 Revenues - external customers Premiums: Individual Medicare Advantage $ 7,434 $ — $ — $ — $ — $ 7,434 Group Medicare Advantage 1,398 — — — — 1,398 Medicare stand-alone PDP 985 — — — — 985 Total Medicare 9,817 — — — — 9,817 Fully-insured 1,113 1,379 — — — 2,492 Specialty 66 265 — — — 331 Medicaid and other 559 4 — 9 — 572 Total premiums 11,555 1,648 — 9 — 13,212 Services revenue: Provider — 11 221 — — 232 ASO and other 2 163 — 3 — 168 Pharmacy — — 7 — — 7 Total services revenue 2 174 228 3 — 407 Total revenues - external customers 11,557 1,822 228 12 — 13,619 Intersegment revenues Services — 22 4,515 — (4,537 ) — Products — — 1,233 — (1,233 ) — Total intersegment revenues — 22 5,748 — (5,770 ) — Investment income 31 6 — 22 54 113 Total revenues 11,588 1,850 5,976 34 (5,716 ) 13,732 Operating expenses: Benefits 10,068 1,341 — 21 (178 ) 11,252 Operating costs 1,213 444 5,713 4 (5,557 ) 1,817 Depreciation and amortization 47 22 40 — (19 ) 90 Total operating expenses 11,328 1,807 5,753 25 (5,754 ) 13,159 Income from operations 260 43 223 9 38 573 Gain on sale of business — — — — 267 267 Interest expense — — — — 47 47 Income before income taxes $ 260 $ 43 $ 223 $ 9 $ 258 $ 793 Retail Group Healthcare Other Eliminations/ Consolidated (in millions) Three months ended June 30, 2014 Revenues - external customers Premiums: Individual Medicare Advantage $ 6,467 $ — $ — $ — $ — $ 6,467 Group Medicare Advantage 1,366 — — — — 1,366 Medicare stand-alone PDP 941 — — — — 941 Total Medicare 8,774 — — — — 8,774 Fully-insured 912 1,321 — — — 2,233 Specialty 66 275 — — — 341 Medicaid and other 214 4 — 18 — 236 Total premiums 9,966 1,600 — 18 — 11,584 Services revenue: Provider — 6 324 — — 330 ASO and other 13 175 — 3 — 191 Pharmacy — — 25 — — 25 Total services revenue 13 181 349 3 — 546 Total revenues - external customers 9,979 1,781 349 21 — 12,130 Intersegment revenues Services — 16 3,724 — (3,740 ) — Products — — 938 — (938 ) — Total intersegment revenues — 16 4,662 — (4,678 ) — Investment income 24 5 — 15 48 92 Total revenues 10,003 1,802 5,011 36 (4,630 ) 12,222 Operating expenses: Benefits 8,495 1,262 — 25 (155 ) 9,627 Operating costs 1,071 484 4,770 5 (4,495 ) 1,835 Depreciation and amortization 37 26 35 1 (20 ) 79 Total operating expenses 9,603 1,772 4,805 31 (4,670 ) 11,541 Income from operations 400 30 206 5 40 681 Interest expense — — — — 35 35 Income before income taxes $ 400 $ 30 $ 206 $ 5 $ 5 $ 646 Retail Group Healthcare Other Eliminations/ Consolidated (in millions) Six months ended June 30, 2015 Revenues - external customers Premiums: Individual Medicare Advantage $ 14,867 $ — $ — $ — $ — $ 14,867 Group Medicare Advantage 2,792 — — — — 2,792 Medicare stand-alone PDP 1,988 — — — — 1,988 Total Medicare 19,647 — — — — 19,647 Fully-insured 2,207 2,763 — — — 4,970 Specialty 129 535 — — — 664 Medicaid and other 1,150 10 — 19 — 1,179 Total premiums 23,133 3,308 — 19 — 26,460 Services revenue: Provider — 20 529 — — 549 ASO and other 6 323 — 5 — 334 Pharmacy — — 14 — — 14 Total services revenue 6 343 543 5 — 897 Total revenues - external customers 23,139 3,651 543 24 — 27,357 Intersegment revenues Services — 44 8,928 — (8,972 ) — Products — — 2,383 — (2,383 ) — Total intersegment revenues — 44 11,311 — (11,355 ) — Investment income 58 11 — 37 102 208 Total revenues 23,197 3,706 11,854 61 (11,253 ) 27,565 Operating expenses: Benefits 20,004 2,567 — 44 (358 ) 22,257 Operating costs 2,467 897 11,319 7 (10,928 ) 3,762 Depreciation and amortization 91 45 82 — (35 ) 183 Total operating expenses 22,562 3,509 11,401 51 (11,321 ) 26,202 Income from operations 635 197 453 10 68 1,363 Gain on sale of business — — — — 267 267 Interest expense — — — — 93 93 Income before income taxes $ 635 $ 197 $ 453 $ 10 $ 242 $ 1,537 Retail Group Healthcare Other Eliminations/ Consolidated (in millions) Six months ended June 30, 2014 Revenues - external customers Premiums: Individual Medicare Advantage $ 12,927 $ — $ — $ — $ — $ 12,927 Group Medicare Advantage 2,750 — — — — 2,750 Medicare stand-alone PDP 1,806 — — — — 1,806 Total Medicare 17,483 — — — — 17,483 Fully-insured 1,437 2,650 — — — 4,087 Specialty 125 550 — — — 675 Medicaid and other 383 10 — 29 — 422 Total premiums 19,428 3,210 — 29 — 22,667 Services revenue: Provider — 11 631 — — 642 ASO and other 27 363 — 6 — 396 Pharmacy — — 46 — — 46 Total services revenue 27 374 677 6 — 1,084 Total revenues - external customers 19,455 3,584 677 35 — 23,751 Intersegment revenues Services — 35 7,205 — (7,240 ) — Products — — 1,784 — (1,784 ) — Total intersegment revenues — 35 8,989 — (9,024 ) — Investment income 47 11 — 30 95 183 Total revenues 19,502 3,630 9,666 65 (8,929 ) 23,934 Operating expenses: Benefits 16,575 2,429 — 49 (302 ) 18,751 Operating costs 2,081 977 9,204 9 (8,651 ) 3,620 Depreciation and amortization 77 50 71 2 (39 ) 161 Total operating expenses 18,733 3,456 9,275 60 (8,992 ) 22,532 Income from operations 769 174 391 5 63 1,402 Interest expense — — — — 70 70 Income (loss) before income taxes $ 769 $ 174 $ 391 $ 5 $ (7 ) $ 1,332 |
