| SEGMENT INFORMATION | SEGMENT INFORMATION During the three months ended March 31, 2017, we realigned certain of our businesses among our reportable segments to correspond with internal management reporting changes and our previously announced planned exit from the Individual Commercial medical business on January 1, 2018. Additionally, we renamed our Group segment to the Group and Specialty segment, and began presenting the Individual Commercial business results as a separate segment rather than as part of the Retail segment. Specialty health insurance benefits, including dental, vision, other supplement health, and financial protection products, marketed to individuals are now included in the Group and Specialty segment. Specialty health insurance benefits marketed to employer groups continue to be included in the Group and Specialty segment. As a result of this realignment, our reportable segments now include Retail, Group and Specialty, Healthcare Services, and Individual Commercial. Prior period segment financial information has been recast to conform to the 2017 presentation. We manage our business with four reportable segments: Retail, Group and Specialty, Healthcare Services and Individual Commercial. 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. In addition, the Retail segment also includes our contract with CMS to administer the Limited Income Newly Eligible Transition, or 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 and Specialty segment consists of employer group commercial fully-insured medical and specialty health insurance benefits marketed to individuals and employer groups, including dental, vision, and other supplemental health and voluntary insurance benefits and financial protection products, as well as administrative services only, or ASO products. In addition, our Group and Specialty segment includes 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, and clinical care service, as well as services and capabilities to promote wellness and advance population health. The Individual Commercial segment consists of our individual commercial fully-insured medical health insurance benefits. We 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 and non-risk-based managed care agreements with our health plans. Under risk based 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. Under non risk-based agreements, our health plans retain the economic risk of funding the assigned members' healthcare services. Our Healthcare Services segment reports provider services revenues associated with risk-based agreements on a gross basis, whereby capitation fee revenue is recognized in the period in which the assigned members are entitled to receive healthcare services. Provider services revenues associated with non-risk-based agreements are presented net of associated healthcare costs. 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 $3.2 billion for the three months ended June 30, 2017 and 2016 . For the six months ended June 30, 2017 and 2016 these amounts were $6.2 billion . 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 $27 million for the three months ended June 30, 2017 and 2016 . For the six months ended June 30, 2017 and 2016 , the amount of this expense was $53 million and $54 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 2016 Form 10-K. Transactions between reportable segments primarily consist of sales of services rendered by our Healthcare Services segment, primarily pharmacy, provider, and clinical care services, to our Retail, Group and Specialty, and Individual Commercial segment 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, 2017 and 2016 : Retail Group and Specialty Healthcare Individual Commercial Other Eliminations/ Consolidated (in millions) Three months ended June 30, 2017 Revenues - external customers Premiums: Individual Medicare Advantage $ 8,282 $ — $ — $ — $ — $ — $ 8,282 Group Medicare Advantage 1,277 — — — — — 1,277 Medicare stand-alone PDP 925 — — — — — 925 Total Medicare 10,484 — — — — — 10,484 Fully-insured 118 1,350 — 247 — — 1,715 Specialty — 323 — — — — 323 Medicaid and other 671 — — — 10 — 681 Total premiums 11,273 1,673 — 247 10 — 13,203 Services revenue: Provider — — 63 — — — 63 ASO and other 2 143 — — 2 — 147 Pharmacy — — 20 — — — 20 Total services revenue 2 143 83 — 2 — 230 Total revenues - external customers 11,275 1,816 83 247 12 — 13,433 Intersegment revenues Services — 5 4,309 — — (4,314 ) — Products — — 1,582 — — (1,582 ) — Total intersegment revenues — 5 5,891 — — (5,896 ) — Investment income 24 7 8 1 21 40 101 Total revenues 11,299 1,828 5,982 248 33 (5,856 ) 13,534 Operating expenses: Benefits 9,672 1,312 — 86 32 (213 ) 10,889 Operating costs 963 394 5,677 40 2 (5,623 ) 1,453 Depreciation and amortization 57 21 35 4 — (25 ) 92 Total operating expenses 10,692 1,727 5,712 130 34 (5,861 ) 12,434 Income (loss) from operations 607 101 270 118 (1 ) 5 1,100 Interest expense — — — — — 58 58 Income (loss) before income taxes $ 607 $ 101 $ 270 $ 118 $ (1 ) $ (53 ) $ 1,042 Retail Group and Specialty Healthcare Individual Commercial Other Eliminations/ Consolidated (in millions) Three months ended June 30, 2016 Revenues - external customers Premiums: Individual Medicare Advantage $ 8,050 $ — $ — $ — $ — $ — $ 8,050 Group Medicare Advantage 1,085 — — — — — 1,085 Medicare stand-alone PDP 1,015 — — — — — 1,015 Total Medicare 10,150 — — — — — 10,150 Fully-insured 106 1,357 — 1,024 — — 2,487 Specialty — 321 — — — — 321 Medicaid and other 678 5 — — 9 — 692 Total premiums 10,934 1,683 — 1,024 9 — 13,650 Services revenue: Provider — — 74 — — — 74 ASO and other 2 176 — — 3 — 181 Pharmacy — — 7 — — — 7 Total services revenue 2 176 81 — 3 — 262 Total revenues - external customers 10,936 1,859 81 1,024 12 — 13,912 Intersegment revenues Services — 6 4,767 — — (4,773 ) — Products — — 1,433 — — (1,433 ) — Total intersegment revenues — 6 6,200 — — (6,206 ) — Investment income 22 6 7 1 16 43 95 Total revenues 10,958 1,871 6,288 1,025 28 (6,163 ) 14,007 Operating expenses: Benefits 9,327 1,302 — 1,089 31 (240 ) 11,509 Operating costs 1,069 423 5,974 152 4 (5,923 ) 1,699 Merger termination fee and related costs, net — — — — — 27 27 Depreciation and amortization 48 22 35 9 — (25 ) 89 Total operating expenses 10,444 1,747 6,009 1,250 35 (6,161 ) 13,324 Income (loss) from operations 514 124 279 (225 ) (7 ) (2 ) 683 Interest expense — — — — — 47 47 Income (loss) before income taxes $ 514 $ 124 $ 279 $ (225 ) $ (7 ) $ (49 ) $ 636 Retail Group and Specialty Healthcare Individual Commercial Other Eliminations/ Consolidated (in millions) Six months ended June 30, 2017 Revenues - external customers Premiums: Individual Medicare Advantage $ 16,658 $ — $ — $ — $ — $ — $ 16,658 Group Medicare Advantage 2,595 — — — — — 2,595 Medicare stand-alone PDP 1,866 — — — — — 1,866 Total Medicare 21,119 — — — — — 21,119 Fully-insured 236 2,728 — 530 — — 3,494 Specialty — 645 — — — — 645 Medicaid and other 1,324 — — — 19 — 1,343 Total premiums 22,679 3,373 — 530 19 — 26,601 Services revenue: Provider — — 133 — — — 133 ASO and other 4 304 — — 4 — 312 Pharmacy — — 38 — — — 38 Total services revenue 4 304 171 — 4 — 483 Total revenues - external customers 22,683 3,677 171 530 23 — 27,084 Intersegment revenues Services — 10 8,619 — — (8,629 ) — Products — — 3,134 — — (3,134 ) — Total intersegment revenues — 10 11,753 — — (11,763 ) — Investment income 49 18 16 2 42 85 212 Total revenues 22,732 3,705 11,940 532 65 (11,678 ) 27,296 Operating expenses: Benefits 19,723 2,598 — 242 61 (409 ) 22,215 Operating costs 1,917 793 11,357 102 6 (11,169 ) 3,006 Merger termination fee and related costs, net — — — — — (947 ) (947 ) Depreciation and amortization 115 42 69 7 — (49 ) 184 Total operating expenses 21,755 3,433 11,426 351 67 (12,574 ) 24,458 Income (loss) from operations 977 272 514 181 (2 ) 896 2,838 Interest expense — — — — — 107 107 Income (loss) before income taxes $ 977 $ 272 $ 514 $ 181 $ (2 ) $ 789 $ 2,731 Retail Group and Specialty Healthcare Individual Commercial Other Eliminations/ Consolidated (in millions) Six months ended June 30, 2016 Revenues - external customers Premiums: Individual Medicare Advantage $ 16,077 $ — $ — $ — $ — $ — $ 16,077 Group Medicare Advantage 2,162 — — — — — 2,162 Medicare stand-alone PDP 2,054 — — — — — 2,054 Total Medicare 20,293 — — — — — 20,293 Fully-insured 210 2,694 — 1,917 — — 4,821 Specialty — 639 — — — — 639 Medicaid and other 1,308 10 — — 19 — 1,337 Total premiums 21,811 3,343 — 1,917 19 — 27,090 Services revenue: Provider — — 145 — — — 145 ASO and other 3 353 1 — 6 — 363 Pharmacy — — 14 — — — 14 Total services revenue 3 353 160 — 6 — 522 Total revenues - external customers 21,814 3,696 160 1,917 25 — 27,612 Intersegment revenues Services — 12 9,551 — — (9,563 ) — Products — — 2,793 — — (2,793 ) — Total intersegment revenues — 12 12,344 — — (12,356 ) — Investment income 46 12 14 3 31 89 195 Total revenues 21,860 3,720 12,518 1,920 56 (12,267 ) 27,807 Operating expenses: Benefits 18,960 2,524 — 1,818 56 (452 ) 22,906 Operating costs 2,151 857 11,916 321 8 (11,820 ) 3,433 Merger termination fee and related costs, net — — — — — 61 61 Depreciation and amortization 94 43 71 18 — (49 ) 177 Total operating expenses 21,205 3,424 11,987 2,157 64 (12,260 ) 26,577 Income (loss) from operations 655 296 531 (237 ) (8 ) (7 ) 1,230 Interest expense — — — — — 94 94 Income (loss) before income taxes $ 655 $ 296 $ 531 $ (237 ) $ (8 ) $ (101 ) $ 1,136 |
