| SEGMENT INFORMATION | SEGMENT INFORMATION We manage our business with three reportable segments: Retail, Group and Specialty, and Healthcare Services. The reportable 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, the Chief Operating Decision Maker, to assess performance and allocate resources. The Retail segment consists of Medicare benefits, marketed to individuals or directly via group Medicare 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, which we refer to collectively as 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 benefits, as well as administrative services only, or ASO products. In addition, our Group and Specialty segment includes our military services business, primarily our TRICARE T2017 East 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, such as home health and other services and capabilities to promote wellness and advance population health, including our non-consolidating minority investment in Kindred at Home and the strategic partnership with WCAS to develop and operate senior-focused, payor-agnostic, primary care centers. 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 condensed 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 $4.4 billion and $4.0 billion for the three months ended June 30, 2021 and 2020, respectively. For the six months ended June 30, 2021 and 2020 these amounts were $8.0 billion and $7.4 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 $26 million and $31 million for the three months ended June 30, 2021 and 2020, respectively. For the six months ended June 30, 2021 and 2020, the amount of this expense was $52 million and $61 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 2020 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 and Group and Specialty 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, 2021 and 2020: Retail Group and Specialty Healthcare Eliminations/ Consolidated Three months ended June 30, 2021 (in millions) External revenues Premiums: Individual Medicare Advantage $ 14,585 $ — $ — $ — $ 14,585 Group Medicare Advantage 1,775 — — — 1,775 Medicare stand-alone PDP 662 — — — 662 Total Medicare 17,022 — — — 17,022 Fully-insured 182 1,078 — — 1,260 Specialty — 432 — — 432 Medicaid and other 1,264 — — — 1,264 Total premiums 18,468 1,510 — — 19,978 Services revenue: Provider — — 122 — 122 ASO and other 12 194 — — 206 Pharmacy — — 163 — 163 Total services revenue 12 194 285 — 491 Total external revenues 18,480 1,704 285 — 20,469 Intersegment revenues Services — 10 4,977 (4,987) — Products — — 2,261 (2,261) — Total intersegment revenues — 10 7,238 (7,248) — Investment income 65 4 1 106 176 Total revenues 18,545 1,718 7,524 (7,142) 20,645 Operating expenses: Benefits 16,068 1,247 — (166) 17,149 Operating costs 1,533 409 7,205 (7,031) 2,116 Depreciation and amortization 108 22 41 (27) 144 Total operating expenses 17,709 1,678 7,246 (7,224) 19,409 Income from operations 836 40 278 82 1,236 Interest expense — — — 79 79 Other expense, net — — — 419 419 Income (loss) before income taxes and equity in net earnings 836 40 278 (416) 738 Equity in net earnings — — 33 — 33 Segment earnings (loss) $ 836 $ 40 $ 311 $ (416) $ 771 Retail Group and Specialty Healthcare Eliminations/ Consolidated Three months ended June 30, 2020 (in millions) External revenues Premiums: Individual Medicare Advantage $ 13,005 $ — $ — $ — $ 13,005 Group Medicare Advantage 1,976 — — — 1,976 Medicare stand-alone PDP 731 — — — 731 Total Medicare 15,712 — — — 15,712 Fully-insured 169 1,208 — — 1,377 Specialty — 425 — — 425 Medicaid and other 1,042 — — — 1,042 Total premiums 16,923 1,633 — — 18,556 Services revenue: Provider — — 105 — 105 ASO and other 6 192 — — 198 Pharmacy — — 147 — 147 Total services revenue 6 192 252 — 450 Total external revenues 16,929 1,825 252 — 19,006 Intersegment revenues Services — 6 4,712 (4,718) — Products — — 1,977 (1,977) — Total intersegment revenues — 6 6,689 (6,695) — Investment income 32 4 — 41 77 Total revenues 16,961 1,835 6,941 (6,654) 19,083 Operating expenses: Benefits 13,251 1,094 — (170) 14,175 Operating costs 1,638 435 6,603 (6,322) 2,354 Depreciation and amortization 83 19 46 (29) 119 Total operating expenses 14,972 1,548 6,649 (6,521) 16,648 Income (loss) from operations 1,989 287 292 (133) 2,435 Interest expense — — — 76 76 Other income, net — — — (227) (227) Income before income taxes and equity in net earnings 1,989 287 292 18 2,586 Equity in net earnings — — 25 — 25 Segment earnings $ 1,989 $ 287 $ 317 $ 18 $ 2,611 Retail Group and Specialty Healthcare Eliminations/ Consolidated Six months ended June 30, 2021 (in millions) External revenues Premiums: Individual Medicare Advantage $ 29,400 $ — $ — $ — $ 29,400 Group Medicare Advantage 3,530 — — — 3,530 Medicare stand-alone PDP 1,326 — — — 1,326 Total Medicare 34,256 — — — 34,256 Fully-insured 360 2,177 — — 2,537 Specialty — 866 — — 866 Medicaid and other 2,443 — — — 2,443 Total premiums 37,059 3,043 — — 40,102 Services revenue: Provider — — 237 — 237 ASO and other 17 384 — — 401 Pharmacy — — 319 — 319 Total services revenue 17 384 556 — 957 Total external revenues 37,076 3,427 556 — 41,059 Intersegment revenues Services — 20 9,751 (9,771) — Products — — 4,413 (4,413) — Total intersegment revenues — 20 14,164 (14,184) — Investment income 117 8 2 127 254 Total revenues 37,193 3,455 14,722 (14,057) 41,313 Operating expenses: Benefits 32,367 2,392 — (314) 34,445 Operating costs 2,984 806 14,115 (13,782) 4,123 Depreciation and amortization 212 43 81 (50) 286 Total operating expenses 35,563 3,241 14,196 (14,146) 38,854 Income from operations 1,630 214 526 89 2,459 Interest expense — — — 147 147 Other expense, net — — — 534 534 Income (loss) before income taxes and equity in net earnings 1,630 214 526 (592) 1,778 Equity in net earnings — — 54 — 54 Segment earnings (loss) $ 1,630 $ 214 $ 580 $ (592) $ 1,832 Retail Group and Specialty Healthcare Eliminations/ Consolidated Six months ended June 30, 2020 (in millions) External Revenues Premiums: Individual Medicare Advantage $ 25,799 $ — $ — $ — $ 25,799 Group Medicare Advantage 3,987 — — — 3,987 Medicare stand-alone PDP 1,486 — — — 1,486 Total Medicare 31,272 — — — 31,272 Fully-insured 332 2,437 — — 2,769 Specialty — 854 — — 854 Medicaid and other 2,023 — — — 2,023 Total premiums 33,627 3,291 — — 36,918 Services revenue: Provider — — 209 — 209 ASO and other 10 387 — — 397 Pharmacy — — 268 — 268 Total services revenue 10 387 477 — 874 Total external revenues 33,637 3,678 477 — 37,792 Intersegment revenues Services — 13 9,662 (9,675) — Products — — 3,887 (3,887) — Total intersegment revenues — 13 13,549 (13,562) — Investment income 86 9 — 131 226 Total revenues 33,723 3,700 14,026 (13,431) 38,018 Operating expenses: Benefits 27,715 2,405 — (316) 29,804 Operating costs 3,170 864 13,403 (12,966) 4,471 Depreciation and amortization 164 39 89 (58) 234 Total operating expenses 31,049 3,308 13,492 (13,340) 34,509 Income (loss) from operations 2,674 392 534 (91) 3,509 Interest expense — — — 136 136 Other expense, net — — — 70 70 Income (loss) before income taxes and equity in net earnings 2,674 392 534 (297) 3,303 Equity in net earnings — — 33 — 33 Segment earnings (loss) $ 2,674 $ 392 $ 567 $ (297) $ 3,336 |
