| 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, including Temporary Assistance for Needy Families, or TANF, dual eligible demonstration, 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 pharmacy, provider, and home services, along with other services and capabilities to promote wellness and advance population health. The operations of the recently acquired full ownership of Kindred at Home, as well as the company's strategic partnerships with WCAS to develop and operate senior-focused, payor-agnostic, primary care centers are also included in the Healthcare Services segment. 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 $4.8 billion and $4.4 billion for the three months ended June 30, 2022 and 2021, respectively. For the six months ended June 30, 2022 and 2021 these amounts were $8.8 billion and $8.0 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 $29 million and $26 million for the three months ended June 30, 2022 and 2021, respectively. For the six months ended June 30, 2022 and 2021, the amount of this expense was $59 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 2021 Form 10-K. Transactions between reportable segments primarily consist of sales of services rendered by our Healthcare Services segment, primarily pharmacy, provider, and home solutions 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, 2022 and 2021: Retail Group and Specialty Healthcare Eliminations/ Consolidated Three months ended June 30, 2022 (in millions) External revenues Premiums: Individual Medicare Advantage $ 16,692 $ — $ — $ — $ 16,692 Group Medicare Advantage 1,857 — — — 1,857 Medicare stand-alone PDP 606 — — — 606 Total Medicare 19,155 — — — 19,155 Fully-insured 185 943 — — 1,128 Specialty — 427 — — 427 Medicaid and other 1,556 — — — 1,556 Total premiums 20,896 1,370 — — 22,266 Services revenue: Home solutions — — 752 — 752 Provider — — 137 — 137 ASO and other 8 196 — — 204 Pharmacy — — 256 — 256 Total services revenue 8 196 1,145 — 1,349 Total external revenues 20,904 1,566 1,145 — 23,615 Intersegment revenues Services — 14 5,327 (5,341) — Products — — 2,489 (2,489) — Total intersegment revenues — 14 7,816 (7,830) — Investment income 42 4 1 — 47 Total revenues 20,946 1,584 8,962 (7,830) 23,662 Operating expenses: Benefits 18,182 1,045 — (128) 19,099 Operating costs 1,712 415 8,469 (7,423) 3,173 Depreciation and amortization 131 23 50 (29) 175 Total operating expenses 20,025 1,483 8,519 (7,580) 22,447 Income (loss) from operations 921 101 443 (250) 1,215 Interest expense — — — 101 101 Other income, net — — — (8) (8) Income (loss) before income taxes and equity in net earnings 921 101 443 (343) 1,122 Equity in net earnings (losses) 8 — (6) — 2 Segment earnings (loss) $ 929 $ 101 $ 437 $ (343) $ 1,124 Less: noncontrolling interests — — (1) — (1) Segment earnings (loss) attributable to Humana $ 929 $ 101 $ 436 $ (343) $ 1,123 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: Home solutions — — 25 — 25 Provider — — 97 — 97 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 Six months ended June 30, 2022 (in millions) External revenues Premiums: Individual Medicare Advantage $ 33,744 $ — $ — $ — $ 33,744 Group Medicare Advantage 3,732 — — — 3,732 Medicare stand-alone PDP 1,245 — — — 1,245 Total Medicare 38,721 — — — 38,721 Fully-insured 367 1,915 — — 2,282 Specialty — 856 — — 856 Medicaid and other 3,110 — — — 3,110 Total premiums 42,198 2,771 — — 44,969 Services revenue: Home solutions — — 1,478 — 1,478 Provider services — — 250 — 250 ASO and other 14 391 — — 405 Pharmacy solutions — — 480 — 480 Total services revenue 14 391 2,208 — 2,613 Total external revenues 42,212 3,162 2,208 — 47,582 Intersegment revenues Services — 28 10,504 (10,532) — Products — — 4,935 (4,935) — Total intersegment revenues — 28 15,439 (15,467) — Investment income 85 7 3 (45) 50 Total revenues 42,297 3,197 17,650 (15,512) 47,632 Operating expenses: Benefits 36,932 2,091 — (299) 38,724 Operating costs 3,406 828 16,654 (14,829) 6,059 Depreciation and amortization 254 45 103 (57) 345 Total operating expenses 40,592 2,964 16,757 (15,185) 45,128 Income (loss) from operations 1,705 233 893 (327) 2,504 Interest expense — — — 191 191 Other income, net — — — (29) (29) Income (loss) before income taxes and equity in net earnings 1,705 233 893 (489) 2,342 Equity in net earnings (losses) 8 — (10) — (2) Segment earnings (loss) $ 1,713 $ 233 $ 883 $ (489) $ 2,340 Less: noncontrolling interests — — (1) — (1) Segment earnings (loss) attributable to Humana $ 1,713 $ 233 $ 882 $ (489) $ 2,339 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: Home solutions — — 49 — 49 Provider services — — 188 — 188 ASO and other 17 384 — — 401 Pharmacy solutions — — 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 |
