Segment Information

12 Months Ended

Dec. 31, 2019

Our organizational structure is comprised of three reportable segments: Commercial & Specialty Business; Government Business; and Other.

Our Commercial & Specialty Business segment includes our Local Group, National Accounts, Individual and Specialty businesses. Business units in the Commercial & Specialty Business segment offer fully-insured health products; provide a broad array of managed care services to self-funded customers including claims processing, underwriting, stop loss insurance, actuarial services, provider network access, medical cost management, disease management, wellness programs and other administrative services; and provide an array of specialty and other insurance products and services such as dental, vision, life and disability insurance benefits.

Our Government Business segment includes our Medicare and Medicaid businesses, National Government Services, or NGS, and services provided to the federal government in connection with the FEHB program. Our Medicare business includes services such as Medicare Supplement plans; Medicare Advantage, including Special Needs Plans; Medicare Part D; and dual-eligible programs through Medicare-Medicaid Plans. Our Medicaid business includes our managed care alternatives through publicly funded healthcare programs, including Medicaid, ACA-related Medicaid expansion programs, Temporary Assistance for Needy Families programs, programs for seniors and people with disabilities, Children’s Health Insurance Programs, and specialty programs such as those focused on long-term services and support, HIV/AIDS, foster care, behavioral health and/or substance abuse disorders, and intellectual disabilities or developmental disabilities. NGS acts as a Medicare contractor for the federal government in several regions across the nation.

Prior to the second quarter of 2019, our Other segment included certain eliminations and corporate expenses not allocated to either of our other reportable segments. Beginning with the second quarter of 2019, our Other segment also includes IngenioRx, our PBM, which began operations during the second quarter of 2019. In addition, during the second quarter, we reclassified our integrated health services business, our Diversified Business Group, or DBG, from our Government Business segment to the Other segment to reflect changes in how our segments are being managed. Amounts for prior years have been reclassified to conform to the current year presentation for comparability. Based on the FASB guidance, as of December 31, 2019, IngenioRx and DBG did not collectively meet the quantitative thresholds for a reportable segment.

We define operating revenues to include premium income and administrative fees and other revenues. Operating revenues are derived from premiums and fees received, primarily from the sale and administration of health benefit products. Operating gain is calculated as total operating revenue less benefit expense, cost of products sold and selling, general and administrative expense.

Through our participation in various federal government programs, we generated approximately 20.7%, 19.8% and 17.8% of our total consolidated revenues from agencies of the U.S. government for the years ended December 31, 2019, 2018, and 2017, respectively. These revenues are contained in the Government Business segment.

The accounting policies of the segments are consistent with those described in the summary of significant accounting policies in Note 2, “Basis of Presentation and Significant Accounting Policies,” except that certain shared administrative expenses for each segment are recognized on a pro rata allocated basis, which in the aggregate approximates the consolidated expense. Any difference between the allocated expenses and actual consolidated expense is included in other expenses not allocated to reportable segments. Affiliated revenues represent revenues or cost for services provided by IngenioRx and DBG to our subsidiaries, are recorded at cost or management’s estimate of fair market value, and are eliminated in consolidation. We evaluate performance of the reportable segments based on operating gain or loss as defined above. We evaluate net investment income, net realized gains on financial instruments, OTTI losses recognized in income, interest expense, amortization expense, gain or loss on extinguishment of debt, income taxes and assets and liabilities on a consolidated basis, as these items are managed in a corporate shared service environment and are not the responsibility of segment operating management.

For our segment reporting, operating gains (losses) generated from IngenioRx and DBG affiliated activity have been included in our Commercial & Specialty Business and Government Business based upon their utilization of services from IngenioRx and DBG.

Financial data by reportable segment for the years ended December 31, 2019, 2018 and 2017 is as follows:



	Commercial & Specialty Business		Government Business		Other			Eliminations			Total
Year ended December 31, 2019
Operating revenue - unaffiliated	$	37,421	$	62,632	$	3,088		$	—		$	103,141
Operating revenue - affiliated	—		—		4,607			(4,607		)	—
Operating gain (loss)	4,046		2,054		(101		)	—			5,999
Depreciation and amortization of property and equipment	—		—		675			—			675
Year ended December 31, 2018
Operating revenue - unaffiliated	$	35,782	$	55,348	$	211		$	—		$	91,341
Operating revenue - affiliated	—		—		1,308			(1,308		)	—
Operating gain (loss)	3,600		1,928		(102		)	—			5,426
Depreciation and amortization of property and equipment	—		—		652			—			652
Year ended December 31, 2017
Operating revenue - unaffiliated	$	40,363	$	48,587	$	111		$	—		$	89,061
Operating revenue - affiliated	—		—		16			(16		)	—
Operating gain (loss)	2,847		1,442		(114		)	—			4,175
Depreciation and amortization of property and equipment	—		—		601			—			601

The major product revenues for each of the reportable segments for the years ended December 31, 2019, 2018 and 2017 are as follows:



	2019			2018			2017
Commercial & Specialty Business
Managed care products	$	30,311		$	29,012		$	33,971
Managed care services	5,451			5,218			4,732
Dental/Vision products and services	1,302			1,220			1,218
Other	357			332			442
Total Commercial & Specialty Business	37,421			35,782			40,363
Government Business
Managed care products	62,229			54,889			48,144
Managed care services	403			459			443
Total Government Business	62,632			55,348			48,587
Other
Other	7,695			1,519			127
Eliminations
Eliminations	(4,607		)	(1,308		)	(16		)
Total product revenues	$	103,141		$	91,341		$	89,061

The classification between managed care products and managed care services in the above table primarily distinguishes between the levels of risk assumed. Managed care products represent insurance products where we bear the insurance risk, whereas managed care services represent product offerings where we provide claims adjudication and other administrative services to the customer, but the customer principally bears the insurance risk.

Asset, liability and equity details by reportable segment have not been disclosed, as we do not internally report such information.

A reconciliation of reportable segments’ operating revenue to the amounts of total revenues included in our consolidated statements of income for the years ended December 31, 2019, 2018 and 2017 is as follows:



	2019			2018			2017
Reportable segments operating revenues	$	103,141		$	91,341		$	89,061
Net investment income	1,005			970			867
Net realized gains (losses) on financial instruments	114			(180		)	145
Other-than-temporary impairment losses recognized in income	(47		)	(26		)	(33		)
Total revenues	$	104,213		$	92,105		$	90,040

A reconciliation of reportable segments’ operating gain to income before income tax expense included in our consolidated statements of income for the years ended December 31, 2019, 2018 and 2017 is as follows:



	2019			2018			2017
Reportable segments operating gain	$	5,999		$	5,426		$	4,175
Net investment income	1,005			970			867
Net realized gains (losses) on financial instruments	114			(180		)	145
Other-than-temporary impairment losses recognized in income	(47		)	(26		)	(33		)
Interest expense	(746		)	(753		)	(739		)
Amortization of other intangible assets	(338		)	(358		)	(169		)
Loss on extinguishment of debt	(2		)	(11		)	(282		)
Income before income tax expense	$	5,985		$	5,068		$	3,964