Segment Information

3 Months Ended

Mar. 31, 2020

Beginning in 2020, IngenioRx meets the quantitative thresholds for a reportable segment based on the FASB guidance. The results of our operations are now described through four reportable segments: Commercial & Specialty Business, Government Business, IngenioRx 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, Medicaid expansion programs related to the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, amended, Temporary Assistance for Needy Families, 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.

Our IngenioRx segment includes our PBM business, which began its operations during the second quarter of 2019. IngenioRx markets and offers PBM services to fully-insured and self-funded Anthem health plan customers, as well as to external customers outside of the health plans we own. IngenioRx has a comprehensive prescription benefits management services portfolio which includes services, such as formulary management, pharmacy networks, prescription drug database, member services and mail order capabilities.

Our Other segment includes our Diversified Business Group, or DBG, which is our integrated health services business, certain eliminations and corporate expenses not allocated to our other reportable segments. We reclassified DBG from our Government Business segment to the Other segment during the second quarter of 2019 to reflect changes in how our segments are being managed. Amounts for the three months ended March 31, 2019 have been reclassified to conform to the current year presentation for comparability. Also, beginning on February 28, 2020, DBG includes Beacon.

For our 2019 segment reporting, operating gains (losses) generated from IngenioRx and DBG affiliated activity were included in our Commercial & Specialty Business and Government Business segments based upon their utilization of services from IngenioRx and DBG, which aligns with the method by which we assessed the 2019 operating performance of our reportable segments. Beginning January 1, 2020, we are managing the operating performance of each of our segments on a standalone basis.

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.

Financial data by reportable segment for the three months ended March 31, 2020 and 2019 is as follows:



	Commercial & Specialty Business		Government Business		IngenioRx		Other			Eliminations			Total
Three Months Ended March 31, 2020
Operating revenue - unaffiliated	$	9,361	$	17,466	$	2,344	$	277		$	—		$	29,448
Operating revenue - affiliated	—		—		2,853		750			(3,603		)	—
Operating gain	1,420		411		349		14			—			2,194
Three Months Ended March 31, 2019
Operating revenue - unaffiliated	$	9,392	$	14,925	$	—	$	71		$	—		$	24,388
Operating revenue - affiliated	—		—		—		477			(477		)	—
Operating gain (loss)	1,598		374		—		(32		)	—			1,940

The major product revenues for each of the reportable segments for the three months ended March 31, 2020 and 2019 are as follows:



	Three Months Ended March 31
	2020			2019
Commercial & Specialty Business
Managed care products	$	7,569		$	7,618
Managed care services	1,381			1,366
Dental/Vision products and services	315			323
Other	96			85
Total Commercial & Specialty Business	9,361			9,392
Government Business
Managed care products	17,375			14,821
Managed care services	91			104
Total Government Business	17,466			14,925
IngenioRx
Pharmacy products and services	5,197			—
Total IngenioRx	5,197			—
Other
Other	1,027			548
Eliminations
Eliminations	(3,603		)	(477		)
Total product revenues	$	29,448		$	24,388

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.

A reconciliation of reportable segments’ operating revenue to the amounts of total revenues included in our consolidated statements of income for the three months ended March 31, 2020 and 2019 is as follows:



	Three Months Ended March 31
	2020			2019
Reportable segments’ operating revenue	$	29,448		$	24,388
Net investment income	254			210
Net realized (losses) gains on financial instruments	(24		)	78
Impairment losses recognized in income	(57		)	(10		)
Total revenues	$	29,621		$	24,666

A reconciliation of reportable segments’ operating gain to income before income tax expense included in our consolidated statements of income for the three months ended March 31, 2020 and 2019 is as follows:



	Three Months Ended March 31
	2020			2019
Reportable segments’ operating gain	$	2,194		$	1,940
Net investment income	254			210
Net realized (losses) gains on financial instruments	(24		)	78
Impairment losses recognized in income	(57		)	(10		)
Interest expense	(194		)	(187		)
Amortization of other intangible assets	(83		)	(87		)
(Loss) gain on extinguishment of debt	(1		)	1
Income before income tax expense	$	2,089		$	1,945