SEGMENT INFORMATION

6 Months Ended

Jun. 30, 2021

Segment Reporting [Abstract]

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 Services		Eliminations/ Corporate		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 Services		Eliminations/ Corporate		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 Services		Eliminations/ Corporate		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 Services		Eliminations/ Corporate		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