SEGMENT INFORMATION

On January 1, 2015, we realigned certain of our businesses among our reportable segments to correspond with internal management reporting changes and renamed our Employer Group segment to the Group segment. Our three reportable segments remain Retail, Group, and Healthcare Services. The more significant realignments included reclassifying Medicare benefits offered to groups to the Retail segment from the Group segment, bringing all of our Medicare offerings, which are now managed collectively, together in one segment, recognizing that in some instances we market directly to individuals that are part of a group Medicare account. In addition, we realigned our military services business, primarily consisting of our TRICARE South Region contract previously included in the Other Businesses category, to our Group segment as we consider this contract with the government to be a group account. Prior period segment financial information has been recast to conform to the 2015 presentation.

We manage our business with three reportable segments: Retail, Group, and Healthcare Services. In addition, the Other Businesses category includes businesses that are not individually reportable because they do not meet the quantitative thresholds required by generally accepted accounting principles. These 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 to assess performance and allocate resources.

The Retail segment consists of Medicare benefits, marketed to individuals or directly via group accounts, as well as individual commercial fully-insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health and financial protection products. In addition, the Retail segment also includes our contract with CMS to administer the LI-NET prescription drug plan program and contracts with various states to provide Medicaid, dual eligible, and Long-Term Support Services benefits, collectively our state-based contracts. The Group segment consists of employer group commercial fully-insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health and voluntary insurance benefits, as well as administrative services only, or ASO products. In addition, our Group segment includes our health and wellness products (primarily marketed to employer groups) and military services business, primarily our TRICARE South 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, home based services, and clinical programs, as well as services and capabilities to advance population health. We will continue to report under the category of Other Businesses those businesses which do not align with the reportable segments described above, primarily our closed-block long-term care insurance policies.

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 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 $12.3 billion in 2015, $9.7 billion in 2014, and $7.3 billion in 2013. 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 $92 million in 2015, $116 million in 2014, and $93 million in 2013.

Other than those described previously, the accounting policies of each segment are the same and are described in Note 2. Transactions between reportable segments primarily consist of sales of services rendered by our Healthcare Services segment, primarily pharmacy, provider, and home based services as well as clinical programs, to our Retail and Group 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 years ended December 31, 2015, 2014, and 2013:



	Retail		Group		Healthcare Services		Other Businesses		Eliminations/ Corporate			Consolidated
	(in millions)
2015
Revenues—external customers
Premiums:
Individual Medicare Advantage	$	29,526	$	—	$	—	$	—	$	—		$	29,526
Group Medicare Advantage	5,588		—		—		—		—			5,588
Medicare stand-alone PDP	3,846		—		—		—		—			3,846
Total Medicare	38,960		—		—		—		—			38,960
Fully-insured	4,243		5,493		—		—		—			9,736
Specialty	261		1,055		—		—		—			1,316
Medicaid and other	2,341		21		—		35		—			2,397
Total premiums	45,805		6,569		—		35		—			52,409
Services revenue:
Provider	—		40		655		—		—			695
ASO and other	9		658		—		14		—			681
Pharmacy	—		—		30		—		—			30
Total services revenue	9		698		685		14		—			1,406
Total revenues—external customers	45,814		7,267		685		49		—			53,815
Intersegment revenues
Services	—		93		17,997		—		(18,090		)	—
Products	—		—		4,923		—		(4,923		)	—
Total intersegment revenues	—		93		22,920		—		(23,013		)	—
Investment income	134		26		—		76		238			474
Total revenues	45,948		7,386		23,605		125		(22,775		)	54,289
Operating expenses:
Benefits	39,708		5,266		—		87		(792		)	44,269
Operating costs	5,118		1,769		22,481		14		(22,064		)	7,318
Depreciation and amortization	192		93		143		—		(73		)	355
Total operating expenses	45,018		7,128		22,624		101		(22,929		)	51,942
Income from operations	930		258		981		24		154			2,347
Gain on sale of business	—		—		—		—		270			270
Interest expense	—		—		—		—		186			186
Income before income taxes	$	930	$	258	$	981	$	24	$	238		$	2,431

Premium and services revenues derived from our contracts with the federal government, as a percentage of our total premium and services revenues, was approximately 73% for 2015, compared to 73% for 2014, and 75% for 2013.

Benefits expense for the Retail segment for 2015 includes $176 million for a provision for probable future losses (premium deficiency) for individual commercial medical business compliant with the Health Care Reform Law for the 2016 coverage year as discussed more fully in Note 7.



	Retail		Group		Healthcare Services		Other Businesses		Eliminations/ Corporate			Consolidated
	(in millions)
2014
Revenues—external customers
Premiums:
Individual Medicare Advantage	$	25,782	$	—	$	—	$	—	$	—		$	25,782
Group Medicare Advantage	5,490		—		—		—		—			5,490
Medicare stand-alone PDP	3,404		—		—		—		—			3,404
Total Medicare	34,676		—		—		—		—			34,676
Fully-insured	3,265		5,339		—		—		—			8,604
Specialty	256		1,098		—		—		—			1,354
Medicaid and other	1,255		19		—		51		—			1,325
Total premiums	39,452		6,456		—		51		—			45,959
Services revenue:
Provider	—		23		1,254		—		—			1,277
ASO and other	39		740		—		9		—			788
Pharmacy	—		—		99		—		—			99
Total services revenue	39		763		1,353		9		—			2,164
Total revenues—external customers	39,491		7,219		1,353		60		—			48,123
Intersegment revenues
Services	—		78		15,098		—		(15,176		)	—
Products	—		—		3,749		—		(3,749		)	—
Total intersegment revenues	—		78		18,847		—		(18,925		)	—
Investment income	97		23		—		60		197			377
Total revenues	39,588		7,320		20,200		120		(18,728		)	48,500
Operating expenses:
Benefits	33,508		5,130		—		102		(574		)	38,166
Operating costs	4,576		1,936		19,307		17		(18,197		)	7,639
Depreciation and amortization	165		103		155		—		(90		)	333
Total operating expenses	38,249		7,169		19,462		119		(18,861		)	46,138
Income from operations	1,339		151		738		1		133			2,362
Interest expense	—		—		—		—		192			192
Income (loss) before income taxes	$	1,339	$	151	$	738	$	1	$	(59	)	$	2,170



	Retail		Group		Healthcare Services		Other Businesses			Eliminations/ Corporate			Consolidated
	(in millions)
2013
Revenues—external customers
Premiums:
Individual Medicare Advantage	$	22,481	$	—	$	—	$	—		$	—		$	22,481
Group Medicare Advantage	4,710		—		—		—			—			4,710
Medicare stand-alone PDP	3,033		—		—		—			—			3,033
Total Medicare	30,224		—		—		—			—			30,224
Fully-insured	1,160		5,117		—		—			—			6,277
Specialty	210		1,095		—		—			—			1,305
Medicaid and other	328		25		—		670			—			1,023
Total premiums	31,922		6,237		—		670			—			38,829
Services revenue:
Provider	—		21		1,291		—			—			1,312
ASO and other	18		714		—		6			—			738
Pharmacy	—		—		59		—			—			59
Total services revenue	18		735		1,350		6			—			2,109
Total revenues—external customers	31,940		6,972		1,350		676			—			40,938
Intersegment revenues
Services	—		51		11,890		—			(11,941		)	—
Products	—		—		2,803		—			(2,803		)	—
Total intersegment revenues	—		51		14,693		—			(14,744		)	—
Investment income	92		24		—		59			200			375
Total revenues	32,032		7,047		16,043		735			(14,544		)	41,313
Operating expenses:
Benefits	27,164		4,847		—		962			(409		)	32,564
Operating costs	3,232		1,860		15,372		56			(14,165		)	6,355
Depreciation and amortization	146		100		151		6			(70		)	333
Total operating expenses	30,542		6,807		15,523		1,024			(14,644		)	39,252
Income (loss) from operations	1,490		240		520		(289		)	100			2,061
Interest expense	—		—		—		—			140			140
Income (loss) before income taxes	$	1,490	$	240	$	520	$	(289	)	$	(40	)	$	1,921

Benefits expense for Other Businesses for 2013 includes $243 million for reserve strengthening associated with our closed block of long-term care insurance policies as discussed more fully in Note 18.