10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE     SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE     SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-5975

HUMANA INC.

(Exact name of registrant as specified in its charter)

Delaware	61-0647538
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

500 West Main Street

Louisville, Kentucky 40202

(Address of principal executive offices, including zip code)

(502) 580-1000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	ý	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨
Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

Class of Common Stock	Outstanding at March 31, 2018
$0.16 2/3 par value	137,682,171 shares

Humana Inc.

FORM 10-Q

MARCH 31, 2018

INDEX

		Page
Part I: Financial Information
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets at March 31, 2018 and December 31, 2017	3
	Condensed Consolidated Statements of Income for the three months ended March 31, 2018 and 2017	4
	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2018 and 2017	5
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2017	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	52
Item 4.	Controls and Procedures	52
Part II: Other Information
Item 1.	Legal Proceedings	53
Item 1A.	Risk Factors	53
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3.	Defaults Upon Senior Securities	53
Item 4.	Mine Safety Disclosures	53
Item 5.	Other Information	54
Item 6.	Exhibits	54
	Signatures	55
	Certifications

Humana Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	March 31, 2018			December 31, 2017
	(in millions, except share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	8,855		$	4,042
Investment securities	9,742			9,557
Receivables, less allowance for doubtful accounts of $87 in 2018 and $96 in 2017	1,276			854
Other current assets	4,059			2,949
Total current assets	23,932			17,402
Property and equipment, net	1,595			1,584
Long-term investment securities	2,361			2,745
Goodwill	3,760			3,281
Other long-term assets	1,805			2,166
Total assets	$	33,453		$	27,178
LIABILITIESAND STOCKHOLDERS’ EQUITY
Current liabilities:
Benefits payable	$	4,961		$	4,668
Trade accounts payable and accrued expenses	6,266			4,069
Book overdraft	124			141
Unearned revenues	3,706			378
Short-term debt	398			150
Total current liabilities	15,455			9,406
Long-term debt	4,772			4,770
Future policy benefits payable	2,842			2,923
Other long-term liabilities	303			237
Total liabilities	23,372			17,336
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred stock, $1 par; 10,000,000 shares authorized; none issued	—			—
Common stock, $0.16 2/3 par; 300,000,000 shares authorized; 198,585,156 shares issued at March 31, 2018 and 198,572,458 shares issued at December 31, 2017	33			33
Capital in excess of par value	2,626			2,445
Retained earnings	14,086			13,670
Accumulated other comprehensive (loss) income	(154		)	19
Treasury stock, at cost, 60,902,985 shares at March 31, 2018 and 60,893,762 shares at December 31, 2017	(6,510		)	(6,325		)
Total stockholders’ equity	10,081			9,842
Total liabilities and stockholders’ equity	$	33,453		$	27,178

See accompanying notes to condensed consolidated financial statements.

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Humana Inc.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three months ended March 31,
	2018		2017
	(in millions, except per share results)
Revenues:
Premiums	$	13,811	$	13,398
Services	327		253
Investment income	141		111
Total revenues	14,279		13,762
Operating expenses:
Benefits	11,670		11,326
Operating costs	1,749		1,553
Merger termination fee and related costs, net	—		(947		)
Depreciation and amortization	100		92
Total operating expenses	13,519		12,024
Income from operations	760		1,738
Interest expense	53		49
Income before income taxes	707		1,689
Provision for income taxes	216		574
Net income	$	491	$	1,115
Basic earnings per common share	$	3.56	$	7.54
Diluted earnings per common share	$	3.53	$	7.49
Dividends declared per common share	$	0.50	$	0.40

See accompanying notes to condensed consolidated financial statements.

4

Humana Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three months ended March 31,
	2018			2017
	(in millions)
Net income	$	491		$	1,115
Other comprehensive (loss) income:
Change in gross unrealized investment gains/losses	(203		)	38
Effect of income taxes	52			(14		)
Total change in unrealized investment gains/losses, net of tax	(151		)	24
Reclassification adjustment for net realized gains included in investment income	(29		)	(26		)
Effect of income taxes	7			10
Total reclassification adjustment, net of tax	(22		)	(16		)
Other comprehensive (loss) income, net of tax	(173		)	8
Comprehensive income	$	318		$	1,123

See accompanying notes to condensed consolidated financial statements.

5

Humana Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the three months ended March 31,
	2018			2017
	(in millions)
Cash flows from operating activities
Net income	$	491		$	1,115
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized capital gains	(29		)	(26		)
Stock-based compensation	35			26
Depreciation	109			100
Other intangible amortization	30			18
Provision for deferred income taxes	83			29
Changes in operating assets and liabilities, net of effect of businesses acquired and dispositions:
Receivables	(422		)	(558		)
Other assets	(1,164		)	(415		)
Benefits payable	293			198
Other liabilities	885			542
Unearned revenues	3,328			3,140
Other, net	47			36
Net cash provided by operating activities	3,686			4,205
Cash flows from investing activities
Acquisitions, net of cash acquired	(169		)	(7		)
Purchases of property and equipment	(134		)	(122		)
Purchases of investment securities	(1,711		)	(1,876		)
Maturities of investment securities	217			284
Proceeds from sales of investment securities	1,392			795
Net cash used in investing activities	(405		)	(926		)
Cash flows from financing activities
Receipts from contract deposits, net	1,401			1,730
Proceeds from issuance of senior notes, net	—			991
Proceeds from issuance of commercial paper, net	245			169
Change in book overdraft	(17		)	(34		)
Common stock repurchases	(51		)	(1,574		)
Dividends paid	(57		)	(47		)
Proceeds from stock option exercises and other	11			34
Net cash provided by financing activities	1,532			1,269
Increase in cash and cash equivalents	4,813			4,548
Cash and cash equivalents at beginning of period	4,042			3,877
Cash and cash equivalents at end of period	$	8,855		$	8,425
Supplemental cash flow disclosures:
Interest payments	$	22		$	10
Income tax payments (refunds), net	$	4		$	(4	)

See accompanying notes to condensed consolidated financial statements.

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Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION AND SIGNIFICANT EVENTS

The accompanying condensed consolidated financial statements are presented in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the disclosures normally required by accounting principles generally accepted in the United States of America, or GAAP, or those normally made in an Annual Report on Form 10-K. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. For further information, the reader of this Form 10-Q should refer to our Form 10-K for the year ended December 31, 2017, that was filed with the Securities and Exchange Commission, or the SEC, on February 16, 2018. We refer to the Form 10-K as the “2017 Form 10-K” in this document. References throughout this document to “we,” “us,” “our,” “Company,” and “Humana” mean Humana Inc. and its subsidiaries.

The preparation of our condensed consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The areas involving the most significant use of estimates are the estimation of benefits payable, future policy benefits payable, the impact of risk adjustment provisions related to our Medicare contracts, the valuation and related impairment recognition of investment securities, and the valuation and related impairment recognition of long-lived assets, including goodwill. These estimates are based on knowledge of current events and anticipated future events, and accordingly, actual results may ultimately differ materially from those estimates. Refer to Note 2 to the consolidated financial statements included in our 2017 Form 10-K for information on accounting policies that we consider in preparing our consolidated financial statements.

The financial information has been prepared in accordance with our customary accounting practices and has not been audited. In our opinion, the information presented reflects all adjustments necessary for a fair statement of interim results. All such adjustments are of a normal and recurring nature.

Acquisition of a 40% Minority Interest in Kindred’s Homecare Business

On December 19, 2017, we announced that we entered into a definitive agreement to acquire a40%minority interest in the Kindred at Home Division, or Kindred at Home, of Kindred Healthcare, Inc., or Kindred, for estimated cash consideration of approximately $800 million, including our share of transaction and related expenses, to facilitate a complete separation from the Long Term Acute Care and Rehabilitation businesses (the Specialty Hospital company). TPG Capital, or TPG, and Welsh, Carson, Anderson & Stowe, or WCAS, collectively, the Sponsors, along with us are jointly creating a consortium to purchase all of the outstanding and issued securities of Kindred. Immediately following the closing of that transaction, Kindred at Home and the Specialty Hospital company will be separated, with the result being that the Specialty Hospital Company will be owned by the Sponsors and Kindred at Home will be owned by a joint venture owned by the Sponsors and us. We will own 40% of Kindred at Home, with the remaining 60% owned by a new entity owned by TPG and WCAS.

At the closing of the transaction, we will enter a shareholders agreement with the Sponsors that will provide for certain rights and obligations of each party concerning the newly formed joint venture that will own Kindred at Home. The shareholders agreement with the Sponsors includes a put option under which they have the right to require us to purchase their interest in the joint venture starting at the end of year three and ending at the end of year four following the closing. Consideration upon exercise of the put option per the agreement would be valued at an exit multiple of 10.5 times the preceding twelve months earnings before interest, income taxes, depreciation and amortization, or EBITDA, subject to certain adjustments. In addition, the multiple is subject to adjustment up to 11.5 times EBITDA based on the achievement of certain pre-defined value-based outcomes tied to clinical metrics. The 11.5 times EBITDA exit multiple is comparable to the valuation of our acquired interest in Kindred at Home. Finally, we have a call option under which we have the right to require the Sponsors to sell their interest in the joint venture to Humana beginning at the end of year four and ending at the end of year five following the closing for cash consideration using the same valuation methodology applicable to the previously discussed put option consideration.

7

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The above transactions, which are anticipated to close in the summer of 2018, are subject to customary state and federal regulatory approvals, as well as other customary closing conditions. On April 5, 2018, Kindred's stockholders approved the transaction. We expect to fund the transaction through the use of parent company cash and will account for the minority investment under the equity method.

Acquisition of a 40% Minority Interest in Curo Health Services

On April 23, 2018, we, along with the same Kindred at Home sponsors, TPG and WCAS, collectively referred to as the "Consortium," entered into a definitive agreement to acquire privately held Curo Health Services, or Curo, one of the nations' leading hospice operators providing care to patients at 245locations in 22 states. The Consortium is purchasing Curo for approximately$1.4 billion, and at the closing of the transaction, we will have a 40% minority interest. The Curo transaction, which is anticipated to close during the summer of 2018, is subject to customary state and federal regulatory approvals as well as other customary closing conditions. The Curo transaction is not conditioned upon the closing of the Consortium’s separate acquisition of Kindred at Home and is expected to occur after the closing of Kindred at Home. Upon the closing of these transactions, the Consortium intends to merge Curo with the hospice business of Kindred at Home.

Sale of Closed Block of Commercial Long-Term Care Insurance Business

On November 6, 2017, we entered into a definitive agreement to sell the stock of our wholly-owned subsidiary, KMG America Corporation, or KMG, to Continental General Insurance Company, or CGIC, a Texas-based insurance company wholly owned by HC2 Holdings, Inc., a diversified holding company. KMG’s subsidiary, Kanawha Insurance Company, or KIC, includes our closed block of non-strategic commercial long-term care insurance policies. Based on the terms of the definitive agreement we expect to record a net loss associated with the sale of KMG of approximately$350 million. The estimated loss includes a pretax loss of approximately $760 million, offset by the expected tax benefit of approximately $410 million. We will fund the transaction with approximately $203 million of parent company cash contributed into KMG, subject to customary adjustments, in addition to the transfer of approximately$150 millionof statutory capital with the sale, which together should be more than offset by the estimated $410 million cash savings associated with the expected tax treatment of the sale. The KMG transaction is anticipated to close by the third quarter of 2018 subject to customary closing conditions, including South Carolina Department of Insurance approval. There can be no assurance we will obtain regulatory approvals needed to sell the business or do so under terms acceptable to us.

Workforce Optimization

During the third quarter of 2017, we initiated a voluntary early retirement program and an involuntary workforce reduction program. These programs impacted approximately 3,600 associates, or 7.8%, of our workforce in 2017. As a result, in 2017 we recorded charges of $148 million, or $0.64per diluted common share.At December 31, 2017, $140 millionwas classified as a current liability, included in our condensed consolidated balance sheet in the trade accounts payable and accrued expenses line. Payments under these programs are being made upon termination during the early retirement or severance pay period. The remaining workforce optimization liability at March 31, 2018 was $94 million and is expected to be paid in 2018.

Aetna Merger

On February 16, 2017, under the terms of the Agreement and Plan of Merger, or Merger Agreement, with Aetna Inc., and certain wholly owned subsidiaries of Aetna Inc., which we collectively refer to as Aetna, we received a breakup fee of $1 billionfrom Aetna, which is included in our consolidated statement of income in the line captioned "Merger termination fee and related costs, net."

Revenue Recognition

Our revenues include premium and service revenues. Service revenues include administrative service fees that are recorded based upon established per member per month rates and the number of members for the month and are recognized as services are provided for the month. Additionally, service revenues include net patient service revenues that are recorded based upon established billing rates, less allowances for contractual adjustments, and are recognized

8

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

as services are provided. For more information about our revenues, refer to Note 2 to the consolidated financial statements included in our 2017 Form 10-K for information on accounting policies that we consider in preparing our consolidated financial statements. See Note 15 for disaggregation of revenue by segment and type.

At March 31, 2018, accounts receivable related to services were $162 million. For the three months ended March 31, 2018, we had no material bad-debt expense and there were no material contract assets, contract liabilities or deferred contract costs recorded on the condensed consolidated balance sheet at March 31, 2018.

For the three months ended March 31, 2018, revenue recognized from performance obligations related to prior periods (for example, due to changes in transaction price), was not material. Further revenue expected to be recognized in any future year related to remaining performance obligations was not material.

Revenue expected to be recognized in any future year related to remaining performance obligations was not material.

2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board, or FASB, issued new guidance that amends the accounting for revenue recognition. The amendments are intended to provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices, and improve disclosure requirements. Insurance contracts are not included in the scope of this new guidance. Accordingly, our premiums revenue and investment income, collectively representing approximately 98% of our consolidated external revenues for the three months ended March 31, 2018, are not included in the scope of the new guidance. We adopted the new standard effective January 1, 2018, using the modified retrospective approach. As the majority of our revenues are not subject to the new guidance and the remaining revenues’ accounting treatment did not materially differ from pre-existing accounting treatment, the adoption of the new standard did not have a material impact on our consolidated results of operations, financial condition, cash flows, or related disclosures.

In February 2016, the FASB issued new guidance related to accounting for leases which requires lessees to record

assets and liabilities reflecting the leased assets and lease obligations, respectively, while following the dual model for recognition in statements of income requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense (similar to current operating leases) while finance leases will result in a front-loaded expense pattern (similar to current capital leases). The new guidance is effective for us beginning with annual and interim periods in 2019, with earlier adoption permitted. We are in the process of reconciling the population of lease agreements and other arrangements that may contain embedded leases for purposes of adopting the new standard. While we expect to record significant leased assets and corresponding lease obligations based on our existing population of individual leases, we continue to evaluate the impact on our results of operations, financial position and cash flows.

In June 2016, the FASB issued guidance introducing a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. The guidance is effective for us beginning January 1, 2020. The new current expected credit losses (CECL) model generally calls for the immediate recognition of all expected credit losses and applies to loans, accounts and trade receivables as well as other financial assets measured at amortized cost, loan commitments and off-balance sheet credit exposures, debt securities and other financial assets measured at fair value through other comprehensive income, and beneficial interests in securitized financial assets. The

new guidance replaces the current incurred loss model for measuring expected credit losses, requires expected losses

on available-for-sale debt securities to be recognized through an allowance for credit losses rather than as reductions

in the amortized cost of the securities, and provides for additional disclosure requirements. Our investment portfolio consists of available-for-sale debt securities. We are currently evaluating the impact on our results of operations, financial condition, and cash flows.

In March 2017, the FASB issued new guidance that amends the accounting for premium amortization on purchased callable debt securities by shortening the amortization period. This amended guidance requires the premium to be amortized to the earliest call date instead of maturity date. The new guidance is effective for us beginning with annual and interim periods in 2019. We do not expect adoption of this guidance will have a material impact on our results of operations, financial condition and cash flows.

9

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

In February 2018, the FASB issued guidance which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the December 22, 2017 enactment of the Tax Cuts and Jobs Act.  The new guidance is effective for us beginning January 1, 2019, with early adoption permitted.  We early adopted this guidance in the first quarter of 2018 and it did not have a material impact on our results of operations, financial condition or cash flows.

There are no other recently issued accounting standards that apply to us or that are expected to have a material impact on our results of operations, financial condition, or cash flows.

3. ACQUISITIONS AND DIVESTITURES

On March 1, 2018 we acquired the remaining equity interest in MCCI Holdings, LLC, or MCCI, a privately held management service organization headquartered in Miami, Florida, that primarily coordinates medical care for Medicare Advantage beneficiaries in Florida and Texas. The purchase price consisted primarily of $169 millioncash, as well as our existing investment in MCCI and a note receivable and a revolving note with an aggregate balance of $383 million. This resulted in a preliminary purchase price allocation to goodwill of $479 million, other intangible assets of $80 million, and net tangible assets of $27 million. The goodwill was assigned to the Retail and Healthcare Services segments. The other intangible assets, which primarily consist of customer contracts, have an estimated weighted average useful life of 8 years. Goodwill and other intangible assets are amortizable as deductible expenses for tax purposes. The purchase price allocation is preliminary, subject to completion of valuation analyses, including for example, refining assumptions used to calculate the fair value of intangible assets.

On April 10, 2018, we acquired Family Physicians Group, or FPG, for cash considerations of approximately $190 million. FPG is one of the largest at-risk providers serving Medicare Advantage and Managed Medicaid HMO patients in Greater Orlando, Florida with a footprint that includes clinics located in Lake, Orange, Osceola and Seminole counties. The acquisition of FPG advances our strategy of helping physicians and clinicians evolve from treating health episodically to managing health holistically. This acquisition is not expected to have a material impact on our results of operations, financial condition, or cash flows.

During 2018 and 2017, we acquired other health and wellness related businesses which, individually or in the aggregate, have not had a material impact on our results of operations, financial condition, or cash flows. The results of operations and financial condition of these businesses have been included in our condensed consolidated statements of income and condensed consolidated balance sheets from the respective acquisition dates. Acquisition-related costs recognized in 2018 and 2017 were not material to our results of operations. The pro forma financial information assuming the acquisitions had occurred as of the beginning of the calendar year prior to the year of acquisition, as well as the revenues and earnings generated during the year of acquisition, were not material for disclosure purposes.

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Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

4. INVESTMENT SECURITIES

Investment securities classified as current and long-term were as follows at March 31, 2018 and December 31, 2017, respectively:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in millions)
March 31, 2018
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	505	$	1	$	(5	)	$	501
Mortgage-backed securities	2,308		—		(56		)	2,252
Tax-exempt municipal securities	3,549		6		(61		)	3,494
Mortgage-backed securities:
Residential	24		—		(1		)	23
Commercial	580		—		(11		)	569
Asset-backed securities	554		1		(1		)	554
Corporate debt securities	4,693		131		(114		)	4,710
Total debt securities	$	12,213	$	139	$	(249	)	$	12,103
December 31, 2017
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	532	$	1	$	(2	)	$	531
Mortgage-backed securities	1,625		4		(19		)	1,610
Tax-exempt municipal securities	3,884		33		(28		)	3,889
Mortgage-backed securities:
Residential	26		—		—			26
Commercial	455		3		(2		)	456
Asset-backed securities	407		1		—			408
Corporate debt securities	5,175		244		(37		)	5,382
Total debt securities	$	12,104	$	286	$	(88	)	$	12,302

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Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Gross unrealized losses and fair values aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position were as follows at March 31, 2018 and December 31, 2017, respectively:

	Less than 12 months					12 months or more					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
	(in millions)
March 31, 2018
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	362	$	(2	)	$	129	$	(3	)	$	491	$	(5	)
Mortgage-backed securities	1,489		(28		)	638		(28		)	2,127		(56		)
Tax-exempt municipal securities	2,409		(41		)	621		(20		)	3,030		(61		)
Mortgage-backed securities:
Residential	18		—			3		(1		)	21		(1		)
Commercial	451		(10		)	28		(1		)	479		(11		)
Asset-backed securities	162		(1		)	7		—			169		(1		)
Corporate debt securities	2,431		(60		)	761		(54		)	3,192		(114		)
Total debt securities	$	7,322	$	(142	)	$	2,187	$	(107	)	$	9,509	$	(249	)
December 31, 2017
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	273	$	(1	)	$	130	$	(1	)	$	403	$	(2	)
Mortgage-backed securities	581		(2		)	672		(17		)	1,253		(19		)
Tax-exempt municipal securities	1,590		(16		)	661		(12		)	2,251		(28		)
Mortgage-backed securities:
Residential	20		—			3		—			23		—
Commercial	131		(1		)	28		(1		)	159		(2		)
Asset-backed securities	107		—			10		—			117		—
Corporate debt securities	1,297		(10		)	804		(27		)	2,101		(37		)
Total debt securities	$	3,999	$	(30	)	$	2,308	$	(58	)	$	6,307	$	(88	)

Approximately 99% of our debt securities were investment-grade quality, with a weighted average credit rating of AA by Standard & Poor's Rating Service, or S&P, at March 31, 2018. Most of the debt securities that were below investment-grade were rated BB, the higher end of the below investment-grade rating scale. Tax-exempt municipal securities were diversified among general obligation bonds of states and local municipalities in the United States as well as special revenue bonds issued by municipalities to finance specific public works projects such as utilities, water and sewer, transportation, or education. Our general obligation bonds are diversified across the United States with no individual state exceeding 9%. In addition, 2% of our tax-exempt securities were insured by bond insurers and had an

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Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

equivalent weighted average S&P credit rating of AA exclusive of the bond insurers’ guarantee. Our investment policy limits investments in a single issuer and requires diversification among various asset types.

Our unrealized losses from all securities were generated from approximately 1,410 positions out of a total of approximately 2,230 positions at March 31, 2018. All issuers of securities we own that were trading at an unrealized loss at March 31, 2018 remain current on all contractual payments. After taking into account these and other factors previously described, we believe these unrealized losses primarily were caused by an increase in market interest rates in the current markets since the time the securities were purchased. At March 31, 2018, we did not intend to sell the securities with an unrealized loss position in accumulated other comprehensive income, and it is not likely that we will be required to sell these securities before recovery of their amortized cost basis. As a result, we believe that the securities with an unrealized loss were not other-than-temporarily impaired at March 31, 2018.

The detail of realized gains (losses) related to investment securities and included within investment income was as follows for the three months ended March 31, 2018 and 2017:

	Three months ended March 31,
	2018			2017
	(in millions)
Gross realized gains	$	32		$	27
Gross realized losses	(3		)	(1		)
Net realized capital gains	$	29		$	26

There were no material other-than-temporary impairments for the three months ended March 31, 2018 or 2017.

The contractual maturities of debt securities available for sale at March 31, 2018, regardless of their balance sheet classification, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Fair Value
	(in millions)
Due within one year	$	856	$	854
Due after one year through five years	2,846		2,803
Due after five years through ten years	2,317		2,247
Due after ten years	2,728		2,801
Mortgage and asset-backed securities	3,466		3,398
Total debt securities	$	12,213	$	12,103

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(Unaudited)

5. FAIR VALUE

Financial Assets

The following table summarizes our fair value measurements at March 31, 2018 and December 31, 2017, respectively, for financial assets measured at fair value on a recurring basis:

	Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
	(in millions)
March 31, 2018
Cash equivalents	$	4,346	$	4,346	$	—	$	—
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	501		—		501		—
Mortgage-backed securities	2,252		—		2,252		—
Tax-exempt municipal securities	3,494		—		3,494		—
Mortgage-backed securities:
Residential	23		—		23		—
Commercial	569		—		569		—
Asset-backed securities	554		—		554		—
Corporate debt securities	4,710		—		4,709		1
Total debt securities	12,103		—		12,102		1
Total invested assets	$	16,449	$	4,346	$	12,102	$	1
December 31, 2017
Cash equivalents	$	4,564	$	4,564	$	—	$	—
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	531		—		531		—
Mortgage-backed securities	1,610		—		1,610		—
Tax-exempt municipal securities	3,889		—		3,889		—
Mortgage-backed securities:
Residential	26		—		26		—
Commercial	456		—		456		—
Asset-backed securities	408		—		408		—
Corporate debt securities	5,382		—		5,381		1
Total debt securities	12,302		—		12,301		1
Total invested assets	$	16,866	$	4,564	$	12,301	$	1

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(Unaudited)

There were no material transfers between Level 1 and Level 2 during the three months ended March 31, 2018 or 2017.

Financial Liabilities

Our debt is recorded at carrying value in our consolidated balance sheets. The carrying value of our senior notes debt outstanding, net of unamortized debt issuance costs, was $4,772 million at March 31, 2018 and $4,770 million at December 31, 2017. The fair value of our senior notes debt was $4,944 million at March 31, 2018 and $5,191 million at December 31, 2017. The fair value of our long-term debt is determined based on Level 2 inputs, including quoted market prices for the same or similar debt, or if no quoted market prices are available, on the current prices estimated to be available to us for debt with similar terms and remaining maturities.

Due to the short-term nature, carrying value approximates fair value for our commercial paper borrowings. There were outstanding commercial paper borrowings of $398 million as of March 31, 2018 and $150 million as of December 31, 2017.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

As disclosed in Note 3, we acquired MCCI, FPG, and other health and wellness related businesses during 2018 and 2017. The values of net tangible assets acquired and the resulting goodwill and other intangible assets were recorded at fair value using Level 3 inputs. The majority of the tangible assets acquired and liabilities assumed were recorded at their carrying values as of the respective dates of acquisition, as their carrying values approximated their fair values due to their short-term nature. The fair values of goodwill and other intangible assets acquired in these acquisitions were internally estimated primarily based on the income approach. The income approach estimates fair value based on the present value of the cash flows that the assets are expected to generate in the future. We developed internal estimates for the expected cash flows and discount rates used in the present value calculations. Other than assets acquired and liabilities assumed in these acquisitions, there were no material assets or liabilities measured at fair value on a nonrecurring basis during 2018 or 2017.

6. MEDICARE PART D

We cover prescription drug benefits in accordance with Medicare Part D under multiple contracts with the Centers for Medicare and Medicaid Services, or CMS, as described further in Note 2 to the consolidated financial statements included in our 2017 Form 10-K. The accompanying condensed consolidated balance sheets include the following amounts associated with Medicare Part D at March 31, 2018 and December 31, 2017. CMS subsidies/discounts in the table below include the reinsurance and low-income cost subsidies funded by CMS for which we assume no risk as well as brand name prescription drug discounts for Part D plan participants in the coverage gap funded by CMS and pharmaceutical manufacturers.

	March 31, 2018						December 31, 2017
	Risk Corridor Settlement			CMS Subsidies/ Discounts			Risk Corridor Settlement			CMS Subsidies/ Discounts
	(in millions)
Other current assets	$	5		$	79		$	4		$	101
Trade accounts payable and accrued expenses	(240		)	(2,509		)	(255		)	(1,085		)
Net current liability	(235		)	(2,430		)	(251		)	(984		)
Other long-term assets	33			—			—			—
Other long-term liabilities	(78		)	—			(28		)	—
Net long-term liability	(45		)	—			(28		)	—
Total net liability	$	(280	)	$	(2,430	)	$	(279	)	$	(984	)

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(Unaudited)

7. HEALTH CARE REFORM

The Patient Protection and Affordable Care Act and The Health Care and Education Reconciliation Act of 2010 (which we collectively refer to as the Health Care Reform Law) established risk spreading premium stabilization programs effective January 1, 2014, including a permanent risk adjustment program and temporary risk corridor and reinsurance programs, which we collectively refer to as the 3Rs. The 3Rs, applicable to certain of our commercial medical insurance products, are further discussed in Note 2 to our 2017 Form 10-K. The temporary programs were only applicable for years 2014 through 2016. As a result of our exit from our individual commercial medical business effective January 1, 2018, the permanent risk adjustment program is currently only applicable to our commercial small group health insurance business.

On November 2, 2017, we filed suit against the United States of America in the United States Court of Federal Claims, on behalf of our health plans seeking recovery from the federal government of approximately $611 millionin payments under the risk corridor premium stabilization program established under the Health Care Reform Law, for years 2014, 2015 and 2016.

The accompanying condensed consolidated balance sheets include the following amounts associated with the 3Rs at March 31, 2018 and December 31, 2017.

	March 31, 2018					December 31, 2017
	Risk Adjustment Settlement			Reinsurance Recoverables		Risk Adjustment Settlement			Reinsurance Recoverables
	(in millions)
Prior Coverage Years
Premiums receivable	$	65		$	—	$	62		$	—
Other current assets	—			—		—			44
Trade accounts payable and accrued expenses	(79		)	—		(80		)	—
Net current (liability) asset	(14		)	—		(18		)	44
Other long-term assets	—			—		5			—
Total prior coverage years' net (liability) asset	(14		)	—		(13		)	44
Current Coverage Year
Other long-term assets	1			—		—			—
Other long-term liabilities	(11		)	—		—			—
Net long-term liability	(10		)	—		—			—
Total 2018 coverage year net liability	(10		)	—		—			—
Total net (liability) asset	$	(24	)	$	—	$	(13	)	$	44

Net collections under the 3R's associated with prior coverage years were $46 million during the three months ended March 31, 2018 and were $62 million during the three months ended March 31, 2017.

In September 2018, we expect to pay the federal government$1.05 billionfor our portion of the annual health insurance industry fee attributed to calendar year 2018 in accordance with the Health Care Reform Law. This fee, fixed in amount by law and apportioned to insurance carriers based on market share, is not deductible for tax purposes. Each year on January 1, except for 2017 when the fee was suspended, we record a liability for this fee in trade accounts payable and accrued expenses which we carry until the fee is paid. We record a corresponding deferred cost in other current assets in our condensed consolidated financial statements which is amortized ratably to expense over the calendar year. Amortization of the deferred cost was recorded in operating cost expense of approximately $263 million for the three months ended March 31, 2018, resulting from the amortization of the 2018 annual health insurance industry fee.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The annual health insurance industry fee was suspended for calendar year 2017, and is also suspended for calendar year 2019.

8. GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for our reportable segments for the three months ended March 31, 2018 were as follows:

	Retail		Group and Specialty		Healthcare Services		Total
	(in millions)
Balance at January 1, 2018	$	1,059	$	261	$	1,961	$	3,281
Acquisitions	360		—		119		479
Balance at March 31, 2018	$	1,419	$	261	$	2,080	$	3,760

The following table presents details of our other intangible assets included in other long-term assets in the accompanying condensed consolidated balance sheets at March 31, 2018 and December 31, 2017.

		March 31, 2018						December 31, 2017
	Weighted Average Life	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
		($ in millions)
Other intangible assets:
Customer contracts/ relationships	9.6 years	$	646	$	414	$	232	$	566	$	401	$	165
Trade names and technology	6.5 years	83		78		5		104		84		20
Provider contracts	11.9 years	68		32		36		68		30		38
Noncompetes and other	8.1 years	32		29		3		32		29		3
Total other intangible assets	9.4 years	$	829	$	553	$	276	$	770	$	544	$	226

For the three months ended March 31, 2018 and 2017, amortization expense for other intangible assets was approximately $30 million and $18 million, respectively. Amortization expense for the three months ended March 31, 2018 included $12 million associated with the write-off of a trade name value reflecting the re-branding of certain provider assets. The following table presents our estimate of amortization expense for 2018 and each of the five next succeeding years:

	(in millions)
For the years ending December 31,
2018	$	84
2019	63
2020	61
2021	27
2022	24
2023	16

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

9. BENEFITS PAYABLE

On a consolidated basis, activity in benefits payable, excluding military services, was as follows for the three months ended March 31, 2018 and 2017:

	For the three months ended March 31,
	2018			2017
	(in millions)
Balances, beginning of period	$	4,668		$	4,563
Less: Reinsurance recoverables	(70		)	(76		)
Balances, beginning of period, net	4,598			4,487
Incurred related to:
Current year	11,947			11,580
Prior years	(267		)	(231		)
Total incurred	11,680			11,349
Paid related to:
Current year	(7,775		)	(7,695		)
Prior years	(3,619		)	(3,451		)
Total paid	(11,394		)	(11,146		)
Reinsurance recoverable	77			71
Balances, end of period	$	4,961		$	4,761

Amounts incurred related to prior periods vary from previously estimated liabilities as the claims ultimately are settled. Negative amounts reported for incurred related to prior years result from claims being ultimately settled for amounts less than originally estimated (favorable development).

Our reserving practice is to consistently recognize the actuarial best estimate of our ultimate liability for claims. Actuarial standards require the use of assumptions based on moderately adverse experience, which generally results in favorable reserve development, or reserves that are considered redundant.

Benefits expense excluded from the previous table was as follows for the three months ended March 31, 2018 and 2017.

	For the three months ended March 31,
	2018			2017
	(in millions)
Future policy benefits:
Individual Commercial	$	(16	)	$	(33	)
Other Businesses	6			10
Total future policy benefits	$	(10	)	$	(23	)

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Incurred and Paid Claims Development

The following discussion provides information about incurred and paid claims development for our Retail, Group and Specialty, and Individual Commercial segments as of March 31, 2018 and 2017, net of reinsurance, and the total of IBNR included within the net incurred claims amounts.

Retail Segment

Activity in benefits payable for our Retail segment was as follows for the three months ended March 31, 2018 and 2017:

	For the three months ended March 31,
	2018			2017
	(in millions)
Balances, beginning of period	$	3,963		$	3,507
Less: Reinsurance recoverables	(70		)	(76		)
Balances, beginning of period, net	3,893			3,431
Incurred related to:
Current year	10,739			10,255
Prior years	(187		)	(204		)
Total incurred	10,552			10,051
Paid related to:
Current year	(7,119		)	(7,014		)
Prior years	(3,082		)	(2,572		)
Total paid	(10,201		)	(9,586		)
Reinsurance recoverable	77			71
Balances, end of period	$	4,321		$	3,967

At March 31, 2018, benefits payable for our Retail segment included IBNR of approximately $2.8 billion, primarily associated with claims incurred in 2018.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Group and Specialty Segment

Activity in benefits payable for our Group and Specialty segment, excluding military services, was as follows for the three months ended March 31, 2018 and 2017:

	For the three months ended March 31,
	2018			2017
	(in millions)
Balances, beginning of period	$	568		$	578
Incurred related to:
Current year	1,307			1,306
Prior years	(34		)	(20		)
Total incurred	1,273			1,286
Paid related to:
Current year	(802		)	(824		)
Prior years	(463		)	(493		)
Total paid	(1,265		)	(1,317		)
Balances, end of period	$	576		$	547

At March 31, 2018, benefits payable for our Group and Specialty segment included IBNR of approximately $502 million, primarily associated with claims incurred in 2018.

Individual Commercial Segment

Activity in benefits payable for our Individual Commercial segment was as follows for the three months ended March 31, 2018 and 2017:

	For the three months ended March 31,
	2018			2017
	(in millions)
Balances, beginning of period	$	101		$	454
Incurred related to:
Current year	—			195
Prior years	(44		)	(6		)
Total incurred	(44		)	189
Paid related to:
Current year	—			(59		)
Prior years	(29		)	(363		)
Total paid	(29		)	(422		)
Balance, end of period	$	28		$	221

At March 31, 2018, benefits payable for our Individual Commercial segment included IBNR of approximately $19 million, associated with claims incurred in 2017 and prior.

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(Unaudited)

Reconciliation to Consolidated

The reconciliation of the net incurred and paid claims development tables to benefits payable in the consolidated

statement of financial position is as follows:

Reconciliation of the Disclosure of Incurred and Paid Claims Development to Benefits Payable, net of reinsurance
	March 31,
	2018
Net outstanding liabilities
Retail	$	4,244
Group and Specialty	576
Individual Commercial	28
Other Businesses	36
Benefits payable, net of reinsurance	4,884
Reinsurance recoverable on unpaid claims
Retail	77
Total reinsurance recoverable on unpaid claims	77
Total benefits payable, gross	$	4,961

10. EARNINGS PER COMMON SHARE COMPUTATION

Detail supporting the computation of basic and diluted earnings per common share was as follows for the three months ended March 31, 2018 and 2017:

	Three months ended March 31,
	2018		2017
	(dollars in millions, except per common share results; number of shares in thousands)
Net income available for common stockholders	$	491	$	1,115
Weighted average outstanding shares of common stock used to compute basic earnings per common share	137,903		147,824
Dilutive effect of:
Employee stock options	213		199
Restricted stock	714		849
Shares used to compute diluted earnings per common share	138,830		148,872
Basic earnings per common share	$	3.56	$	7.54
Diluted earnings per common share	$	3.53	$	7.49
Number of antidilutive stock options and restricted stock excluded from computation	645		938

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

11. STOCKHOLDERS’ EQUITY

Dividends

The following table provides details of dividend payments, excluding dividend equivalent rights for unvested stock awards, in 2017 and 2018 under our Board approved quarterly cash dividend policy:

Record Date	Payment Date	Amount per Share		Total Amount
				(in millions)
2017 payments
1/12/2017	1/27/2017	$	0.29	$	43
3/31/2017	4/28/2017	$	0.40	$	58
6/30/2017	7/31/2017	$	0.40	$	58
9/29/2017	10/27/2017	$	0.40	$	57
2018 payments
12/29/2017	1/26/2018	$	0.40	$	55
3/30/2018	4/27/2018	$	0.50	$	69

On April 19, 2018, the Board declared a cash dividend of $0.50 per share payable on July 27, 2018, to stockholders of record on June 29, 2018.

Stock Repurchases

On December 14, 2017, our Board of Directors authorized the repurchase of up to $3.0 billion of our common shares expiring on December 31, 2020, exclusive of shares repurchased in connection with employee stock plans. Under the share repurchase authorization, shares may be purchased from time to time at prevailing prices in the open market, by block purchases, through plans designed to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, or in privately-negotiated transactions, including pursuant to accelerated share repurchase agreements with investment banks, subject to certain regulatory restrictions on volume, pricing, and timing.

On December 21, 2017, we entered into an accelerated stock repurchase agreement, the December 2017 ASR, with Bank of America, N.A., or BofA, to repurchase $1.0 billion of our common stock as part of the $3.0 billion share repurchase program authorized on December 14, 2017. On December 22, 2017, we made a payment of $1.0 billion to BofA from available cash on hand and received an initial delivery of 3.28 million shares of our common stock from BofA based on the then current market price of Humana common stock. The payment to BofA was recorded as a reduction to stockholders’ equity, consisting of an $800 million increase in treasury stock, which reflects the value of the initial 3.28 million shares received upon initial settlement, and a $200 million decrease in capital in excess of par value, which reflected the value of stock held back by BofA pending final settlement of the December 2017 ASR. Upon settlement of the ASR on March 26, 2018, we received an additional 0.46 million shares as determined by the average daily volume weighted-average share price of our common stock during the term of the ASR Agreement of $267.55,bringing the total shares received under this program to 3.74 million. In addition, upon settlement we reclassified the $200 million value of stock initially held back by BofA from capital in excess of par value to treasury stock.

Our remaining repurchase authorization was approximately$2 billion as of May 1, 2018.

In connection with employee stock plans, we acquired 0.19 million common shares for $51 million and 0.35 million common shares for $74 million during the three months ended March 31, 2018 and 2017, respectively.

Treasury Stock Reissuance

We reissued 0.63 million shares of treasury stock during the three months ended March 31, 2018 at a cost of $66 million associated with restricted stock unit vestings and option exercises.

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(Unaudited)

Accumulated Other Comprehensive Income

Accumulated other comprehensive income included net unrealized losses, net of tax, on our investment securities of $110 million at March 31, 2018 and net unrealized gains, net of tax, on our investment securities of $125 million at December 31, 2017. In addition, accumulated other comprehensive income included $44 million, net of tax, at March 31, 2018 and $106 million, net of tax, at December 31, 2017 for an additional liability that would exist on our closed block of long-term care insurance policies if unrealized gains on the sale of the investments backing such products had been realized and the proceeds reinvested at then current yields. Refer to Note 18 to the consolidated financial statements in our 2017 Form 10-K for further discussion of our long-term care insurance policies.

12. INCOME TAXES

The effective income tax rate was 30.7% for the three months ended March 31, 2018, compared to 34.0% for the three months ended March 31, 2017primarily due to the tax reform law enacted on December 22, 2017 (the "Tax Reform Law"), partially offset by the impact of the reinstatement of the non-deductible health insurance industry fee in 2018. The income tax rate for the three months ended March 31, 2017 included previously non-deductible transaction costs that, as a result of the termination of the Merger Agreement, became deductible for tax purposes. The Tax Reform Law reduced the statutory federal corporate income tax rate to 21 percent from 35 percent, beginning in 2018. The accounting for certain income tax effects of the Tax Reform Law is provisional. Revisions to prior estimates are recorded as additional analysis is completed using information available at each measurement date during 2018, with adjustments to the income tax provision recorded as new information becomes known. Revisions to our prior estimates for the income tax effects of the Tax Reform Law decreased our tax expense for the three months ended March 31, 2018 by $6.6 million.

13.  DEBT

The carrying value of long-term debt outstanding, net of unamortized debt issuance costs, was as follows at March 31, 2018 and December 31, 2017:

	March 31, 2018		December 31, 2017
	(in millions)
Senior notes:
$400 million, 2.625% due October 1, 2019	$	399	$	399
$400 million, 2.50% due December 15, 2020	397		397
$400 million, 2.90% due December 15, 2022	396		396
$600 million, 3.15% due December 1, 2022	596		595
$600 million, 3.85% due October 1, 2024	596		595
$600 million, 3.95% due March 15, 2027	595		594
$250 million, 8.15% due June 15, 2038	263		263
$400 million, 4.625% due December 1, 2042	396		396
$750 million, 4.95% due October 1, 2044	739		739
$400 million, 4.80% due March 15, 2047	395		396
Total long-term debt	$	4,772	$	4,770

Senior Notes

In March 2017, we issued $600 million of 3.95% senior notes due March 15, 2027 and $400 million of 4.80% senior notes due March 15, 2047. Our net proceeds, reduced for the underwriters' discount and commission and offering expenses paid as of March 31, 2017, were $991 million.

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(Unaudited)

Our senior notes, which are unsecured, may be redeemed at our option at any time at 100% of the principal amount plus accrued interest and a specified make-whole amount. The 8.15% senior notes are subject to an interest rate adjustment if the debt ratings assigned to the notes are downgraded (or subsequently upgraded). In addition, our senior notes contain a change of control provision that may require us to purchase the notes under certain circumstances.

Credit Agreement

In May 2017 we amended and restated our previous 5-year $1.0 billion unsecured revolving credit agreement expiring July 2018 with a 5-year $2.0 billion unsecured revolving credit agreement which expires May 2022. Under the credit agreement, at our option, we can borrow on either a competitive advance basis or a revolving credit basis. The revolving credit portion bears interest at either LIBOR plus a spread or the base rate plus a spread. The LIBOR spread, currently 110.0 basis points, varies depending on our credit ratings ranging from 91.0 to 150.0 basis points. We also pay an annual facility fee regardless of utilization. This facility fee, currently 15.0 basis points, may fluctuate between 9.0 and 25.0 basis points, depending upon our credit ratings. The competitive advance portion of any borrowings will bear interest at market rates prevailing at the time of borrowing on either a fixed rate or a floating rate based on LIBOR, at our option.

The terms of the credit agreement include standard provisions related to conditions of borrowing, including a customary material adverse effect clause which could limit our ability to borrow additional funds. In addition, the credit agreement contains customary restrictive and financial covenants as well as customary events of default, including financial covenants regarding the maintenance of a minimum level of net worth of $9.5 billion at March 31, 2018 and a maximum leverage ratio of 3.0:1. We are in compliance with the financial covenants, with actual net worth of $10.1 billion and an actual leverage ratio of 1.4:1as measured in accordance with the credit agreement as of March 31, 2018. Upon our agreement with one or more financial institutions, we may expand the aggregate commitments under the credit agreement to a maximum of $2.5 billion, through a $500.0 million incremental loan facility.

At March 31, 2018, we had noborrowings and noletters of credit outstanding under the credit agreement. Accordingly, as ofMarch 31, 2018, we had $2.0 billion of remaining borrowing capacity (which excludes the uncommitted $500 million incremental loan facility under the credit agreement), none of which would be restricted by our financial covenant compliance requirement. We have other customary, arms-length relationships, including financial advisory and banking, with some parties to the credit agreement.

Commercial Paper

We previously entered into a commercial paper program pursuant to which we may issue short-term, unsecured commercial paper notes privately placed on a discount basis through certain broker dealers. On June 15, 2017, we increased the size of the commercial paper program to permit the issuance of the commercial notes with the aggregate face or principal amount outstanding under the program at any time not to exceed $2 billion. Amounts available under the program may be borrowed, repaid and re-borrowed from time to time. The net proceeds of issuances have been and are expected to be used for general corporate purposes. The maximum principal amount outstanding at any one time during the three months ended March 31, 2018 was $442 million. There were outstanding borrowings of $398 million at March 31, 2018 and $150 million at December 31, 2017.

14. GUARANTEES AND CONTINGENCIES

Government Contracts

Our Medicare products, which accounted for approximately 81% of our total premiums and services revenue for the three months ended March 31, 2018, primarily consisted of products covered under the Medicare Advantage and Medicare Part D Prescription Drug Plan contracts with the federal government. These contracts are renewed generally for a calendar year term unless CMS notifies us of its decision not to renew by May 1 of the calendar year in which the contract would end, or we notify CMS of our decision not to renew by the first Monday in June of the calendar year in which the contract would end. Our bids for the 2019 calendar year are due by June 4, 2018.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

CMS uses a risk-adjustment model which adjusts premiums paid to Medicare Advantage, or MA, plans according to health status of covered members. The risk-adjustment model, which CMS implemented pursuant to the Balanced Budget Act of 1997 (BBA) and the Benefits Improvement and Protection Act of 2000 (BIPA), generally pays more where a plan's membership has higher expected costs. Under this model, rates paid to MA plans are based on actuarially determined bids, which include a process whereby our prospective payments are based on our estimated cost of providing standard Medicare-covered benefits to an enrollee with a "national average risk profile." That baseline payment amount is adjusted to reflect the health status of our enrolled membership. Under the risk-adjustment methodology, all MA plans must collect and submit the necessary diagnosis code information from hospital inpatient, hospital outpatient, and physician providers to CMS within prescribed deadlines. The CMS risk-adjustment model uses the diagnosis data to calculate the risk-adjusted premium payment to MA plans, which CMS adjusts for coding pattern differences between the health plans and the government fee-for-service program. We generally rely on providers, including certain providers in our network who are our employees, to code their claim submissions with appropriate diagnoses, which we send to CMS as the basis for our payment received from CMS under the actuarial risk-adjustment model. We also rely on these providers to document appropriately all medical data, including the diagnosis data submitted with claims. In addition, we conduct medical record reviews as part of our data and payment accuracy compliance efforts, to more accurately reflect diagnosis conditions under the risk adjustment model. These compliance efforts include the internal contract level audits described in more detail below, as well as ordinary course reviews of our internal business processes.

CMS is phasing-in the process of calculating risk scores using diagnoses data from the Risk Adjustment Processing System, or RAPS, to diagnoses data from the Encounter Data System, or EDS. The RAPS process requires MA plans to apply a filter logic based on CMS guidelines and only submit claims that satisfy those guidelines. For submissions through EDS, CMS requires MA plans to submit all the encounter data and CMS will apply the risk adjustment filtering logic to determine the risk scores. For 2017, 25% of the risk score was calculated from claims data submitted through EDS. CMS has revised the pace of the phase-in and, for 2018 and 2019, 15% and 25%, respectively, of the risk score will be calculated from claims data submitted through EDS. The phase-in from RAPS to EDS could result in different risk scores from each dataset as a result of plan processing issues, CMS processing issues, or filtering logic differences between RAPS and EDS, and could have a material adverse effect on our results of operations, financial position, or cash flows.

CMS is continuing to perform audits of various companies’ selected MA contracts related to this risk adjustment diagnosis data. We refer to these audits as Risk-Adjustment Data Validation Audits, or RADV audits. RADV audits review medical records in an attempt to validate provider medical record documentation and coding practices which influence the calculation of premium payments to MA plans.

In 2012, CMS released a “Notice of Final Payment Error Calculation Methodology for Part C Medicare Advantage Risk Adjustment Data Validation (RADV) Contract-Level Audits.” The payment error calculation methodology provides that, in calculating the economic impact of audit results for an MA contract, if any, the results of the RADV audit sample will be extrapolated to the entire MA contract after a comparison of the audit results to a similar audit of Medicare FFS (we refer to the process of accounting for errors in FFS claims as the "FFS Adjuster"). This comparison of RADV audit results to the FFS error rate is necessary to determine the economic impact, if any, of RADV audit results because the government used the Medicare FFS program data set, including any attendant errors that are present in that data set, to estimate the costs of various health status conditions and to set the resulting adjustments to MA plans’ payment rates. CMS already makes other adjustments to payment rates based on a comparison of coding pattern differences between MA plans and Medicare FFS data (such as for frequency of coding for certain diagnoses in MA plan data versus the Medicare FFS program dataset).

The final RADV extrapolation methodology, including the first application of extrapolated audit results to determine audit settlements, is expected to be applied to RADV contract level audits conducted for contract year 2011 and subsequent years. CMS is currently conducting RADV contract level audits for contract years 2011, 2012, and 2013 in which two, five and five of our Medicare Advantage plans are being audited, respectively. Per CMS guidance, selected MA contracts will be notified of an audit at some point after the close of the final reconciliation for the payment year being audited.

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Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Estimated audit settlements are recorded as a reduction of premiums revenue in our consolidated statements of income, based upon available information. We perform internal contract level audits based on the RADV audit methodology prescribed by CMS. Included in these internal contract level audits is an audit of our Private Fee-For Service business which we used to represent a proxy of the FFS Adjuster which has not yet been released. We based our accrual of estimated audit settlements for each contract year on the results of these internal contract level audits and update our estimates as each audit is completed. Estimates derived from these results were not material to our results of operations, financial position, or cash flows. We report the results of these internal contract level audits to CMS, including identified overpayments, if any. However, as indicated, we are awaiting additional guidance from CMS regarding the FFS Adjuster. Accordingly, we cannot determine whether such RADV audits will have a material adverse effect on our results of operations, financial position, or cash flows.

In addition, as part of our internal compliance efforts, we routinely perform ordinary course reviews of our internal business processes related to, among other things, our risk coding and data submissions in connection with the risk adjustment model. These reviews may also result in the identification of errors and the submission of corrections to CMS, that may, either individually or in the aggregate, be material. As such, the result of these reviews may have a material adverse effect on our results of operations, financial position, or cash flows.

In addition, CMS' comments in formalized guidance regarding “overpayments” to MA plans appear to be inconsistent with CMS' prior RADV audit guidance. These statements, contained in the preamble to CMS’ final rule release regarding Medicare Advantage and Part D prescription drug benefit program regulations for Contract Year 2015, appear to equate each Medicare Advantage risk adjustment data error with an “overpayment” without reconciliation to the principles underlying the FFS Adjuster referenced above. We will continue to work with CMS to ensure that MA plans are paid accurately and that payment model principles are in accordance with the requirements of the Social Security Act, which, if not implemented correctly could have a material adverse effect on our results of operations, financial position, or cash flows.

At March 31, 2018, our military services business, which accounted for approximately 1% of our total premiums and services revenue for the three months ended March 31, 2018, primarily consisted of the T2017 TRICARE East Region contract. The T2017 East Region contract is a consolidation of the former T3 North and South Regions, comprising thirty-two states and approximately six million TRICARE beneficiaries, under which delivery of health care services commenced on January 1, 2018. The T2017 East Region contract is a 5-year contract set to expire on December 31, 2022 and is subject to renewals on January 1 of each year during its term at the government's option.

Our state-based Medicaid business accounted for approximately 4% of our total premiums and services revenue for the three months ended March 31, 2018. In addition to our state-based Temporary Assistance for Needy Families, or TANF, Medicaid contracts in Florida and Kentucky, we have contracts in Florida for Long Term Support Services (LTSS), and in Illinois for stand-alone dual eligible demonstration programs serving individuals dually eligible for both the federal Medicare program and the applicable state-based Medicaid program.

The loss of any of the contracts above or significant changes in these programs as a result of legislative or regulatory action, including reductions in premium payments to us, regulatory restrictions on profitability, including by comparison of our Medicare Advantage profitability to our non-Medicare Advantage business profitability and a requirement that they remain within certain ranges of each other, or increases in member benefits without corresponding increases in premium payments to us, may have a material adverse effect on our results of operations, financial position, and cash flows.

26

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Legal Proceedings and Certain Regulatory Matters

As previously disclosed, the Civil Division of the United States Department of Justice provided us with an information request in December 2014, concerning our Medicare Part C risk adjustment practices. The request relates to our oversight and submission of risk adjustment data generated by providers in our Medicare Advantage network, as well as to our business and compliance practices related to risk adjustment data generated by our providers and by us, including medical record reviews conducted as part of our data and payment accuracy compliance efforts, the use of health and well-being assessments, and our fraud detection efforts. We believe that this request for information is in connection with a wider review of Medicare Risk Adjustment generally that includes a number of Medicare Advantage plans, providers and vendors. We continue to cooperate with and voluntarily respond to the information requests from the Department of Justice. These matters are expected to result in additional qui tam litigation.

As previously disclosed, on January 19, 2016, an individual filed a qui tam suit captioned United States of America ex rel. Steven Scott v. Humana, Inc., in United States District Court, Central District of California, Western Division. The complaint alleges certain civil violations by us in connection with the actuarial equivalence of the plan benefits under Humana’s Basic PDP plan, a prescription drug plan offered by us under Medicare Part D. The action seeks damages and penalties on behalf of the United States under the False Claims Act. The court ordered the qui tam action unsealed on September 13, 2017, so that the relator could proceed, following notice from the U.S. Government that it was not intervening at that time. On January 29, 2018, the suit was transferred to the United States District Court, Western District of Kentucky, Louisville Division. We take seriously our obligations to comply with applicable CMS requirements and actuarial standards of practice, and we are vigorously defending against these allegations.

On November 2, 2017, we filed suit against the United States of America in the United States Court of Federal Claims, on behalf of our health plans seeking recovery from the federal government of approximately $611 million in payments under the risk corridor premium stabilization program established under Health Care Reform, for years 2014, 2015 and 2016.  We have not recognized revenue, nor have we recorded a receivable, for any amount due from the federal government for unpaid risk corridor payments as of March 31, 2018.  We have fully recognized all liabilities due to the federal government that we have incurred under the risk corridor program, and have paid all amounts due to the federal government as required. There is no assurance that we will prevail in the lawsuit.

Other Lawsuits and Regulatory Matters

Our current and past business practices are subject to review or other investigations by various state insurance and health care regulatory authorities and other state and federal regulatory authorities. These authorities regularly scrutinize the business practices of health insurance, health care delivery and benefits companies. These reviews focus on numerous facets of our business, including claims payment practices, statutory capital requirements, provider contracting, risk adjustment, competitive practices, commission payments, privacy issues, utilization management practices, pharmacy benefits, access to care, and sales practices, among others. Some of these reviews have historically resulted in fines imposed on us and some have required changes to some of our practices. We continue to be subject to these reviews, which could result in additional fines or other sanctions being imposed on us or additional changes in some of our practices.

We also are involved in various other lawsuits that arise, for the most part, in the ordinary course of our business operations, certain of which may be styled as class-action lawsuits. Among other matters, this litigation may include employment matters, claims of medical malpractice, bad faith, nonacceptance or termination of providers, anticompetitive practices, improper rate setting, provider contract rate and payment disputes, including disputes over reimbursement rates required by statute, general contractual matters, intellectual property matters, and challenges to subrogation practices. For example, a number of hospitals and other providers have asserted that, under their network provider contracts, we are not entitled to reduce Medicare Advantage payments to these providers in connection with changes in Medicare payment systems and in accordance with the Balanced Budget and Emergency Deficit Control Act of 1985, as amended (commonly referred to as “sequestration”). Those challenges have led and could lead to arbitration demands or other litigation. Also, under state guaranty assessment laws, including those related to state cooperative failures in the industry, we may be assessed (up to prescribed limits) for certain obligations to the policyholders and claimants of insolvent insurance companies that write the same line or lines of business as we do.

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Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

As a government contractor, we may also be subject to qui tam litigation brought by individuals who seek to sue

on behalf of the government, alleging that the government contractor submitted false claims to the government including, among other allegations, those resulting from coding and review practices under the Medicare risk adjustment model. Qui tam litigation is filed under seal to allow the government an opportunity to investigate and to decide if it wishes to intervene and assume control of the litigation. If the government does not intervene, the lawsuit is unsealed, and the individual may continue to prosecute the action on his or her own, on behalf of the government. We also are subject to other allegations of non-performance of contractual obligations to providers, members, and others, including failure to properly pay claims, improper policy terminations, challenges to our implementation of the Medicare Part D prescription drug program and other litigation.

A limited number of the claims asserted against us are subject to insurance coverage. Personal injury claims, claims for extra contractual damages, care delivery malpractice, and claims arising from medical benefit denials are covered by insurance from our wholly owned captive insurance subsidiary and excess carriers, except to the extent that claimants seek punitive damages, which may not be covered by insurance in certain states in which insurance coverage for punitive damages is not permitted. In addition, insurance coverage for all or certain forms of liability has become increasingly costly and may become unavailable or prohibitively expensive in the future.

We record accruals for the contingencies discussed in the sections above to the extent that we conclude it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. No estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made at this time regarding the matters specifically described above because of the inherently unpredictable nature of legal proceedings, which also may be exacerbated by various factors, including: (i) the damages sought in the proceedings are unsubstantiated or indeterminate; (ii) discovery is not complete; (iii) the proceeding is in its early stages; (iv) the matters present legal uncertainties; (v) there are significant facts in dispute; (vi) there are a large number of parties (including where it is uncertain how liability, if any, will be shared among multiple defendants); or (vii) there is a wide range of potential outcomes.

The outcome of any current or future litigation or governmental or internal investigations, including the matters described above, cannot be accurately predicted, nor can we predict any resulting judgments, penalties, fines or other sanctions that may be imposed at the discretion of federal or state regulatory authorities or as a result of actions by third parties. Nevertheless, it is reasonably possible that any such outcome of litigation, judgments, penalties, fines or other sanctions could be substantial, and the outcome of these matters may have a material adverse effect on our results of operations, financial position, and cash flows, and may also affect our reputation.

15. SEGMENT INFORMATION

We manage our business with four reportable segments: Retail, Group and Specialty, Healthcare Services and Individual Commercial. 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. 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 and voluntary insurance benefits and financial protection products, as well as administrative services only, or ASO products. In addition, our Group and Specialty segment includes 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. The Individual Commercial segment consisted of our individual commercial fully-insured medical health insurance benefits. We report under the category of Other Businesses those businesses that do not align with the reportable segments described above, primarily our closed-block long-term care insurance policies.

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Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

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 $2.9 billion and $3.0 billion for the three months ended March 31, 2018 and 2017, 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 $39 million and $26 million for the three months ended March 31, 2018 and 2017, 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 2017 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, Group and Specialty, and Individual Commercial 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.

29

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Our segment results were as follows for the three months ended March 31, 2018 and 2017:

	Retail		Group and Specialty		Healthcare Services		Individual Commercial			Other Businesses		Eliminations/ Corporate			Consolidated
	(in millions)
Three months ended March 31, 2018
Revenues - external customers
Premiums:
Individual Medicare Advantage	$	8,970	$	—	$	—	$	—		$	—	$	—		$	8,970
Group Medicare Advantage	1,524		—		—		—			—		—			1,524
Medicare stand-alone PDP	896		—		—		—			—		—			896
Total Medicare	11,390		—		—		—			—		—			11,390
Fully-insured	125		1,392		—		(5		)	—		—			1,512
Specialty	—		347		—		—			—		—			347
Medicaid and other	553		—		—		—			9		—			562
Total premiums	12,068		1,739		—		(5		)	9		—			13,811
Services revenue:
Provider	—		—		65		—			—		—			65
ASO and other	2		219		—		—			2		—			223
Pharmacy	—		—		39		—			—		—			39
Total services revenue	2		219		104		—			2		—			327
Total revenues - external customers	12,070		1,958		104		(5		)	11		—			14,138
Intersegment revenues
Services	—		5		4,018		—			—		(4,023		)	—
Products	—		—		1,535		—			—		(1,535		)	—
Total intersegment revenues	—		5		5,553		—			—		(5,558		)	—
Investment income	37		7		6		—			35		56			141
Total revenues	12,107		1,970		5,663		(5		)	46		(5,502		)	14,279
Operating expenses:
Benefits	10,552		1,273		—		(60		)	26		(121		)	11,670
Operating costs	1,222		463		5,441		2			2		(5,381		)	1,749
Depreciation and amortization	66		23		49		—			—		(38		)	100
Total operating expenses	11,840		1,759		5,490		(58		)	28		(5,540		)	13,519
Income from operations	267		211		173		53			18		38			760
Interest expense	—		—		—		—			—		53			53
Income (loss) before income taxes	$	267	$	211	$	173	$	53		$	18	$	(15	)	$	707

30

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

	Retail		Group and Specialty		Healthcare Services		Individual Commercial		Other Businesses			Eliminations/ Corporate			Consolidated
	(in millions)
Three months ended March 31, 2017
Revenues - external customers
Premiums:
Individual Medicare Advantage	$	8,376	$	—	$	—	$	—	$	—		$	—		$	8,376
Group Medicare Advantage	1,318		—		—		—		—			—			1,318
Medicare stand-alone PDP	941		—		—		—		—			—			941
Total Medicare	10,635		—		—		—		—			—			10,635
Fully-insured	118		1,378		—		283		—			—			1,779
Specialty	—		322		—		—		—			—			322
Medicaid and other	653		—		—		—		9			—			662
Total premiums	11,406		1,700		—		283		9			—			13,398
Services revenue:
Provider	—		—		70		—		—			—			70
ASO and other	2		161		—		—		2			—			165
Pharmacy	—		—		18		—		—			—			18
Total services revenue	2		161		88		—		2			—			253
Total revenues - external customers	11,408		1,861		88		283		11			—			13,651
Intersegment revenues
Services	—		5		4,310		—		—			(4,315		)	—
Products	—		—		1,552		—		—			(1,552		)	—
Total intersegment revenues	—		5		5,862		—		—			(5,867		)	—
Investment income	25		11		8		1		21			45			111
Total revenues	11,433		1,877		5,958		284		32			(5,822		)	13,762
Operating expenses:
Benefits	10,051		1,286		—		156		29			(196		)	11,326
Operating costs	954		399		5,680		62		4			(5,546		)	1,553
Merger termination fee and related costs, net	—		—		—		—		—			(947		)	(947		)
Depreciation and amortization	58		21		34		3		—			(24		)	92
Total operating expenses	11,063		1,706		5,714		221		33			(6,713		)	12,024
Income (loss) from operations	370		171		244		63		(1		)	891			1,738
Interest expense	—		—		—		—		—			49			49
Income (loss) before income taxes	$	370	$	171	$	244	$	63	$	(1	)	$	842		$	1,689

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Humana Inc.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The condensed consolidated financial statements of Humana Inc. in this document present the Company’s financial position, results of operations and cash flows, and should be read in conjunction with the following discussion and analysis. References to “we,” “us,” “our,” “Company,” and “Humana” mean Humana Inc. and its subsidiaries. This discussion includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in filings with the Securities and Exchange Commission, or SEC, in our press releases, investor presentations, and in oral statements made by or with the approval of one of our executive officers, the words or phrases like “believes,” “expects,” “anticipates,” “intends,” “likely will result,” “estimates,” “projects” or variations of such words and similar expressions are intended to identify such forward–looking statements. These forward–looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions, including, among other things, information set forth in Item 1A. – Risk Factors in our 2017 Form 10-K, as modified by any changes to those risk factors included in this document and in other reports we filed subsequent to February 16, 2018, in each case incorporated by reference herein. In making these statements, we are not undertaking to address or update such forward-looking statements in future filings or communications regarding our business or results. In light of these risks, uncertainties and assumptions, the forward–looking events discussed in this document might not occur. There may also be other risks that we are unable to predict at this time. Any of these risks and uncertainties may cause actual results to differ materially from the results discussed in the forward–looking statements.

Executive Overview

General

Humana Inc., headquartered in Louisville, Kentucky, is a leading health and well-being company committed to

helping our millions of medical and specialty members achieve their best health. Our successful history in care delivery and health plan administration is helping us create a new kind of integrated care with the power to improve health and well being and lower costs. Our efforts are leading to a better quality of life for people with Medicare, families, individuals, military service personnel, and communities at large. To accomplish that, we support physicians and other health care professionals as they work to deliver the right care in the right place for their patients, our members. Our range of clinical capabilities, resources and tools, such as in home care, behavioral health, pharmacy services, data analytics and wellness solutions, combine to produce a simplified experience that makes health care easier to navigate and more effective.

Our industry relies on two key statistics to measure performance. The benefit ratio, which is computed by taking

total benefits expense as a percentage of premiums revenue, represents a statistic used to measure underwriting profitability. The operating cost ratio, which is computed by taking total operating costs, excluding Merger termination fee and related costs, net, and depreciation and amortization, as a percentage of total revenue less investment income, represents a statistic used to measure administrative spending efficiency.

Aetna Merger

On February 16, 2017, under the terms of the Merger Agreement with Aetna, we received a breakup fee of $1 billionfrom Aetna, which is included in our consolidated statement of income in the line captioned "Merger termination fee and related costs, net."

Acquisitions and Divestitures

On April 10, 2018, we acquired FPG for cash considerations of approximately $190 million. FPG is one of the largest at-risk providers serving Medicare Advantage and Managed Medicaid HMO patients in Greater Orlando, Florida with a footprint that includes clinics located in Lake, Orange, Osceola and Seminole counties. The acquisition of FPG advances our strategy of helping physicians and clinicians evolve from treating health episodically to managing health holistically. This acquisition is not expected to have a material impact on our results of operations, financial condition, or cash flows.

On March 1, 2018 we acquired the remaining equity interest in MCCI, a privately held management service organization headquartered in Miami, Florida, that primarily coordinates medical care for Medicare Advantage beneficiaries in Florida and Texas. The purchase price consisted primarily of $169 millioncash, as well as our existing

32

investment in MCCI and a note receivable and a revolving note with an aggregate balance of $383 million. This resulted in a preliminary purchase price allocation to goodwill of $479 million, other intangible assets of $80 million, and net tangible assets of $27 million.

On December 19, 2017, we announced that we entered into a definitive agreement to acquire a40%minority interest in Kindred at Home for estimated cash consideration of approximately $800 million, including our share of transaction and related expenses, to facilitate a complete separation from the Long Term Acute Care and Rehabilitation businesses (the Specialty Hospital company).

On April 23, 2018, we announced that we entered into a definitive agreement to acquire a 40% minority interest in Curo, one of the nations' leading hospice operators providing care to patients at 245 locations in 22 states. Upon the closing, we intend to merge Curo with the hospice business of Kindred at Home.

On November 6, 2017, we entered into a definitive agreement to sell the stock of our wholly-owned subsidiary, KMG America Corporation, or KMG, to Continental General Insurance Company, or CGIC, a Texas-based insurance company wholly owned by HC2 Holdings, Inc., a diversified holding company. KMG’s subsidiary, Kanawha Insurance Company, or KIC, includes our closed block of non-strategic commercial long-term care insurance policies.

These transactions are more fully discussed in Note 1 and Note 3 to the condensed consolidated financial statements.

Workforce Optimization

We have been committed to productivity initiatives designed to promote operational excellence, accelerate our strategy, fund critical initiatives and advance our growth objectives. During the third quarter of 2017, we initiated a voluntary early retirement program and an involuntary workforce reduction program that will allow us to achieve these objectives and position us for the future. These programs impacted approximately 3,600 associates, or 7.8%, of our workforce in 2017. As a result, we recorded charges of $148 million, or $0.64 per diluted common share. At December 31, 2017, $140 millionwas classified as a current liability, included in our condensed consolidated balance sheet in the trade accounts payable and accrued expenses line. Payments under these programs are being made upon termination during the early retirement or severance pay period. The remaining workforce optimization liability at March 31, 2018 was $94 million and is expected to be paid in 2018.

Business Segments

We manage our business with four reportable segments: Retail, Group and Specialty, Healthcare Services and Individual Commercial. 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. 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 and voluntary insurance benefits and financial protection products, as well as administrative services only, or ASO products. In addition, our Group and Specialty segment includes 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. The Individual Commercial segment consisted of our individual commercial fully-insured medical health insurance benefits. We report under the category of Other Businesses those businesses that do not align with the reportable segments described above, primarily our closed-block long-term care insurance policies.

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The results of each segment are measured by income before income taxes. 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, Group and Specialty, and Individual Commercial 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.

Seasonality

One of the product offerings of our Retail segment is Medicare stand-alone prescription drug plans, or PDPs, under the Medicare Part D program. Our quarterly Retail segment earnings and operating cash flows are impacted by the Medicare Part D benefit design and changes in the composition of our membership. The Medicare Part D benefit design results in coverage that varies as a member’s cumulative out-of-pocket costs pass through successive stages of a member’s plan period, which begins annually on January 1 for renewals. These plan designs generally result in us sharing a greater portion of the responsibility for total prescription drug costs in the early stages and less in the latter stages. As a result, the PDP benefit ratio generally decreases as the year progresses. In addition, the number of low-income senior members as well as year-over-year changes in the mix of membership in our stand-alone PDP products affects the quarterly benefit ratio pattern.

In addition, the Retail segment also experiences seasonality in the operating cost ratio as a result of costs incurred in the second half of the year associated with the Medicare marketing season.

Our Group and Specialty segment also experiences seasonality in the benefit ratio pattern. However, the effect is opposite of Medicare stand-alone PDP in the Retail segment, with the Group and Specialty segment’s benefit ratio increasing as fully-insured members progress through their annual deductible and maximum out-of-pocket expenses.

2018 Highlights

Consolidated

• Our consolidated pretax results of $707 million for the three months ended March 31, 2018 as compared to $1.7 billion for the three months ended March 31, 2017 were primarily impacted by the net gain associated with the terminated Merger Agreement, mainly the break-up fee, that was recorded in the three months ended March 31, 2017, and lower year-over-year pretax earnings in the Retail and Healthcare Services segments, partially offset by higher Group and Specialty segment pretax earnings. The year-over-year comparison was further impacted by the guaranty fund assessment expense to support policyholder obligations of Penn Treaty, an unaffiliated long-term care insurance company, recorded in the three months ended March 31, 2017.

• Year-over-year comparisons of diluted earnings per common share are favorably impacted by a lower number of shares used to compute earnings per commons share reflecting the impact of share repurchases and the impact of a lower tax rate for the three months ended March 31, 2018.

• Our 2018 results through March 31, 2018 reflect the continued implementation of our strategy to offer our members affordable health care combined with a positive consumer experience in growing markets. At the core of this strategy is our integrated care delivery model, which unites quality care, high member engagement, and sophisticated data analytics. Our approach to primary, physician-directed care for our members aims to provide quality care that is consistent, integrated, cost-effective, and member-focused, provided by both employed physicians and physicians with network contract arrangements. The model is designed to improve health outcomes and affordability for individuals and for the health system as a whole, while offering our members a simple, seamless healthcare experience. We believe this strategy is positioning us for long-term

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growth in both membership and earnings. We offer providers a continuum of opportunities to increase the integration of care and offer assistance to providers in transitioning from a fee-for-service to a value-based arrangement. These include performance bonuses, shared savings and shared risk relationships. At March 31, 2018, approximately 1,959,400 members, or 64.9%, of our individual Medicare Advantage members were in value-based relationships under our integrated care delivery model, as compared to 1,901,300 members, or 66.5%, at December 31, 2017 and 1,827,600 members, or 64.4%, at March 31, 2017.

• The annual health insurance industry fee was suspended for calendar year 2017, but has resumed in 2018. Operating costs associated with the health insurer fee attributable to the three months ended March 31, 2018 was $263 million. This fee is not deductible for tax purposes, which increases our effective income tax rate. The one-year suspension in 2017 of the health insurer fee has significantly reduced our operating costs and effective tax rate during the three months ended March 31, 2017.

• The 2018 quarter includes pretax income from our Individual Commercial business of $53 million, or $0.29 per diluted common share compared to $63 million, or 0.27 per diluted common share, included in the 2017 quarter.

• The 2018 quarter also includes an adjustment to provisional remeasurement of deferred taxes related to rate change from the tax reform law enacted on December 22, 2017 of $6.6 million, or $0.05 per diluted common share.

• We recorded a net gain associated with the terminated Merger Agreement, consisting primarily of the break-up fee, of approximately $947 million, or $4.26 per diluted common share during the three months ended March 31, 2017. Certain costs associated with the Merger were previously not deductible for tax purposes, but became deductible, and were recorded as such in the three months ended March 31, 2017 as a result of the termination of the Merger Agreement.

• On March 1, 2017, a court ordered the liquidation of Penn Treaty (an unaffiliated long-term care insurance company), which triggered assessments from state guaranty associations that resulted in our recording a $54 million, or $0.23 per diluted common share, estimate in operating costs in the three months ended March 31, 2017.

• During the three months ended March 31, 2018, cash flow provided by operations was $3.7 billion as compared to $4.2 billion for the three months ended March 31, 2017. Our operating cash flows for the three months ended March 31, 2017 were significantly impacted by the receipt of the $1 billion Merger termination fee, net of related expenses. Our operating cash flows were also significantly impacted in both periods by the early receipt of the Medicare premium remittance for April 2018 of $3.3 billion in March 2018 and the receipt of the Medicare premium remittance for April 2017 of $3.1 billion in March 2017 because the payment dates of April 2018 and April 2017 fell on a weekend. Excluding the Merger termination fee and the timing of the Medicare premium remittances, our operating cash flows were impacted by higher earnings and the timing of working capital items. See further discussion under the section titled "Liquidity" in this report.

Retail

• On April 2, 2018, the Centers for Medicare and Medicaid Services (CMS) issued its announcement of 2019 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter (the Final Rate Notice). The company expects the Final Rate Notice to result in a 3% rate increase for Humana’s individual Medicare Advantage business versus CMS’ estimate for the sector of 3.5%, excluding the impact of Employer Group Waiver Plan (EGWP) funding changes, on a comparable basis. The difference between Humana and CMS projections primarily results from the geographic distribution of our members relative to the national average. In addition, the Final Rate Notice clarified that CMS has the authority to permit MA organizations to offer tailored supplemental benefits with flexibilities to target the social determinants of health as recommended by a licensed medical professional. We expect that this additional flexibility will allow us to include supplemental benefits that we believe will improve health outcomes for our members.

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• On April 24, 2018, we received a Notice of Intent to be Awarded a Comprehensive Medicaid Contract under Florida’s Statewide Managed Medicaid Program in 10 of 11 regions, including the South Florida, Tampa, Jacksonville, and Orlando metro areas. The comprehensive program combines the traditional Medicaid, or TANF, and Long-Term Care programs.

Group and Specialty Segment

• The T2017 East Region contract is a consolidation of the former T3 North and South Regions, comprising thirty-two states and approximately six million TRICARE beneficiaries, under which delivery of health care services commenced on January 1, 2018. The T2017 East Region contract is a 5-year contract set to expire on December 31, 2022 and is subject to renewals on January 1 of each year during its term at the government's option. During 2017, we delivered services under the 5-year T3 South Region contract, which expired on December 31, 2017.

Healthcare Services Segment

• Medicare Advantage and dual demonstration program membership enrolled in a Humana chronic care management program was 752,400 at March 31, 2018, a decrease of 27.3% from 1,035,300 at March 31, 2017, and 5.3% from 794,900 at December 31, 2017. We have undergone an optimization process that ensures the appropriate level of member interaction with clinicians, including moving members into a monitoring program as their needs change, and graduating them out of the care management program when they no longer benefit from the services. This drives quality outcomes, which has resulted in reduced segment earnings but higher returns on investment.

Health Care Reform

The Health Care Reform Law enacted significant reforms to various aspects of the U.S. health insurance industry. Certain significant provisions of the Health Care Reform Law include, among others, mandated coverage requirements, mandated benefits and guarantee issuance associated with commercial medical insurance, rebates to policyholders based on minimum benefit ratios, adjustments to Medicare Advantage premiums, the establishment of federally-facilitated or state-based exchanges coupled with programs designed to spread risk among insurers, and the introduction of plan designs based on set actuarial values. In addition, the Health Care Reform Law established insurance industry assessments, including an annual health insurance industry fee and a three-year $25 billion industry wide commercial reinsurance fee. The annual health insurance industry fee levied on the insurance industry is $14.3 billion in 2018 and is not deductible for income tax purposes, which significantly increases our effective income tax rate. A one year suspension in 2017 and 2019 of the health insurer fee significantly impacts our trend in key operating metrics including our operating cost and medical expense ratios, as well as our effective tax rate.

As noted above, the Health Care Reform Law required the establishment of health insurance exchanges for individuals and small employers to purchase health insurance that became effective January 1, 2014, with an annual open enrollment period. Although we previously participated in these exchanges by offering on-exchange individual commercial medical plans, effective January 1, 2018, we have exited our Individual Commercial medical business.

On November 2, 2017, we filed suit against the United States of America in the United States Court of Federal Claims, on behalf of our health plans seeking recovery from the federal government of approximately $611 millionin payments under the risk corridor premium stabilization program established under the Health Care Reform Law, for years 2014, 2015 and 2016.

It is reasonably possible that the Health Care Reform Law and related regulations, as well as future legislative or regulatory changes, including restrictions on our ability to manage our provider network or otherwise operate our business, or restrictions on profitability, including by comparison of our Medicare Advantage profitability to our non-Medicare Advantage business profitability and a requirement that they remain within certain ranges of each other, in the aggregate may have a material adverse effect on our results of operations (including restricting revenue, enrollment and premium growth in certain products and market segments, restricting our ability to expand into new markets, increasing our medical and operating costs, further lowering our Medicare payment rates and increasing our expenses

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associated with the non-deductible health insurance industry fee and other assessments); our financial position (including our ability to maintain the value of our goodwill); and our cash flows.

We intend for the discussion of our financial condition and results of operations that follows to assist in the understanding of our financial statements and related changes in certain key items in those financial statements from year to year, including the primary factors that accounted for those changes. 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, Group and Specialty, and Individual Commercial segment customers and are described in Note 15 to the condensed consolidated financial statements included in this report.

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Comparison of Results of Operations for 2018 and 2017

The following discussion primarily deals with our results of operations for the three months ended March 31, 2018, or the 2018 quarter, and the three months ended March 31, 2017, or the 2017 quarter.

Consolidated

	For the three months ended March 31,						Change
	2018			2017			Dollars			Percentage
	(dollars in millions, except per common share results)
Revenues:
Premiums:
Retail	$	12,068		$	11,406		$	662		5.8	%
Group and Specialty	1,739			1,700			39			2.3	%
Individual Commercial	(5		)	283			(288		)	(101.8	)%
Other Businesses	9			9			—			—	%
Total premiums	13,811			13,398			413			3.1	%
Services:
Retail	2			2			—			—	%
Group and Specialty	219			161			58			36.0	%
Healthcare Services	104			88			16			18.2	%
Other Businesses	2			2			—			—	%
Total services	327			253			74			29.2	%
Investment income	141			111			30			27.0	%
Total revenues	14,279			13,762			517			3.8	%
Operating expenses:
Benefits	11,670			11,326			344			3.0	%
Operating costs	1,749			1,553			196			12.6	%
Merger termination fee and related costs, net	—			(947		)	947			100.0	%
Depreciation and amortization	100			92			8			8.7	%
Total operating expenses	13,519			12,024			1,495			12.4	%
Income from operations	760			1,738			(978		)	(56.3	)%
Interest expense	53			49			4			8.2	%
Income before income taxes	707			1,689			(982		)	(58.1	)%
Provision for income taxes	216			574			(358		)	(62.4	)%
Net income	$	491		$	1,115		$	(624	)	(56.0	)%
Diluted earnings per common share	$	3.53		$	7.49		$	(3.96	)	(52.9	)%
Benefit ratio (a)	84.5		%	84.5		%				—	%
Operating cost ratio (b)	12.4		%	11.4		%				1.0	%
Effective tax rate	30.7		%	34.0		%				(3.3	)%

(a) Represents total benefits expense as a percentage of premiums revenue.

(b) Represents total operating costs, excluding Merger termination fee and related costs, net, and depreciation and amortization, as a percentage of total revenues less investment income.

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Summary

Net income was $491 million, or $3.53 per diluted common share, in the 2018 quarter compared to $1.1 billion, or $7.49 per diluted common share, in the 2017 quarter. This comparison was impacted by the Merger Agreement break-up fee, the suspension of the health insurance industry fee for calendar year 2017, the estimated guaranty fund assessment expense to support the policy holders obligations of Penn treaty, the exit of the Individual Commercial business effective January 1, 2018, and the Tax Reform Law as previously described. Excluding the impact of the items above, the year-over-year comparison primarily was due to lower earnings in the Retail and Healthcare Services segments, partially offset by higher Group and Specialty segment earnings.

Premiums Revenue

Consolidated premiums increased$413 million, or 3.1%, from the 2017 quarter to $13.8 billion for the 2018 quarter primarily due to higher premiums in the Retail segment, mainly resulting from our Medicare Advantage business, and the Group and Specialty segment. These items were partially offset by lower premiums resulting from the exit of the Individual Commercial business.

Services Revenue

Consolidated services revenue increased$74 million, or 29.2%, from the 2017 quarter to $327 million for the 2018 quarter primarily due to an increase in services revenue in the Group and Specialty segment as discussed in the detailed segment results discussion that follows.

Investment Income

Investment income totaled $141 million for the 2018 quarter, increasing$30 million, or 27.0% , from $111 million in the 2017 quarter primarily reflecting higher average invested balances, interest rates, and realized capital gains.

Benefits Expense

Consolidated benefits expense was $11.7 billion for the 2018 quarter, an increase of $344 million from the 2017 quarter, primarily due to an increase in the Retail segment benefits expense, partially offset by a decrease in the Individual Commercial and Group and Specialty segment benefits expense. We experienced favorable medical claims reserve development related to prior fiscal years of $267 million in the 2018 quarter as compared to $231 million in the 2017 quarter as discussed in the detailed segment results discussion that follows.

The consolidated benefit ratio was unchanged at 84.5% for the 2018 quarter compared to the 2017 quarter. The year-over-year comparison was favorably impacted by the reinstatement of the health insurance industry fee in 2018, which was contemplated in the pricing and benefit design of the company’s products, the seasonality and product design of our fully-insured commercial products, including an increased number of high deductible plan offerings, and higher favorable prior-period reserve development in the 2018 quarter. Favorable prior-period medical claims reserve development decreased the consolidated benefit ratio by approximately 190 basis points in the 2018 quarter versus approximately 170 basis points in the 2017 quarter. These items were partially offset by investment of higher than initially expected individual Medicare Advantage pretax earnings in 2017 into our benefit design for its 2018 Medicare Advantage offerings, and a more severe flu season year-over-year.

Operating Costs

Our segments incur both direct and shared indirect operating costs. We allocate the indirect costs shared by the segments primarily as a function of revenues. As a result, the profitability of each segment is interdependent.

Consolidated operating costs increased$196 million, or 12.6%, during the 2018 quarter compared to the 2017 quarter primarily due to an increase in operating costs in the Retail and Group and Specialty segments, partially offset by a decrease in operating costs in the Healthcare Services and Individual Commercial segments.

The consolidated operating cost ratio for the 2018 quarter of 12.4%increased100 basis points from the 2017 quarter primarily due to the reinstatement of the health insurance industry fee in 2018, and long-term sustainability

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investments in the 2018 quarter as a result of the Tax Reform Law. Our long-term sustainability investments include investments in our associate workforce, primarily the establishment of an annual incentive program for a broader range of employees, together with additional investments in the communities of our members, technology and our integrated delivery model. These items were partially offset by the favorable impact of significant operating cost efficiencies in the 2018 quarter driven by productivity initiatives implemented in 2017, the impact of the guaranty fund assessment expense to support policy holder obligations of Penn Treaty in the 2017 quarter, and the exit of the Individual Commercial business effective January 1, 2018. The non-deductible health insurance industry fee impacted the operating cost ratio by 190 basis points in the 2018 quarter.

Depreciation and Amortization

Depreciation and amortization for the 2018 quarter totaled $100 million compared to $92 million for the 2017 quarter.

Interest Expense

Interest expense for the 2018 quarter totaled $53 million, compared to $49 million for the 2017 quarter.

Income Taxes

Our effective tax rate during the 2018 quarter was 30.7% compared to the effective tax rate of 34.0% for the 2017 quarter, primarily due to the Tax Reform Law primarily due to the Tax Reform Law, partially offset by the impact of the reinstatement of the non-deductible health insurance industry fee in 2018. The income tax rate for the three months ended March 31, 2017 included previously non-deductible transaction costs that, as a result of the termination of the Merger Agreement, became deductible for tax purposes. The Tax Reform Law reduced the statutory federal corporate income tax rate to 21 percent from 35 percent, beginning in 2018. The accounting for certain income tax effects of the Tax Reform Law is provisional. Revisions to prior estimates are recorded as additional analysis is completed using information available at each measurement date during 2018, with adjustments to the income tax provision recorded as new information becomes known. Revisions to our prior estimates for the income tax effects of the Tax Reform Law decreased our tax expense for the three months ended March 31, 2018 by $6.6 million.

Retail Segment

	March 31,		Change
	2018	2017	Members		Percentage
Membership:
Medical membership:
Individual Medicare Advantage	3,018,500	2,839,700	178,800		6.3	%
Group Medicare Advantage	492,700	431,100	61,600		14.3	%
Medicare stand-alone PDP	5,042,100	5,199,400	(157,300	)	(3.0	)%
Total Retail Medicare	8,553,300	8,470,200	83,100		1.0	%
State-based Medicaid	336,000	380,400	(44,400	)	(11.7	)%
Medicare Supplement	238,700	231,400	7,300		3.2	%
Total Retail medical members	9,128,000	9,082,000	46,000		0.5	%

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	For the three months ended March 31,						Change
	2018			2017			Dollars			Percentage
	(in millions)
Premiums and Services Revenue:
Premiums:
Individual Medicare Advantage	$	8,970		$	8,376		$	594		7.1	%
Group Medicare Advantage	1,524			1,318			206			15.6	%
Medicare stand-alone PDP	896			941			(45		)	(4.8	)%
Total Retail Medicare	11,390			10,635			755			7.1	%
State-based Medicaid	553			653			(100		)	(15.3	)%
Medicare Supplement	125			118			7			5.9	%
Total premiums	12,068			11,406			662			5.8	%
Services	2			2			—			—	%
Total premiums and services revenue	$	12,070		$	11,408		$	662		5.8	%
Income before income taxes	$	267		$	370		$	(103	)	(27.8	)%
Benefit ratio	87.4		%	88.1		%				(0.7	)%
Operating cost ratio	10.1		%	8.4		%				1.7	%

Pretax Results

• Retail segment pretax income was $267 million in the 2018 quarter, a decrease of $103 million, or 27.8%, compared to $370 million in the 2017 quarter, primarily due to the result of investment in benefit design for 2018 Medicare Advantage offerings further discussed below, investments made in the 2018 quarter as a result of the Tax Reform Law as previously described, lower favorable prior-period reserve development, and a more severe flu season year-over-year. These items were partially offset by the significant operating cost efficiencies further discussed below.

Enrollment

• Individual Medicare Advantage membership increased178,800 members, or 6.3%, from March 31, 2017 to March 31, 2018, primarily due to membership additions associated with the most recent Annual Election Period, or AEP, for Medicare beneficiaries.

• Group Medicare Advantage membership increased61,600, or 14.3%, from March 31, 2017 to March 31, 2018 , primarily due to increased sales to our existing group accounts during the most recent AEP for Medicare beneficiaries.

• Medicare stand-alone PDP membership decreased157,300 members, or 3.0%, from March 31, 2017 to March 31, 2018reflecting net declines during the most recent AEP for Medicare beneficiaries.These declines primarily resulted from the previously disclosed loss of auto assigned members in Florida and South Carolina due to pricing over CMS low income benchmark and continued membership declines in our Enhanced Plan. In addition, growth in our co-branded Walmart plan was significantly lower than historic levels due to the introduction of additional low-priced competitor offerings in many regions.

• State-based Medicaid membership decreased44,400 members, or 11.7%, from March 31, 2017 to March 31, 2018, primarily driven by the previously disclosed decision to not participate in Illinois' Integrated Program Medicaid contract, along with lower membership associated with our Florida contract due to overall strengthening economic conditions.

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Premiums Revenue

• Retail segment premiums increased $662 million, or 5.8%, from the 2017 quarter to the 2018 quarter primarily due to individual and group Medicare Advantage membership growth in the most recent AEP as well as increased per-member premiums for certain products within the segment, partially offset by declines in the stand-alone PDP and state-based contracts revenues resulting from membership declines discussed above. Average group and individual Medicare Advantage membership increased 7.4% for the 2018 quarter. Average membership is calculated by summing the ending membership for each month in a period and dividing the result by the number of months in a period. Premiums revenue reflects changes in membership and average per-member premiums. Items impacting average per-member premiums include changes in premium rates as well as changes in the geographic mix of membership, the mix of product offerings, and the mix of benefit plans selected by our membership.

Benefits Expense

• The Retail segment benefit ratio decreased70 basis points from 88.1% in the 2017 quarter to 87.4% in the 2018 quarter, primarily due to the reinstatement of the health insurance industry fee in 2018 which was contemplated in the pricing and benefit design of our products. This was partially offset by the unfavorable impact from investment of higher than initially expected individual Medicare Advantage pretax earnings in 2017 into our benefit design for our 2018 Medicare Advantage offerings, lower favorable prior-period reserve development, and a more severe flu season year-over-year.

• The Retail segment’s benefits expense for the 2018 quarter included $187 million in favorable prior-period medical claims reserve development versus $204 million in the 2017 quarter. Prior-period medical claims reserve development decreased the Retail segment benefit ratio by approximately 150 basis points in the 2018 quarter versus approximately 180 basis points in the 2017 quarter.

Operating Costs

• The Retail segment operating cost ratio of 10.1% for the 2018 quarter increased 170 basis points from 8.4% for the 2017 quarter. The year-over-year comparison was negatively impacted by the reinstatement of the health insurance industry fee in 2018, and investments made in the 2018 quarter as a result of the Tax Reform Law. These items were partially offset by significant operating cost efficiencies in the 2018 quarter driven by productivity initiatives implemented in 2017. The non-deductible health insurance industry fee impacted the operating cost ratio by 190 basis points in the 2018 quarter.

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Group and Specialty Segment

	March 31,		Change
	2018	2017	Members		Percentage
Membership:
Medical membership:
Fully-insured commercial group	1,075,100	1,119,400	(44,300	)	(4.0	)%
ASO	452,600	447,000	5,600		1.3	%
Military services	5,931,100	3,082,800	2,848,300		92.4	%
Total group and specialty medical members	7,458,800	4,649,200	2,809,600		60.4	%
Specialty membership (a)	6,738,900	6,921,800	(182,900	)	(2.6	)%

(a) Specialty products include dental, vision, voluntary benefit products and other supplemental health and financial protection products. Members included in these products may not be unique to each product since members have the ability to enroll in multiple products.

	For the three months ended March 31,						Change
	2017			2016			Dollars		Percentage
	(in millions)
Premiums and Services Revenue:
Premiums:
Fully-insured commercial group	$	1,392		$	1,378		$	14	1.0	%
Group specialty	347			322			25		7.8	%
Total premiums	1,739			1,700			39		2.3	%
Services	219			161			58		36.0	%
Total premiums and services revenue	$	1,958		$	1,861		$	97	5.2	%
Income before income taxes	$	211		$	171		$	40	23.4	%
Benefit ratio	73.2		%	75.6		%			(2.4	)%
Operating cost ratio	23.6		%	21.4		%			2.2	%

Pretax Results

• Group and Specialty segment pretax income was $211 million in the 2018 quarter, an increase of $40 million or 23.4%, from $171 million in the 2017 quarter, primarily due to higher pretax earnings from our fully insured commercial medical business.

Enrollment

• Fully-insured commercial group medical membership decreased44,300 members, or 4.0%, from March 31, 2017 to March 31, 2018 reflecting lower membership in small group accounts due in part to more small group accounts continuing to select level funded ASO products in 2018.

• Group ASO commercial medical membership increased5,600 members, or 1.3%, from March 31, 2017 to March 31, 2018 reflecting more small group accounts selecting level-funded ASO products in 2018, partially offset by the loss of certain large group accounts as a result of continued discipline in pricing of services for self-funded accounts amid a highly competitive environment.

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• Military services membership increased2,848,300 members, or 92.4%, from March 31, 2017 to March 31, 2018 primarily due to our transition to providing healthcare services to military service members, retirees, and their families under the new T2017 East Region contract covering 32 states, which became effective January 1, 2018.

• Specialty membership decreased182,900 members, or 2.6%, from March 31, 2017 to March 31, 2018 primarily due to the losses of some large group accounts offering stand-alone dental and vision products, partially offset by an increase in individual dental and vision membership.

Premiums Revenue

• Group and Specialty segment premiums increased$39 million, or 2.3%, from the 2017 quarter to $1.7 billion for the 2018 quarter primarily reflecting higher stop-loss premiums related to our small group level funded accounts, and higherper-member premiums across most lines of business in the segment, partially offset by declines in average group fully-insured and ASO commercial medical membership.

Services Revenue

• Group and Specialty segment services revenue increased$58 million, or 36.0%, from the 2017 quarter to $219 million for the 2018 quarter as a result of the transition to the TRICARE T2017 East Region contract on January 1, 2018.

Benefits Expense

• The Group and Specialty segment benefit ratio decreased240 basis points from 75.6% in the 2017 quarter to 73.2% in the 2018 quarter primarily due to the impact of the reinstatement of the health insurance industry fee in 2018 which was contemplated in the pricing of our products, the seasonality and product design of our fully-insured commercial products, including increased number of high deductible plan offerings, and higher favorable prior-period reserve development.

• The Group and Specialty segment's benefits expense included $34 million in favorable prior-period medical claims reserve development in the 2018 quarter and $20 million in the 2017 quarter. This favorable prior-period medical claims reserve development decreased the Group and Specialty segment benefit ratio by approximately 200 basis points in the 2018 quarter and 120 basis points in the 2017 quarter.

Operating Costs

• The Group and Specialty segment operating cost ratio of 23.6% for the 2018 quarterincreased220 basis points from 21.4% for the 2017 quarter primarily due to the reinstatement of the health insurance industry fee in 2018, growth in our military services business, which carries a higher operating cost ratio than other products within the segment, as a result of the transition to the TRICARE T2017 East Region contract, and investments made in the 2018 quarter as a result of the Tax Reform Law as previously described. These items were partially offset by significant operating cost efficiencies in the 2018 quarter driven by productivity initiatives implemented in 2017. The non-deductible health insurance industry fee impacted the operating cost ratio by 160 basis points in the 2018 quarter.

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Healthcare Services Segment

	For the three months ended March 31,						Change
	2018			2017			Dollars			Percentage
	(in millions)
Revenues:
Services:
Clinical care services	$	44		$	50		$	(6	)	(12.0	)%
Pharmacy solutions	39			18			21			116.7	%
Provider services	21			20			1			5.0	%
Total services revenues	104			88			16			18.2	%
Intersegment revenues:
Pharmacy solutions	4,995			5,141			(146		)	(2.8	)%
Provider services	378			418			(40		)	(9.6	)%
Clinical care services	180			303			(123		)	(40.6	)%
Total intersegment revenues	5,553			5,862			(309		)	(5.3	)%
Total services and intersegment revenues	$	5,657		$	5,950		$	(293	)	(4.9	)%
Income before income taxes	$	173		$	244		$	(71	)	(29.1	)%
Operating cost ratio	96.2		%	95.5		%				0.7	%

Pretax Results

• Healthcare Services segment pretax income of $173 million for the 2018 quarter decreased $71 million, or 29.1%, from $244 million in the 2017 quarter primarily due to the impact of the optimization process associated with our chronic care management programs, as well as the investments made in the 2018 quarter as a result of the Tax Reform Law as previously described.

Script Volume

• Humana Pharmacy Solutions script volumes on an adjusted 30-day equivalent basis increased to approximately 108 million in the 2018 quarter, up 0.9%, versus scripts of approximately 107 million in the 2017 quarter. This increase primarily reflected growth associated with higher individual Medicare Advantage membership for the 2018 quarter compared to the 2017 quarter, partially offset by the decline in stand-alone PDP and Individual Commercial membership.

Services Revenues

• Services revenues increased$16 million, or 18.2%, from the 2017 quarter to $104 million for the 2018 quarter primarily due to service revenue growth from our pharmacy solutions business.

Intersegment Revenues

• Intersegment revenues decreased$309 million, or 5.3%, from the 2017 quarter to $5.6 billion for the 2018 quarter primarily due to the loss of intersegment revenues associated with our exit from the Individual commercial business, and a decline in pharmacy solutions revenue year-over-year primarily due to lower stand-alone PDP membership as a result of the previously disclosed loss of auto assigned members in Florida and South Carolina resulting from pricing over the CMS low income benchmark and continued membership declines in our Enhanced product. In addition, the year-over-year comparison was impacted by the result of the optimization process associated with our chronic care management programs previously discussed, and lower revenue in our provider services business reflecting Medicare rates year-over-year in geographies where

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our provider assets are primarily located. These declines were partially offset by Medicare Advantage membership growth in the 2018 quarter.

Operating Costs

• The Healthcare Services segment operating cost ratio of 96.2% for the 2018 quarterincreased70 basis points from 95.5% for the 2017 quarter primarily due to the timing of the optimization process associated with our chronic conditions management programs and the long-term sustainability investments in the 2018 quarter as a result of the Tax Reform Law. With the optimization of our chronic care management programs, operating cost reductions may lag the associated reduction in revenue, negatively impacting the operating cost ratio. These items were partially offset by significant operating cost efficiencies in the 2018 quarter driven by productivity initiatives implemented in 2017.

Individual Commercial Segment

• Individual Commercial segment pretax income of $53 million for the 2018 quarterdecreased$10 million from the 2017 quarter. The pretax income in the 2018 quarter primarily reflects the impact of favorable prior-period reserve development.

Liquidity

Historically, our primary sources of cash have included receipts of premiums, services revenue, and investment and other income, as well as proceeds from the sale or maturity of our investment securities, borrowings, and proceeds from sales of businesses. Our primary uses of cash historically have included disbursements for claims payments, operating costs, interest on borrowings, taxes, purchases of investment securities, acquisitions, capital expenditures, repayments on borrowings, dividends, and share repurchases. Because premiums generally are collected in advance of claim payments by a period of up to several months, our business normally should produce positive cash flows during periods of increasing premiums and enrollment. Conversely, cash flows would be negatively impacted during periods of decreasing premiums and enrollment. From period to period, our cash flows may also be affected by the timing of working capital items including premiums receivable, benefits payable, and other receivables and payables. Our cash flows are impacted by the timing of payments to and receipts from CMS associated with Medicare Part D subsidies for which we do not assume risk. The use of cash flows may be limited by regulatory requirements of state departments of insurance (or comparable state regulators) which require, among other items, that our regulated subsidiaries maintain minimum levels of capital and seek approval before paying dividends from the subsidiaries to the parent. Our use of cash flows derived from our non-insurance subsidiaries, such as in our Healthcare Services segment, is generally not restricted by state departments of insurance (or comparable state regulators).

The effect of the commercial risk adjustment, risk corridor, and reinsurance provisions of the Health Care Reform Law have impacted the timing of our operating cash flows, as we build receivables for each coverage year that are expected to be collected in subsequent coverage years. During the three months ended March 31, 2018, net collections under the 3Rs associated with prior coverage years were $46 million compared to $62 million during the three months ended March 31, 2017. The remaining net payable balance associated with the 3Rs was approximately $24 million at March 31, 2018, including $14 million related to prior coverage years, compared to a net receivable of $31 million at December 31, 2017. The remaining net payable balance is primarily related to our Individual Commercial medical business which we exited effective January 1, 2018. On November 2, 2017, we filed suit against the United States of America in the United States Court of Federal Claims, on behalf of our health plans seeking recovery from the federal government of approximately $611 millionin payments under the risk corridor premium stabilization program established under the Health Care Reform Law, for years 2014, 2015 and 2016. There is no assurance, however, that we will prevail in this lawsuit.

For additional information on our liquidity risk, please refer to the section entitled “Risk Factors” in our 2017 Form 10-K.

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Cash and cash equivalents increased to approximately $8.9 billion at March 31, 2018 from $4.0 billion at December 31, 2017. The change in cash and cash equivalents for the three months ended March 31, 2018 and 2017 is summarized as follows:

	Three Months Ended
	2018			2017
	(in millions)
Net cash provided by operating activities	$	3,686		$	4,205
Net cash used in investing activities	(405		)	(926		)
Net cash provided by financing activities	1,532			1,269
Increase in cash and cash equivalents	$	4,813		$	4,548

Cash Flow from Operating Activities

Our operating cash flows for the 2018 quarter and 2017 quarter were significantly impacted in both periods by the early receipt of the Medicare premium remittances of $3.3 billion in March 2018 and $3.1 billion in March 2017 because the payment dates of April 2018 and April 2017 fell on a weekend. Generally, when the first day of a month falls on a weekend or holiday, with the exception of January 1 (New Year's Day), we receive this payment at the end of the previous month. This also resulted in an increase to unearned revenues in our condensed consolidated balance sheet at March 31, 2018. Our operating cash flows for the 2017 quarter were also significantly impacted by the receipt of the $1 billion Merger Agreement break-up fee. Excluding the Merger termination fee and the timing of the Medicare premium remittances, our operating cash flows were impacted by higher earnings and the timing of working capital items.

The most significant drivers of changes in our working capital are typically the timing of payments of benefits expense and receipts for premiums. We illustrate these changes with the following summaries of benefits payable and receivables.

The detail of benefits payable was as follows at March 31, 2018 and December 31, 2017:

	March 31, 2018		December 31, 2017		2018 Quarter Change			2017 Quarter Change
	(in millions)
IBNR (1)	$	3,360	$	3,154	$	206		$	(25	)
Reported claims in process (2)	718		614		104			(66		)
Other benefits payable (3)	883		900		(17		)	289
Total benefits payable	$	4,961	$	4,668	$	293		$	198

(1) IBNR represents an estimate of benefits payable for claims incurred but not reported (IBNR) at the balance sheet date and includes unprocessed claim inventories. The level of IBNR is primarily impacted by membership levels, medical claim trends and the receipt cycle time, which represents the length of time between when a claim is initially incurred and when the claim form is received and processed (i.e. a shorter time span results in a lower IBNR). IBNR includes unprocessed claims inventories.

(2) Reported claims in process represents the estimated valuation of processed claims that are in the post claim adjudication process, which consists of administrative functions such as audit and check batching and handling, as well as amounts owed to our pharmacy benefit administrator which fluctuate due to bi-weekly payments and the month-end cutoff.

(3) Other benefits payable primarily include amounts owed to providers under capitated and risk sharing arrangements.

The increase in benefits payable from December 31, 2017 to March 31, 2018 primarily was due to an increase in IBNR, primarily as a result of Medicare Advantage membership growth as well as an increase in the amount of processed

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but unpaid claims, which fluctuate due to month-end cutoff. The increase in benefits payable from December 31, 2016 to March 31, 2017 primarily was due to an increase in the amounts owed to providers under the capitated and risk sharing arrangements. This was partially offset by a decrease in the amount of processed but unpaid claims, which fluctuate due to month-end cutoff as well as a decrease in IBNR primarily driven by declines in individual commercial medical membership in the 2017 quarter, partially offset by an increase in group Medicare Advantage membership.

The detail of total net receivables was as follows at March 31, 2018 and December 31, 2017:

	March 31, 2018			December 31, 2017			2018 Quarter Change			2017 Quarter Change
	(in millions)
Medicare	$	968		$	511		$	457		$	467
Commercial and other	246			273			(27		)	64
Military services	149			166			(17		)	22
Allowance for doubtful accounts	(87		)	(96		)	9			5
Total net receivables	$	1,276		$	854		$	422		$	558

The changes in Medicare receivables for both the 2018 quarter and the 2017 quarter reflect the typical pattern caused by the timing of accruals and related collections associated with the CMS risk-adjustment model. Significant collections occur with the mid-year and final settlements with CMS in the second and third quarter.

Cash Flow from Investing Activities

We reinvested a portion of our operating cash flows in investment securities, primarily investment-grade fixed income securities, totaling $102 million in the 2018 quarter and $797 million in the 2017 quarter.

On March 1, 2018 we acquired the remaining equity interest in MCCI, a privately held management service organization headquartered in Miami, Florida, that primarily coordinates medical care for Medicare Advantage beneficiaries in Florida and Texas. The purchase price included, in part, cash consideration of $169 million, as discussed in Note 3 to the condensed consolidated financial statements.

Our ongoing capital expenditures primarily relate to our information technology initiatives, support of services in our provider services operations including medical and administrative facility improvements necessary for activities such as the provision of care to members, claims processing, billing and collections, wellness solutions, care coordination, regulatory compliance and customer service. Total capital expenditures, excluding acquisitions, were $134 million in the 2018 quarter and $122 million in the 2017 quarter.

Cash Flow from Financing Activities

Receipts from CMS associated with Medicare Part D claim subsidies for which we do not assume risk werehigher than claims payments by $1.4 billion during the 2018 quarter and higher than claims payments by $1.7 billion during the 2017 quarter.

Under our administrative services only TRICARE contracts, health care cost payments for which we do not assume risk exceeded reimbursements from the federal government by $28 million in the 2018 quarter. In the 2017 quarter, reimbursements from the federal government exceeded health care cost payments for which we do not assume risk by $9 million.

Claims payments associated with cost sharing provisions of the Health Care Reform Law for which we do not assume risk were $16 millionhigher than reimbursements from HHS during the 2018 quarter and $3 millionhigher than reimbursements from HHS during the 2017 quarter.

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On March 26, 2018 we completed the final settlement of our accelerated stock repurchase with no additional share repurchases under the current stock repurchase authorization during the 2018 quarter. We also acquired common shares in connection with employee stock plans for an aggregate cost of $51 million in the 2018 quarter and $74 million in the 2017 quarter.

In March 2017, we issued $600 million of 3.95% senior notes due March 15, 2027 and $400 million of 4.80% senior notes due March 15, 2047. Our net proceeds, reduced for the underwriters' discount and commission and offering expenses paid as of March 31, 2017, were $991 million.

Net proceeds from the issuance of commercial paper were $245 million in the 2018 quarter and $169 million in the 2017 quarter. The maximum principal amount outstanding at any one time during the 2018 quarter was $442 million.

We paid dividends to stockholders of $57 million during the 2018 quarter and $47 million during the 2017 quarter.

Future Sources and Uses of Liquidity

Dividends

For a detailed discussion of dividends to stockholders, please refer to Note 11 to the condensed consolidated financial statements.

Stock Repurchases

For a detailed discussion of stock repurchases, please refer to Note 11 to the condensed consolidated financial statements.

Debt

For a detailed discussion of our debt, including our senior notes, credit agreement and commercial paper program, please refer to Note 13 to the condensed consolidated financial statements.

Acquisitions and Divestitures

On April 10, 2018, we acquired FPG for cash considerations of approximately $190 million. FPG is one of the largest at-risk providers serving Medicare Advantage and Managed Medicaid HMO patients in Greater Orlando, Florida with a footprint that includes clinics located in Lake, Orange, Osceola and Seminole counties. The acquisition of FPG advances our strategy of helping physicians and clinicians evolve from treating health episodically to managing health holistically. This acquisition is not expected to have a material impact on our results of operations, financial condition, or cash flows.

On March 1, 2018 we acquired the remaining equity interest in MCCI, a privately held management service organization headquartered in Miami, Florida, that primarily coordinates medical care for Medicare Advantage beneficiaries in Florida and Texas. The purchase price consisted primarily of $169 millioncash, as well as our existing investment in MCCI and a note receivable and a revolving note with an aggregate balance of $383 million. This resulted in a preliminary purchase price allocation to goodwill of $479 million, other intangible assets of $80 million, and net tangible assets of $27 million.

On December 19, 2017, we announced that we entered into a definitive agreement to acquire a40%minority interest in Kindred at Home for estimated cash consideration of approximately $800 million, including our share of transaction and related expenses, to facilitate a complete separation from the Long Term Acute Care and Rehabilitation businesses (the Specialty Hospital company). TPG and WCAS, collectively, the Sponsors, along with us are jointly creating a consortium to purchase all of the outstanding and issued securities of Kindred. The Kindred transaction, which is anticipated to close in the summer of 2018, is subject to customary state and federal regulatory approvals, as well as other customary closing conditions. On April 5, 2018, Kindred's stockholders approved the transaction. We expect to fund the transaction through the use of parent company cash and will account for the minority investment under the equity method.

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On April 23, 2018, we, along with the same Kindred at Home Sponsors, TPG and WCAS entered into a definitive agreement to acquire privately held Curo, one of the nations' leading hospice operators providing care to patients at 245 locations in 22 states. The Consortium is purchasing Curo for approximately $1.4 billion, and at the closing of the transaction, we will have a 40% minority interest. The Curo transaction, which is anticipated to close during the summer of 2018, is subject to customary state and federal regulatory approvals as well as other customary closing conditions.

On November 6, 2017, we entered into a definitive agreement to sell the stock of our wholly-owned subsidiary, KMG, to CGIC, a Texas-based insurance company wholly owned by HC2 Holdings, Inc., a diversified holding company. KMG’s subsidiary, KIC, includes our closed block of non-strategic commercial long-term care insurance policies. We will fund the transaction with approximately $203 million of parent company cash contributed into KMG, subject to customary adjustments, in addition to the transfer of approximately $150 million of statutory capital with the sale. The KMG transaction is anticipated to close by the third quarter of 2018 subject to customary closing conditions, including South Carolina Department of Insurance approval. There can be no assurance we will obtain regulatory approvals needed to sell the business or do so under terms acceptable to us.

Liquidity Requirements

We believe our cash balances, investment securities, operating cash flows, and funds available under our credit agreement and our commercial paper program or from other public or private financing sources, taken together, provide adequate resources to fund ongoing operating and regulatory requirements, acquisitions, future expansion opportunities, and capital expenditures for at least the next twelve months, as well as to refinance or repay debt, and repurchase shares.

Adverse changes in our credit rating may increase the rate of interest we pay and may impact the amount of credit available to us in the future. Our investment-grade credit rating at March 31, 2018 was BBB+ according to Standard & Poor’s Rating Services, or S&P, and Baa3 according to Moody’s Investors Services, Inc., or Moody’s. A downgrade by S&P to BB+ or by Moody’s to Ba1 triggers an interest rate increase of 25 basis points with respect to $250 million of our senior notes. Successive one notch downgrades increase the interest rate an additional 25 basis points, or annual interest expense by less than $1 million, up to a maximum 100 basis points, or annual interest expense by $3 million.

In addition, we operate as a holding company in a highly regulated industry. Humana Inc., our parent company, is dependent upon dividends and administrative expense reimbursements from our subsidiaries, most of which are subject to regulatory restrictions. We continue to maintain significant levels of aggregate excess statutory capital and surplus in our state-regulated operating subsidiaries. Cash, cash equivalents, and short-term investments at the parent company were $567 million at March 31, 2018 compared to $688 million at December 31, 2017. This decrease primarily reflects the impact of capital contributions into a subsidiary to fund Medicare growth, as well as the acquisition of the remaining equity interest in MCCI for $169 million cash, dividends and capital expenditures partially offset by cash generated by our non-insurance subsidiaries and net proceeds from the issuance of commercial paper. Our use of operating cash derived from our non-insurance subsidiaries, such as our Healthcare Services segment, is generally not restricted by departments of insurance (or comparable state regulator).

In September 2018, we expect to pay the federal government$1.05 billionfor our portion of the annual health insurance industry fee attributed to calendar year 2018 in accordance with the Health Care Reform Law. This fee is not deductible for tax purposes. Each year on January 1, except for 2017, we record a liability for this fee in trade accounts payable and accrued expenses which we carry until the fee is paid. We record a corresponding deferred cost in other current assets in our condensed consolidated financial statements which is amortized ratably to expense over the calendar year. Amortization of the deferred cost resulted in operating cost expense of approximately $263 million for the three months ended March 31, 2018 resulting from the amortization of the 2018 annual health insurance industry fee. The annual health insurance industry fee was suspended for calendar year 2017, and is also suspended for calendar year 2019.

Regulatory Requirements

Certain of our subsidiaries operate in states that regulate the payment of dividends, loans, or other cash transfers to Humana Inc., our parent company, and require minimum levels of equity as well as limit investments to approved securities. The amount of dividends that may be paid to Humana Inc. by these subsidiaries, without prior approval by

50

state regulatory authorities, or ordinary dividends, is limited based on the entity’s level of statutory income and statutory capital and surplus. In most states, prior notification is provided before paying a dividend even if approval is not required.

Although minimum required levels of equity are largely based on premium volume, product mix, and the quality of assets held, minimum requirements vary significantly at the state level. Based on the most recently filed statutory financial statements as of December 31, 2017, our state regulated subsidiaries had aggregate statutory capital and surplus of approximately $8.0 billion, which exceeded aggregate minimum regulatory requirements of $4.8 billion. Subsidiary dividends are subject to state regulatory approval, the amount and timing of which could be reduced or delayed. Excluding Puerto Rico subsidiaries, the amount of ordinary dividends that may be paid to our parent company in 2018 is approximately $1.1 billion in the aggregate. This compares to dividends that were paid to our parent company in 2017 of approximately $1.4 billion. Actual dividends paid may vary due to consideration of excess statutory capital and surplus and expected future surplus requirements related to, for example, premium volume and product mix.

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Item 3.    Quantitative and Qualitative Disclosures about Market Risk

Our earnings and financial position are exposed to financial market risk, including those resulting from changes in interest rates.

Interest rate risk also represents a market risk factor affecting our consolidated financial position due to our significant investment portfolio, consisting primarily of fixed maturity securities of investment-grade quality with a weighted average S&P credit rating of AA at March 31, 2018. Our net unrealized position decreased$308 million from a net unrealized gain position of $198 million at December 31, 2017 to a net unrealized loss position of $110 million at March 31, 2018. At March 31, 2018, we had gross unrealized losses of $249 million on our investment portfolio primarily due to an increase in market interest rates since the time the securities were purchased. There were no material other-than-temporary impairments during the three months ended March 31, 2018. While we believe that these impairments are temporary and we currently do not have the intent to sell such securities, given the current market conditions and the significant judgments involved, there is a continuing risk that future declines in fair value may occur and material realized losses from sales or other-than-temporary impairments may be recorded in future periods.

Duration is the time-weighted average of the present value of the bond portfolio’s cash flow. Duration is indicative of the relationship between changes in fair value and changes in interest rates, providing a general indication of the sensitivity of the fair values of our fixed maturity securities to changes in interest rates. However, actual fair values may differ significantly from estimates based on duration. The average duration of our investment portfolio, including cash and cash equivalents, was approximately 4.0 years as of March 31, 2018 and approximately 4.1 years as of December 31, 2017. Based on the duration, including cash equivalents, a 1% increase in interest rates would generally decrease the fair value of our securities by approximately $650 million at March 31, 2018.

Item 4.    Controls and Procedures

Under the supervision and with the participation of our Chief Executive Officer, or CEO, our Chief Financial Officer, or CFO, and our Principal Accounting Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures for the quarter ended March 31, 2018.

Based on our evaluation, our CEO, CFO, and our Principal Accounting Officer concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information the Company is required to disclose in its reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, including, without limitation, ensuring that such information is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

There have been no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2018 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II. Other Information

Item 1.     Legal Proceedings

For a description of the legal proceedings pending against us and certain other pending or threatened litigation, investigations, or other matters, see “Legal Proceedings and Certain Regulatory Matters” in Note 14 to the condensed consolidated financial statements beginning on page 27 of this Form 10-Q.

Item 1A.    Risk Factors

There have been no changes to the risk factors included in our 2017 Form 10-K.

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

(a) None.

(b) N/A

(c) The following table provides information about our purchases of equity securities that are registered by us pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, during the three months ended March 31, 2018:

Period	Total Number of Shares Purchased (1)(2)	Average Price Paid per Share (3)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)(2)	Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
January 2018	—	$	—	—	$	2,000,000,000
February 2018	—	—		—	2,000,000,000
March 2018	453,323	—		453,323	2,000,000,000
Total	453,323	$	—	453,323

(1) On December 14, 2017, our Board of Directors authorized the repurchase of up to $3.0 billion of our common shares expiring on December 31, 2020, exclusive of shares repurchased in connection with employee stock plans. On December 21, 2017, we entered into an accelerated stock repurchase agreement, the December 2017 ASR, with Bank of America, N.A., or BofA, to repurchase $1.0 billion of our common stock as part of the $3.0 billion share repurchase program authorized on December 14, 2017. On March 26, 2018 we completed the final settlement of our accelerated stock repurchase. Our remaining repurchase authorization was approximately$2 billion as of May 1, 2018.

(2) Includes 0.46 million shares received in March 2018 upon settlement of an accelerated repurchase program for which no cash was paid during the period and excludes 0.19 million shares repurchased in connection with employee stock plans.

(3) Excludes the impact of the 0.46 million shares received in March 2018 upon settlement of an accelerated repurchase program which were determined by the average daily volume weighted-average share price of our common stock during the term of the ASR Agreement of $267.55.

Item 3: Defaults Upon Senior Securities

None.

Item 4: Mine Safety Disclosures

Not applicable.

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Item 5: Other Information

None.

Item 6: Exhibits

3(i) Restated Certificate of Incorporation of Humana Inc. filed with the Secretary of State of Delaware on November 9, 1989, as restated to incorporate the amendment of January 9, 1992, and the correction of March 23, 1992 (incorporated herein by reference to Exhibit 4(i) to Humana Inc.’s Post-Effective Amendment No. 1 to the Registration Statement on Form S-8 (Reg. No. 33-49305) filed February 2, 1994).

3(ii)By-Laws of Humana Inc., as amended on December 14, 2017 (incorporated herein by reference to Exhibit 3(b) to Humana Inc.’s Current Report on Form 8-K, filed December 14, 2017).

12Computation of ratio of earnings to fixed charges.

31.1Principal Executive Officer certification pursuant to Section 302 of Sarbanes–Oxley Act of 2002.

31.2Principal Financial Officer certification pursuant to Section 302 of Sarbanes–Oxley Act of 2002.

32Principal Executive Officer and Principal Financial Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101 The following materials from Humana Inc.'s Quarterly Report on Form 10-Q formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets at March 31, 2018 and December 31, 2017; (ii) the Condensed Consolidated Statements of Income for the three months ended March 31, 2018 and 2017; (iii) the Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2018 and 2017; (iv) the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2017; and (v) Notes to Condensed Consolidated Financial Statements.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			HUMANA INC.
			(Registrant)
Date:	May 2, 2018	By:	/s/ CYNTHIA H. ZIPPERLE
			Cynthia H. Zipperle
			Senior Vice President, Chief Accounting Officer and Controller (Principal Accounting Officer)

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EX-12

Exhibit 12

Humana Inc.
Computation of Ratio of Earnings to Fixed Charges

	For the three months ended March 31,		For the twelve months ended December 31,
	2018		2017		2016		2015		2014		2013
	(Dollars in millions)
Income before income taxes	$	707	$	4,020	$	1,552	$	2,431	$	2,170	$	1,921
Fixed charges	67		310		249		253		267		216
Total earnings	$	774	$	4,330	$	1,801	$	2,684	$	2,437	$	2,137
Interest charged to expense	$	53	$	242	$	189	$	186	$	192	$	140
One-third of rent expense	14		68		60		67		75		76
Total fixed charges	$	67	$	310	$	249	$	253	$	267	$	216
Ratio of earnings to fixed charges (1)(2)	11.6x		14.0x		7.2x		10.6x		9.1x		9.9x

Notes

(1) For the purposes of determining the ratio of earnings to fixed charges, earnings consist of income before income taxes and fixed charges. Fixed charges include gross interest expense, amortization of deferred financing expenses and an amount equivalent to interest included in rental charges. One-third of rental expense represents a reasonable approximation of the interest amount.

(2) There are no shares of preferred stock outstanding.

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002

I, Bruce D. Broussard, principal executive officer of Humana Inc., certify that:

1. I have reviewed this Quarterly Report of Humana Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2018;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	May 2, 2018
Signature:	/s/ Bruce D. Broussard
	Bruce D. Broussard Principal Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002

I, Brian A. Kane, principal financial officer of Humana Inc., certify that:

1. I have reviewed this Quarterly Report of Humana Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2018;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	May 2, 2018
Signature:	/s/ Brian A. Kane
	Brian A. Kane Principal Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Humana Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned hereby certifies, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of Humana Inc., that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Bruce D. Broussard

Bruce D. Broussard

Principal Executive Officer

May 2, 2018

/s/ Brian A. Kane

Brian A. Kane

Principal Financial Officer

May 2, 2018

A signed original of this written statement required by Section 906 has been provided to Humana Inc. and will be retained by Humana Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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Document and Entity Information	3 Months Ended
	Mar. 31, 2018 shares
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Trading Symbol	HUM
Entity Registrant Name	HUMANA INC
Entity Central Index Key	0000049071
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding	137,682,171

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Millions	Mar. 31, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 8,855	$ 4,042
Investment securities	9,742	9,557
Receivables, less allowance for doubtful accounts of $87 in 2018 and $96 in 2017	1,276	854
Other current assets	4,059	2,949
Total current assets	23,932	17,402
Property and equipment, net	1,595	1,584
Long-term investment securities	2,361	2,745
Goodwill	3,760	3,281
Other long-term assets	1,805	2,166
Total assets	33,453	27,178
Current liabilities:
Benefits payable	4,961	4,668
Trade accounts payable and accrued expenses	6,266	4,069
Book overdraft	124	141
Unearned revenues	3,706	378
Short-term debt	398	150
Total current liabilities	15,455	9,406
Long-term debt	4,772	4,770
Future policy benefits payable	2,842	2,923
Other long-term liabilities	303	237
Total liabilities	23,372	17,336
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred stock, $1 par; 10,000,000 shares authorized; none issued	0	0
Common stock, $0.16 2/3 par; 300,000,000 shares authorized; 198,585,156 shares issued at March 31, 2018 and 198,572,458 shares issued at December 31, 2017	33	33
Capital in excess of par value	2,626	2,445
Retained earnings	14,086	13,670
Accumulated other comprehensive (loss) income	(154)	19
Treasury stock, at cost, 60,902,985 shares at March 31, 2018 and 60,893,762 shares at December 31, 2017	(6,510)	(6,325)
Total stockholders’ equity	10,081	9,842
Total liabilities and stockholders’ equity	$ 33,453	$ 27,178

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Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions	Mar. 31, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Receivables, allowance for doubtful accounts	$ 87	$ 96
Preferred stock, par (in dollars per share)	$ 1	$ 1
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, shares issued (in shares)	0	0
Common stock, par (in dollars per share)	$ 0.1667	$ 0.1667
Common stock, shares authorized (in shares)	300,000,000	300,000,000
Common stock, shares issued (in shares)	198,585,156	198,572,458
Treasury stock, shares (in shares)	60,902,985	60,893,762

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Condensed Consolidated Statements Of Income - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Revenues:
Premiums	$ 13,811	$ 13,398
Services	327	253
Investment income	141	111
Total revenues	14,279	13,762
Operating expenses:
Benefits	11,670	11,326
Operating costs	1,749	1,553
Merger termination fee and related costs, net	0	(947)
Depreciation and amortization	100	92
Total operating expenses	13,519	12,024
Income (loss) from operations	760	1,738
Interest expense	53	49
Income (loss) before income taxes	707	1,689
Provision for income taxes	216	574
Net income	$ 491	$ 1,115
Basic earnings per common share (in dollars per share)	$ 3.56	$ 7.54
Diluted earnings per common share (in dollars per share)	3.53	7.49
Dividends declared per common share (in dollars per share)	$ 0.5	$ 0.40

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Condensed Consolidated Statements Of Comprehensive Income - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Statement of Comprehensive Income [Abstract]
Net income	$ 491	$ 1,115
Other comprehensive (loss) income:
Change in gross unrealized investment gains/losses	(203)	38
Effect of income taxes	52	(14)
Total change in unrealized investment gains/losses, net of tax	(151)	24
Reclassification adjustment for net realized gains included in investment income	(29)	(26)
Effect of income taxes	7	10
Total reclassification adjustment, net of tax	(22)	(16)
Other comprehensive (loss) income, net of tax	(173)	8
Comprehensive income	$ 318	$ 1,123

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Condensed Consolidated Statements Of Cash Flows - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Cash flows from operating activities
Net income	$ 491	$ 1,115
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized capital gains	(29)	(26)
Stock-based compensation	35	26
Depreciation	109	100
Other intangible amortization	30	18
Provision for deferred income taxes	83	29
Changes in operating assets and liabilities, net of effect of businesses acquired and dispositions:
Receivables	(422)	(558)
Other assets	(1,164)	(415)
Benefits payable	293	198
Other liabilities	885	542
Unearned revenues	3,328	3,140
Other, net	47	36
Net cash provided by operating activities	3,686	4,205
Cash flows from investing activities
Acquisitions, net of cash acquired	(169)	(7)
Purchases of property and equipment	(134)	(122)
Purchases of investment securities	(1,711)	(1,876)
Maturities of investment securities	217	284
Proceeds from sales of investment securities	1,392	795
Net cash used in investing activities	(405)	(926)
Cash flows from financing activities
Receipts from contract deposits, net	1,401	1,730
Proceeds from issuance of senior notes, net	0	991
Proceeds from issuance of commercial paper, net	245	169
Change in book overdraft	(17)	(34)
Common stock repurchases	(51)	(1,574)
Dividends paid	(57)	(47)
Proceeds from stock option exercises and other	11	34
Net cash provided by financing activities	1,532	1,269
Increase in cash and cash equivalents	4,813	4,548
Cash and cash equivalents at beginning of period	4,042	3,877
Cash and cash equivalents at end of period	8,855	8,425
Supplemental cash flow disclosures:
Interest payments	22	10
Income tax payments (refunds), net	$ 4	$ (4)

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BASIS OF PRESENTATION AND SIGNIFICANT EVENTS

3 Months Ended

Mar. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION AND SIGNIFICANT EVENTS

BASIS OF PRESENTATION AND SIGNIFICANT EVENTS

The accompanying condensed consolidated financial statements are presented in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the disclosures normally required by accounting principles generally accepted in the United States of America, or GAAP, or those normally made in an Annual Report on Form 10-K. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. For further information, the reader of this Form 10-Q should refer to our Form 10-K for the year ended December 31, 2017, that was filed with the Securities and Exchange Commission, or the SEC, on February 16, 2018. We refer to the Form 10-K as the “2017 Form 10-K” in this document. References throughout this document to “we,” “us,” “our,” “Company,” and “Humana” mean Humana Inc. and its subsidiaries.

The preparation of our condensed consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The areas involving the most significant use of estimates are the estimation of benefits payable, future policy benefits payable, the impact of risk adjustment provisions related to our Medicare contracts, the valuation and related impairment recognition of investment securities, and the valuation and related impairment recognition of long-lived assets, including goodwill. These estimates are based on knowledge of current events and anticipated future events, and accordingly, actual results may ultimately differ materially from those estimates. Refer to Note 2 to the consolidated financial statements included in our 2017 Form 10-K for information on accounting policies that we consider in preparing our consolidated financial statements.

The financial information has been prepared in accordance with our customary accounting practices and has not been audited. In our opinion, the information presented reflects all adjustments necessary for a fair statement of interim results. All such adjustments are of a normal and recurring nature.

Acquisition of a 40% Minority Interest in Kindred’s Homecare Business

On December 19, 2017, we announced that we entered into a definitive agreement to acquire a40%minority interest in the Kindred at Home Division, or Kindred at Home, of Kindred Healthcare, Inc., or Kindred, for estimated cash consideration of approximately $800 million, including our share of transaction and related expenses, to facilitate a complete separation from the Long Term Acute Care and Rehabilitation businesses (the Specialty Hospital company). TPG Capital, or TPG, and Welsh, Carson, Anderson & Stowe, or WCAS, collectively, the Sponsors, along with us are jointly creating a consortium to purchase all of the outstanding and issued securities of Kindred. Immediately following the closing of that transaction, Kindred at Home and the Specialty Hospital company will be separated, with the result being that the Specialty Hospital Company will be owned by the Sponsors and Kindred at Home will be owned by a joint venture owned by the Sponsors and us. We will own 40% of Kindred at Home, with the remaining 60% owned by a new entity owned by TPG and WCAS.

At the closing of the transaction, we will enter a shareholders agreement with the Sponsors that will provide for certain rights and obligations of each party concerning the newly formed joint venture that will own Kindred at Home. The shareholders agreement with the Sponsors includes a put option under which they have the right to require us to purchase their interest in the joint venture starting at the end of year three and ending at the end of year four following the closing. Consideration upon exercise of the put option per the agreement would be valued at an exit multiple of 10.5 times the preceding twelve months earnings before interest, income taxes, depreciation and amortization, or EBITDA, subject to certain adjustments. In addition, the multiple is subject to adjustment up to 11.5 times EBITDA based on the achievement of certain pre-defined value-based outcomes tied to clinical metrics. The 11.5 times EBITDA exit multiple is comparable to the valuation of our acquired interest in Kindred at Home. Finally, we have a call option under which we have the right to require the Sponsors to sell their interest in the joint venture to Humana beginning at the end of year four and ending at the end of year five following the closing for cash consideration using the same valuation methodology applicable to the previously discussed put option consideration.

The above transactions, which are anticipated to close in the summer of 2018, are subject to customary state and federal regulatory approvals, as well as other customary closing conditions. On April 5, 2018, Kindred's stockholders approved the transaction. We expect to fund the transaction through the use of parent company cash and will account for the minority investment under the equity method.

Acquisition of a 40% Minority Interest in Curo Health Services

On April 23, 2018, we, along with the same Kindred at Home sponsors, TPG and WCAS, collectively referred to as the "Consortium," entered into a definitive agreement to acquire privately held Curo Health Services, or Curo, one of the nations' leading hospice operators providing care to patients at 245locations in 22 states. The Consortium is purchasing Curo for approximately$1.4 billion, and at the closing of the transaction, we will have a 40% minority interest. The Curo transaction, which is anticipated to close during the summer of 2018, is subject to customary state and federal regulatory approvals as well as other customary closing conditions. The Curo transaction is not conditioned upon the closing of the Consortium’s separate acquisition of Kindred at Home and is expected to occur after the closing of Kindred at Home. Upon the closing of these transactions, the Consortium intends to merge Curo with the hospice business of Kindred at Home.

Sale of Closed Block of Commercial Long-Term Care Insurance Business

On November 6, 2017, we entered into a definitive agreement to sell the stock of our wholly-owned subsidiary, KMG America Corporation, or KMG, to Continental General Insurance Company, or CGIC, a Texas-based insurance company wholly owned by HC2 Holdings, Inc., a diversified holding company. KMG’s subsidiary, Kanawha Insurance Company, or KIC, includes our closed block of non-strategic commercial long-term care insurance policies. Based on the terms of the definitive agreement we expect to record a net loss associated with the sale of KMG of approximately$350 million. The estimated loss includes a pretax loss of approximately $760 million, offset by the expected tax benefit of approximately $410 million. We will fund the transaction with approximately $203 million of parent company cash contributed into KMG, subject to customary adjustments, in addition to the transfer of approximately$150 millionof statutory capital with the sale, which together should be more than offset by the estimated $410 million cash savings associated with the expected tax treatment of the sale. The KMG transaction is anticipated to close by the third quarter of 2018 subject to customary closing conditions, including South Carolina Department of Insurance approval. There can be no assurance we will obtain regulatory approvals needed to sell the business or do so under terms acceptable to us.

Workforce Optimization

During the third quarter of 2017, we initiated a voluntary early retirement program and an involuntary workforce reduction program. These programs impacted approximately 3,600 associates, or 7.8%, of our workforce in 2017. As a result, in 2017 we recorded charges of $148 million, or $0.64per diluted common share.At December 31, 2017, $140 millionwas classified as a current liability, included in our condensed consolidated balance sheet in the trade accounts payable and accrued expenses line. Payments under these programs are being made upon termination during the early retirement or severance pay period. The remaining workforce optimization liability at March 31, 2018 was $94 million and is expected to be paid in 2018.

Aetna Merger

On February 16, 2017, under the terms of the Agreement and Plan of Merger, or Merger Agreement, with Aetna Inc., and certain wholly owned subsidiaries of Aetna Inc., which we collectively refer to as Aetna, we received a breakup fee of $1 billionfrom Aetna, which is included in our consolidated statement of income in the line captioned "Merger termination fee and related costs, net."

Revenue Recognition

Our revenues include premium and service revenues. Service revenues include administrative service fees that are recorded based upon established per member per month rates and the number of members for the month and are recognized as services are provided for the month. Additionally, service revenues include net patient service revenues that are recorded based upon established billing rates, less allowances for contractual adjustments, and are recognized as services are provided. For more information about our revenues, refer to Note 2 to the consolidated financial statements included in our 2017 Form 10-K for information on accounting policies that we consider in preparing our consolidated financial statements. See Note 15 for disaggregation of revenue by segment and type.

At March 31, 2018, accounts receivable related to services were $162 million. For the three months ended March 31, 2018, we had no material bad-debt expense and there were no material contract assets, contract liabilities or deferred contract costs recorded on the condensed consolidated balance sheet at March 31, 2018.

For the three months ended March 31, 2018, revenue recognized from performance obligations related to prior periods (for example, due to changes in transaction price), was not material. Further revenue expected to be recognized in any future year related to remaining performance obligations was not material.

Revenue expected to be recognized in any future year related to remaining performance obligations was not material.

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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

3 Months Ended

Mar. 31, 2018

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board, or FASB, issued new guidance that amends the accounting for revenue recognition. The amendments are intended to provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices, and improve disclosure requirements. Insurance contracts are not included in the scope of this new guidance. Accordingly, our premiums revenue and investment income, collectively representing approximately 98% of our consolidated external revenues for the three months ended March 31, 2018, are not included in the scope of the new guidance. We adopted the new standard effective January 1, 2018, using the modified retrospective approach. As the majority of our revenues are not subject to the new guidance and the remaining revenues’ accounting treatment did not materially differ from pre-existing accounting treatment, the adoption of the new standard did not have a material impact on our consolidated results of operations, financial condition, cash flows, or related disclosures.

In February 2016, the FASB issued new guidance related to accounting for leases which requires lessees to record

assets and liabilities reflecting the leased assets and lease obligations, respectively, while following the dual model for recognition in statements of income requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense (similar to current operating leases) while finance leases will result in a front-loaded expense pattern (similar to current capital leases). The new guidance is effective for us beginning with annual and interim periods in 2019, with earlier adoption permitted. We are in the process of reconciling the population of lease agreements and other arrangements that may contain embedded leases for purposes of adopting the new standard. While we expect to record significant leased assets and corresponding lease obligations based on our existing population of individual leases, we continue to evaluate the impact on our results of operations, financial position and cash flows.

In June 2016, the FASB issued guidance introducing a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. The guidance is effective for us beginning January 1, 2020. The new current expected credit losses (CECL) model generally calls for the immediate recognition of all expected credit losses and applies to loans, accounts and trade receivables as well as other financial assets measured at amortized cost, loan commitments and off-balance sheet credit exposures, debt securities and other financial assets measured at fair value through other comprehensive income, and beneficial interests in securitized financial assets. The

new guidance replaces the current incurred loss model for measuring expected credit losses, requires expected losses

on available-for-sale debt securities to be recognized through an allowance for credit losses rather than as reductions

in the amortized cost of the securities, and provides for additional disclosure requirements. Our investment portfolio consists of available-for-sale debt securities. We are currently evaluating the impact on our results of operations, financial condition, and cash flows.

In March 2017, the FASB issued new guidance that amends the accounting for premium amortization on purchased callable debt securities by shortening the amortization period. This amended guidance requires the premium to be amortized to the earliest call date instead of maturity date. The new guidance is effective for us beginning with annual and interim periods in 2019. We do not expect adoption of this guidance will have a material impact on our results of operations, financial condition and cash flows.

In February 2018, the FASB issued guidance which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the December 22, 2017 enactment of the Tax Cuts and Jobs Act.  The new guidance is effective for us beginning January 1, 2019, with early adoption permitted.  We early adopted this guidance in the first quarter of 2018 and it did not have a material impact on our results of operations, financial condition or cash flows.

There are no other recently issued accounting standards that apply to us or that are expected to have a material impact on our results of operations, financial condition, or cash flows.

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ACQUISITIONS AND DIVESTITURES

3 Months Ended

Mar. 31, 2018

Business Combinations [Abstract]

ACQUISITIONS AND DIVESTITURES

ACQUISITIONS AND DIVESTITURES

On March 1, 2018 we acquired the remaining equity interest in MCCI Holdings, LLC, or MCCI, a privately held management service organization headquartered in Miami, Florida, that primarily coordinates medical care for Medicare Advantage beneficiaries in Florida and Texas. The purchase price consisted primarily of $169 millioncash, as well as our existing investment in MCCI and a note receivable and a revolving note with an aggregate balance of $383 million. This resulted in a preliminary purchase price allocation to goodwill of $479 million, other intangible assets of $80 million, and net tangible assets of $27 million. The goodwill was assigned to the Retail and Healthcare Services segments. The other intangible assets, which primarily consist of customer contracts, have an estimated weighted average useful life of 8 years. Goodwill and other intangible assets are amortizable as deductible expenses for tax purposes. The purchase price allocation is preliminary, subject to completion of valuation analyses, including for example, refining assumptions used to calculate the fair value of intangible assets.

On April 10, 2018, we acquired Family Physicians Group, or FPG, for cash considerations of approximately $190 million. FPG is one of the largest at-risk providers serving Medicare Advantage and Managed Medicaid HMO patients in Greater Orlando, Florida with a footprint that includes clinics located in Lake, Orange, Osceola and Seminole counties. The acquisition of FPG advances our strategy of helping physicians and clinicians evolve from treating health episodically to managing health holistically. This acquisition is not expected to have a material impact on our results of operations, financial condition, or cash flows.

During 2018 and 2017, we acquired other health and wellness related businesses which, individually or in the aggregate, have not had a material impact on our results of operations, financial condition, or cash flows. The results of operations and financial condition of these businesses have been included in our condensed consolidated statements of income and condensed consolidated balance sheets from the respective acquisition dates. Acquisition-related costs recognized in 2018 and 2017 were not material to our results of operations. The pro forma financial information assuming the acquisitions had occurred as of the beginning of the calendar year prior to the year of acquisition, as well as the revenues and earnings generated during the year of acquisition, were not material for disclosure purposes.

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INVESTMENT SECURITIES

3 Months Ended

Mar. 31, 2018

Investments, Debt and Equity Securities [Abstract]

INVESTMENT SECURITIES

INVESTMENT SECURITIES

Investment securities classified as current and long-term were as follows at March 31, 2018 and December 31, 2017, respectively:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in millions)
March 31, 2018
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	505	$	1	$	(5	)	$	501
Mortgage-backed securities	2,308		—		(56		)	2,252
Tax-exempt municipal securities	3,549		6		(61		)	3,494
Mortgage-backed securities:
Residential	24		—		(1		)	23
Commercial	580		—		(11		)	569
Asset-backed securities	554		1		(1		)	554
Corporate debt securities	4,693		131		(114		)	4,710
Total debt securities	$	12,213	$	139	$	(249	)	$	12,103
December 31, 2017
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	532	$	1	$	(2	)	$	531
Mortgage-backed securities	1,625		4		(19		)	1,610
Tax-exempt municipal securities	3,884		33		(28		)	3,889
Mortgage-backed securities:
Residential	26		—		—			26
Commercial	455		3		(2		)	456
Asset-backed securities	407		1		—			408
Corporate debt securities	5,175		244		(37		)	5,382
Total debt securities	$	12,104	$	286	$	(88	)	$	12,302

Gross unrealized losses and fair values aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position were as follows at March 31, 2018 and December 31, 2017, respectively:

	Less than 12 months					12 months or more					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
	(in millions)
March 31, 2018
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	362	$	(2	)	$	129	$	(3	)	$	491	$	(5	)
Mortgage-backed securities	1,489		(28		)	638		(28		)	2,127		(56		)
Tax-exempt municipal securities	2,409		(41		)	621		(20		)	3,030		(61		)
Mortgage-backed securities:
Residential	18		—			3		(1		)	21		(1		)
Commercial	451		(10		)	28		(1		)	479		(11		)
Asset-backed securities	162		(1		)	7		—			169		(1		)
Corporate debt securities	2,431		(60		)	761		(54		)	3,192		(114		)
Total debt securities	$	7,322	$	(142	)	$	2,187	$	(107	)	$	9,509	$	(249	)
December 31, 2017
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	273	$	(1	)	$	130	$	(1	)	$	403	$	(2	)
Mortgage-backed securities	581		(2		)	672		(17		)	1,253		(19		)
Tax-exempt municipal securities	1,590		(16		)	661		(12		)	2,251		(28		)
Mortgage-backed securities:
Residential	20		—			3		—			23		—
Commercial	131		(1		)	28		(1		)	159		(2		)
Asset-backed securities	107		—			10		—			117		—
Corporate debt securities	1,297		(10		)	804		(27		)	2,101		(37		)
Total debt securities	$	3,999	$	(30	)	$	2,308	$	(58	)	$	6,307	$	(88	)

Approximately 99% of our debt securities were investment-grade quality, with a weighted average credit rating of AA by Standard & Poor's Rating Service, or S&P, at March 31, 2018. Most of the debt securities that were below investment-grade were rated BB, the higher end of the below investment-grade rating scale. Tax-exempt municipal securities were diversified among general obligation bonds of states and local municipalities in the United States as well as special revenue bonds issued by municipalities to finance specific public works projects such as utilities, water and sewer, transportation, or education. Our general obligation bonds are diversified across the United States with no individual state exceeding 9%. In addition, 2% of our tax-exempt securities were insured by bond insurers and had an equivalent weighted average S&P credit rating of AA exclusive of the bond insurers’ guarantee. Our investment policy limits investments in a single issuer and requires diversification among various asset types.

Our unrealized losses from all securities were generated from approximately 1,410 positions out of a total of approximately 2,230 positions at March 31, 2018. All issuers of securities we own that were trading at an unrealized loss at March 31, 2018 remain current on all contractual payments. After taking into account these and other factors previously described, we believe these unrealized losses primarily were caused by an increase in market interest rates in the current markets since the time the securities were purchased. At March 31, 2018, we did not intend to sell the securities with an unrealized loss position in accumulated other comprehensive income, and it is not likely that we will be required to sell these securities before recovery of their amortized cost basis. As a result, we believe that the securities with an unrealized loss were not other-than-temporarily impaired at March 31, 2018.

The detail of realized gains (losses) related to investment securities and included within investment income was as follows for the three months ended March 31, 2018 and 2017:

	Three months ended March 31,
	2018			2017
	(in millions)
Gross realized gains	$	32		$	27
Gross realized losses	(3		)	(1		)
Net realized capital gains	$	29		$	26

There were no material other-than-temporary impairments for the three months ended March 31, 2018 or 2017.

The contractual maturities of debt securities available for sale at March 31, 2018, regardless of their balance sheet classification, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Fair Value
	(in millions)
Due within one year	$	856	$	854
Due after one year through five years	2,846		2,803
Due after five years through ten years	2,317		2,247
Due after ten years	2,728		2,801
Mortgage and asset-backed securities	3,466		3,398
Total debt securities	$	12,213	$	12,103

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FAIR VALUE

3 Months Ended

Mar. 31, 2018

Fair Value Disclosures [Abstract]

FAIR VALUE

FAIR VALUE

Financial Assets

The following table summarizes our fair value measurements at March 31, 2018 and December 31, 2017, respectively, for financial assets measured at fair value on a recurring basis:

	Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
	(in millions)
March 31, 2018
Cash equivalents	$	4,346	$	4,346	$	—	$	—
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	501		—		501		—
Mortgage-backed securities	2,252		—		2,252		—
Tax-exempt municipal securities	3,494		—		3,494		—
Mortgage-backed securities:
Residential	23		—		23		—
Commercial	569		—		569		—
Asset-backed securities	554		—		554		—
Corporate debt securities	4,710		—		4,709		1
Total debt securities	12,103		—		12,102		1
Total invested assets	$	16,449	$	4,346	$	12,102	$	1
December 31, 2017
Cash equivalents	$	4,564	$	4,564	$	—	$	—
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	531		—		531		—
Mortgage-backed securities	1,610		—		1,610		—
Tax-exempt municipal securities	3,889		—		3,889		—
Mortgage-backed securities:
Residential	26		—		26		—
Commercial	456		—		456		—
Asset-backed securities	408		—		408		—
Corporate debt securities	5,382		—		5,381		1
Total debt securities	12,302		—		12,301		1
Total invested assets	$	16,866	$	4,564	$	12,301	$	1

There were no material transfers between Level 1 and Level 2 during the three months ended March 31, 2018 or 2017.

Financial Liabilities

Our debt is recorded at carrying value in our consolidated balance sheets. The carrying value of our senior notes debt outstanding, net of unamortized debt issuance costs, was $4,772 million at March 31, 2018 and $4,770 million at December 31, 2017. The fair value of our senior notes debt was $4,944 million at March 31, 2018 and $5,191 million at December 31, 2017. The fair value of our long-term debt is determined based on Level 2 inputs, including quoted market prices for the same or similar debt, or if no quoted market prices are available, on the current prices estimated to be available to us for debt with similar terms and remaining maturities.

Due to the short-term nature, carrying value approximates fair value for our commercial paper borrowings. There were outstanding commercial paper borrowings of $398 million as of March 31, 2018 and $150 million as of December 31, 2017.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

As disclosed in Note 3, we acquired MCCI, FPG, and other health and wellness related businesses during 2018 and 2017. The values of net tangible assets acquired and the resulting goodwill and other intangible assets were recorded at fair value using Level 3 inputs. The majority of the tangible assets acquired and liabilities assumed were recorded at their carrying values as of the respective dates of acquisition, as their carrying values approximated their fair values due to their short-term nature. The fair values of goodwill and other intangible assets acquired in these acquisitions were internally estimated primarily based on the income approach. The income approach estimates fair value based on the present value of the cash flows that the assets are expected to generate in the future. We developed internal estimates for the expected cash flows and discount rates used in the present value calculations. Other than assets acquired and liabilities assumed in these acquisitions, there were no material assets or liabilities measured at fair value on a nonrecurring basis during 2018 or 2017.

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MEDICARE PART D

3 Months Ended

Mar. 31, 2018

Insurance [Abstract]

MEDICARE PART D

MEDICARE PART D

We cover prescription drug benefits in accordance with Medicare Part D under multiple contracts with the Centers for Medicare and Medicaid Services, or CMS, as described further in Note 2 to the consolidated financial statements included in our 2017 Form 10-K. The accompanying condensed consolidated balance sheets include the following amounts associated with Medicare Part D at March 31, 2018 and December 31, 2017. CMS subsidies/discounts in the table below include the reinsurance and low-income cost subsidies funded by CMS for which we assume no risk as well as brand name prescription drug discounts for Part D plan participants in the coverage gap funded by CMS and pharmaceutical manufacturers.

	March 31, 2018						December 31, 2017
	Risk Corridor Settlement			CMS Subsidies/ Discounts			Risk Corridor Settlement			CMS Subsidies/ Discounts
	(in millions)
Other current assets	$	5		$	79		$	4		$	101
Trade accounts payable and accrued expenses	(240		)	(2,509		)	(255		)	(1,085		)
Net current liability	(235		)	(2,430		)	(251		)	(984		)
Other long-term assets	33			—			—			—
Other long-term liabilities	(78		)	—			(28		)	—
Net long-term liability	(45		)	—			(28		)	—
Total net liability	$	(280	)	$	(2,430	)	$	(279	)	$	(984	)

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HEALTH CARE REFORM

3 Months Ended

Mar. 31, 2018

Insurance [Abstract]

HEALTH CARE REFORM

HEALTH CARE REFORM

The Patient Protection and Affordable Care Act and The Health Care and Education Reconciliation Act of 2010 (which we collectively refer to as the Health Care Reform Law) established risk spreading premium stabilization programs effective January 1, 2014, including a permanent risk adjustment program and temporary risk corridor and reinsurance programs, which we collectively refer to as the 3Rs. The 3Rs, applicable to certain of our commercial medical insurance products, are further discussed in Note 2 to our 2017 Form 10-K. The temporary programs were only applicable for years 2014 through 2016. As a result of our exit from our individual commercial medical business effective January 1, 2018, the permanent risk adjustment program is currently only applicable to our commercial small group health insurance business.

On November 2, 2017, we filed suit against the United States of America in the United States Court of Federal Claims, on behalf of our health plans seeking recovery from the federal government of approximately $611 millionin payments under the risk corridor premium stabilization program established under the Health Care Reform Law, for years 2014, 2015 and 2016.

The accompanying condensed consolidated balance sheets include the following amounts associated with the 3Rs at March 31, 2018 and December 31, 2017.

	March 31, 2018					December 31, 2017
	Risk Adjustment Settlement			Reinsurance Recoverables		Risk Adjustment Settlement			Reinsurance Recoverables
	(in millions)
Prior Coverage Years
Premiums receivable	$	65		$	—	$	62		$	—
Other current assets	—			—		—			44
Trade accounts payable and accrued expenses	(79		)	—		(80		)	—
Net current (liability) asset	(14		)	—		(18		)	44
Other long-term assets	—			—		5			—
Total prior coverage years' net (liability) asset	(14		)	—		(13		)	44
Current Coverage Year
Other long-term assets	1			—		—			—
Other long-term liabilities	(11		)	—		—			—
Net long-term liability	(10		)	—		—			—
Total 2018 coverage year net liability	(10		)	—		—			—
Total net (liability) asset	$	(24	)	$	—	$	(13	)	$	44

Net collections under the 3R's associated with prior coverage years were $46 million during the three months ended March 31, 2018 and were $62 million during the three months ended March 31, 2017.

In September 2018, we expect to pay the federal government$1.05 billionfor our portion of the annual health insurance industry fee attributed to calendar year 2018 in accordance with the Health Care Reform Law. This fee, fixed in amount by law and apportioned to insurance carriers based on market share, is not deductible for tax purposes. Each year on January 1, except for 2017 when the fee was suspended, we record a liability for this fee in trade accounts payable and accrued expenses which we carry until the fee is paid. We record a corresponding deferred cost in other current assets in our condensed consolidated financial statements which is amortized ratably to expense over the calendar year. Amortization of the deferred cost was recorded in operating cost expense of approximately $263 million for the three months ended March 31, 2018, resulting from the amortization of the 2018 annual health insurance industry fee. The annual health insurance industry fee was suspended for calendar year 2017, and is also suspended for calendar year 2019.

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GOODWILL AND OTHER INTANGIBLE ASSETS

3 Months Ended

Mar. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for our reportable segments for the three months ended March 31, 2018 were as follows:

	Retail		Group and Specialty		Healthcare Services		Total
	(in millions)
Balance at January 1, 2018	$	1,059	$	261	$	1,961	$	3,281
Acquisitions	360		—		119		479
Balance at March 31, 2018	$	1,419	$	261	$	2,080	$	3,760

The following table presents details of our other intangible assets included in other long-term assets in the accompanying condensed consolidated balance sheets at March 31, 2018 and December 31, 2017.

		March 31, 2018						December 31, 2017
	Weighted Average Life	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
		($ in millions)
Other intangible assets:
Customer contracts/ relationships	9.6 years	$	646	$	414	$	232	$	566	$	401	$	165
Trade names and technology	6.5 years	83		78		5		104		84		20
Provider contracts	11.9 years	68		32		36		68		30		38
Noncompetes and other	8.1 years	32		29		3		32		29		3
Total other intangible assets	9.4 years	$	829	$	553	$	276	$	770	$	544	$	226

For the three months ended March 31, 2018 and 2017, amortization expense for other intangible assets was approximately $30 million and $18 million, respectively. Amortization expense for the three months ended March 31, 2018 included $12 million associated with the write-off of a trade name value reflecting the re-branding of certain provider assets. The following table presents our estimate of amortization expense for 2018 and each of the five next succeeding years:

	(in millions)
For the years ending December 31,
2018	$	84
2019	63
2020	61
2021	27
2022	24
2023	16

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BENEFITS PAYABLE

3 Months Ended

Mar. 31, 2018

Insurance [Abstract]

BENEFITS PAYABLE

BENEFITS PAYABLE

On a consolidated basis, activity in benefits payable, excluding military services, was as follows for the three months ended March 31, 2018 and 2017:

	For the three months ended March 31,
	2018			2017
	(in millions)
Balances, beginning of period	$	4,668		$	4,563
Less: Reinsurance recoverables	(70		)	(76		)
Balances, beginning of period, net	4,598			4,487
Incurred related to:
Current year	11,947			11,580
Prior years	(267		)	(231		)
Total incurred	11,680			11,349
Paid related to:
Current year	(7,775		)	(7,695		)
Prior years	(3,619		)	(3,451		)
Total paid	(11,394		)	(11,146		)
Reinsurance recoverable	77			71
Balances, end of period	$	4,961		$	4,761

Amounts incurred related to prior periods vary from previously estimated liabilities as the claims ultimately are settled. Negative amounts reported for incurred related to prior years result from claims being ultimately settled for amounts less than originally estimated (favorable development).

Our reserving practice is to consistently recognize the actuarial best estimate of our ultimate liability for claims. Actuarial standards require the use of assumptions based on moderately adverse experience, which generally results in favorable reserve development, or reserves that are considered redundant.

Benefits expense excluded from the previous table was as follows for the three months ended March 31, 2018 and 2017.

	For the three months ended March 31,
	2018			2017
	(in millions)
Future policy benefits:
Individual Commercial	$	(16	)	$	(33	)
Other Businesses	6			10
Total future policy benefits	$	(10	)	$	(23	)

Incurred and Paid Claims Development

The following discussion provides information about incurred and paid claims development for our Retail, Group and Specialty, and Individual Commercial segments as of March 31, 2018 and 2017, net of reinsurance, and the total of IBNR included within the net incurred claims amounts.

Retail Segment

Activity in benefits payable for our Retail segment was as follows for the three months ended March 31, 2018 and 2017:

	For the three months ended March 31,
	2018			2017
	(in millions)
Balances, beginning of period	$	3,963		$	3,507
Less: Reinsurance recoverables	(70		)	(76		)
Balances, beginning of period, net	3,893			3,431
Incurred related to:
Current year	10,739			10,255
Prior years	(187		)	(204		)
Total incurred	10,552			10,051
Paid related to:
Current year	(7,119		)	(7,014		)
Prior years	(3,082		)	(2,572		)
Total paid	(10,201		)	(9,586		)
Reinsurance recoverable	77			71
Balances, end of period	$	4,321		$	3,967

At March 31, 2018, benefits payable for our Retail segment included IBNR of approximately $2.8 billion, primarily associated with claims incurred in 2018.

Group and Specialty Segment

Activity in benefits payable for our Group and Specialty segment, excluding military services, was as follows for the three months ended March 31, 2018 and 2017:

	For the three months ended March 31,
	2018			2017
	(in millions)
Balances, beginning of period	$	568		$	578
Incurred related to:
Current year	1,307			1,306
Prior years	(34		)	(20		)
Total incurred	1,273			1,286
Paid related to:
Current year	(802		)	(824		)
Prior years	(463		)	(493		)
Total paid	(1,265		)	(1,317		)
Balances, end of period	$	576		$	547

At March 31, 2018, benefits payable for our Group and Specialty segment included IBNR of approximately $502 million, primarily associated with claims incurred in 2018.

Individual Commercial Segment

Activity in benefits payable for our Individual Commercial segment was as follows for the three months ended March 31, 2018 and 2017:

	For the three months ended March 31,
	2018			2017
	(in millions)
Balances, beginning of period	$	101		$	454
Incurred related to:
Current year	—			195
Prior years	(44		)	(6		)
Total incurred	(44		)	189
Paid related to:
Current year	—			(59		)
Prior years	(29		)	(363		)
Total paid	(29		)	(422		)
Balance, end of period	$	28		$	221

At March 31, 2018, benefits payable for our Individual Commercial segment included IBNR of approximately $19 million, associated with claims incurred in 2017 and prior.

Reconciliation to Consolidated

The reconciliation of the net incurred and paid claims development tables to benefits payable in the consolidated

statement of financial position is as follows:

Reconciliation of the Disclosure of Incurred and Paid Claims Development to Benefits Payable, net of reinsurance
	March 31,
	2018
Net outstanding liabilities
Retail	$	4,244
Group and Specialty	576
Individual Commercial	28
Other Businesses	36
Benefits payable, net of reinsurance	4,884
Reinsurance recoverable on unpaid claims
Retail	77
Total reinsurance recoverable on unpaid claims	77
Total benefits payable, gross	$	4,961

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EARNINGS PER COMMON SHARE COMPUTATION

3 Months Ended

Mar. 31, 2018

Earnings Per Share [Abstract]

EARNINGS PER COMMON SHARE COMPUTATION

EARNINGS PER COMMON SHARE COMPUTATION

Detail supporting the computation of basic and diluted earnings per common share was as follows for the three months ended March 31, 2018 and 2017:

	Three months ended March 31,
	2018		2017
	(dollars in millions, except per common share results; number of shares in thousands)
Net income available for common stockholders	$	491	$	1,115
Weighted average outstanding shares of common stock used to compute basic earnings per common share	137,903		147,824
Dilutive effect of:
Employee stock options	213		199
Restricted stock	714		849
Shares used to compute diluted earnings per common share	138,830		148,872
Basic earnings per common share	$	3.56	$	7.54
Diluted earnings per common share	$	3.53	$	7.49
Number of antidilutive stock options and restricted stock excluded from computation	645		938

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STOCKHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2018

Equity [Abstract]

STOCKHOLDERS' EQUITY

STOCKHOLDERS’ EQUITY

Dividends

The following table provides details of dividend payments, excluding dividend equivalent rights for unvested stock awards, in 2017 and 2018 under our Board approved quarterly cash dividend policy:

Record Date	Payment Date	Amount per Share		Total Amount
				(in millions)
2017 payments
1/12/2017	1/27/2017	$	0.29	$	43
3/31/2017	4/28/2017	$	0.40	$	58
6/30/2017	7/31/2017	$	0.40	$	58
9/29/2017	10/27/2017	$	0.40	$	57
2018 payments
12/29/2017	1/26/2018	$	0.40	$	55
3/30/2018	4/27/2018	$	0.50	$	69

On April 19, 2018, the Board declared a cash dividend of $0.50 per share payable on July 27, 2018, to stockholders of record on June 29, 2018.

Stock Repurchases

On December 14, 2017, our Board of Directors authorized the repurchase of up to $3.0 billion of our common shares expiring on December 31, 2020, exclusive of shares repurchased in connection with employee stock plans. Under the share repurchase authorization, shares may be purchased from time to time at prevailing prices in the open market, by block purchases, through plans designed to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, or in privately-negotiated transactions, including pursuant to accelerated share repurchase agreements with investment banks, subject to certain regulatory restrictions on volume, pricing, and timing.

On December 21, 2017, we entered into an accelerated stock repurchase agreement, the December 2017 ASR, with Bank of America, N.A., or BofA, to repurchase $1.0 billion of our common stock as part of the $3.0 billion share repurchase program authorized on December 14, 2017. On December 22, 2017, we made a payment of $1.0 billion to BofA from available cash on hand and received an initial delivery of 3.28 million shares of our common stock from BofA based on the then current market price of Humana common stock. The payment to BofA was recorded as a reduction to stockholders’ equity, consisting of an $800 million increase in treasury stock, which reflects the value of the initial 3.28 million shares received upon initial settlement, and a $200 million decrease in capital in excess of par value, which reflected the value of stock held back by BofA pending final settlement of the December 2017 ASR. Upon settlement of the ASR on March 26, 2018, we received an additional 0.46 million shares as determined by the average daily volume weighted-average share price of our common stock during the term of the ASR Agreement of $267.55,bringing the total shares received under this program to 3.74 million. In addition, upon settlement we reclassified the $200 million value of stock initially held back by BofA from capital in excess of par value to treasury stock.

Our remaining repurchase authorization was approximately$2 billion as of May 1, 2018.

In connection with employee stock plans, we acquired 0.19 million common shares for $51 million and 0.35 million common shares for $74 million during the three months ended March 31, 2018 and 2017, respectively.

Treasury Stock Reissuance

We reissued 0.63 million shares of treasury stock during the three months ended March 31, 2018 at a cost of $66 million associated with restricted stock unit vestings and option exercises.

Accumulated Other Comprehensive Income

Accumulated other comprehensive income included net unrealized losses, net of tax, on our investment securities of $110 million at March 31, 2018 and net unrealized gains, net of tax, on our investment securities of $125 million at December 31, 2017. In addition, accumulated other comprehensive income included $44 million, net of tax, at March 31, 2018 and $106 million, net of tax, at December 31, 2017 for an additional liability that would exist on our closed block of long-term care insurance policies if unrealized gains on the sale of the investments backing such products had been realized and the proceeds reinvested at then current yields. Refer to Note 18 to the consolidated financial statements in our 2017 Form 10-K for further discussion of our long-term care insurance policies.

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INCOME TAXES

3 Months Ended

Mar. 31, 2018

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The effective income tax rate was 30.7% for the three months ended March 31, 2018, compared to 34.0% for the three months ended March 31, 2017primarily due to the tax reform law enacted on December 22, 2017 (the "Tax Reform Law"), partially offset by the impact of the reinstatement of the non-deductible health insurance industry fee in 2018. The income tax rate for the three months ended March 31, 2017 included previously non-deductible transaction costs that, as a result of the termination of the Merger Agreement, became deductible for tax purposes. The Tax Reform Law reduced the statutory federal corporate income tax rate to 21 percent from 35 percent, beginning in 2018. The accounting for certain income tax effects of the Tax Reform Law is provisional. Revisions to prior estimates are recorded as additional analysis is completed using information available at each measurement date during 2018, with adjustments to the income tax provision recorded as new information becomes known. Revisions to our prior estimates for the income tax effects of the Tax Reform Law decreased our tax expense for the three months ended March 31, 2018 by $6.6 million.

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DEBT

3 Months Ended

Mar. 31, 2018

Debt Disclosure [Abstract]

DEBT

DEBT

The carrying value of long-term debt outstanding, net of unamortized debt issuance costs, was as follows at March 31, 2018 and December 31, 2017:

	March 31, 2018		December 31, 2017
	(in millions)
Senior notes:
$400 million, 2.625% due October 1, 2019	$	399	$	399
$400 million, 2.50% due December 15, 2020	397		397
$400 million, 2.90% due December 15, 2022	396		396
$600 million, 3.15% due December 1, 2022	596		595
$600 million, 3.85% due October 1, 2024	596		595
$600 million, 3.95% due March 15, 2027	595		594
$250 million, 8.15% due June 15, 2038	263		263
$400 million, 4.625% due December 1, 2042	396		396
$750 million, 4.95% due October 1, 2044	739		739
$400 million, 4.80% due March 15, 2047	395		396
Total long-term debt	$	4,772	$	4,770

Senior Notes

In March 2017, we issued $600 million of 3.95% senior notes due March 15, 2027 and $400 million of 4.80% senior notes due March 15, 2047. Our net proceeds, reduced for the underwriters' discount and commission and offering expenses paid as of March 31, 2017, were $991 million.

Our senior notes, which are unsecured, may be redeemed at our option at any time at 100% of the principal amount plus accrued interest and a specified make-whole amount. The 8.15% senior notes are subject to an interest rate adjustment if the debt ratings assigned to the notes are downgraded (or subsequently upgraded). In addition, our senior notes contain a change of control provision that may require us to purchase the notes under certain circumstances.

Credit Agreement

In May 2017 we amended and restated our previous 5-year $1.0 billion unsecured revolving credit agreement expiring July 2018 with a 5-year $2.0 billion unsecured revolving credit agreement which expires May 2022. Under the credit agreement, at our option, we can borrow on either a competitive advance basis or a revolving credit basis. The revolving credit portion bears interest at either LIBOR plus a spread or the base rate plus a spread. The LIBOR spread, currently 110.0 basis points, varies depending on our credit ratings ranging from 91.0 to 150.0 basis points. We also pay an annual facility fee regardless of utilization. This facility fee, currently 15.0 basis points, may fluctuate between 9.0 and 25.0 basis points, depending upon our credit ratings. The competitive advance portion of any borrowings will bear interest at market rates prevailing at the time of borrowing on either a fixed rate or a floating rate based on LIBOR, at our option.

The terms of the credit agreement include standard provisions related to conditions of borrowing, including a customary material adverse effect clause which could limit our ability to borrow additional funds. In addition, the credit agreement contains customary restrictive and financial covenants as well as customary events of default, including financial covenants regarding the maintenance of a minimum level of net worth of $9.5 billion at March 31, 2018 and a maximum leverage ratio of 3.0:1. We are in compliance with the financial covenants, with actual net worth of $10.1 billion and an actual leverage ratio of 1.4:1as measured in accordance with the credit agreement as of March 31, 2018. Upon our agreement with one or more financial institutions, we may expand the aggregate commitments under the credit agreement to a maximum of $2.5 billion, through a $500.0 million incremental loan facility.

At March 31, 2018, we had noborrowings and noletters of credit outstanding under the credit agreement. Accordingly, as ofMarch 31, 2018, we had $2.0 billion of remaining borrowing capacity (which excludes the uncommitted $500 million incremental loan facility under the credit agreement), none of which would be restricted by our financial covenant compliance requirement. We have other customary, arms-length relationships, including financial advisory and banking, with some parties to the credit agreement.

Commercial Paper

We previously entered into a commercial paper program pursuant to which we may issue short-term, unsecured commercial paper notes privately placed on a discount basis through certain broker dealers. On June 15, 2017, we increased the size of the commercial paper program to permit the issuance of the commercial notes with the aggregate face or principal amount outstanding under the program at any time not to exceed $2 billion. Amounts available under the program may be borrowed, repaid and re-borrowed from time to time. The net proceeds of issuances have been and are expected to be used for general corporate purposes. The maximum principal amount outstanding at any one time during the three months ended March 31, 2018 was $442 million. There were outstanding borrowings of $398 million at March 31, 2018 and $150 million at December 31, 2017.

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GUARANTEES AND CONTINGENCIES

3 Months Ended

Mar. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

GUARANTEES AND CONTINGENCIES

GUARANTEES AND CONTINGENCIES

Government Contracts

Our Medicare products, which accounted for approximately 81% of our total premiums and services revenue for the three months ended March 31, 2018, primarily consisted of products covered under the Medicare Advantage and Medicare Part D Prescription Drug Plan contracts with the federal government. These contracts are renewed generally for a calendar year term unless CMS notifies us of its decision not to renew by May 1 of the calendar year in which the contract would end, or we notify CMS of our decision not to renew by the first Monday in June of the calendar year in which the contract would end. Our bids for the 2019 calendar year are due by June 4, 2018.

CMS uses a risk-adjustment model which adjusts premiums paid to Medicare Advantage, or MA, plans according to health status of covered members. The risk-adjustment model, which CMS implemented pursuant to the Balanced Budget Act of 1997 (BBA) and the Benefits Improvement and Protection Act of 2000 (BIPA), generally pays more where a plan's membership has higher expected costs. Under this model, rates paid to MA plans are based on actuarially determined bids, which include a process whereby our prospective payments are based on our estimated cost of providing standard Medicare-covered benefits to an enrollee with a "national average risk profile." That baseline payment amount is adjusted to reflect the health status of our enrolled membership. Under the risk-adjustment methodology, all MA plans must collect and submit the necessary diagnosis code information from hospital inpatient, hospital outpatient, and physician providers to CMS within prescribed deadlines. The CMS risk-adjustment model uses the diagnosis data to calculate the risk-adjusted premium payment to MA plans, which CMS adjusts for coding pattern differences between the health plans and the government fee-for-service program. We generally rely on providers, including certain providers in our network who are our employees, to code their claim submissions with appropriate diagnoses, which we send to CMS as the basis for our payment received from CMS under the actuarial risk-adjustment model. We also rely on these providers to document appropriately all medical data, including the diagnosis data submitted with claims. In addition, we conduct medical record reviews as part of our data and payment accuracy compliance efforts, to more accurately reflect diagnosis conditions under the risk adjustment model. These compliance efforts include the internal contract level audits described in more detail below, as well as ordinary course reviews of our internal business processes.

CMS is phasing-in the process of calculating risk scores using diagnoses data from the Risk Adjustment Processing System, or RAPS, to diagnoses data from the Encounter Data System, or EDS. The RAPS process requires MA plans to apply a filter logic based on CMS guidelines and only submit claims that satisfy those guidelines. For submissions through EDS, CMS requires MA plans to submit all the encounter data and CMS will apply the risk adjustment filtering logic to determine the risk scores. For 2017, 25% of the risk score was calculated from claims data submitted through EDS. CMS has revised the pace of the phase-in and, for 2018 and 2019, 15% and 25%, respectively, of the risk score will be calculated from claims data submitted through EDS. The phase-in from RAPS to EDS could result in different risk scores from each dataset as a result of plan processing issues, CMS processing issues, or filtering logic differences between RAPS and EDS, and could have a material adverse effect on our results of operations, financial position, or cash flows.

CMS is continuing to perform audits of various companies’ selected MA contracts related to this risk adjustment diagnosis data. We refer to these audits as Risk-Adjustment Data Validation Audits, or RADV audits. RADV audits review medical records in an attempt to validate provider medical record documentation and coding practices which influence the calculation of premium payments to MA plans.

In 2012, CMS released a “Notice of Final Payment Error Calculation Methodology for Part C Medicare Advantage Risk Adjustment Data Validation (RADV) Contract-Level Audits.” The payment error calculation methodology provides that, in calculating the economic impact of audit results for an MA contract, if any, the results of the RADV audit sample will be extrapolated to the entire MA contract after a comparison of the audit results to a similar audit of Medicare FFS (we refer to the process of accounting for errors in FFS claims as the "FFS Adjuster"). This comparison of RADV audit results to the FFS error rate is necessary to determine the economic impact, if any, of RADV audit results because the government used the Medicare FFS program data set, including any attendant errors that are present in that data set, to estimate the costs of various health status conditions and to set the resulting adjustments to MA plans’ payment rates. CMS already makes other adjustments to payment rates based on a comparison of coding pattern differences between MA plans and Medicare FFS data (such as for frequency of coding for certain diagnoses in MA plan data versus the Medicare FFS program dataset).

The final RADV extrapolation methodology, including the first application of extrapolated audit results to determine audit settlements, is expected to be applied to RADV contract level audits conducted for contract year 2011 and subsequent years. CMS is currently conducting RADV contract level audits for contract years 2011, 2012, and 2013 in which two, five and five of our Medicare Advantage plans are being audited, respectively. Per CMS guidance, selected MA contracts will be notified of an audit at some point after the close of the final reconciliation for the payment year being audited.

Estimated audit settlements are recorded as a reduction of premiums revenue in our consolidated statements of income, based upon available information. We perform internal contract level audits based on the RADV audit methodology prescribed by CMS. Included in these internal contract level audits is an audit of our Private Fee-For Service business which we used to represent a proxy of the FFS Adjuster which has not yet been released. We based our accrual of estimated audit settlements for each contract year on the results of these internal contract level audits and update our estimates as each audit is completed. Estimates derived from these results were not material to our results of operations, financial position, or cash flows. We report the results of these internal contract level audits to CMS, including identified overpayments, if any. However, as indicated, we are awaiting additional guidance from CMS regarding the FFS Adjuster. Accordingly, we cannot determine whether such RADV audits will have a material adverse effect on our results of operations, financial position, or cash flows.

In addition, as part of our internal compliance efforts, we routinely perform ordinary course reviews of our internal business processes related to, among other things, our risk coding and data submissions in connection with the risk adjustment model. These reviews may also result in the identification of errors and the submission of corrections to CMS, that may, either individually or in the aggregate, be material. As such, the result of these reviews may have a material adverse effect on our results of operations, financial position, or cash flows.

In addition, CMS' comments in formalized guidance regarding “overpayments” to MA plans appear to be inconsistent with CMS' prior RADV audit guidance. These statements, contained in the preamble to CMS’ final rule release regarding Medicare Advantage and Part D prescription drug benefit program regulations for Contract Year 2015, appear to equate each Medicare Advantage risk adjustment data error with an “overpayment” without reconciliation to the principles underlying the FFS Adjuster referenced above. We will continue to work with CMS to ensure that MA plans are paid accurately and that payment model principles are in accordance with the requirements of the Social Security Act, which, if not implemented correctly could have a material adverse effect on our results of operations, financial position, or cash flows.

At March 31, 2018, our military services business, which accounted for approximately 1% of our total premiums and services revenue for the three months ended March 31, 2018, primarily consisted of the T2017 TRICARE East Region contract. The T2017 East Region contract is a consolidation of the former T3 North and South Regions, comprising thirty-two states and approximately six million TRICARE beneficiaries, under which delivery of health care services commenced on January 1, 2018. The T2017 East Region contract is a 5-year contract set to expire on December 31, 2022 and is subject to renewals on January 1 of each year during its term at the government's option.

Our state-based Medicaid business accounted for approximately 4% of our total premiums and services revenue for the three months ended March 31, 2018. In addition to our state-based Temporary Assistance for Needy Families, or TANF, Medicaid contracts in Florida and Kentucky, we have contracts in Florida for Long Term Support Services (LTSS), and in Illinois for stand-alone dual eligible demonstration programs serving individuals dually eligible for both the federal Medicare program and the applicable state-based Medicaid program.

The loss of any of the contracts above or significant changes in these programs as a result of legislative or regulatory action, including reductions in premium payments to us, regulatory restrictions on profitability, including by comparison of our Medicare Advantage profitability to our non-Medicare Advantage business profitability and a requirement that they remain within certain ranges of each other, or increases in member benefits without corresponding increases in premium payments to us, may have a material adverse effect on our results of operations, financial position, and cash flows.

Legal Proceedings and Certain Regulatory Matters

As previously disclosed, the Civil Division of the United States Department of Justice provided us with an information request in December 2014, concerning our Medicare Part C risk adjustment practices. The request relates to our oversight and submission of risk adjustment data generated by providers in our Medicare Advantage network, as well as to our business and compliance practices related to risk adjustment data generated by our providers and by us, including medical record reviews conducted as part of our data and payment accuracy compliance efforts, the use of health and well-being assessments, and our fraud detection efforts. We believe that this request for information is in connection with a wider review of Medicare Risk Adjustment generally that includes a number of Medicare Advantage plans, providers and vendors. We continue to cooperate with and voluntarily respond to the information requests from the Department of Justice. These matters are expected to result in additional qui tam litigation.

As previously disclosed, on January 19, 2016, an individual filed a qui tam suit captioned United States of America ex rel. Steven Scott v. Humana, Inc., in United States District Court, Central District of California, Western Division. The complaint alleges certain civil violations by us in connection with the actuarial equivalence of the plan benefits under Humana’s Basic PDP plan, a prescription drug plan offered by us under Medicare Part D. The action seeks damages and penalties on behalf of the United States under the False Claims Act. The court ordered the qui tam action unsealed on September 13, 2017, so that the relator could proceed, following notice from the U.S. Government that it was not intervening at that time. On January 29, 2018, the suit was transferred to the United States District Court, Western District of Kentucky, Louisville Division. We take seriously our obligations to comply with applicable CMS requirements and actuarial standards of practice, and we are vigorously defending against these allegations.

On November 2, 2017, we filed suit against the United States of America in the United States Court of Federal Claims, on behalf of our health plans seeking recovery from the federal government of approximately $611 million in payments under the risk corridor premium stabilization program established under Health Care Reform, for years 2014, 2015 and 2016.  We have not recognized revenue, nor have we recorded a receivable, for any amount due from the federal government for unpaid risk corridor payments as of March 31, 2018.  We have fully recognized all liabilities due to the federal government that we have incurred under the risk corridor program, and have paid all amounts due to the federal government as required. There is no assurance that we will prevail in the lawsuit.

Other Lawsuits and Regulatory Matters

Our current and past business practices are subject to review or other investigations by various state insurance and health care regulatory authorities and other state and federal regulatory authorities. These authorities regularly scrutinize the business practices of health insurance, health care delivery and benefits companies. These reviews focus on numerous facets of our business, including claims payment practices, statutory capital requirements, provider contracting, risk adjustment, competitive practices, commission payments, privacy issues, utilization management practices, pharmacy benefits, access to care, and sales practices, among others. Some of these reviews have historically resulted in fines imposed on us and some have required changes to some of our practices. We continue to be subject to these reviews, which could result in additional fines or other sanctions being imposed on us or additional changes in some of our practices.

We also are involved in various other lawsuits that arise, for the most part, in the ordinary course of our business operations, certain of which may be styled as class-action lawsuits. Among other matters, this litigation may include employment matters, claims of medical malpractice, bad faith, nonacceptance or termination of providers, anticompetitive practices, improper rate setting, provider contract rate and payment disputes, including disputes over reimbursement rates required by statute, general contractual matters, intellectual property matters, and challenges to subrogation practices. For example, a number of hospitals and other providers have asserted that, under their network provider contracts, we are not entitled to reduce Medicare Advantage payments to these providers in connection with changes in Medicare payment systems and in accordance with the Balanced Budget and Emergency Deficit Control Act of 1985, as amended (commonly referred to as “sequestration”). Those challenges have led and could lead to arbitration demands or other litigation. Also, under state guaranty assessment laws, including those related to state cooperative failures in the industry, we may be assessed (up to prescribed limits) for certain obligations to the policyholders and claimants of insolvent insurance companies that write the same line or lines of business as we do.

As a government contractor, we may also be subject to qui tam litigation brought by individuals who seek to sue

on behalf of the government, alleging that the government contractor submitted false claims to the government including, among other allegations, those resulting from coding and review practices under the Medicare risk adjustment model. Qui tam litigation is filed under seal to allow the government an opportunity to investigate and to decide if it wishes to intervene and assume control of the litigation. If the government does not intervene, the lawsuit is unsealed, and the individual may continue to prosecute the action on his or her own, on behalf of the government. We also are subject to other allegations of non-performance of contractual obligations to providers, members, and others, including failure to properly pay claims, improper policy terminations, challenges to our implementation of the Medicare Part D prescription drug program and other litigation.

A limited number of the claims asserted against us are subject to insurance coverage. Personal injury claims, claims for extra contractual damages, care delivery malpractice, and claims arising from medical benefit denials are covered by insurance from our wholly owned captive insurance subsidiary and excess carriers, except to the extent that claimants seek punitive damages, which may not be covered by insurance in certain states in which insurance coverage for punitive damages is not permitted. In addition, insurance coverage for all or certain forms of liability has become increasingly costly and may become unavailable or prohibitively expensive in the future.

We record accruals for the contingencies discussed in the sections above to the extent that we conclude it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. No estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made at this time regarding the matters specifically described above because of the inherently unpredictable nature of legal proceedings, which also may be exacerbated by various factors, including: (i) the damages sought in the proceedings are unsubstantiated or indeterminate; (ii) discovery is not complete; (iii) the proceeding is in its early stages; (iv) the matters present legal uncertainties; (v) there are significant facts in dispute; (vi) there are a large number of parties (including where it is uncertain how liability, if any, will be shared among multiple defendants); or (vii) there is a wide range of potential outcomes.

The outcome of any current or future litigation or governmental or internal investigations, including the matters described above, cannot be accurately predicted, nor can we predict any resulting judgments, penalties, fines or other sanctions that may be imposed at the discretion of federal or state regulatory authorities or as a result of actions by third parties. Nevertheless, it is reasonably possible that any such outcome of litigation, judgments, penalties, fines or other sanctions could be substantial, and the outcome of these matters may have a material adverse effect on our results of operations, financial position, and cash flows, and may also affect our reputation.

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SEGMENT INFORMATION

3 Months Ended

Mar. 31, 2018

Segment Reporting [Abstract]

SEGMENT INFORMATION

SEGMENT INFORMATION

We manage our business with four reportable segments: Retail, Group and Specialty, Healthcare Services and Individual Commercial. 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. 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 and voluntary insurance benefits and financial protection products, as well as administrative services only, or ASO products. In addition, our Group and Specialty segment includes 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. The Individual Commercial segment consisted of our individual commercial fully-insured medical health insurance benefits. We report under the category of Other Businesses those businesses that 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 $2.9 billion and $3.0 billion for the three months ended March 31, 2018 and 2017, 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 $39 million and $26 million for the three months ended March 31, 2018 and 2017, 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 2017 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, Group and Specialty, and Individual Commercial 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 months ended March 31, 2018 and 2017:

	Retail		Group and Specialty		Healthcare Services		Individual Commercial			Other Businesses		Eliminations/ Corporate			Consolidated
	(in millions)
Three months ended March 31, 2018
Revenues - external customers
Premiums:
Individual Medicare Advantage	$	8,970	$	—	$	—	$	—		$	—	$	—		$	8,970
Group Medicare Advantage	1,524		—		—		—			—		—			1,524
Medicare stand-alone PDP	896		—		—		—			—		—			896
Total Medicare	11,390		—		—		—			—		—			11,390
Fully-insured	125		1,392		—		(5		)	—		—			1,512
Specialty	—		347		—		—			—		—			347
Medicaid and other	553		—		—		—			9		—			562
Total premiums	12,068		1,739		—		(5		)	9		—			13,811
Services revenue:
Provider	—		—		65		—			—		—			65
ASO and other	2		219		—		—			2		—			223
Pharmacy	—		—		39		—			—		—			39
Total services revenue	2		219		104		—			2		—			327
Total revenues - external customers	12,070		1,958		104		(5		)	11		—			14,138
Intersegment revenues
Services	—		5		4,018		—			—		(4,023		)	—
Products	—		—		1,535		—			—		(1,535		)	—
Total intersegment revenues	—		5		5,553		—			—		(5,558		)	—
Investment income	37		7		6		—			35		56			141
Total revenues	12,107		1,970		5,663		(5		)	46		(5,502		)	14,279
Operating expenses:
Benefits	10,552		1,273		—		(60		)	26		(121		)	11,670
Operating costs	1,222		463		5,441		2			2		(5,381		)	1,749
Depreciation and amortization	66		23		49		—			—		(38		)	100
Total operating expenses	11,840		1,759		5,490		(58		)	28		(5,540		)	13,519
Income from operations	267		211		173		53			18		38			760
Interest expense	—		—		—		—			—		53			53
Income (loss) before income taxes	$	267	$	211	$	173	$	53		$	18	$	(15	)	$	707

	Retail		Group and Specialty		Healthcare Services		Individual Commercial		Other Businesses			Eliminations/ Corporate			Consolidated
	(in millions)
Three months ended March 31, 2017
Revenues - external customers
Premiums:
Individual Medicare Advantage	$	8,376	$	—	$	—	$	—	$	—		$	—		$	8,376
Group Medicare Advantage	1,318		—		—		—		—			—			1,318
Medicare stand-alone PDP	941		—		—		—		—			—			941
Total Medicare	10,635		—		—		—		—			—			10,635
Fully-insured	118		1,378		—		283		—			—			1,779
Specialty	—		322		—		—		—			—			322
Medicaid and other	653		—		—		—		9			—			662
Total premiums	11,406		1,700		—		283		9			—			13,398
Services revenue:
Provider	—		—		70		—		—			—			70
ASO and other	2		161		—		—		2			—			165
Pharmacy	—		—		18		—		—			—			18
Total services revenue	2		161		88		—		2			—			253
Total revenues - external customers	11,408		1,861		88		283		11			—			13,651
Intersegment revenues
Services	—		5		4,310		—		—			(4,315		)	—
Products	—		—		1,552		—		—			(1,552		)	—
Total intersegment revenues	—		5		5,862		—		—			(5,867		)	—
Investment income	25		11		8		1		21			45			111
Total revenues	11,433		1,877		5,958		284		32			(5,822		)	13,762
Operating expenses:
Benefits	10,051		1,286		—		156		29			(196		)	11,326
Operating costs	954		399		5,680		62		4			(5,546		)	1,553
Merger termination fee and related costs, net	—		—		—		—		—			(947		)	(947		)
Depreciation and amortization	58		21		34		3		—			(24		)	92
Total operating expenses	11,063		1,706		5,714		221		33			(6,713		)	12,024
Income (loss) from operations	370		171		244		63		(1		)	891			1,738
Interest expense	—		—		—		—		—			49			49
Income (loss) before income taxes	$	370	$	171	$	244	$	63	$	(1	)	$	842		$	1,689

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INVESTMENT SECURITIES (Tables)

3 Months Ended

Mar. 31, 2018

Investments, Debt and Equity Securities [Abstract]

Schedule of Investment Securities Classified as Current and Long-Term

Investment securities classified as current and long-term were as follows at March 31, 2018 and December 31, 2017, respectively:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in millions)
March 31, 2018
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	505	$	1	$	(5	)	$	501
Mortgage-backed securities	2,308		—		(56		)	2,252
Tax-exempt municipal securities	3,549		6		(61		)	3,494
Mortgage-backed securities:
Residential	24		—		(1		)	23
Commercial	580		—		(11		)	569
Asset-backed securities	554		1		(1		)	554
Corporate debt securities	4,693		131		(114		)	4,710
Total debt securities	$	12,213	$	139	$	(249	)	$	12,103
December 31, 2017
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	532	$	1	$	(2	)	$	531
Mortgage-backed securities	1,625		4		(19		)	1,610
Tax-exempt municipal securities	3,884		33		(28		)	3,889
Mortgage-backed securities:
Residential	26		—		—			26
Commercial	455		3		(2		)	456
Asset-backed securities	407		1		—			408
Corporate debt securities	5,175		244		(37		)	5,382
Total debt securities	$	12,104	$	286	$	(88	)	$	12,302

Schedule of Gross Unrealized Losses and Fair Value of Securities

Gross unrealized losses and fair values aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position were as follows at March 31, 2018 and December 31, 2017, respectively:

	Less than 12 months					12 months or more					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
	(in millions)
March 31, 2018
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	362	$	(2	)	$	129	$	(3	)	$	491	$	(5	)
Mortgage-backed securities	1,489		(28		)	638		(28		)	2,127		(56		)
Tax-exempt municipal securities	2,409		(41		)	621		(20		)	3,030		(61		)
Mortgage-backed securities:
Residential	18		—			3		(1		)	21		(1		)
Commercial	451		(10		)	28		(1		)	479		(11		)
Asset-backed securities	162		(1		)	7		—			169		(1		)
Corporate debt securities	2,431		(60		)	761		(54		)	3,192		(114		)
Total debt securities	$	7,322	$	(142	)	$	2,187	$	(107	)	$	9,509	$	(249	)
December 31, 2017
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	273	$	(1	)	$	130	$	(1	)	$	403	$	(2	)
Mortgage-backed securities	581		(2		)	672		(17		)	1,253		(19		)
Tax-exempt municipal securities	1,590		(16		)	661		(12		)	2,251		(28		)
Mortgage-backed securities:
Residential	20		—			3		—			23		—
Commercial	131		(1		)	28		(1		)	159		(2		)
Asset-backed securities	107		—			10		—			117		—
Corporate debt securities	1,297		(10		)	804		(27		)	2,101		(37		)
Total debt securities	$	3,999	$	(30	)	$	2,308	$	(58	)	$	6,307	$	(88	)

Schedule of Realized Gains (Losses) Related to Investment Securities Included Within Investment Income

The detail of realized gains (losses) related to investment securities and included within investment income was as follows for the three months ended March 31, 2018 and 2017:

	Three months ended March 31,
	2018			2017
	(in millions)
Gross realized gains	$	32		$	27
Gross realized losses	(3		)	(1		)
Net realized capital gains	$	29		$	26

Schedule of Contractual Maturity of Debt Securities Available for Sale

The contractual maturities of debt securities available for sale at March 31, 2018, regardless of their balance sheet classification, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Fair Value
	(in millions)
Due within one year	$	856	$	854
Due after one year through five years	2,846		2,803
Due after five years through ten years	2,317		2,247
Due after ten years	2,728		2,801
Mortgage and asset-backed securities	3,466		3,398
Total debt securities	$	12,213	$	12,103

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FAIR VALUE (Tables)

3 Months Ended

Mar. 31, 2018

Fair Value Disclosures [Abstract]

Financial Assets Measured at Fair Value on Recurring Basis

The following table summarizes our fair value measurements at March 31, 2018 and December 31, 2017, respectively, for financial assets measured at fair value on a recurring basis:

	Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
	(in millions)
March 31, 2018
Cash equivalents	$	4,346	$	4,346	$	—	$	—
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	501		—		501		—
Mortgage-backed securities	2,252		—		2,252		—
Tax-exempt municipal securities	3,494		—		3,494		—
Mortgage-backed securities:
Residential	23		—		23		—
Commercial	569		—		569		—
Asset-backed securities	554		—		554		—
Corporate debt securities	4,710		—		4,709		1
Total debt securities	12,103		—		12,102		1
Total invested assets	$	16,449	$	4,346	$	12,102	$	1
December 31, 2017
Cash equivalents	$	4,564	$	4,564	$	—	$	—
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	531		—		531		—
Mortgage-backed securities	1,610		—		1,610		—
Tax-exempt municipal securities	3,889		—		3,889		—
Mortgage-backed securities:
Residential	26		—		26		—
Commercial	456		—		456		—
Asset-backed securities	408		—		408		—
Corporate debt securities	5,382		—		5,381		1
Total debt securities	12,302		—		12,301		1
Total invested assets	$	16,866	$	4,564	$	12,301	$	1

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MEDICARE PART D (Tables)

3 Months Ended

Mar. 31, 2018

Insurance [Abstract]

Balance Sheet Amounts Associated With Medicare Part D

The accompanying condensed consolidated balance sheets include the following amounts associated with Medicare Part D at March 31, 2018 and December 31, 2017. CMS subsidies/discounts in the table below include the reinsurance and low-income cost subsidies funded by CMS for which we assume no risk as well as brand name prescription drug discounts for Part D plan participants in the coverage gap funded by CMS and pharmaceutical manufacturers.

	March 31, 2018						December 31, 2017
	Risk Corridor Settlement			CMS Subsidies/ Discounts			Risk Corridor Settlement			CMS Subsidies/ Discounts
	(in millions)
Other current assets	$	5		$	79		$	4		$	101
Trade accounts payable and accrued expenses	(240		)	(2,509		)	(255		)	(1,085		)
Net current liability	(235		)	(2,430		)	(251		)	(984		)
Other long-term assets	33			—			—			—
Other long-term liabilities	(78		)	—			(28		)	—
Net long-term liability	(45		)	—			(28		)	—
Total net liability	$	(280	)	$	(2,430	)	$	(279	)	$	(984	)

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HEALTH CARE REFORM (Tables)

3 Months Ended

Mar. 31, 2018

Insurance [Abstract]

Schedule Of Risk Adjustment, Reinsurance Recoverable And Risk Corridor Settlement

The accompanying condensed consolidated balance sheets include the following amounts associated with the 3Rs at March 31, 2018 and December 31, 2017.

	March 31, 2018					December 31, 2017
	Risk Adjustment Settlement			Reinsurance Recoverables		Risk Adjustment Settlement			Reinsurance Recoverables
	(in millions)
Prior Coverage Years
Premiums receivable	$	65		$	—	$	62		$	—
Other current assets	—			—		—			44
Trade accounts payable and accrued expenses	(79		)	—		(80		)	—
Net current (liability) asset	(14		)	—		(18		)	44
Other long-term assets	—			—		5			—
Total prior coverage years' net (liability) asset	(14		)	—		(13		)	44
Current Coverage Year
Other long-term assets	1			—		—			—
Other long-term liabilities	(11		)	—		—			—
Net long-term liability	(10		)	—		—			—
Total 2018 coverage year net liability	(10		)	—		—			—
Total net (liability) asset	$	(24	)	$	—	$	(13	)	$	44

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GOODWILL AND OTHER INTANGIBLE ASSETS (Tables)

3 Months Ended

Mar. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Changes in Carrying Amount of Goodwill By Reportable Segments

Changes in the carrying amount of goodwill for our reportable segments for the three months ended March 31, 2018 were as follows:

	Retail		Group and Specialty		Healthcare Services		Total
	(in millions)
Balance at January 1, 2018	$	1,059	$	261	$	1,961	$	3,281
Acquisitions	360		—		119		479
Balance at March 31, 2018	$	1,419	$	261	$	2,080	$	3,760

Details of Intangible Assets Included in Other Long-Term Assets

The following table presents details of our other intangible assets included in other long-term assets in the accompanying condensed consolidated balance sheets at March 31, 2018 and December 31, 2017.

		March 31, 2018						December 31, 2017
	Weighted Average Life	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
		($ in millions)
Other intangible assets:
Customer contracts/ relationships	9.6 years	$	646	$	414	$	232	$	566	$	401	$	165
Trade names and technology	6.5 years	83		78		5		104		84		20
Provider contracts	11.9 years	68		32		36		68		30		38
Noncompetes and other	8.1 years	32		29		3		32		29		3
Total other intangible assets	9.4 years	$	829	$	553	$	276	$	770	$	544	$	226

Schedule of Estimated Amortization Expense

The following table presents our estimate of amortization expense for 2018 and each of the five next succeeding years:

	(in millions)
For the years ending December 31,
2018	$	84
2019	63
2020	61
2021	27
2022	24
2023	16

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BENEFITS PAYABLE (Tables)

3 Months Ended

Mar. 31, 2018

Insurance [Abstract]

Activity in Benefits Payable

Activity in benefits payable for our Group and Specialty segment, excluding military services, was as follows for the three months ended March 31, 2018 and 2017:

	For the three months ended March 31,
	2018			2017
	(in millions)
Balances, beginning of period	$	568		$	578
Incurred related to:
Current year	1,307			1,306
Prior years	(34		)	(20		)
Total incurred	1,273			1,286
Paid related to:
Current year	(802		)	(824		)
Prior years	(463		)	(493		)
Total paid	(1,265		)	(1,317		)
Balances, end of period	$	576		$	547

On a consolidated basis, activity in benefits payable, excluding military services, was as follows for the three months ended March 31, 2018 and 2017:

	For the three months ended March 31,
	2018			2017
	(in millions)
Balances, beginning of period	$	4,668		$	4,563
Less: Reinsurance recoverables	(70		)	(76		)
Balances, beginning of period, net	4,598			4,487
Incurred related to:
Current year	11,947			11,580
Prior years	(267		)	(231		)
Total incurred	11,680			11,349
Paid related to:
Current year	(7,775		)	(7,695		)
Prior years	(3,619		)	(3,451		)
Total paid	(11,394		)	(11,146		)
Reinsurance recoverable	77			71
Balances, end of period	$	4,961		$	4,761

Activity in benefits payable for our Retail segment was as follows for the three months ended March 31, 2018 and 2017:

	For the three months ended March 31,
	2018			2017
	(in millions)
Balances, beginning of period	$	3,963		$	3,507
Less: Reinsurance recoverables	(70		)	(76		)
Balances, beginning of period, net	3,893			3,431
Incurred related to:
Current year	10,739			10,255
Prior years	(187		)	(204		)
Total incurred	10,552			10,051
Paid related to:
Current year	(7,119		)	(7,014		)
Prior years	(3,082		)	(2,572		)
Total paid	(10,201		)	(9,586		)
Reinsurance recoverable	77			71
Balances, end of period	$	4,321		$	3,967

Activity in benefits payable for our Individual Commercial segment was as follows for the three months ended March 31, 2018 and 2017:

	For the three months ended March 31,
	2018			2017
	(in millions)
Balances, beginning of period	$	101		$	454
Incurred related to:
Current year	—			195
Prior years	(44		)	(6		)
Total incurred	(44		)	189
Paid related to:
Current year	—			(59		)
Prior years	(29		)	(363		)
Total paid	(29		)	(422		)
Balance, end of period	$	28		$	221

Benefit Expenses Excluded From Activity in Benefits Payable

Benefits expense excluded from the previous table was as follows for the three months ended March 31, 2018 and 2017.

	For the three months ended March 31,
	2018			2017
	(in millions)
Future policy benefits:
Individual Commercial	$	(16	)	$	(33	)
Other Businesses	6			10
Total future policy benefits	$	(10	)	$	(23	)

Schedule Of Benefits Payable

The reconciliation of the net incurred and paid claims development tables to benefits payable in the consolidated

statement of financial position is as follows:

Reconciliation of the Disclosure of Incurred and Paid Claims Development to Benefits Payable, net of reinsurance
	March 31,
	2018
Net outstanding liabilities
Retail	$	4,244
Group and Specialty	576
Individual Commercial	28
Other Businesses	36
Benefits payable, net of reinsurance	4,884
Reinsurance recoverable on unpaid claims
Retail	77
Total reinsurance recoverable on unpaid claims	77
Total benefits payable, gross	$	4,961

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EARNINGS PER COMMON SHARE COMPUTATION (Tables)

3 Months Ended

Mar. 31, 2018

Earnings Per Share [Abstract]

Schedule of Details Supporting Computation of Earnings Per Share

Detail supporting the computation of basic and diluted earnings per common share was as follows for the three months ended March 31, 2018 and 2017:

	Three months ended March 31,
	2018		2017
	(dollars in millions, except per common share results; number of shares in thousands)
Net income available for common stockholders	$	491	$	1,115
Weighted average outstanding shares of common stock used to compute basic earnings per common share	137,903		147,824
Dilutive effect of:
Employee stock options	213		199
Restricted stock	714		849
Shares used to compute diluted earnings per common share	138,830		148,872
Basic earnings per common share	$	3.56	$	7.54
Diluted earnings per common share	$	3.53	$	7.49
Number of antidilutive stock options and restricted stock excluded from computation	645		938

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STOCKHOLDERS' EQUITY (Tables)

3 Months Ended

Mar. 31, 2018

Equity [Abstract]

Schedule of Details of Dividend Payments

The following table provides details of dividend payments, excluding dividend equivalent rights for unvested stock awards, in 2017 and 2018 under our Board approved quarterly cash dividend policy:

Record Date	Payment Date	Amount per Share		Total Amount
				(in millions)
2017 payments
1/12/2017	1/27/2017	$	0.29	$	43
3/31/2017	4/28/2017	$	0.40	$	58
6/30/2017	7/31/2017	$	0.40	$	58
9/29/2017	10/27/2017	$	0.40	$	57
2018 payments
12/29/2017	1/26/2018	$	0.40	$	55
3/30/2018	4/27/2018	$	0.50	$	69

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DEBT (Tables)

3 Months Ended

Mar. 31, 2018

Debt Disclosure [Abstract]

Schedule of carrying value of long-term debt outstanding

The carrying value of long-term debt outstanding, net of unamortized debt issuance costs, was as follows at March 31, 2018 and December 31, 2017:

	March 31, 2018		December 31, 2017
	(in millions)
Senior notes:
$400 million, 2.625% due October 1, 2019	$	399	$	399
$400 million, 2.50% due December 15, 2020	397		397
$400 million, 2.90% due December 15, 2022	396		396
$600 million, 3.15% due December 1, 2022	596		595
$600 million, 3.85% due October 1, 2024	596		595
$600 million, 3.95% due March 15, 2027	595		594
$250 million, 8.15% due June 15, 2038	263		263
$400 million, 4.625% due December 1, 2042	396		396
$750 million, 4.95% due October 1, 2044	739		739
$400 million, 4.80% due March 15, 2047	395		396
Total long-term debt	$	4,772	$	4,770

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SEGMENT INFORMATION (Tables)

3 Months Ended

Mar. 31, 2018

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, By Segment

Our segment results were as follows for the three months ended March 31, 2018 and 2017:

	Retail		Group and Specialty		Healthcare Services		Individual Commercial			Other Businesses		Eliminations/ Corporate			Consolidated
	(in millions)
Three months ended March 31, 2018
Revenues - external customers
Premiums:
Individual Medicare Advantage	$	8,970	$	—	$	—	$	—		$	—	$	—		$	8,970
Group Medicare Advantage	1,524		—		—		—			—		—			1,524
Medicare stand-alone PDP	896		—		—		—			—		—			896
Total Medicare	11,390		—		—		—			—		—			11,390
Fully-insured	125		1,392		—		(5		)	—		—			1,512
Specialty	—		347		—		—			—		—			347
Medicaid and other	553		—		—		—			9		—			562
Total premiums	12,068		1,739		—		(5		)	9		—			13,811
Services revenue:
Provider	—		—		65		—			—		—			65
ASO and other	2		219		—		—			2		—			223
Pharmacy	—		—		39		—			—		—			39
Total services revenue	2		219		104		—			2		—			327
Total revenues - external customers	12,070		1,958		104		(5		)	11		—			14,138
Intersegment revenues
Services	—		5		4,018		—			—		(4,023		)	—
Products	—		—		1,535		—			—		(1,535		)	—
Total intersegment revenues	—		5		5,553		—			—		(5,558		)	—
Investment income	37		7		6		—			35		56			141
Total revenues	12,107		1,970		5,663		(5		)	46		(5,502		)	14,279
Operating expenses:
Benefits	10,552		1,273		—		(60		)	26		(121		)	11,670
Operating costs	1,222		463		5,441		2			2		(5,381		)	1,749
Depreciation and amortization	66		23		49		—			—		(38		)	100
Total operating expenses	11,840		1,759		5,490		(58		)	28		(5,540		)	13,519
Income from operations	267		211		173		53			18		38			760
Interest expense	—		—		—		—			—		53			53
Income (loss) before income taxes	$	267	$	211	$	173	$	53		$	18	$	(15	)	$	707

	Retail		Group and Specialty		Healthcare Services		Individual Commercial		Other Businesses			Eliminations/ Corporate			Consolidated
	(in millions)
Three months ended March 31, 2017
Revenues - external customers
Premiums:
Individual Medicare Advantage	$	8,376	$	—	$	—	$	—	$	—		$	—		$	8,376
Group Medicare Advantage	1,318		—		—		—		—			—			1,318
Medicare stand-alone PDP	941		—		—		—		—			—			941
Total Medicare	10,635		—		—		—		—			—			10,635
Fully-insured	118		1,378		—		283		—			—			1,779
Specialty	—		322		—		—		—			—			322
Medicaid and other	653		—		—		—		9			—			662
Total premiums	11,406		1,700		—		283		9			—			13,398
Services revenue:
Provider	—		—		70		—		—			—			70
ASO and other	2		161		—		—		2			—			165
Pharmacy	—		—		18		—		—			—			18
Total services revenue	2		161		88		—		2			—			253
Total revenues - external customers	11,408		1,861		88		283		11			—			13,651
Intersegment revenues
Services	—		5		4,310		—		—			(4,315		)	—
Products	—		—		1,552		—		—			(1,552		)	—
Total intersegment revenues	—		5		5,862		—		—			(5,867		)	—
Investment income	25		11		8		1		21			45			111
Total revenues	11,433		1,877		5,958		284		32			(5,822		)	13,762
Operating expenses:
Benefits	10,051		1,286		—		156		29			(196		)	11,326
Operating costs	954		399		5,680		62		4			(5,546		)	1,553
Merger termination fee and related costs, net	—		—		—		—		—			(947		)	(947		)
Depreciation and amortization	58		21		34		3		—			(24		)	92
Total operating expenses	11,063		1,706		5,714		221		33			(6,713		)	12,024
Income (loss) from operations	370		171		244		63		(1		)	891			1,738
Interest expense	—		—		—		—		—			49			49
Income (loss) before income taxes	$	370	$	171	$	244	$	63	$	(1	)	$	842		$	1,689

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BASIS OF PRESENTATION AND SIGNIFICANT EVENTS - Acquisition of a Minority Interest (Details) - Forecast $ in Millions	12 Months Ended
	Dec. 31, 2018 USD ($) location State
Consortium
Noncontrolling Interest [Line Items]
Payments to acquire equity method investments	$ 1,400
TPG Capital and Welsh, Carson, Anderson and Stowe
Noncontrolling Interest [Line Items]
Noncontrolling interest ownership percentage by parent	60.00%
Kindred’s Homecare Business
Noncontrolling Interest [Line Items]
Equity method investment, ownership percentage	40.00%
Payments to acquire equity method investments	$ 800
Consideration upon exercise of put option, EBITDA multiple	10.5
Consideration adjustment upon exercise of put option, EBITDA multiple (up to)	11.5
Curo Health Services
Noncontrolling Interest [Line Items]
Equity method investment, ownership percentage	40.00%
Equity method investment, number of locations | location	245
Equity method investment, number of states | State	22

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BASIS OF PRESENTATION AND SIGNIFICANT EVENTS - Sale of Closed Block of Commercial Long-Term Care Insurance Business (Details) - KMG America Corporation - Disposed of by Sale - Forecast $ in Millions	9 Months Ended
	Sep. 30, 2018 USD ($)
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Estimated net loss on sale of subsidiary	$ 350
Estimated pretax loss on sale of subsidiary	760
Expected tax benefit on sale of subsidiary	410
Parent company cash contributed to sale of subsidiary	203
Transfer of statutory capital with sale of subsidiary	$ 150

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BASIS OF PRESENTATION AND SIGNIFICANT EVENTS - Workforce Optimization, Aetna Merger, and Revenue Recognition (Details) $ / shares in Units, $ in Millions		3 Months Ended		12 Months Ended
	Feb. 16, 2017 USD ($)	Mar. 31, 2018 USD ($)	Mar. 31, 2017 USD ($)	Dec. 31, 2017 USD ($) employee $ / shares
Business Acquisition [Line Items]
Number of associates impacted | employee				3,600
Percentage of workforce associated impacted				7.80%
Restructuring charges				$ 148
Restructuring charges per diluted share (in dollars per share) | $ / shares				$ 0.64
Restructuring liability, current		$ 94		$ 140
Break up fee received	$ 1,000	0	$ (947)
Accounts receivable		1,276		$ 854
Services Accounts Receivable
Business Acquisition [Line Items]
Accounts receivable		$ 162

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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Details)	3 Months Ended
	Mar. 31, 2018
Revenue From Premiums and Investment Income | Revenues
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Concentration risk, percentage	98.00%

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ACQUISITIONS AND DIVESTITURES - Narrative (Details) - USD ($) $ in Millions			3 Months Ended
	Apr. 10, 2018	Mar. 01, 2018	Mar. 31, 2018
Business Acquisition [Line Items]
Goodwill, acquired during period			$ 479
MCCI
Business Acquisition [Line Items]
Payments to acquire business		$ 169
Goodwill, acquired during period		479
Other intangible assets acquired		80
Net tangible assets acquired		$ 27
Other intangible assets, weighted average useful life		8 years
MCCI
Business Acquisition [Line Items]
Notes receivable and revolving note, related party		$ 383
Subsequent Event | FPG
Business Acquisition [Line Items]
Payments to acquire business	$ 190

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INVESTMENT SECURITIES - Securities Classified as Current and Long-Term (Detail) - USD ($) $ in Millions	Mar. 31, 2018	Dec. 31, 2017
Investment [Line Items]
Amortized Cost	$ 12,213	$ 12,104
Gross Unrealized Gains	139	286
Gross Unrealized Losses	(249)	(88)
Fair Value	12,103	12,302
Debt Securities | Tax-exempt municipal securities
Investment [Line Items]
Amortized Cost	3,549	3,884
Gross Unrealized Gains	6	33
Gross Unrealized Losses	(61)	(28)
Fair Value	3,494	3,889
Debt Securities | Residential Mortgage-Backed Securities
Investment [Line Items]
Amortized Cost	24	26
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(1)	0
Fair Value	23	26
Debt Securities | Commercial Mortgage-Backed Securities
Investment [Line Items]
Amortized Cost	580	455
Gross Unrealized Gains	0	3
Gross Unrealized Losses	(11)	(2)
Fair Value	569	456
Debt Securities | Asset-backed securities
Investment [Line Items]
Amortized Cost	554	407
Gross Unrealized Gains	1	1
Gross Unrealized Losses	(1)	0
Fair Value	554	408
Debt Securities | Corporate debt securities
Investment [Line Items]
Amortized Cost	4,693	5,175
Gross Unrealized Gains	131	244
Gross Unrealized Losses	(114)	(37)
Fair Value	4,710	5,382
Debt Securities | U.S. Treasury and other U.S. government corporations and agencies | U.S. Treasury and agency obligations
Investment [Line Items]
Amortized Cost	505	532
Gross Unrealized Gains	1	1
Gross Unrealized Losses	(5)	(2)
Fair Value	501	531
Debt Securities | U.S. Treasury and other U.S. government corporations and agencies | Mortgage-backed securities
Investment [Line Items]
Amortized Cost	2,308	1,625
Gross Unrealized Gains	0	4
Gross Unrealized Losses	(56)	(19)
Fair Value	$ 2,252	$ 1,610

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INVESTMENT SECURITIES - Gross Unrealized Losses and Fair Values of Securities (Detail) - USD ($) $ in Millions	Mar. 31, 2018	Dec. 31, 2017
Investment [Line Items]
Less than 12 months, Fair Value	$ 7,322	$ 3,999
Less than 12 months, Gross Unrealized Losses	(142)	(30)
12 months or more, Fair Value	2,187	2,308
12 months or more, Gross Unrealized Losses	(107)	(58)
Total, Fair Value	9,509	6,307
Total, Gross Unrealized Losses	(249)	(88)
Debt Securities | Tax-exempt municipal securities
Investment [Line Items]
Less than 12 months, Fair Value	2,409	1,590
Less than 12 months, Gross Unrealized Losses	(41)	(16)
12 months or more, Fair Value	621	661
12 months or more, Gross Unrealized Losses	(20)	(12)
Total, Fair Value	3,030	2,251
Total, Gross Unrealized Losses	(61)	(28)
Debt Securities | Residential Mortgage-Backed Securities
Investment [Line Items]
Less than 12 months, Fair Value	18	20
Less than 12 months, Gross Unrealized Losses	0	0
12 months or more, Fair Value	3	3
12 months or more, Gross Unrealized Losses	(1)	0
Total, Fair Value	21	23
Total, Gross Unrealized Losses	(1)	0
Debt Securities | Commercial Mortgage-Backed Securities
Investment [Line Items]
Less than 12 months, Fair Value	451	131
Less than 12 months, Gross Unrealized Losses	(10)	(1)
12 months or more, Fair Value	28	28
12 months or more, Gross Unrealized Losses	(1)	(1)
Total, Fair Value	479	159
Total, Gross Unrealized Losses	(11)	(2)
Debt Securities | Asset-backed securities
Investment [Line Items]
Less than 12 months, Fair Value	162	107
Less than 12 months, Gross Unrealized Losses	(1)	0
12 months or more, Fair Value	7	10
12 months or more, Gross Unrealized Losses	0	0
Total, Fair Value	169	117
Total, Gross Unrealized Losses	(1)	0
Debt Securities | Corporate debt securities
Investment [Line Items]
Less than 12 months, Fair Value	2,431	1,297
Less than 12 months, Gross Unrealized Losses	(60)	(10)
12 months or more, Fair Value	761	804
12 months or more, Gross Unrealized Losses	(54)	(27)
Total, Fair Value	3,192	2,101
Total, Gross Unrealized Losses	(114)	(37)
Debt Securities | U.S. Treasury and other U.S. government corporations and agencies | U.S. Treasury and agency obligations
Investment [Line Items]
Less than 12 months, Fair Value	362	273
Less than 12 months, Gross Unrealized Losses	(2)	(1)
12 months or more, Fair Value	129	130
12 months or more, Gross Unrealized Losses	(3)	(1)
Total, Fair Value	491	403
Total, Gross Unrealized Losses	(5)	(2)
Debt Securities | U.S. Treasury and other U.S. government corporations and agencies | Mortgage-backed securities
Investment [Line Items]
Less than 12 months, Fair Value	1,489	581
Less than 12 months, Gross Unrealized Losses	(28)	(2)
12 months or more, Fair Value	638	672
12 months or more, Gross Unrealized Losses	(28)	(17)
Total, Fair Value	2,127	1,253
Total, Gross Unrealized Losses	$ (56)	$ (19)

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INVESTMENT SECURITIES - Additional Information (Detail) $ in Millions	3 Months Ended
	Mar. 31, 2018 USD ($) position	Mar. 31, 2017 USD ($)
Investments, Debt and Equity Securities [Abstract]
Percentage of debt securities considered to be of investment-grade	99.00%
Maximum percentage of any general obligation bonds in one state	9.00%
Percent of tax exempt securities insured	2.00%
Securities in unrealized loss positions, number of positions	1,410
Number of positions	2,230
Other-than-temporary impairments | $	$ 0.0	$ 0.0

XML

INVESTMENT SECURITIES - Realized Gains (Losses) Within Investment Income (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Investments, Debt and Equity Securities [Abstract]
Gross realized gains	$ 32	$ 27
Gross realized losses	(3)	(1)
Net realized capital gains	$ 29	$ 26

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INVESTMENT SECURITIES - Contractual Maturities, Available for Sale (Detail) - USD ($) $ in Millions	Mar. 31, 2018	Dec. 31, 2017
Amortized Cost
Due within one year	$ 856
Due after one year through five years	2,846
Due after five years through ten years	2,317
Due after ten years	2,728
Mortgage and asset-backed securities	3,466
Amortized Cost	12,213	$ 12,104
Fair Value
Due within one year	854
Due after one year through five years	2,803
Due after five years through ten years	2,247
Due after ten years	2,801
Mortgage and asset-backed securities	3,398
Fair Value	$ 12,103	$ 12,302

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FAIR VALUE - Financial Assets Measured on Recurring Basis (Detail) - USD ($) $ in Millions	Mar. 31, 2018	Dec. 31, 2017
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	$ 12,103	$ 12,302
Measured On Recurring Basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	4,346	4,564
Debt securities	12,103	12,302
Total invested assets	16,449	16,866
Measured On Recurring Basis | Tax-exempt municipal securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	3,494	3,889
Measured On Recurring Basis | Residential Mortgage-Backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	23	26
Measured On Recurring Basis | Commercial Mortgage-Backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	569	456
Measured On Recurring Basis | Asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	554	408
Measured On Recurring Basis | Corporate debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	4,710	5,382
Measured On Recurring Basis | U.S. Treasury and other U.S. government corporations and agencies | U.S. Treasury and agency obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	501	531
Measured On Recurring Basis | U.S. Treasury and other U.S. government corporations and agencies | Mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	2,252	1,610
Measured On Recurring Basis | Quoted Prices in Active Markets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	4,346	4,564
Debt securities	0	0
Total invested assets	4,346	4,564
Measured On Recurring Basis | Quoted Prices in Active Markets (Level 1) | Tax-exempt municipal securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
Measured On Recurring Basis | Quoted Prices in Active Markets (Level 1) | Residential Mortgage-Backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
Measured On Recurring Basis | Quoted Prices in Active Markets (Level 1) | Commercial Mortgage-Backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
Measured On Recurring Basis | Quoted Prices in Active Markets (Level 1) | Asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
Measured On Recurring Basis | Quoted Prices in Active Markets (Level 1) | Corporate debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
Measured On Recurring Basis | Quoted Prices in Active Markets (Level 1) | U.S. Treasury and other U.S. government corporations and agencies | U.S. Treasury and agency obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
Measured On Recurring Basis | Quoted Prices in Active Markets (Level 1) | U.S. Treasury and other U.S. government corporations and agencies | Mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
Measured On Recurring Basis | Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	0	0
Debt securities	12,102	12,301
Total invested assets	12,102	12,301
Measured On Recurring Basis | Other Observable Inputs (Level 2) | Tax-exempt municipal securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	3,494	3,889
Measured On Recurring Basis | Other Observable Inputs (Level 2) | Residential Mortgage-Backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	23	26
Measured On Recurring Basis | Other Observable Inputs (Level 2) | Commercial Mortgage-Backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	569	456
Measured On Recurring Basis | Other Observable Inputs (Level 2) | Asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	554	408
Measured On Recurring Basis | Other Observable Inputs (Level 2) | Corporate debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	4,709	5,381
Measured On Recurring Basis | Other Observable Inputs (Level 2) | U.S. Treasury and other U.S. government corporations and agencies | U.S. Treasury and agency obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	501	531
Measured On Recurring Basis | Other Observable Inputs (Level 2) | U.S. Treasury and other U.S. government corporations and agencies | Mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	2,252	1,610
Measured On Recurring Basis | Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	0	0
Debt securities	1	1
Total invested assets	1	1
Measured On Recurring Basis | Unobservable Inputs (Level 3) | Tax-exempt municipal securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
Measured On Recurring Basis | Unobservable Inputs (Level 3) | Residential Mortgage-Backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
Measured On Recurring Basis | Unobservable Inputs (Level 3) | Commercial Mortgage-Backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
Measured On Recurring Basis | Unobservable Inputs (Level 3) | Asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
Measured On Recurring Basis | Unobservable Inputs (Level 3) | Corporate debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	1	1
Measured On Recurring Basis | Unobservable Inputs (Level 3) | U.S. Treasury and other U.S. government corporations and agencies | U.S. Treasury and agency obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
Measured On Recurring Basis | Unobservable Inputs (Level 3) | U.S. Treasury and other U.S. government corporations and agencies | Mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	$ 0	$ 0

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FAIR VALUE - Additional Information (Detail) - USD ($) $ in Millions	Mar. 31, 2018	Dec. 31, 2017
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Short-term debt	$ 398	$ 150
Commercial Paper
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Short-term debt	398	150
Carrying Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Carrying value of debt outstanding	4,772	4,770
Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Carrying value of debt outstanding	$ 4,944	$ 5,191

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MEDICARE PART D (Detail) - USD ($) $ in Millions	Mar. 31, 2018	Dec. 31, 2017
Segment Reporting Information [Line Items]
Other current assets	$ 4,059	$ 2,949
Trade accounts payable and accrued expenses	(6,266)	(4,069)
Other long-term assets	1,805	2,166
Other long-term liabilities	(303)	(237)
Risk Corridor Settlement
Segment Reporting Information [Line Items]
Other current assets	5	4
Trade accounts payable and accrued expenses	(240)	(255)
Net current (liability) asset	(235)	(251)
Other long-term assets	33	0
Other long-term liabilities	(78)	(28)
Net long-term liability	(45)	(28)
Total net (liability) asset	(280)	(279)
CMS Subsidies/ Discounts
Segment Reporting Information [Line Items]
Other current assets	79	101
Trade accounts payable and accrued expenses	(2,509)	(1,085)
Net current (liability) asset	(2,430)	(984)
Other long-term assets	0	0
Other long-term liabilities	0	0
Net long-term liability	0	0
Total net (liability) asset	$ (2,430)	$ (984)

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HEALTH CARE REFORM (Details) - USD ($) $ in Millions	1 Months Ended	3 Months Ended
	Sep. 30, 2018	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017	Nov. 02, 2017
Supplementary Insurance Information, by Segment [Line Items]
Litigation recoveries sought					$ 611
Other current assets		$ 4,059		$ 2,949
Trade accounts payable and accrued expenses		(6,266)		(4,069)
Other long-term assets		1,805		2,166
Other long-term liabilities		(303)		(237)
Risk Adjustment Settlement
Supplementary Insurance Information, by Segment [Line Items]
Total net (liability) asset		(24)		(13)
Reinsurance Recoverables
Supplementary Insurance Information, by Segment [Line Items]
Total net (liability) asset		0		44
Health Care Reform
Supplementary Insurance Information, by Segment [Line Items]
Amortization of deferred charges		263
Prior Coverage Years
Supplementary Insurance Information, by Segment [Line Items]
Proceeds from risk corridor settlements		46	$ 62
Prior Coverage Years | Risk Adjustment Settlement
Supplementary Insurance Information, by Segment [Line Items]
Premiums receivable		65		62
Other current assets		0		0
Trade accounts payable and accrued expenses		(79)		(80)
Net current (liability) asset		(14)		(18)
Other long-term assets		0		5
Total net (liability) asset		(14)		(13)
Prior Coverage Years | Reinsurance Recoverables
Supplementary Insurance Information, by Segment [Line Items]
Premiums receivable		0		0
Other current assets		0		44
Trade accounts payable and accrued expenses		0		0
Net current (liability) asset		0		44
Other long-term assets		0		0
Total net (liability) asset		0		44
Current Coverage Year | Risk Adjustment Settlement
Supplementary Insurance Information, by Segment [Line Items]
Other long-term assets		1		0
Other long-term liabilities		(11)		0
Net long-term liability		(10)		0
Total net (liability) asset		(10)		0
Current Coverage Year | Reinsurance Recoverables
Supplementary Insurance Information, by Segment [Line Items]
Other long-term assets		0		0
Other long-term liabilities		0		0
Net long-term liability		0		0
Total net (liability) asset		$ 0		$ 0
Forecast | Health Care Reform
Supplementary Insurance Information, by Segment [Line Items]
Payment of annual health insurance industry fee	$ 1,050

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GOODWILL AND OTHER INTANGIBLE ASSETS - Goodwill by Segments (Detail) $ in Millions	3 Months Ended
	Mar. 31, 2018 USD ($)
Goodwill [Roll Forward]
Beginning balance	$ 3,281
Acquisitions	479
Ending balance	3,760
Retail
Goodwill [Roll Forward]
Beginning balance	1,059
Acquisitions	360
Ending balance	1,419
Group and Specialty
Goodwill [Roll Forward]
Beginning balance	261
Acquisitions	0
Ending balance	261
Healthcare Services
Goodwill [Roll Forward]
Beginning balance	1,961
Acquisitions	119
Ending balance	$ 2,080

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GOODWILL AND OTHER INTANGIBLE ASSETS - Details of Intangible Assets Included in Other Long-Term Assets (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted Average Life	9 years 5 months
Cost	$ 829	$ 770
Accumulated Amortization	553	544
Net	$ 276	226
Customer contracts/ relationships
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted Average Life	9 years 7 months
Cost	$ 646	566
Accumulated Amortization	414	401
Net	$ 232	165
Trade names and technology
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted Average Life	6 years 6 months
Cost	$ 83	104
Accumulated Amortization	78	84
Net	$ 5	20
Provider contracts
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted Average Life	11 years 11 months
Cost	$ 68	68
Accumulated Amortization	32	30
Net	$ 36	38
Noncompetes and other
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted Average Life	8 years 1 month
Cost	$ 32	32
Accumulated Amortization	29	29
Net	$ 3	$ 3

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GOODWILL AND OTHER INTANGIBLE ASSETS - Schedule of Estimated Amortization Expense (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense for other intangible assets	$ 30	$ 18
Amortization expense, trade name write-off	12
2018	84
2019	63
2020	61
2021	27
2022	24
2023	$ 16

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BENEFITS PAYABLE - Activity in Benefits Payable (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017	Dec. 31, 2016
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward]
Beginning balance	$ 4,668	$ 4,563
Less: Reinsurance recoverables	(70)	(76)
Balances, beginning of period, net			$ 4,598	$ 4,487
Incurred related to:
Current year	11,947	11,580
Prior years	(267)	(231)
Total incurred	11,680	11,349
Paid related to:
Current year	(7,775)	(7,695)
Prior years	(3,619)	(3,451)
Total paid	(11,394)	(11,146)
Reinsurance recoverable	77	71
Ending balance	4,961	4,761
Retail
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward]
Beginning balance	3,963	3,507
Less: Reinsurance recoverables	(70)	(76)
Balances, beginning of period, net			$ 3,893	$ 3,431
Incurred related to:
Current year	10,739	10,255
Prior years	(187)	(204)
Total incurred	10,552	10,051
Paid related to:
Current year	(7,119)	(7,014)
Prior years	(3,082)	(2,572)
Total paid	(10,201)	(9,586)
Reinsurance recoverable	77	71
Ending balance	4,321	3,967
Total IBNR	2,800
Group and Specialty
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward]
Beginning balance	568	578
Incurred related to:
Current year	1,307	1,306
Prior years	(34)	(20)
Total incurred	1,273	1,286
Paid related to:
Current year	(802)	(824)
Prior years	(463)	(493)
Total paid	(1,265)	(1,317)
Ending balance	576	547
Total IBNR	502
Individual Commercial
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward]
Beginning balance	101	454
Incurred related to:
Current year	0	195
Prior years	(44)	(6)
Total incurred	(44)	189
Paid related to:
Current year	0	(59)
Prior years	(29)	(363)
Total paid	(29)	(422)
Ending balance	28	$ 221
Total IBNR	$ 19

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BENEFITS PAYABLE - Benefit Expenses Excluded From Activity in Benefits Payable (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Total future policy benefits	$ (10)	$ (23)
Operating Segments | Individual Commercial
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Total future policy benefits	(16)	(33)
Other Businesses
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Total future policy benefits	$ 6	$ 10

XML

BENEFITS PAYABLE - Reconciliation to Consolidated (Details) - USD ($) $ in Millions	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017	Dec. 31, 2016
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Benefits payable, net of reinsurance	$ 4,884
Reinsurance recoverable on unpaid claims	77	$ 70	$ 71	$ 76
Benefits payable	4,961	4,668	4,761	4,563
Retail
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Reinsurance recoverable on unpaid claims	77	70	71	76
Benefits payable	4,321	3,963	3,967	3,507
Group and Specialty
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Benefits payable	576	568	547	578
Individual Commercial
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Benefits payable	28	$ 101	$ 221	$ 454
Operating Segments | Retail
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Benefits payable, net of reinsurance	4,244
Operating Segments | Group and Specialty
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Benefits payable, net of reinsurance	576
Operating Segments | Individual Commercial
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Benefits payable, net of reinsurance	28
Other Businesses
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Benefits payable, net of reinsurance	$ 36

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EARNINGS PER COMMON SHARE COMPUTATION (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Net income available for common stockholders	$ 491	$ 1,115
Weighted average outstanding shares of common stock used to compute basic earnings per common share (in shares)	137,903	147,824
Shares used to compute diluted earnings per common share (in shares)	138,830	148,872
Basic earnings per common share (in dollars per share)	$ 3.56	$ 7.54
Diluted earnings per common share (in dollars per share)	$ 3.53	$ 7.49
Number of antidilutive stock options and restricted stock excluded from computation (in shares)	645	938
Employee stock options
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Dilutive effect of employee stock options and restricted stock (in shares)	213	199
Restricted stock
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Dilutive effect of employee stock options and restricted stock (in shares)	714	849

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STOCKHOLDERS' EQUITY - Schedule of Details of Dividend Payments (Detail) - USD ($) $ / shares in Units, $ in Millions		3 Months Ended
	Apr. 19, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017
Subsequent Event [Line Items]
Record Date			Dec. 29, 2017	Sep. 29, 2017	Jun. 30, 2017	Mar. 31, 2017	Jan. 12, 2017
Payment Date			Jan. 26, 2018	Oct. 27, 2017	Jul. 31, 2017	Apr. 28, 2017	Jan. 27, 2017
Amount per Share (in dollars per share)			$ 0.40	$ 0.40	$ 0.40	$ 0.40	$ 0.29
Total Amount			$ 55	$ 57	$ 58	$ 58	$ 43
Dividend declared per common share (in dollars per share)			$ 0.5				$ 0.40
Subsequent Event
Subsequent Event [Line Items]
Record Date		Mar. 30, 2018
Payment Date		Apr. 27, 2018
Amount per Share (in dollars per share)		$ 0.50
Total Amount		$ 69
Dividend declared per common share (in dollars per share)	$ 0.50

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STOCKHOLDERS' EQUITY - Additional Information (Detail) - USD ($) $ / shares in Units, shares in Thousands			3 Months Ended
	Mar. 26, 2018	Dec. 22, 2017	Mar. 31, 2018	Mar. 26, 2018	Mar. 31, 2017	May 01, 2018	Dec. 31, 2017	Dec. 21, 2017	Dec. 14, 2017
Equity, Class of Treasury Stock [Line Items]
Share repurchase authorization									$ 3,000,000,000
Common shares acquired in connection with employee stock plans (in shares)			190		350
Common shares acquired in connection with employee stock plans, amount			$ 51,000,000		$ 74,000,000
Treasury stock reissued (in shares)			630
Treasury stock reissued			$ 66,000,000
Accumulated other comprehensive gain (loss)			(154,000,000)				$ 19,000,000
Net unrealized (losses) gains on investment securities
Equity, Class of Treasury Stock [Line Items]
Accumulated other comprehensive gain (loss)			(110,000,000)				125,000,000
Additional liability that would exist on closed block of long-term care policies assuming unrealized gains on investments backing such products were realized and reinvested at current yields
Equity, Class of Treasury Stock [Line Items]
Accumulated other comprehensive gain (loss)			$ 44,000,000				$ 106,000,000
December 2017 ASR
Equity, Class of Treasury Stock [Line Items]
Share repurchase authorization								$ 1,000,000,000.0
Share repurchase payment		$ 1,000,000,000
Shares repurchased (in shares)	460	3,280		3,740
Value of shares repurchased	$ 200,000,000	$ 800,000,000
Decrease in capital in excess of par value		$ 200,000,000
Average cost per share (in dollars per share)				$ 267.55
Subsequent Event
Equity, Class of Treasury Stock [Line Items]
Remaining authorized amount						$ 2,000,000,000

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INCOME TAXES (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Income Tax Disclosure [Abstract]
Effective income tax rate	30.70%	34.00%
Provisional income tax benefit, Tax Reform Law	$ 6.6

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DEBT - Senior Notes (Details) - Senior Notes - USD ($)	1 Months Ended	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2018	Dec. 31, 2017
Debt Instrument [Line Items]
Long-term debt		$ 4,772,000,000	$ 4,770,000,000
Proceeds from debt, net of discounts and offering expenses	$ 991,000,000
Redemption price, percentage		100.00%
$400 million, 2.625% due October 1, 2019
Debt Instrument [Line Items]
Long-term debt		$ 399,000,000	399,000,000
Face amount		$ 400,000,000
Stated interest rate		2.625%
$400 million, 2.50% due December 15, 2020
Debt Instrument [Line Items]
Long-term debt		$ 397,000,000	397,000,000
Face amount		$ 400,000,000
Stated interest rate		2.50%
$400 million, 2.90% due December 15, 2022
Debt Instrument [Line Items]
Long-term debt		$ 396,000,000	396,000,000
Face amount		$ 400,000,000
Stated interest rate		2.90%
$600 million, 3.15% due December 1, 2022
Debt Instrument [Line Items]
Long-term debt		$ 596,000,000	595,000,000
Face amount		$ 600,000,000
Stated interest rate		3.15%
$600 million, 3.85% due October 1, 2024
Debt Instrument [Line Items]
Long-term debt		$ 596,000,000	595,000,000
Face amount		$ 600,000,000
Stated interest rate		3.85%
$600 million, 3.95% due March 15, 2027
Debt Instrument [Line Items]
Long-term debt		$ 595,000,000	594,000,000
Face amount	$ 600,000,000	$ 600,000,000
Stated interest rate	3.95%	3.95%
$250 million, 8.15% due June 15, 2038
Debt Instrument [Line Items]
Long-term debt		$ 263,000,000	263,000,000
Face amount		$ 250,000,000
Stated interest rate		8.15%
$400 million, 4.625% due December 1, 2042
Debt Instrument [Line Items]
Long-term debt		$ 396,000,000	396,000,000
Face amount		$ 400,000,000
Stated interest rate		4.625%
$750 million, 4.95% due October 1, 2044
Debt Instrument [Line Items]
Long-term debt		$ 739,000,000	739,000,000
Face amount		$ 750,000,000
Stated interest rate		4.95%
$400 million, 4.80% due March 15, 2047
Debt Instrument [Line Items]
Long-term debt		$ 395,000,000	$ 396,000,000
Face amount	$ 400,000,000	$ 400,000,000
Stated interest rate	4.80%	4.80%

XML

DEBT - Credit Agreement (Details)	3 Months Ended
	Mar. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	May 31, 2017 USD ($)
Line of Credit Facility [Line Items]
Actual net worth	$ 10,081,000,000	$ 9,842,000,000
Credit Agreement | Line of Credit | Revolving Credit Facility
Line of Credit Facility [Line Items]
Term	5 years
Maximum borrowing capacity	$ 2,500,000,000		$ 1,000,000,000.0
Minimum level of net worth required	9,500,000,000
Actual net worth	$ 10,100,000,000
Required maximum leverage ratio	3.0
Actual leverage ratio	1.4
Uncommitted incremental loan facility	$ 500,000,000
Line of credit, outstanding borrowings	0
Credit Agreement | Line of Credit | Letter of Credit
Line of Credit Facility [Line Items]
Line of credit, outstanding borrowings	$ 0
Credit Agreement | London Interbank Offered Rate (LIBOR) | Line of Credit | Revolving Credit Facility
Line of Credit Facility [Line Items]
Interest rate spread	1.10%
Facility fee (percentage)	0.15%
Credit Agreement | Minimum | London Interbank Offered Rate (LIBOR) | Line of Credit | Revolving Credit Facility
Line of Credit Facility [Line Items]
Interest rate spread	0.91%
Facility fee (percentage)	0.09%
Credit Agreement | Maximum | London Interbank Offered Rate (LIBOR) | Line of Credit | Revolving Credit Facility
Line of Credit Facility [Line Items]
Interest rate spread	1.50%
Facility fee (percentage)	0.25%
Unsecured Revolving Credit Agreement, Expires May 2022 | Line of Credit | Revolving Credit Facility
Line of Credit Facility [Line Items]
Term	5 years
Maximum borrowing capacity			$ 2,000,000,000
Remaining borrowing capacity	$ 2,000,000,000

XML

DEBT - Commercial Paper (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Short-term Debt [Line Items]
Outstanding borrowings	$ 398,000,000	$ 150,000,000
Commercial Paper
Short-term Debt [Line Items]
Maximum borrowing capacity	2,000,000,000
Maximum amount outstanding during period	442,000,000
Outstanding borrowings	$ 398,000,000	$ 150,000,000

XML

GUARANTEES AND CONTINGENCIES (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Nov. 02, 2017
Loss Contingencies [Line Items]
Litigation recoveries sought		$ 611
Total Medicare
Loss Contingencies [Line Items]
Percentage of premiums and services revenue	81.00%
Military services
Loss Contingencies [Line Items]
Percentage of premiums and services revenue	1.00%
Medicaid
Loss Contingencies [Line Items]
Percentage of premiums and services revenue	4.00%

XML

SEGMENT INFORMATION - Additional Information (Detail) $ in Millions	3 Months Ended
	Mar. 31, 2018 USD ($) Segment	Mar. 31, 2017 USD ($)
Segment Reporting [Abstract]
Number of reportable segments | Segment	4
Member co-share amounts and government subsidies	$ 2,900	$ 3,000
Depreciation and amortization classified as benefit expense	$ 39	$ 26

XML

SEGMENT INFORMATION - Reconciliation (Detail) - USD ($) $ in Millions		3 Months Ended
	Feb. 16, 2017	Mar. 31, 2018	Mar. 31, 2017
Segment Reporting Information [Line Items]
Premiums		$ 13,811	$ 13,398
Services		327	253
Total revenues - external customers		14,138	13,651
Investment income		141	111
Total revenues		14,279	13,762
Benefits		11,670	11,326
Operating costs		1,749	1,553
Merger termination fee and related costs, net	$ 1,000	0	(947)
Depreciation and amortization		100	92
Total operating expenses		13,519	12,024
Income (loss) from operations		760	1,738
Interest expense		53	49
Income (loss) before income taxes		707	1,689
Individual Medicare Advantage
Segment Reporting Information [Line Items]
Premiums		8,970	8,376
Group Medicare Advantage
Segment Reporting Information [Line Items]
Premiums		1,524	1,318
Medicare stand-alone PDP
Segment Reporting Information [Line Items]
Premiums		896	941
Total Medicare
Segment Reporting Information [Line Items]
Premiums		11,390	10,635
Fully-insured
Segment Reporting Information [Line Items]
Premiums		1,512	1,779
Specialty
Segment Reporting Information [Line Items]
Premiums		347	322
Medicaid and other
Segment Reporting Information [Line Items]
Premiums		562	662
Provider
Segment Reporting Information [Line Items]
Services		65	70
ASO and other
Segment Reporting Information [Line Items]
Services		223	165
Pharmacy
Segment Reporting Information [Line Items]
Services		39	18
Intersegment revenues
Segment Reporting Information [Line Items]
Total revenues		(5,558)	(5,867)
Intersegment revenues | Retail
Segment Reporting Information [Line Items]
Total revenues		0	0
Intersegment revenues | Group and Specialty
Segment Reporting Information [Line Items]
Total revenues		5	5
Intersegment revenues | Healthcare Services
Segment Reporting Information [Line Items]
Total revenues		5,553	5,862
Intersegment revenues | Individual Commercial
Segment Reporting Information [Line Items]
Total revenues		0	0
Intersegment revenues | Services
Segment Reporting Information [Line Items]
Total revenues		(4,023)	(4,315)
Intersegment revenues | Services | Retail
Segment Reporting Information [Line Items]
Total revenues		0	0
Intersegment revenues | Services | Group and Specialty
Segment Reporting Information [Line Items]
Total revenues		5	5
Intersegment revenues | Services | Healthcare Services
Segment Reporting Information [Line Items]
Total revenues		4,018	4,310
Intersegment revenues | Services | Individual Commercial
Segment Reporting Information [Line Items]
Total revenues		0	0
Intersegment revenues | Products
Segment Reporting Information [Line Items]
Total revenues		(1,535)	(1,552)
Intersegment revenues | Products | Retail
Segment Reporting Information [Line Items]
Total revenues		0	0
Intersegment revenues | Products | Group and Specialty
Segment Reporting Information [Line Items]
Total revenues		0	0
Intersegment revenues | Products | Healthcare Services
Segment Reporting Information [Line Items]
Total revenues		1,535	1,552
Intersegment revenues | Products | Individual Commercial
Segment Reporting Information [Line Items]
Total revenues		0	0
Operating Segments | Retail
Segment Reporting Information [Line Items]
Premiums		12,068	11,406
Services		2	2
Total revenues - external customers		12,070	11,408
Investment income		37	25
Total revenues		12,107	11,433
Benefits		10,552	10,051
Operating costs		1,222	954
Merger termination fee and related costs, net			0
Depreciation and amortization		66	58
Total operating expenses		11,840	11,063
Income (loss) from operations		267	370
Interest expense		0	0
Income (loss) before income taxes		267	370
Operating Segments | Group and Specialty
Segment Reporting Information [Line Items]
Premiums		1,739	1,700
Services		219	161
Total revenues - external customers		1,958	1,861
Investment income		7	11
Total revenues		1,970	1,877
Benefits		1,273	1,286
Operating costs		463	399
Merger termination fee and related costs, net			0
Depreciation and amortization		23	21
Total operating expenses		1,759	1,706
Income (loss) from operations		211	171
Interest expense		0	0
Income (loss) before income taxes		211	171
Operating Segments | Healthcare Services
Segment Reporting Information [Line Items]
Premiums		0	0
Services		104	88
Total revenues - external customers		104	88
Investment income		6	8
Total revenues		5,663	5,958
Benefits		0	0
Operating costs		5,441	5,680
Merger termination fee and related costs, net			0
Depreciation and amortization		49	34
Total operating expenses		5,490	5,714
Income (loss) from operations		173	244
Interest expense		0	0
Income (loss) before income taxes		173	244
Operating Segments | Individual Commercial
Segment Reporting Information [Line Items]
Premiums		(5)	283
Services		0	0
Total revenues - external customers		(5)	283
Investment income		0	1
Total revenues		(5)	284
Benefits		(60)	156
Operating costs		2	62
Merger termination fee and related costs, net			0
Depreciation and amortization		0	3
Total operating expenses		(58)	221
Income (loss) from operations		53	63
Interest expense		0	0
Income (loss) before income taxes		53	63
Operating Segments | Individual Medicare Advantage | Retail
Segment Reporting Information [Line Items]
Premiums		8,970	8,376
Operating Segments | Individual Medicare Advantage | Group and Specialty
Segment Reporting Information [Line Items]
Premiums		0	0
Operating Segments | Individual Medicare Advantage | Healthcare Services
Segment Reporting Information [Line Items]
Premiums		0	0
Operating Segments | Individual Medicare Advantage | Individual Commercial
Segment Reporting Information [Line Items]
Premiums		0	0
Operating Segments | Group Medicare Advantage | Retail
Segment Reporting Information [Line Items]
Premiums		1,524	1,318
Operating Segments | Group Medicare Advantage | Group and Specialty
Segment Reporting Information [Line Items]
Premiums		0	0
Operating Segments | Group Medicare Advantage | Healthcare Services
Segment Reporting Information [Line Items]
Premiums		0	0
Operating Segments | Group Medicare Advantage | Individual Commercial
Segment Reporting Information [Line Items]
Premiums		0	0
Operating Segments | Medicare stand-alone PDP | Retail
Segment Reporting Information [Line Items]
Premiums		896	941
Operating Segments | Medicare stand-alone PDP | Group and Specialty
Segment Reporting Information [Line Items]
Premiums		0	0
Operating Segments | Medicare stand-alone PDP | Healthcare Services
Segment Reporting Information [Line Items]
Premiums		0	0
Operating Segments | Medicare stand-alone PDP | Individual Commercial
Segment Reporting Information [Line Items]
Premiums		0	0
Operating Segments | Total Medicare | Retail
Segment Reporting Information [Line Items]
Premiums		11,390	10,635
Operating Segments | Total Medicare | Group and Specialty
Segment Reporting Information [Line Items]
Premiums		0	0
Operating Segments | Total Medicare | Healthcare Services
Segment Reporting Information [Line Items]
Premiums		0	0
Operating Segments | Total Medicare | Individual Commercial
Segment Reporting Information [Line Items]
Premiums		0	0
Operating Segments | Fully-insured | Retail
Segment Reporting Information [Line Items]
Premiums		125	118
Operating Segments | Fully-insured | Group and Specialty
Segment Reporting Information [Line Items]
Premiums		1,392	1,378
Operating Segments | Fully-insured | Healthcare Services
Segment Reporting Information [Line Items]
Premiums		0	0
Operating Segments | Fully-insured | Individual Commercial
Segment Reporting Information [Line Items]
Premiums		(5)	283
Operating Segments | Specialty | Retail
Segment Reporting Information [Line Items]
Premiums		0	0
Operating Segments | Specialty | Group and Specialty
Segment Reporting Information [Line Items]
Premiums		347	322
Operating Segments | Specialty | Healthcare Services
Segment Reporting Information [Line Items]
Premiums		0	0
Operating Segments | Specialty | Individual Commercial
Segment Reporting Information [Line Items]
Premiums		0	0
Operating Segments | Medicaid and other | Retail
Segment Reporting Information [Line Items]
Premiums		553	653
Operating Segments | Medicaid and other | Group and Specialty
Segment Reporting Information [Line Items]
Premiums		0	0
Operating Segments | Medicaid and other | Healthcare Services
Segment Reporting Information [Line Items]
Premiums		0	0
Operating Segments | Medicaid and other | Individual Commercial
Segment Reporting Information [Line Items]
Premiums		0	0
Operating Segments | Provider | Retail
Segment Reporting Information [Line Items]
Services		0	0
Operating Segments | Provider | Group and Specialty
Segment Reporting Information [Line Items]
Services		0	0
Operating Segments | Provider | Healthcare Services
Segment Reporting Information [Line Items]
Services		65	70
Operating Segments | Provider | Individual Commercial
Segment Reporting Information [Line Items]
Services		0	0
Operating Segments | ASO and other | Retail
Segment Reporting Information [Line Items]
Services		2	2
Operating Segments | ASO and other | Group and Specialty
Segment Reporting Information [Line Items]
Services		219	161
Operating Segments | ASO and other | Healthcare Services
Segment Reporting Information [Line Items]
Services		0	0
Operating Segments | ASO and other | Individual Commercial
Segment Reporting Information [Line Items]
Services		0	0
Operating Segments | Pharmacy | Retail
Segment Reporting Information [Line Items]
Services		0	0
Operating Segments | Pharmacy | Group and Specialty
Segment Reporting Information [Line Items]
Services		0	0
Operating Segments | Pharmacy | Healthcare Services
Segment Reporting Information [Line Items]
Services		39	18
Operating Segments | Pharmacy | Individual Commercial
Segment Reporting Information [Line Items]
Services		0	0
Other Businesses
Segment Reporting Information [Line Items]
Premiums		9	9
Services		2	2
Total revenues - external customers		11	11
Investment income		35	21
Total revenues		46	32
Benefits		26	29
Operating costs		2	4
Merger termination fee and related costs, net			0
Depreciation and amortization		0	0
Total operating expenses		28	33
Income (loss) from operations		18	(1)
Interest expense		0	0
Income (loss) before income taxes		18	(1)
Other Businesses | Individual Medicare Advantage
Segment Reporting Information [Line Items]
Premiums		0	0
Other Businesses | Group Medicare Advantage
Segment Reporting Information [Line Items]
Premiums		0	0
Other Businesses | Medicare stand-alone PDP
Segment Reporting Information [Line Items]
Premiums		0	0
Other Businesses | Total Medicare
Segment Reporting Information [Line Items]
Premiums		0	0
Other Businesses | Fully-insured
Segment Reporting Information [Line Items]
Premiums		0	0
Other Businesses | Specialty
Segment Reporting Information [Line Items]
Premiums		0	0
Other Businesses | Medicaid and other
Segment Reporting Information [Line Items]
Premiums		9	9
Other Businesses | Provider
Segment Reporting Information [Line Items]
Services		0	0
Other Businesses | ASO and other
Segment Reporting Information [Line Items]
Services		2	2
Other Businesses | Pharmacy
Segment Reporting Information [Line Items]
Services		0	0
Eliminations/ Corporate
Segment Reporting Information [Line Items]
Investment income		56	45
Total revenues		(5,502)	(5,822)
Benefits		(121)	(196)
Operating costs		(5,381)	(5,546)
Merger termination fee and related costs, net			(947)
Depreciation and amortization		(38)	(24)
Total operating expenses		(5,540)	(6,713)
Income (loss) from operations		38	891
Interest expense		53	49
Income (loss) before income taxes		$ (15)	$ 842