10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2020

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 No.)

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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, $0.16 2/3 par value	HUM	New York Stock Exchange

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  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes  ☒    No  ☐

Indicate by check mark 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.

Large accelerated filer	☒	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 provided 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  ☒

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 September 30, 2020
$0.16 2/3 par value	132,341,451 shares

Humana Inc.

FORM 10-Q

SEPTEMBER 30, 2020

INDEX

		Page
Part I: Financial Information
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets at September 30, 2020 and December 31, 2019	3
	Condensed Consolidated Statements of Income for the three and nine months ended     September 30, 2020 and 2019	4
	Condensed Consolidated Statements of Comprehensive Income for the three and nine     months ended September 30, 2020 and 2019	5
	Condensed Consolidated Statements of Stockholders' Equity for the three and nine months     ended September 30, 2020 and 2019	6
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results     of Operations	35
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	58
Item 4.	Controls and Procedures	58
Part II: Other Information
Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	59
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 3.	Defaults Upon Senior Securities	61
Item 4.	Mine Safety Disclosures	61
Item 5.	Other Information	61
Item 6.	Exhibits	62
	Signatures	63
	Certifications

Humana Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30, 2020		December 31, 2019
	(in millions, except share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	7,985	$	4,054
Investment securities	12,741		10,972
Receivables, less allowance for doubtful accounts of $78 in 2020     and $69 in 2019	1,135		1,056
Other current assets	5,170		3,806
Total current assets	27,031		19,888
Property and equipment, net	2,228		1,955
Long-term investment securities	1,105		406
Equity method investments	1,160		1,063
Goodwill	4,443		3,928
Other long-term assets	2,510		1,834
Total assets	$	38,477	$	29,074
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Benefits payable	$	8,208	$	6,004
Trade accounts payable and accrued expenses	4,472		3,754
Book overdraft	214		225
Unearned revenues	287		247
Short-term debt	1,724		699
Total current liabilities	14,905		10,929
Long-term debt	6,059		4,967
Future policy benefits payable	202		206
Other long-term liabilities	1,543		935
Total liabilities	22,709		17,037
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;   198,648,742 shares issued at September 30, 2020 and 198,629,992 shares issued at December 31, 2019	33		33
Capital in excess of par value	2,940		2,820
Retained earnings	20,872		17,483
Accumulated other comprehensive income	370		156
Treasury stock, at cost, 66,307,291 shares at September 30, 2020 and     66,524,771 shares at December 31, 2019	(8,447)		(8,455)
Total stockholders’ equity	15,768		12,037
Total liabilities and stockholders’ equity	$	38,477	$	29,074

See accompanying notes to condensed consolidated financial statements.

3

Humana Inc.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in millions, except per share results)
Revenues:
Premiums	$	18,904	$	15,712	$	55,822	$	47,139
Services	457		393		1,331		1,103
Investment income	714		136		940		351
Total revenues	20,075		16,241		58,093		48,593
Operating expenses:
Benefits	15,611		13,357		45,415		40,168
Operating costs	2,513		1,889		6,984		5,252
Depreciation and amortization	128		127		362		343
Total operating expenses	18,252		15,373		52,761		45,763
Income from operations	1,823		868		5,332		2,830
Interest expense	75		62		211		184
Other (income) expense, net	(7)		(82)		63		(217)
Income before income taxes and equity in net earnings	1,755		888		5,058		2,863
Provision for income taxes	450		200		1,485		684
Equity in net earnings	35		1		68		16
Net income	$	1,340	$	689	$	3,641	$	2,195
Basic earnings per common share	$	10.12	$	5.16	$	27.53	$	16.31
Diluted earnings per common share	$	10.05	$	5.14	$	27.37	$	16.24

See accompanying notes to condensed consolidated financial statements.

4

Humana Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in millions)
Net income	$	1,340	$	689	$	3,641	$	2,195
Other comprehensive income:
Change in gross unrealized investment gains/losses	66		87		332		452
Effect of income taxes	(15)		(20)		(78)		(105)
Total change in unrealized investment gains/losses, net of tax	51		67		254		347
Reclassification adjustment for net realized gains	(1)		(1)		(48)		(7)
Effect of income taxes	—		—		10		2
Total reclassification adjustment, net of tax	(1)		(1)		(38)		(5)
Other comprehensive income, net of tax	50		66		216		342
Comprehensive income (loss) attributable to equity method investments	3		(1)		(2)		(6)
Comprehensive income	$	1,393	$	754	$	3,855	$	2,531

See accompanying notes to condensed consolidated financial statements.

5

Humana Inc.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

	Common Stock			Capital In Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Stockholders’ Equity
	Issued Shares	Amount
	(dollars in millions, share amounts in thousands)
Three months ended September 30, 2020
Balances, June 30, 2020	198,630	$	33	$	2,898	$	19,616	$	317	$	(8,448)	$	14,416
Net income						1,340						1,340
Other comprehensive loss								53				53
Common stock repurchases	19			—						(5)		(5)
Dividends and dividend equivalents						(84)						(84)
Stock-based compensation				47								47
Restricted stock unit vesting	—			(6)						6		—
Stock option exercises	—			1						—		1
Balances, September 30, 2020	198,649	$	33	$	2,940	$	20,872	$	370	$	(8,447)	$	15,768
Three months ended September 30, 2019
Balances, June 30, 2019	198,628	$	33	$	2,763	$	16,429	$	112	$	(7,465)	$	11,872
Net income						689						689
Other comprehensive income								65				65
Common stock repurchases	—			(200)						(800)		(1,000)
Dividends and dividend equivalents						(73)						(73)
Stock-based compensation				43								43
Restricted stock unit vesting	—			—						—		—
Stock option exercises	1			2						3		5
Balances, September 30, 2019	198,629	$	33	$	2,608	$	17,045	$	177	$	(8,262)	$	11,601

See accompanying notes to condensed consolidated financial statements.

6

Humana Inc.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY — (Continued)

(Unaudited)

	Common Stock			Capital In Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Stockholders’ Equity
	Issued Shares	Amount
	(dollars in millions, share amounts in thousands)
Nine months ended September 30, 2020
Balances, December 31, 2019	198,630	$	33	$	2,820	$	17,483	$	156	$	(8,455)	$	12,037
Net income						3,641						3,641
Impact of adopting ASC 326 - Current expected credit loss standard (CECL)						(2)						(2)
Other comprehensive income								214				214
Common stock repurchases	19			—						(30)		(30)
Dividends and dividend equivalents						(250)						(250)
Stock-based compensation				129								129
Restricted stock unit vesting	—			(21)						21		—
Stock option exercises	—			12						17		29
Balances, September 30, 2020	198,649	$	33	$	2,940	$	20,872	$	370	$	(8,447)	$	15,768
Nine months ended September 30, 2019
Balances, December 31, 2018	198,595	$	33	$	2,535	$	15,072	$	(159)	$	(7,320)	$	10,161
Net income						2,195						2,195
Other comprehensive loss								336				336
Common stock repurchases	—			(50)						(960)		(1,010)
Dividends and dividend equivalents						(222)						(222)
Stock-based compensation				119								119
Restricted stock unit vesting	32			(3)						3		—
Stock option exercises	2			7						15		22
Balances, September 30, 2019	198,629	$	33	$	2,608	$	17,045	$	177	$	(8,262)	$	11,601

7

Humana Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the nine months ended September 30,
	2020		2019
	(in millions)
Cash flows from operating activities
Net income	$	3,641	$	2,195
Adjustments to reconcile net income to net cash provided by operating activities:
Gains on investment securities, net	(696)		(23)
Equity in net earnings	(68)		(16)
Stock-based compensation	129		119
Depreciation	390		382
Amortization	66		53
Benefit for deferred income taxes	(3)		(21)
Changes in operating assets and liabilities, net of effect of businesses acquired and dispositions:
Receivables	(82)		179
Other assets	(1,547)		334
Benefits payable	2,204		1,358
Other liabilities	1,257		168
Unearned revenues	40		(9)
Other	25		53
Net cash provided by operating activities	5,356		4,772
Cash flows from investing activities
Acquisitions, net of cash acquired	(709)		—
Purchases of property and equipment	(668)		(506)
Purchases of investment securities	(7,230)		(4,130)
Maturities of investment securities	3,500		1,281
Proceeds from sales of investment securities	2,097		2,878
Net cash used in investing activities	(3,010)		(477)
Cash flows from financing activities
(Withdrawals) receipts from contract deposits, net	(274)		11
Proceeds from issuance of senior notes, net	1,088		987
Proceeds (repayments) from issuance of commercial paper, net	21		(358)
Proceeds from term loan	1,000		—
Repayment of term loan	—		(650)
Change in book overdraft	(11)		102
Common stock repurchases	(30)		(1,010)
Dividends paid	(239)		(216)
Proceeds from stock option exercises and other, net	30		23
Net cash provided by (used in) financing activities	1,585		(1,111)
Increase in cash and cash equivalents	3,931		3,184
Cash and cash equivalents at beginning of period	4,054		2,343
Cash and cash equivalents at end of period	$	7,985	$	5,527
Supplemental cash flow disclosures:
Interest payments	$	159	$	136
Income tax payments, net	$	778	$	578

See accompanying notes to condensed consolidated financial statements.

8

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, 2019, that was filed with the Securities and Exchange Commission, or the SEC, on February 20, 2020. We refer to the Form 10-K as the “2019 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, 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 2019 Form 10-K for information on accounting policies that we consider in preparing our consolidated financial statements. Since the filing of our 2019 Form 10-K we have received common stock, primarily in Oak Street Health, Inc., or OSH, as part of their initial public offering during the third quarter of 2020. We have updated our accounting policy for investment securities below.

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.

Investment Securities

Investment securities, which consist of debt and equity securities, are stated at fair value. Our debt securities have been categorized as available for sale. Debt securities available for current operations are classified as current assets and debt securities available for our long-term insurance products and professional liability funding requirements, as well as restricted statutory deposits and equity securities, are classified as long-term assets. For the purpose of determining realized gross gains and losses for debt securities sold, which are included as a component of investment income in the consolidated statements of income, the cost of investment securities sold is based upon specific identification. Unrealized holding gains and losses for debt securities, net of applicable deferred taxes, are included as a component of stockholders’ equity and comprehensive income until realized from a sale or other-than-temporary impairment. For the purpose of determining gross gains and losses for equity securities, changes in fair value at the reporting date are included as a component of investment income in the consolidated statements of income.

COVID-19

The temporary deferral of non-essential care resulting from stay-at-home and physical distancing orders and other restrictions on movement and economic activity implemented throughout the country beginning in the second half of March 2020 to reduce the spread of the novel coronavirus, or COVID-19, has impacted our business. Hospital admissions and utilization were significantly depressed in April and increased throughout May and June. Utilization continued to rebound throughout the third quarter of 2020, reaching approximately 95% of historic baseline levels at the close of the third quarter. The impact of the deferral of non-essential care was partially offset by COVID-19 testing and treatment costs, as well as our ongoing pandemic relief efforts.

9

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

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 2019 Form 10-K for information on accounting policies that we consider in preparing our consolidated financial statements. See Note 14 for disaggregation of revenue by segment and type.

At September 30, 2020, accounts receivable related to services were $155 million. For the three and nine months ended September 30, 2020, 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 September 30, 2020.

For the three and nine months ended September 30, 2020, services revenue recognized from performance obligations related to prior periods (for example, due to changes in transaction price), was not material. Further, services revenue expected to be recognized in any future year related to remaining performance obligations was not material.

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) enacted significant reforms to various aspects of the U.S. health insurance industry. Certain of these reforms became effective January 1, 2014, including an annual insurance industry premium-based fee. The Continuing Resolution bill, H.R. 195, enacted on January 22, 2018, included a one year suspension in 2019 of the health insurance industry fee, but the fee resumed in calendar year 2020. The Further Consolidated Appropriations Act, 2020, enacted on December 20, 2019, permanently repealed the health insurance industry fee beginning in calendar year 2021.

In September 2020, we paid the federal government $1.2 billion for the annual health insurance industry fee attributed to calendar year 2020. This fee, fixed in amount by law and apportioned to insurance carriers based on market share, is not deductible for tax purposes. On January 1 we recorded a liability for this fee in trade accounts payable and accrued expenses which we carried until the fee was paid. We also recorded 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 $292 million and $884 million for the three and nine months ended September 30, 2020, respectively, resulting from the amortization of the 2020 annual health insurance industry fee.

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. On April 27, 2020, the U.S. Supreme Court ruled that the government is obligated to pay the losses under this risk corridor program, and that Congress did not impliedly repeal the obligation under its appropriations riders. In September 2020, we received a $609 million payment from the U.S Government pursuant to the judgement issued by the Court of Federal Claims on July 7, 2020. The $609 million payment received from the U.S Government and approximately $31 million in related fees and expenses are reflected in "Premiums" revenue and "Operating costs", respectively, in our condensed consolidated statements of income for the three and nine months ended September 30, 2020 and reported in the Corporate segment.

2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

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 was effective for us beginning January 1, 2020. The new current expected credit losses (CECL) model generally calls for the immediate recognition

10

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

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 primarily of available for sale debt securities. We adopted the new standard effective January 1, 2020. Due to the high concentration of our financial assets measured at amortized cost being with the federal government resulting in zero nonpayment risk as well as our available for sale debt securities primarily being in an unrealized gain position, the adoption of the new standard did not have a material impact on our results of operations, financial condition, or cash flows.

In September 2018, the FASB issued new guidance related to accounting for long-duration contracts of insurers which revises key elements of the measurement models and disclosure requirements for long-duration contracts issued by insurers and reinsurers. The new guidance is effective for us beginning with annual and interim periods in 2023, with earlier adoption permitted, and requires retrospective application to previously issued annual and interim financial statements. We are currently evaluating the impact on our results of operations, financial position and 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 January 31, 2020, we purchased privately held Enclara Healthcare, or Enclara, one of the nation’s largest hospice pharmacy and benefit management providers for cash consideration of approximately $709 million, net of cash received. This resulted in a preliminary purchase price allocation to goodwill of $515 million, other intangible assets of $240 million, and net tangible liabilities assumed of $11 million. The goodwill was assigned to the Healthcare Services segment. The other intangible assets, which primarily consist of customer contracts, have an estimated weighted average useful life of 11.4 years. The purchase price allocation is preliminary, subject to completion of valuation analysis, including for example, refining assumptions used to calculate the fair value of intangible assets.

On February 1, 2020, our Partners in Primary Care wholly-owned subsidiary entered into a strategic partnership with Welsh, Carson, Anderson & Stowe, or WCAS, to accelerate the expansion of our primary care model. The WCAS partnership is expected to open approximately 50 payor-agnostic, senior-focused primary care centers over 3 years beginning in 2020. Partners in Primary Care committed to the acquisition of a non-controlling interest in the approximately $600 million entity accounted for under the equity method of accounting. In addition, the agreement includes a series of put and call options through which WCAS may require us to purchase their interest in the entity, and through which we may acquire WCAS’s interest, over the next 5 to 10 years.

During 2020 and 2019, 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 acquired in 2020 and 2019 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 2020 and 2019 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.

11

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 September 30, 2020 and December 31, 2019, respectively:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in millions)
September 30, 2020
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	1,195	$	2	$	(1)	$	1,196
Mortgage-backed securities	3,511		183		(2)		3,692
Tax-exempt municipal securities	1,439		40		(3)		1,476
Commercial mortgage-backed securities	1,020		54		(1)		1,073
Asset-backed securities	1,278		8		(5)		1,281
Corporate debt securities	4,199		218		(2)		4,415
Total debt securities	$	12,642	$	505	$	(14)	13,133
Common stock							713
Total investment securities							$	13,846
December 31, 2019
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	353	$	1	$	—	$	354
Mortgage-backed securities	3,628		85		(3)		3,710
Tax-exempt municipal securities	1,433		30		—		1,463
Commercial mortgage-backed securities	786		18		—		804
Asset-backed securities	1,093		3		(3)		1,093
Corporate debt securities	3,867		82		(2)		3,947
Total debt securities	$	11,160	$	219	$	(8)	11,371
Common stock							7
Total investment securities							$	11,378

12

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Gross unrealized losses and fair values aggregated by investment category and length of time of individual debt securities that have been in a continuous unrealized loss position were as follows at September 30, 2020 and December 31, 2019, 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)
September 30, 2020
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	662	$	(1)	$	—	$	—	$	662	$	(1)
Mortgage-backed securities	450		(2)		—		—		450		(2)
Tax-exempt municipal securities	127		(3)		12		—		139		(3)
Commercial mortgage-backed securities	181		—		36		(1)		217		(1)
Asset-backed securities	121		(1)		537		(4)		658		(5)
Corporate debt securities	275		(1)		98		(1)		373		(2)
Total debt securities	$	1,816	$	(8)	$	683	$	(6)	$	2,499	$	(14)
December 31, 2019
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	48	$	—	$	23	$	—	$	71	$	—
Mortgage-backed securities	315		(1)		204		(2)		519		(3)
Tax-exempt municipal securities	58		—		75		—		133		—
Commercial mortgage-backed securities	118		—		36		—		154		—
Asset-backed securities	20		—		607		(3)		627		(3)
Corporate debt securities	589		(2)		155		—		744		(2)
Total debt securities	$	1,148	$	(3)	$	1,100	$	(5)	$	2,248	$	(8)

Approximately 96% 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 September 30, 2020. 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 1% of our total debt securities. Our investment policy limits investments in a single issuer and requires diversification among various asset types.

13

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Our unrealized losses from all debt securities were generated from approximately 155 positions out of a total of approximately 1,530 positions at September 30, 2020. All issuers of debt securities we own that were trading at an unrealized loss at September 30, 2020 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 these debt securities were purchased. At September 30, 2020, we did not intend to sell any debt securities with an unrealized loss position in accumulated other comprehensive income, and it is not likely that we will be required to sell these debt securities before recovery of their amortized cost basis. Additionally, we did not record any material credit allowances for debt securities that were in an unrealized loss position for the three and nine months ended September 30, 2020.

The detail of gains (losses) related to investment securities and included within investment income was as follows for the three and nine months ended September 30, 2020 and 2019:

	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in millions)
Gross gains on investment securities	$	645	$	41	$	714	$	59
Gross losses on investment securities	—		(23)		(18)		(36)
Net gains on investment securities	$	645	$	18	$	696	$	23

Gross gain on investment securities includes both the gain resulting from the initial conversion of our prior ownership interest in certain privately held companies into common stock upon such companies' initial public offering, or IPO, during the three months ended September 30, 2020, and subsequent changes in the market value of such securities from the IPO through the end of the period, which combined to total $643 million for the three and nine months ended September 30, 2020.

All purchases of and proceeds from investment securities for the three and nine months ended September 30, 2020 and 2019 relate to debt securities.

There were no material other-than-temporary impairments for the three and nine months ended September 30, 2019.

The contractual maturities of debt securities available for sale at September 30, 2020, 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	$	1,487	$	1,490
Due after one year through five years	2,176		2,259
Due after five years through ten years	1,999		2,128
Due after ten years	1,171		1,210
Mortgage and asset-backed securities	5,809		6,046
Total debt securities	$	12,642	$	13,133

14

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

5. FAIR VALUE

Financial Assets

The following table summarizes our fair value measurements at September 30, 2020 and December 31, 2019, 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)
September 30, 2020
Cash equivalents	$	7,722	$	7,722	$	—	$	—
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	1,196		—		1,196		—
Mortgage-backed securities	3,692		—		3,692		—
Tax-exempt municipal securities	1,476		—		1,476		—
Commercial mortgage-backed securities	1,073		—		1,073		—
Asset-backed securities	1,281		—		1,281		—
Corporate debt securities	4,415		—		4,415		—
Total debt securities	13,133		—		13,133		—
Common stock	713		713		—		—
Total investment securities	$	21,568	$	8,435	$	13,133	$	—
December 31, 2019
Cash equivalents	$	3,660	$	3,660	$	—	$	—
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	354		—		354		—
Mortgage-backed securities	3,710		—		3,710		—
Tax-exempt municipal securities	1,463		—		1,463		—
Commercial mortgage-backed securities	804		—		804		—
Asset-backed securities	1,093		—		1,093		—
Corporate debt securities	3,947		—		3,947		—
Total debt securities	11,371		—		11,371		—
Common stock	7		7		—		—
Total investment securities	$	15,038	$	3,667	$	11,371	$	—

15

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

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 $6,458 million at September 30, 2020 and $5,366 million at December 31, 2019. The fair value of our senior notes debt was $7,674 million at September 30, 2020 and $5,916 million at December 31, 2019. The fair value of our senior note 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 term note and commercial paper borrowings. The term loan outstanding and commercial paper borrowings were $1,325 million as of September 30, 2020. The commercial paper borrowings were $300 million as of December 31, 2019.

Put and Call Options Measured at Fair Value

As part of our investment in Kindred at Home, we entered into a shareholders agreement with TPG Capital, or TPG, and Welsh, Carson, Anderson & Stowe, or WCAS, the Sponsors, that provides for certain rights and obligations of each party. 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 beginning on July 2, 2021 and ending on July 1, 2022. Likewise, 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 on July 2, 2022 and ending on July 1, 2023. The put and call options, which are exercisable at a fixed EBITDA multiple and provide a minimum return on the Sponsor's investment if exercised, are measured at fair value each period using a Monte Carlo simulation.

The put and call options fair values were $151 million and $634 million, respectively, at September 30, 2020, and $28 million and $557 million, respectively, at December 31, 2019. The put option is included within other long-term liabilities and the call option is included within other long-term assets. The change in fair value of the put and call options is reflected as "Other (income) expense, net" in our condensed consolidated statements of income.

The significant unobservable inputs utilized in these Level 3 fair value measurements (and selected values) include the enterprise value of Kindred at Home, annualized volatility and secured credit rate. Enterprise value was derived from a discounted cash flow model, which utilized significant unobservable inputs for long-term net operating profit after tax margin, or NOPAT, to measure underlying cash flows, weighted average cost of capital and long term growth rate. The table below presents the assumptions used for each reporting period.

	September 30, 2020		December 31, 2019
Annualized volatility	44.9	%	19.8	%
Secured credit rate	0.4	%	2.2	%
NOPAT	12.0	%	12.0	%
Weighted average cost of capital	10.0	%	10.0	%
Long term growth rate	3.0	%	3.0	%

The calculation of NOPAT utilized net income plus after tax interest expense. We regularly evaluate each of the assumptions used in establishing these assets and liabilities. Significant changes in assumptions for weighted average cost of capital, long term growth rates, NOPAT, volatility, credit spreads, risk free rate, and underlying cash flow estimates, could result in significantly lower or higher fair value measurements. A change in one of these assumptions is not necessarily accompanied by a change in another assumption.

Other Assets and Liabilities Measured at Fair Value

As disclosed in Note 3, we acquired Enclara during 2020. 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 net tangible liabilities assumed were recorded at their carrying values as of the date of acquisition, as their carrying values approximated their fair values due to their short-term nature. The fair values of goodwill and other intangible

16

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

assets acquired in this acquisition 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 future cash flows and discount rates used in the present value calculations. Other than assets acquired and liabilities assumed in this acquisition, there were no other material assets or liabilities measured at fair value on a recurring or nonrecurring basis during 2020.

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 2019 Form 10-K. The accompanying condensed consolidated balance sheets include the following amounts associated with Medicare Part D at September 30, 2020 and December 31, 2019. 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.

	September 30, 2020				December 31, 2019
	Risk Corridor Settlement		CMS Subsidies/ Discounts		Risk Corridor Settlement		CMS Subsidies/ Discounts
	(in millions)
Other current assets	$	25	$	1,226	$	5	$	585
Trade accounts payable and accrued expenses	(101)		(714)		(120)		(356)
Net current (liability) asset	(76)		512		(115)		229
Other long-term assets	273		—		6		—
Other long-term liabilities	(176)		—		(61)		—
Net long-term asset (liability)	97		—		(55)		—
Total net asset (liability)	$	21	$	512	$	(170)	$	229

7. GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for our reportable segments for the nine months ended September 30, 2020 were as follows:

	Retail		Group and Specialty		Healthcare Services		Total
	(in millions)
Balance at January 1, 2020	$	1,535	$	261	$	2,132	$	3,928
Acquisitions	—		—		515		515
Balance at September 30, 2020	$	1,535	$	261	$	2,647	$	4,443

17

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

    The following table presents details of our other intangible assets included in other long-term assets in the accompanying condensed consolidated balance sheets at September 30, 2020 and December 31, 2019.

		September 30, 2020						December 31, 2019
	Weighted Average Life	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
		($ in millions)
Other intangible assets:
Customer contracts/ relationships	9.5 years	$	849	$	553	$	296	$	646	$	496	$	150
Trade names and technology	7.0 years	122		87		35		84		84		—
Provider contracts	11.8 years	70		49		21		70		44		26
Noncompetes and other	7.3 years	29		29		—		29		28		1
Total other intangible assets	9.3 years	$	1,070	$	718	$	352	$	829	$	652	$	177

    For the three months ended September 30, 2020 and 2019, amortization expense for other intangible assets was approximately $23 million and $17 million, respectively. For the nine months ended September 30, 2020 and 2019, amortization expense for other intangible assets was approximately $66 million and $53 million, respectively. The following table presents our estimate of amortization expense remaining for 2020 and each of the five next succeeding years:

	(in millions)
For the years ending December 31,
2020	$	22
2021	56
2022	53
2023	40
2024	33
2025	33

18

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

8. BENEFITS PAYABLE

On a consolidated basis, activity in benefits payable, was as follows for the nine months ended September 30, 2020 and 2019:

	For the nine months ended September 30,
	2020		2019
	(in millions)
Balances, beginning of period	$	6,004	$	4,862
Less: Reinsurance recoverables	(68)		(95)
Balances, beginning of period, net	5,936		4,767
Incurred related to:
Current year	45,693		40,499
Prior years	(278)		(331)
Total incurred	45,415		40,168
Paid related to:
Current year	(37,810)		(34,625)
Prior years	(5,334)		(4,158)
Total paid	(43,144)		(38,783)
Reinsurance recoverable	1		68
Balances, end of period	$	8,208	$	6,220

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.

Incurred and Paid Claims Development

The following discussion provides information about incurred and paid claims development for our Retail and Group and Specialty segments as of September 30, 2020 and 2019, net of reinsurance, and the total estimate of benefits payable for claims incurred but not reported, or IBNR, included within the net incurred claims amounts.

19

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Retail Segment

Activity in benefits payable for our Retail segment was as follows for the nine months ended September 30, 2020 and 2019:

	For the nine months ended September 30,
	2020		2019
	(in millions)
Balances, beginning of period	$	5,363	$	4,338
Less: Reinsurance recoverables	(68)		(95)
Balances, beginning of period, net	5,295		4,243
Incurred related to:
Current year	42,186		36,762
Prior years	(235)		(366)
Total incurred	41,951		36,396
Paid related to:
Current year	(34,946)		(31,476)
Prior years	(4,759)		(3,634)
Total paid	(39,705)		(35,110)
Reinsurance recoverable	1		68
Balances, end of period	$	7,542	$	5,597

At September 30, 2020, benefits payable for our Retail segment included IBNR of approximately $4.6 billion, primarily associated with claims incurred in 2020.

Group and Specialty Segment

Activity in benefits payable for our Group and Specialty segment, was as follows for the nine months ended September 30, 2020 and 2019:

	For the nine months ended September 30,
	2020		2019
	(in millions)
Balances, beginning of period	$	641	$	517
Incurred related to:
Current year	3,929		4,142
Prior years	(43)		35
Total incurred	3,886		4,177
Paid related to:
Current year	(3,286)		(3,547)
Prior years	(575)		(524)
Total paid	(3,861)		(4,071)
Balances, end of period	$	666	$	623

At September 30, 2020, benefits payable for our Group and Specialty segment included IBNR of approximately $576 million, primarily associated with claims incurred in 2020.

20

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(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
	September 30,
	2020
Net outstanding liabilities	(in millions)
Retail	$	7,541
Group and Specialty	666
Benefits payable, net of reinsurance	8,207
Reinsurance recoverable on unpaid claims
Retail	1
Total benefits payable, gross	$	8,208

9. EARNINGS PER COMMON SHARE COMPUTATION

Detail supporting the computation of basic and diluted earnings per common share was as follows for the three and nine months ended September 30, 2020 and 2019:

	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(dollars in millions, except per common share results; number of shares in thousands)
Net income available for common stockholders	$	1,340	$	689	$	3,641	$	2,195
Weighted average outstanding shares of common stock used to compute basic earnings per common share	132,318		133,321		132,234		134,589
Dilutive effect of:
Employee stock options	105		101		95		99
Restricted stock	773		603		681		501
Shares used to compute diluted earnings per common share	133,196		134,025		133,010		135,189
Basic earnings per common share	$	10.12	$	5.16	$	27.53	$	16.31
Diluted earnings per common share	$	10.05	$	5.14	$	27.37	$	16.24
Number of antidilutive stock options and restricted stock excluded from computation	143		302		311		589

21

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

10. STOCKHOLDERS’ EQUITY

Dividends

The following table provides details of dividend payments, excluding dividend equivalent rights for unvested stock awards, in 2019 and 2020 under our Board approved quarterly cash dividend policy:

Record Date	Payment Date	Amount per Share		Total Amount
				(in millions)
2019 payments
12/31/2018	1/25/2019	$	0.50	$	68
3/29/2019	4/26/2019	$	0.55	$	74
6/28/2019	7/26/2019	$	0.55	$	74
9/30/2019	10/25/2019	$	0.55	$	73
2020 payments
12/31/2019	1/31/2020	$	0.55	$	73
3/31/2020	4/24/2020	$	0.625	$	83
6/30/2020	7/31/2020	$	0.625	$	83
9/30/2020	10/30/2020	$	0.625	$	83

In November 2020, the Board declared a cash dividend of $0.625 per share payable on January 29, 2021 to stockholders of record on December 31, 2020.

Stock Repurchases

Our Board of Directors may authorize the purchase of our common stock shares. 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 July 30, 2019, the Board of Directors replaced a previous share repurchase authorization of up to $3 billion (of which approximately $1.03 billion remained unused) with a new authorization for repurchases of up to $3 billion of our common shares exclusive of shares repurchased in connection with employee stock plans, expiring on June 30, 2022.

On July 31, 2019, we entered into an accelerated stock repurchase agreement, the July 2019 ASR, with Citibank, N.A., or Citi, to repurchase $1 billion of our common stock. On August 2, 2019, we made a payment of $1 billion to Citi and received an initial delivery of 2.7 million shares of our common stock. We recorded the payment to Citi as a reduction to stockholders’ equity, consisting of an $800 million increase in treasury stock, which reflects the value of the initial 2.7 million shares received upon initial settlement, and a $200 million decrease in capital in excess of par value, which reflects the value of stock held back by Citi pending final settlement of the July 2019 ASR. Upon final settlement of the July 2019 ASR on December 26, 2019, we received an additional 0.7 million shares as determined by the average daily volume weighted-averages share price of our common stock during the term of the agreement, less a discount, of $296.19, bringing the total shares received under the July 2019 ASR to 3.4 million. In addition, upon settlement we reclassified the $200 million value of stock initially held back by Citi from capital in excess of par value to treasury stock.

Our remaining repurchase authorization was approximately $2 billion of the $3 billion share repurchase program as of November 2, 2020.

22

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

In connection with employee stock plans, we acquired 0.08 million common shares for $30 million and 0.03 million common shares for $10 million during the nine months ended September 30, 2020 and 2019, respectively.

11. INCOME TAXES

The effective income tax rate was 25.2% and 29.0% for the three and nine months ended September 30, 2020, respectively, compared to 22.5% and 23.8% for the three and nine months ended September 30, 2019, respectively, primarily due to the reinstatement of the non-deductible health insurance industry fee in 2020.

12.  DEBT

The carrying value of debt outstanding, net of unamortized debt issuance costs, was as follows at September 30, 2020 and December 31, 2019:

	September 30, 2020		December 31, 2019
	(in millions)
Short-term debt:
Commercial paper	$	325	$	300
Term note	1,000		—
Senior notes:
$400 million, 2.50% due December 15, 2020	399		399
Total short-term debt	$	1,724	$	699
Long-term debt:
Senior notes:
$600 million, 3.15% due December 1, 2022	$	598	$	598
$400 million, 2.90% due December 15, 2022	398		397
$600 million, 3.85% due October 1, 2024	597		597
$600 million, 4.50% due April 1, 2025	595		—
$600 million, 3.95% due March 15, 2027	596		595
$500 million, 3.125% due August 15, 2029	495		495
$500 million, 4.875% due April 1, 2030	494		—
$250 million, 8.15% due June 15, 2038	262		262
$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	396		396
$500 million, 3.95% due August 15, 2049	493		492
Total long-term debt	$	6,059	$	4,967

Senior Notes    

In March 2020, we issued $600 million of 4.500% senior notes due April 1, 2025 and $500 million of 4.875% senior notes due April 1, 2030. Our net proceeds, reduced for the underwriters' discount and commission and offering expenses paid, were approximately $1,088 million as of September 30, 2020. We intend to use the net proceeds for general corporate purposes, which may include the repayment of existing indebtedness.

23

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(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

Our 5-year, $2.0 billion unsecured revolving credit agreement 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. If drawn upon, the revolving credit would revert to using the alternative base rate once LIBOR is discontinued. 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 which could limit our ability to borrow additional funds. In addition, the credit agreement contains customary restrictive covenants and a financial covenant regarding maximum debt to capitalization of 50%, as well as customary events of default. We are in compliance with this financial covenant, with actual debt to capitalization of 33% as measured in accordance with the credit agreement as of September 30, 2020. 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 million incremental loan facility.

At September 30, 2020, we had no borrowings and no letters of credit outstanding under the credit agreement. Accordingly, as of September 30, 2020, 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

Under our commercial paper program we may issue short-term, unsecured commercial paper notes privately placed on a discount basis through certain broker dealers 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 nine months ended September 30, 2020 was $600 million, with $325 million outstanding at September 30, 2020 compared to $300 million outstanding at December 31, 2019. The outstanding commercial paper at September 30, 2020 had a weighted average annual interest rate of 0.35%.

Term Note

In February 2020, we entered into a new $1 billion term loan commitment with a bank that matures 1 year after the first draw, subject to a 1 year extension. In March 2020, we made a draw on the entire term loan commitment of $1 billion. The facility fee, interest rate and financial covenants are consistent with those of our revolving credit agreement. There is no prepayment penalty.

24

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

13. COMMITMENTS, GUARANTEES AND CONTINGENCIES

Government Contracts

Our Medicare products, which accounted for approximately 82% of our total premiums and services revenue for the nine months ended September 30, 2020, 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. All material contracts between Humana and CMS relating to our Medicare products have been renewed for 2021 and all of our product offerings have been approved.

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 diagnoses 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 2019, 25% of the risk score was calculated from claims data submitted through EDS. CMS increased that percentage to 50% in 2020 and will increase that percentage to 75% in 2021. For 2022, CMS has proposed to calculate risk scores for payment to MA organizations using only risk adjustment eligible diagnoses identified from EDS data completing the phased-in transition from RAPS to 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 and the Office of the Inspector General of Health and Human Services, or HHS-OIG, are 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 provided that, in calculating the economic impact of audit results for an MA contract, if any, the results of the RADV audit sample would be extrapolated to the entire MA contract after a comparison of the audit results to a similar audit of the government’s traditional fee-for-service Medicare program, or Medicare FFS. We

25

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

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 in order to establish actuarial equivalence in payment rates as required under the Medicare statute. 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 CMS RADV contract level audits conducted for contract year 2011 and subsequent years. CMS is currently conducting RADV contract level audits for certain of our Medicare Advantage plans.

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 finalized. 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.

On October 26, 2018, CMS issued a proposed rule and accompanying materials (which we refer to as the “Proposed Rule”) related to, among other things, the RADV audit methodology described above. If implemented, the Proposed Rule would use extrapolation in RADV audits applicable to payment year 2011 contract-level audits and all subsequent audits, without the application of a FFS Adjuster to audit findings. We believe that the Proposed Rule fails to address adequately the statutory requirement of actuarial equivalence, and have provided substantive comments to CMS on the Proposed Rule as part of the notice-and-comment rulemaking process. Whether, and to what extent, CMS finalizes the Proposed Rule, and any related regulatory, industry or company reactions, could 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.

We believe that CMS' statements and policies regarding the requirement to report and return identified overpayments received by MA plans are inconsistent with CMS' 2012 RADV audit methodology, and the Medicare statute's requirements. These statements and policies, such as certain 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 (which we refer to as the "Overpayment Rule"), and the Proposed Rule, appear to equate each Medicare Advantage risk adjustment data error with an “overpayment” without addressing the principles underlying the FFS Adjuster referenced above. On September 7, 2018, the Federal District Court for the District of Columbia vacated CMS's Overpayment Rule, concluding that it violated the Medicare statute, including the requirement for actuarial equivalence, and that the Overpayment Rule was also arbitrary and capricious in departing from CMS's RADV methodology without adequate explanation (among other reasons). CMS has appealed the decision to the Circuit Court of Appeals.

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.

26

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

At September 30, 2020, our military services business, which accounted for approximately 1% of our total premiums and services revenue for the nine months ended September 30, 2020, primarily consisted of the TRICARE T2017 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 6 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 5% of our total premiums and services revenue for the nine months ended September 30, 2020. 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 reviews by regulatory bodies that may compare our Medicare Advantage profitability to our non-Medicare Advantage business profitability, or compare the profitability of various products within our Medicare Advantage business, and require that they remain within certain ranges of each other, or increases in member benefits or member eligibility criteria 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 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 continue to vigorously defend against these allegations since the transfer to the Western District of Kentucky. We have substantially completed discovery with the relator who has pursued the matter on behalf of the United States following its unsealing, and expect the Court to consider our motion for summary judgment.

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. On April 27, 2020, the U.S. Supreme Court ruled that the government is obligated to pay the losses under this risk corridor program, and that Congress did not impliedly repeal the obligation under its appropriations riders. In September 2020, we received a $609 million payment from the U.S Government pursuant to the judgement issued by the Court of Federal Claims on July 7, 2020. The $609 million payment received from

27

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

the U.S Government and approximately $31 million in related fees and expenses are reflected in "Premiums" revenue and "Operating costs", respectively, in our condensed consolidated statements of income for the three and nine months ended September 30, 2020.

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, disputes arising from competitive procurement process, general contractual matters, intellectual property matters, and challenges to subrogation practices. 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 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 nonperformance 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.

28

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

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.

14. SEGMENT INFORMATION

We manage our business with three reportable segments: Retail, Group and Specialty, and Healthcare Services. The reportable segments are based on a combination of the type of health plan customer and adjacent businesses centered on well-being solutions for our health plans and other customers, as described below. These segment groupings are consistent with information used by our Chief Executive Officer, the Chief Operating Decision Maker, to assess performance and allocate resources.

The Retail segment consists of Medicare benefits, marketed to individuals or directly via group Medicare accounts. In addition, the Retail segment also includes our contract with CMS to administer the Limited Income Newly Eligible Transition, or LI-NET, prescription drug plan program and contracts with various states to provide Medicaid, dual eligible, and Long-Term Support Services benefits, which we refer to collectively as our state-based contracts. The Group and Specialty segment consists of employer group commercial fully-insured medical and specialty health insurance benefits marketed to individuals and employer groups, including dental, vision, and other supplemental health benefits, as well as administrative services only, or ASO products. In addition, our Group and Specialty segment includes our military services business, primarily our TRICARE T2017 East Region contract. The Healthcare Services segment includes our services offered to our health plan members as well as to third parties, including pharmacy solutions, provider services, and clinical care service, such as home health and other services and capabilities to promote wellness and advance population health, including our minority investment in Kindred at Home and the strategic partnership with WCAS to develop and operate senior-focused, payor-agnostic, primary care centers.

Our Healthcare Services intersegment revenues primarily relate to managing prescription drug coverage for members of our other segments through Humana Pharmacy Solutions®, or HPS, and includes the operations of Humana Pharmacy, Inc., our mail order pharmacy business. These revenues consist of the prescription price (ingredient cost plus dispensing fee), including the portion to be settled with the member (co-share) or with the government (subsidies), plus any associated administrative fees. Services revenues related to the distribution of prescriptions by third party retail pharmacies in our networks are recognized when the claim is processed and product revenues from dispensing prescriptions from our mail order pharmacies are recorded when the prescription or product is shipped. Our pharmacy operations, which are responsible for designing pharmacy benefits, including defining member co-share responsibilities, determining formulary listings, contracting with retail pharmacies, confirming member eligibility, reviewing drug utilization, and processing claims, act as a principal in the arrangement on behalf of members in our other segments. As principal, our Healthcare Services segment reports revenues on a gross basis, including co-share amounts from members collected by third party retail pharmacies at the point of service.

In addition, our Healthcare Services intersegment revenues include revenues earned by certain owned providers derived from risk-based and non-risk-based managed care agreements with our health plans. Under risk-based agreements, the provider receives a monthly capitated fee that varies depending on the demographics and health status of the member, for each member assigned to these owned providers by our health plans. The owned provider assumes the economic risk of funding the assigned members’ healthcare services. Under non risk-based agreements, our health plans retain the economic risk of funding the assigned members' healthcare services. Our Healthcare Services segment reports provider services revenues associated with risk-based agreements on a gross basis, whereby capitation fee revenue is recognized in the period in which the assigned members are entitled to receive healthcare services. Provider services revenues associated with non-risk-based agreements are presented net of associated healthcare costs.

29

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

We present our condensed consolidated results of operations from the perspective of the health plans. As a result, the cost of providing benefits to our members, whether provided via a third party provider or internally through a stand-alone subsidiary, is classified as benefits expense and excludes the portion of the cost for which the health plans do not bear responsibility, including member co-share amounts and government subsidies of $4.4 billion and $4.0 billion for the three months ended September 30, 2020 and 2019, respectively. For the nine months ended September 30, 2020 and 2019 these amounts were $11.9 billion and $10.7 billion, respectively. In addition, depreciation and amortization expense associated with certain businesses in our Healthcare Services segment delivering benefits to our members, primarily associated with our provider services and pharmacy operations, are included with benefits expense. The amount of this expense was $33 million and $32 million for the three months ended September 30, 2020 and 2019, respectively. For the nine months ended September 30, 2020 and 2019, the amount of this expense was $94 million and $92 million, respectively.

Other than those described previously, the accounting policies of each segment are the same and are described in Note 2 to the consolidated financial statements included in our 2019 Form 10-K. Transactions between reportable segments primarily consist of sales of services rendered by our Healthcare Services segment, primarily pharmacy, provider, and clinical care services, to our Retail and Group and Specialty segment customers. Intersegment sales and expenses are recorded at fair value and eliminated in consolidation. Members served by our segments often use the same provider networks, enabling us in some instances to obtain more favorable contract terms with providers. Our segments also share indirect costs and assets. As a result, the profitability of each segment is interdependent. We allocate most operating expenses to our segments. Assets and certain corporate income and expenses are not allocated to the segments, including the portion of investment income not supporting segment operations, interest expense on corporate debt, and certain other corporate expenses. These items are managed at a corporate level. These corporate amounts are reported separately from our reportable segments and are included with intersegment eliminations in the tables presenting segment results below.

30

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Our segment results were as follows for the three and nine months ended September 30, 2020 and 2019:

	Retail		Group and Specialty		Healthcare Services		Eliminations/ Corporate		Consolidated
Three months ended September 30, 2020	(in millions)
External revenues
Premiums:
Individual Medicare Advantage	$	12,949	$	—	$	—	$	—	$	12,949
Group Medicare Advantage	1,880		—		—		—		1,880
Medicare stand-alone PDP	622		—		—		—		622
Total Medicare	15,451		—		—		—		15,451
Fully-insured	177		1,169		—		602		1,948
Specialty	—		424		—		—		424
Medicaid and other	1,081		—		—		—		1,081
Total premiums	16,709		1,593		—		602		18,904
Services revenue:
Provider	—		—		107		—		107
ASO and other	4		189		—		—		193
Pharmacy	—		—		157		—		157
Total services revenue	4		189		264		—		457
Total external revenues	16,713		1,782		264		602		19,361
Intersegment revenues
Services	—		9		4,852		(4,861)		—
Products	—		—		2,013		(2,013)		—
Total intersegment revenues	—		9		6,865		(6,874)		—
Investment income	28		3		2		681		714
Total revenues	16,741		1,794		7,131		(5,591)		20,075
Operating expenses:
Benefits	14,224		1,481		—		(94)		15,611
Operating costs	1,877		452		6,871		(6,687)		2,513
Depreciation and amortization	87		21		46		(26)		128
Total operating expenses	16,188		1,954		6,917		(6,807)		18,252
Income (loss) from operations	553		(160)		214		1,216		1,823
Interest expense	—		—		—		75		75
Other income, net	—		—		—		(7)		(7)
Income (loss) before income taxes and equity in net earnings	553		(160)		214		1,148		1,755
Equity in net earnings	—		—		35		—		35
Segment earnings (loss)	$	553	$	(160)	$	249	$	1,148	$	1,790

31

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

	Retail		Group and Specialty		Healthcare Services		Eliminations/ Corporate		Consolidated
Three months ended September 30, 2019	(in millions)
External revenues
Premiums:
Individual Medicare Advantage	$	10,752	$	—	$	—	$	—	$	10,752
Group Medicare Advantage	1,609		—		—		—		1,609
Medicare stand-alone PDP	781		—		—		—		781
Total Medicare	13,142		—		—		—		13,142
Fully-insured	150		1,278		—		—		1,428
Specialty	—		400		—		—		400
Medicaid and other	742		—		—		—		742
Total premiums	14,034		1,678		—		—		15,712
Services revenue:
Provider	—		—		136		—		136
ASO and other	4		200		—		—		204
Pharmacy	—		—		53		—		53
Total services revenue	4		200		189		—		393
Total external revenues	14,038		1,878		189		—		16,105
Intersegment revenues
Services	—		4		4,654		(4,658)		—
Products	—		—		1,759		(1,759)		—
Total intersegment revenues	—		4		6,413		(6,417)		—
Investment income	50		7		—		79		136
Total revenues	14,088		1,889		6,602		(6,338)		16,241
Operating expenses:
Benefits	12,050		1,448		—		(141)		13,357
Operating costs	1,310		413		6,348		(6,182)		1,889
Depreciation and amortization	89		24		43		(29)		127
Total operating expenses	13,449		1,885		6,391		(6,352)		15,373
Income from operations	639		4		211		14		868
Interest expense	—		—		—		62		62
Other income, net	—		—		—		(82)		(82)
Income before income taxes and equity in net earnings	639		4		211		34		888
Equity in net earnings	—		—		1		—		1
Segment earnings	$	639	$	4	$	212	$	34	$	889

32

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

	Retail		Group and Specialty		Healthcare Services		Eliminations/ Corporate		Consolidated
Nine months ended September 30, 2020	(in millions)
External revenues
Premiums:
Individual Medicare Advantage	$	38,748	$	—	$	—	$	—	$	38,748
Group Medicare Advantage	5,867		—		—		—		5,867
Medicare stand-alone PDP	2,108		—		—		—		2,108
Total Medicare	46,723		—		—		—		46,723
Fully-insured	509		3,606		—		602		4,717
Specialty	—		1,278		—		—		1,278
Medicaid and other	3,104		—		—		—		3,104
Total premiums	50,336		4,884		—		602		55,822
Services revenue:
Provider	—		—		316		—		316
ASO and other	14		576		—		—		590
Pharmacy	—		—		425		—		425
Total services revenue	14		576		741		—		1,331
Total external revenues	50,350		5,460		741		602		57,153
Intersegment revenues
Services	—		22		14,514		(14,536)		—
Products	—		—		5,900		(5,900)		—
Total intersegment revenues	—		22		20,414		(20,436)		—
Investment income	114		12		2		812		940
Total revenues	50,464		5,494		21,157		(19,022)		58,093
Operating expenses:
Benefits	41,939		3,886		—		(410)		45,415
Operating costs	5,047		1,316		20,274		(19,653)		6,984
Depreciation and amortization	251		60		135		(84)		362
Total operating expenses	47,237		5,262		20,409		(20,147)		52,761
Income from operations	3,227		232		748		1,125		5,332
Interest expense	—		—		—		211		211
Other expense, net	—		—		—		63		63
Income before income taxes and equity in net earnings	3,227		232		748		851		5,058
Equity in net earnings	—		—		68		—		68
Segment earnings	$	3,227	$	232	$	816	$	851	$	5,126

33

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

	Retail		Group and Specialty		Healthcare Services		Eliminations/ Corporate		Consolidated
Nine months ended September 30, 2019	(in millions)
External Revenues
Premiums:
Individual Medicare Advantage	$	32,254	$	—	$	—	$	—	$	32,254
Group Medicare Advantage	4,867		—		—		—		4,867
Medicare stand-alone PDP	2,408		—		—		—		2,408
Total Medicare	39,529		—		—		—		39,529
Fully-insured	434		3,873		—		—		4,307
Specialty	—		1,160		—		—		1,160
Medicaid and other	2,143		—		—		—		2,143
Total premiums	42,106		5,033		—		—		47,139
Services revenue:
Provider	—		—		367		—		367
ASO and other	14		587		—		—		601
Pharmacy	—		—		135		—		135
Total services revenue	14		587		502		—		1,103
Total external revenues	42,120		5,620		502		—		48,242
Intersegment revenues
Services	—		13		13,456		(13,469)		—
Products	—		—		5,128		(5,128)		—
Total intersegment revenues	—		13		18,584		(18,597)		—
Investment income	139		17		1		194		351
Total revenues	42,259		5,650		19,087		(18,403)		48,593
Operating expenses:
Benefits	36,396		4,177		—		(405)		40,168
Operating costs	3,664		1,232		18,371		(18,015)		5,252
Depreciation and amortization	239		67		121		(84)		343
Total operating expenses	40,299		5,476		18,492		(18,504)		45,763
Income from operations	1,960		174		595		101		2,830
Interest expense	—		—		—		184		184
Other income, net	—		—		—		(217)		(217)
Income before income taxes and equity in net earnings	1,960		174		595		134		2,863
Equity in net earnings	—		—		16		—		16
Segment earnings	$	1,960	$	174	$	611	$	134	$	2,879

34

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 2019 Form 10-K, as modified by any changes to those risk factors included in this document including the potential impacts of risks related to the spread of, and response to, the COVID-19 pandemic as further discussed in Part II of this report and in other reports we filed subsequent to February 20, 2020, 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 depreciation and amortization, as a percentage of total revenue less investment income, represents a statistic used to measure administrative spending efficiency.

COVID-19

We have continued to take actions to protect, inform, and care for our members, providers, employees, and other stakeholders associated with the outbreak of the novel coronavirus, or COVID-19. Specifically, we have taken the following actions to support our members:

•waiving all cost sharing for in-network primary care, outpatient behavioral health, and telehealth visits for the remainder of 2020 for our Medicare Advantage members, to reduce financial barriers to members seeking to re-engage with their providers, while continuing to encourage the use of telehealth;

•delivering meals to our senior members in need;

•making it easier for members to be tested for COVID-19 by offering at-home testing, as well as collaborating with other providers to deploy drive-thru testing at hundreds of sites throughout the country;

35

•mailing in-home screening kits to members, to encourage members to seek preventative care that may have been delayed during the pandemic;

•proactively delivering safety kits, including face masks, to members and employee homes to facilitate access to care and support visits to providers safely;

•continuing to extend grace periods for premium payments for our fully-insured commercial group members, to ensure continuity of coverage during times of financial stress; and

•establishing a clinical outreach team to proactively engage with our most vulnerable members.

In addition, we took steps to support our provider partners and boost system viability:

•increasing provider funding, simplifying and expanding claims processing and releasing advanced funding to providers, to get reimbursement payments to providers as quickly as possible and ease financial concerns so that members are able to continue to access the care and information they need; and

•expanding modifications to certain utilization management processes, to ease administrative stress and make sure providers are able to most efficiently care for their patients.

Finally, we continued to support the communities we serve by donating $200 million during the first half of 2020 to the Humana Foundation to address social determinants of health in an effort to promote more health days and encourage greater health equity.

The temporary deferral of non-essential care resulting from stay-at-home and physical distancing orders and other restrictions on movement and economic activity implemented throughout the country beginning in the second half of March 2020 to reduce the spread of the novel coronavirus, or COVID-19, has impacted our business. Hospital admissions and utilization were significantly depressed in April and increased throughout May and June. Utilization continued to rebound throughout the third quarter of 2020, reaching approximately 95% of historic baseline levels at the close of the third quarter. The impact of the deferral of non-essential care was partially offset by COVID-19 testing and treatment costs, as well as our ongoing pandemic relief efforts.

We significantly increased our liquidity position during March 2020 with the issuance of $1.1 billion in senior notes and a $1 billion draw under the prior one-year term loan bank commitment. At September 30, 2020, we held $2.4 billion of cash and short-term investments at our parent company and access to an additional $2.0 billion under our credit agreement.

For the remainder of 2020, we expect our year to date 2020 performance will be further offset by the impact of increasing utilization, COVID-19 testing and treatment costs and the continued support for our constituents. A number of significant variables and uncertainties will impact these trends including, among others, the severity and duration of the pandemic, continued actions taken to mitigate the spread of COVID-19 and in turn, relax those restrictions, the timing and degree in resumption of demand for deferred health care services, the ability of our commercial members to pay their premium, the nature, level and cost of diagnostic testing, the cost and timing of new therapeutic treatments and vaccines, all of which are difficult to predict. As such, our response to this global health crisis and the subsequent recovery will continue to evolve over the coming months to support the needs of our stakeholders.

Recent Transactions

In the first quarter of 2020, we purchased privately held Enclara, one of the nation’s largest hospice pharmacy and benefit management providers, for cash consideration of approximately $709 million, net of cash received.

36

We have entered into a strategic partnership with WCAS to accelerate the expansion of our primary care model. The WCAS partnership is expected to open approximately 50 payor-agnostic, senior-focused primary care centers over 3 years beginning in 2020.

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

Business Segments

We manage our business with three reportable segments: Retail, Group and Specialty, and Healthcare Services. The reportable segments are based on a combination of the type of health plan customer and adjacent businesses centered on well-being solutions for our health plans and other customers, as described below. These segment groupings are consistent with information used by our Chief Executive Officer, the Chief Operating Decision Maker, to assess performance and allocate resources.

The Retail segment consists of Medicare benefits, marketed to individuals or directly via group Medicare accounts. In addition, the Retail segment also includes our contract with CMS to administer the Limited Income Newly Eligible Transition, or LI-NET, prescription drug plan program and contracts with various states to provide Medicaid, dual eligible, and Long-Term Support Services benefits, which we refer to collectively as our state-based contracts. The Group and Specialty segment consists of employer group commercial fully-insured medical and specialty health insurance benefits marketed to individuals and employer groups, including dental, vision, and other supplemental health benefits, as well as administrative services only, or ASO products. In addition, our Group and Specialty segment includes our military services business, primarily our TRICARE T2017 East Region contract. The Healthcare Services segment includes our services offered to our health plan members as well as to third parties, including pharmacy solutions, provider services, and clinical care service, such as home health and other services and capabilities to promote wellness and advance population health, including our minority investment in Kindred at Home and the strategic partnership with WCAS to develop and operate senior-focused, payor-agnostic, primary care centers.

The results of each segment are measured by segment earnings, and for our Healthcare Services Segment, also include equity in net earnings from our equity method investees. Transactions between reportable segments primarily consist of sales of services rendered by our Healthcare Services segment, primarily pharmacy, provider, and clinical care services, to our Retail and Group and Specialty segment customers. Intersegment sales and expenses are recorded at fair value and eliminated in consolidation. Members served by our segments often use the same provider networks, enabling us in some instances to obtain more favorable contract terms with providers. Our segments also share indirect costs and assets. As a result, the profitability of each segment is interdependent. We allocate most operating expenses to our segments. Assets and certain corporate income and expenses are not allocated to the segments, including the portion of investment income not supporting segment operations, interest expense on corporate debt, and certain other corporate expenses. These items are managed at a corporate level. These corporate amounts are reported separately from our reportable segments and are included with intersegment eliminations.

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.

37

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.

2020 Highlights

•Our strategy offers 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 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 September 30, 2020, approximately 2,605,900 members, or 66%, of our individual Medicare Advantage members were in value-based relationships under our integrated care delivery model, as compared to 2,340,600 members, or 66%, at September 30, 2019. Medicare Advantage and dual demonstration program membership enrolled in a Humana chronic care management program was 917,200 at September 30, 2020, an increase of 4% from 882,800 at September 30, 2019. These members may not be unique to each program since members have the ability to enroll in multiple programs. The increase is driven by our improved process for identifying and enrolling members in the appropriate program at the right time, coupled with growth in Special Needs Plans, or SNP, membership.

•In October, 2020, the Centers for Medicare and Medicaid Services, or CMS, issued its preliminary 2022 Medicare Advantage and Part D payment rates and proposed policy changes, collectively, the Advance Notice. CMS has invited public comment on the Advance Notice before publishing final rates on or before April 5, 2021, or the Final Notice, and indicated that the Final Notice may be published early in light of the challenges posed by the uncertainty associated with the COVID-19 pandemic. In the Advance Notice, CMS estimates Medicare Advantage plans across the sector will, on average, experience a 2.82 percent increase in benchmark funding based on proposals included therein. As indicated by CMS, its estimate excludes the impact of fee-for-service county rebasing/re-pricing since the related impact is dependent upon finalization of certain data, which will be available with the publication of the Final Notice. Based on our preliminary analysis using the same factors CMS included in its estimate, the components of which are detailed on CMS’ website, we anticipate the proposals in the Advance Notice would result in a change generally in line with CMS’ estimate, with the exception of our Medicare Star Ratings for bonus year 2022, as more fully described below, that led our peers. We will be drawing upon our program expertise to provide CMS formal commentary on the impact of the Advance Notice and the related impact upon Medicare beneficiaries’ quality of care and service to our members through the Medicare Advantage program.

•In October 2020, CMS published its updated Medicare Star Ratings for bonus year 2022.We have 4.1 million members, or approximately 92 percent of our Medicare Advantage membership as of September 2020, enrolled in 15 contracts that received a 4-star rating or above. In addition, we received a 5 out of 5-star rating for our CarePlus Health Plans, Inc. contract in Florida for the third consecutive year and received a 4.5-star rating for three Medicare Advantage contracts offered in 7 states, which cover approximately 796,000 members. Additionally, over 99 percent of retirees in our group Medicare Advantage plans remain in 4-star or above contracts for bonus year 2022. Our Star Ratings continue to reflect our focus on quality in both member experience and clinical outcomes.    

•Net income was $1.3 billion, or $10.05 per diluted common share, for the three months ended September 30, 2020, or the 2020 quarter, compared to $689 million, or $5.14 per diluted common share, for the three months ended September 30, 2019, or the 2019 quarter, and was $3.6 billion, or $27.37 per diluted

38

common share, for the nine months ended September 30, 2020, or the 2020 period, compared to $2.2 billion, or $16.24 per diluted common share, for the nine months ended September 30, 2019, or the 2019 period. These comparisons were significantly impacted by the change in the fair value of publicly-traded equity securities, the net receipt of commercial risk corridor receivables previously written off, and the put/call valuation adjustments associated with certain equity method investments. The change in the fair value of our publicly-traded equity securities relates primarily to our common stock holdings, including both the gain resulting from the initial conversion of our prior ownership interest in certain privately held companies, primarily in Oak Street Health, Inc., or OSH, into common stock upon such companies' initial public offering, or IPO, during the third quarter of 2020, and the subsequent changes in the market value of such securities from their IPO through the end of the period. In September 2020, we received $578 million, net of related fees and expenses pursuant to the U.S. Supreme Court ruling that the government is obligated to pay the losses under the risk corridor program. The receipt of the risk corridor payments was associated with losses incurred under the Health Care Reform business in 2014 to 2016. The receipt of these risk corridor payments accounted for less than half of our accumulated losses before income taxes from this business during that time period. The impact of these adjustments to our consolidated income before income taxes and equity in net earnings and diluted earnings per common share was as follows for the 2020 quarter and period.

	For the three months ended September 30,				For the nine months ended September 30,
	2020		2019		2020		2019
Consolidated income before income taxes and equity in net earnings:
Change in the fair value of publicly-traded equity securities	$	643	$	—	$	643	$	—
Receipt of commercial risk corridor receivables previously written off, net	578		—		578		—
Put/call valuation adjustments	7		82		(63)		217
Total	$	1,228	$	82	$	1,158	$	217
	For the three months ended September 30,				For the nine months ended September 30,
	2020		2019		2020		2019
Diluted earnings per common share:
Change in the fair value of publicly-traded equity securities	$	3.72	$	—	$	3.73	$	—
Receipt of commercial risk corridor receivables previously written off, net	3.35		—		3.35		—
Put/call valuation adjustments	0.03		0.47		(0.37)		1.23
Total	$	7.10	$	0.47	$	6.71	$	1.23

Excluding these adjustments, our results of operations reflect the impact of the ongoing COVID-19 pandemic. Utilization continued to rebound throughout the 2020 quarter, reaching approximately 95% of historic baseline levels by end of the third quarter. As such, our 2020 quarter results of operations comparisons were impacted by increasing utilization, COVID-19 testing and treatment costs, as well as the financial impact of our ongoing crisis relief efforts. Our 2020 period results reflect historically low utilization levels in the first six months of the year from the temporary deferral of non-essential care amid the COVID-19 pandemic.

39

These changes were also favorably impacted by a lower number of shares used to compute dilutive earnings per common share, primarily reflecting share repurchases completed during 2019, partially offset by a higher tax rate resulting from the return of the non-deductible health insurance industry free in 2020.

•Contributing to our Retail segment revenue growth was our individual Medicare Advantage membership, which increased 382,600 members, or 10.8%, from September 30, 2019 to September 30, 2020.

•Our operating cash flows for the 2020 period of $5.4 billion increased from the 2019 period of $4.8 billion primarily due primarily to higher income from operations.

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. The annual health insurance industry fee, which was suspended in 2019, but has resumed for calendar year 2020, is not deductible for income tax purposes and significantly increases our effective tax rate. We paid the federal government $1.2 billion in September 2020 for this fee. Under current law, the health industry fee will be permanently repealed beginning in calendar year 2021.

It is reasonably possible that the Health Care Reform Law and related regulations, as well as other current or future legislative, judicial or regulatory changes, such as legislative and regulatory changes associated with COVID-19, including restrictions on our ability to manage our provider network or otherwise operate our business, or restrictions on profitability, including reviews by regulatory bodies that may compare our Medicare Advantage profitability to our non-Medicare Advantage business profitability, or compare the profitability of various products within our Medicare Advantage business, and require that they remain within certain ranges of each other, increases in member benefits or changes to member eligibility criteria without corresponding increases in premium payments to us, or increases in regulation of our prescription drug benefit businesses, 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 associated with 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 and Group and Specialty segment customers and are described in Note 14 to the condensed consolidated financial statements included in this report.

40

Comparison of Results of Operations for 2020 and 2019

The following discussion primarily deals with our results of operations for the three months ended September 30, 2020, or the 2020 quarter, and the three months ended September 30, 2019, or the 2019 quarter, the nine months ended September 30, 2020, or the 2020 period, and the nine months ended September 30, 2019, or the 2019 period.

Consolidated

	For the three months ended September 30,						Change
	2020			2019			Dollars		Percentage
	(dollars in millions, except per common share results)
Revenues:
Premiums:
Retail	$	16,709		$	14,034		$	2,675	19.1	%
Group and Specialty	1,593			1,678			(85)		(5.1)	%
Corporate	602			—			602		100.0	%
Total premiums	18,904			15,712			3,192		20.3	%
Services:
Retail	4			4			—		—	%
Group and Specialty	189			200			(11)		(5.5)	%
Healthcare Services	264			189			75		39.7	%
Total services	457			393			64		16.3	%
Investment income	714			136			578		425.0	%
Total revenues	20,075			16,241			3,834		23.6	%
Operating expenses:
Benefits	15,611			13,357			2,254		16.9	%
Operating costs	2,513			1,889			624		33.0	%
Depreciation and amortization	128			127			1		0.8	%
Total operating expenses	18,252			15,373			2,879		18.7	%
Income from operations	1,823			868			955		110.0	%
Interest expense	75			62			13		21.0	%
Other income, net	(7)			(82)			(75)		(91.5)	%
Income before income taxes and equity in net earnings	1,755			888			867		97.6	%
Provision for income taxes	450			200			250		125.0	%
Equity in net earnings	35			1			34		3,400.0	%
Net income	$	1,340		$	689		$	651	94.5	%
Diluted earnings per common share	$	10.05		$	5.14		$	4.91	95.5	%
Benefit ratio (a)	82.6		%	85.0		%			(2.4)	%
Operating cost ratio (b)	13.0		%	11.7		%			1.3	%
Effective tax rate	25.2		%	22.5		%			2.7	%

41

	For the nine months ended September 30,						Change
	2020			2019			Dollars		Percentage
	(dollars in millions, except per common share results)
Revenues:
Premiums:
Retail	$	50,336		$	42,106		$	8,230	19.5	%
Group and Specialty	4,884			5,033			(149)		(3.0)	%
Corporate	602			—			602		100.0	%
Total premiums	55,822			47,139			8,683		18.4	%
Services:
Retail	14			14			—		—	%
Group and Specialty	576			587			(11)		(1.9)	%
Healthcare Services	741			502			239		47.6	%
Total services	1,331			1,103			228		20.7	%
Investment income	940			351			589		167.8	%
Total revenues	58,093			48,593			9,500		19.6	%
Operating expenses:
Benefits	45,415			40,168			5,247		13.1	%
Operating costs	6,984			5,252			1,732		33.0	%
Depreciation and amortization	362			343			19		5.5	%
Total operating expenses	52,761			45,763			6,998		15.3	%
Income from operations	5,332			2,830			2,502		88.4	%
Interest expense	211			184			27		14.7	%
Other expense (income), net	63			(217)			280		129.0	%
Income before income taxes and equity in net earnings	5,058			2,863			2,195		76.7	%
Provision for income taxes	1,485			684			801		117.1	%
Equity in net earnings	68			16			52		325.0	%
Net income	$	3,641		$	2,195		$	1,446	65.9	%
Diluted earnings per common share	$	27.37		$	16.24		$	11.13	68.5	%
Benefit ratio (a)	81.4		%	85.2		%			(3.8)	%
Operating cost ratio (b)	12.2		%	10.9		%			1.3	%
Effective tax rate	29.0		%	23.8		%			5.2	%

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

(b)Represents operating costs as a percentage of total revenues less investment income.

42

Premiums Revenue

Consolidated premiums increased $3.2 billion, or 20.3%, from $15.7 billion in the 2019 quarter to $18.9 billion in the 2020 quarter and increased $8.7 billion, or 18.4%, from $47.1 billion in the 2019 period to $55.8 billion in the 2020 period. These increases were primarily due to higher premiums in the Retail segment, mainly resulting from Medicare Advantage and state-based contracts membership growth, higher per member Medicare Advantage premiums, and the receipt of commercial risk corridor receivables previously written off, partially offset by the impact of declining stand-alone PDP membership as more fully described in the detailed segment results discussion that follows.

Consolidated services revenue increased $64 million, or 16.3%, from $393 million in the 2019 quarter to $457 million in the 2020 quarter and increased $228 million, or 20.7%, from $1.1 billion in the 2019 period to $1.3 billion in the 2020 period. These increases were primarily due to an increase in services revenue in the Healthcare Services segment associated with higher external pharmacy revenues resulting from the Enclara acquisition in the first quarter of 2020.

Investment Income

Investment income increased $578 million, or 425.0%, from $136 million in the 2019 quarter to $714 million in the 2020 quarter and increased $589 million, or 167.8%, from $351 million in the 2019 period to $940 million in the 2020 period. These increases were primarily due to the $643 million change in fair value of publicly-traded equity securities during the 2020 quarter.

Benefit Expense

Consolidated benefits expense increased $2.3 billion, or 16.9%, from $13.4 billion in the 2019 quarter to $15.6 billion in the 2020 quarter and increased $5.2 billion, or 13.1%, from $40.2 billion in the 2019 period to $45.4 billion in the 2020 period. The consolidated benefit ratio decreased 240 basis points from 85.0% for the 2019 quarter to 82.6% for the 2020 quarter and decreased 380 basis points from 85.2% for the 2019 period to 81.4% for the 2020 period. These comparisons reflect the receipt of the commercial risk corridor receivables previously written off, the change in quarterly utilization patterns from the COVID-19 pandemic and the reinstatement of the non-deductible health insurance industry fee in 2020 that was contemplated in the pricing and benefit design of our products.These factors were were partially offset by COVID-19 testing and treatment costs along with our ongoing pandemic relief efforts.

The favorable prior-period medical claims reserve development decreased the consolidated benefit ratio by approximately 20 basis points in the 2020 quarter versus approximately 40 basis points in the 2019 quarter. The favorable prior-period medical claims reserve development decreased the consolidated benefit ratio by approximately 50 basis points in the 2020 period versus approximately 70 basis points in the 2019 period.

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 $624 million, or 33.0%, from $1.9 billion in the 2019 quarter to $2.5 billion in the 2020 quarter and increased $1.7 billion, or 33.0% from $5.3 billion in the 2019 period to $7.0 billion in the 2020 period.

The consolidated operating cost ratio increased 130 basis points from 11.7% for the 2019 quarter to 13.0% for the 2020 quarter and increased 130 basis points from 10.9% for the 2019 period to 12.2% for the 2020 period. These increases were primarily due to the reinstatement of the non-deductible health insurance industry fee in 2020 and COVID-19 related administrative costs, including those associated with purchasing personal protective equipment for our clinicians, member response efforts, and the build-out of infrastructure necessary to support employees working remotely. These increases were partially offset by scale efficiencies associated with growth in our Medicare Advantage membership, significant operating cost efficiencies in the 2020 quarter driven by previously disclosed

43

productivity initiatives, charges associated with workforce optimization in the 2019 quarter that did not recur in the 2020 quarter, and the net impact of the receipt of the commercial risk corridor receivables previously written off. The 2020 period was further impacted by a $200 million contribution during the first half of 2020 to the Humana Foundation to support the communities served by us, particularly those with social and health disparities. The non-deductible health insurance industry fee impacted the operating cost ratio by 150 basis points in the 2020 quarter and period.     

Depreciation and Amortization

Depreciation and amortization increased $1 million, or 0.8%, from $127 million in the 2019 quarter to $128 million in the 2020 quarter and increased $19 million, or 5.5%, from $343 million in the 2019 period to $362 million in the 2020 period.

Interest Expense

Interest expense increased $13 million, or 21.0%, from $62 million in the 2019 quarter to $75 million in the 2020 quarter and increased $27 million, or 14.7%, from $184 million in the 2019 period to $211 million in the 2020 period.

Income Taxes

The effective income tax rate was 25.2% and 29.0% for the three and nine months ended September 30, 2020, respectively, compared to 22.5% and 23.8% for the three and nine months ended September 30, 2019, respectively. These increases were primarily due to the reinstatement of the non-deductible health insurance industry fee in 2020.

Retail Segment

	September 30,		Change
	2020	2019	Members	Percentage
Membership:
Medical membership:
Individual Medicare Advantage	3,935,100	3,552,500	382,600	10.8	%
Group Medicare Advantage	612,000	523,900	88,100	16.8	%
Medicare stand-alone PDP	3,892,200	4,379,800	(487,600)	(11.1)	%
Total Retail Medicare	8,439,300	8,456,200	(16,900)	(0.2)	%
State-based Medicaid	730,100	469,000	261,100	55.7	%
Medicare Supplement	331,300	286,600	44,700	15.6	%
Total Retail medical members	9,500,700	9,211,800	288,900	3.1	%

44

	For the three months ended September 30,						Change
	2020			2019			Dollars		Percentage
	(in millions)
Premiums and Services Revenue:
Premiums:
Individual Medicare Advantage	$	12,949		$	10,752		$	2,197	20.4	%
Group Medicare Advantage	1,880			1,609			271		16.8	%
Medicare stand-alone PDP	622			781			(159)		(20.4)	%
Total Retail Medicare	15,451			13,142			2,309		17.6	%
State-based Medicaid	1,081			742			339		45.7	%
Medicare Supplement	177			150			27		18.0	%
Total premiums	16,709			14,034			2,675		19.1	%
Services	4			4			—		—	%
Total premiums and services revenue	16,713			$	14,038		$	2,675	19.1	%
Segment earnings	$	553		$	639		$	(86)	(13.5)	%
Benefit ratio	85.1		%	85.9		%			(0.8)	%
Operating cost ratio	11.2		%	9.3		%			1.9	%

	For the nine months ended September 30,						Change
	2020			2019			Dollars		Percentage
	(in millions)
Premiums and Services Revenue:
Premiums:
Individual Medicare Advantage	$	38,748		$	32,254		$	6,494	20.1	%
Group Medicare Advantage	5,867			4,867			1,000		20.5	%
Medicare stand-alone PDP	2,108			2,408			(300)		(12.5)	%
Total Retail Medicare	46,723			39,529			7,194		18.2	%
State-based Medicaid	3,104			2,143			961		44.8	%
Medicare Supplement	509			434			75		17.3	%
Total premiums	50,336			42,106			8,230		19.5	%
Services	14			14			—		—	%
Total premiums and services revenue	$	50,350		$	42,120		$	8,230	19.5	%
Segment earnings	$	3,227		$	1,960		$	1,267	64.6	%
Benefit ratio	83.3		%	86.4		%			(3.1)	%
Operating cost ratio	10.0		%	8.7		%			1.3	%

Segment Earnings

•Retail segment earnings decreased $86 million, or 13.5%, from $639 million in the 2019 quarter to $553 million in the 2020 quarter primarily due to a higher operating cost ratio, partially offset by a lower benefit ratio as more fully described below. Retail segment earnings increased $1.3 billion, or 64.6%, from $2.0 billion in the 2019 period to $3.2 billion in the 2020 period, primarily due to the net favorable impact of a lower benefit ratio, partially offset by a higher operating cost ratio as more fully described below.

45

Enrollment

•Individual Medicare Advantage membership increased 382,600 members, or 10.8%, from September 30, 2019 to September 30, 2020, primarily due to membership additions associated with the previous Annual Election Period, or AEP, and Open Election Period, or OEP, for Medicare beneficiaries. The OEP sales period, which ran from January 1 to March 31, 2020 added approximately 30,000 members. Since the conclusion of the 2020 OEP, enrollment continued to increase due to special elections, age-ins, and Dual Eligible Special Need Plans, or D-SNP, members. Individual Medicare Advantage membership includes 391,100 D-SNP members as of September 30, 2020, a net increase of 110,400, or 39.3%, from 280,700 as of September 30, 2019.

•Group Medicare Advantage membership increased 88,100, or 16.8%, from September 30, 2019 to September 30, 2020, primarily due to the addition of a large account in January 2020, along with net membership additions associated with the previous AEP for Medicare beneficiaries.

•Medicare stand-alone PDP membership decreased 487,600 members, or 11.1%, from September 30, 2019 to September 30, 2020 primarily reflecting net declines during the previous AEP for Medicare beneficiaries. The anticipated decline primarily resulted from terminations driven by premium and benefit adjustments experienced by members that were previously enrolled in our 2019 Humana Walmart Rx plan and the 2019 Humana Enhanced plan, which were consolidated into the Premier Rx plan in 2020. The expected PDP losses were partially offset by growth in the new low-price Humana Walmart Value Rx plan, driven by both new sales and plan to plan changes.

•State-based Medicaid membership increased 261,100 members, or 55.7%, from September 30, 2019 to September 30, 2020. This increase primarily reflects the impact of discontinuing the reinsurance agreement with CareSource and the assumption of full financial risk for the existing Kentucky Medicaid contract as of January 1, 2020, as well as additional enrollment, particularly in Florida, resulting from the current economic downturn due to the COVID-19 pandemic.

Premiums Revenue

•Retail segment premiums increased $2.7 billion, or 19.1%, from $14.0 billion in the 2019 quarter to $16.7 billion in the 2020 quarter and increased $8.2 billion, or 19.5%, from $42.1 billion in the 2019 period to $50.3 billion in the 2020 period. These increases primarily reflect higher premiums as a result of Medicare Advantage and state-based contracts membership growth and higher per member Medicare Advantage premiums. These favorable items were partially offset by the decline in membership in our stand-alone PDP offerings.

Benefits Expense

•The Retail segment benefit ratio decreased 80 basis points from 85.9% for the 2019 quarter to 85.1% for the 2020 quarter primarily due to the impact of the temporary deferral of non-essential care amid the COVID-19 pandemic, and the reinstatement of the non-deductible health insurance industry fee in 2020 which was contemplated in the pricing and benefit design of our products. These were partially offset by COVID-19 testing and treatment costs, as well as our ongoing pandemic relief efforts, including the waiver of all cost sharing for in-network primary care, outpatient behavioral health, and telehealth visits for our Medicare Advantage members, continued delivery of meals to senior members in need, the distribution of in-home preventative screening kits to members, establishment of a clinical outreach team to proactively engage with our most vulnerable members, and various provider initiatives. The 2020 quarter was further impacted by a shift in Medicare membership mix due to the loss of stand-alone PDP members and significant growth in the Medicare Advantage membership as well as lower favorable prior-period medical claims reserve development. The benefit ratio for stand-alone PDP members generally decreases as the year progresses. The Retail segment benefit ratio decreased 310 basis points from 86.4% for the 2019 period to 83.3% for the 2020 period primarily reflecting significantly depressed utilization experienced in the first

46

half of 2020 as well as the same factors as discussed above with the exception of the impact from a shift in Medicare membership mix.

•The Retail segment's benefits expense for the 2020 quarter included $30 million in favorable prior-period medical claims reserve development versus $55 million in the 2019 quarter. For the 2020 period, the Retail segment’s benefit expense included the beneficial effect of $235 million in favorable prior-period medical claims reserve development versus $366 million in the 2019 period. Prior-period medical claims reserve development decreased the Retail segment benefit ratio by approximately 20 basis points in the 2020 quarter versus approximately 40 basis points in the 2019 quarter. Favorable prior-period medical claims reserve development decreased the Retail segment benefit ratio by approximately 50 basis points in the 2020 period versus approximately 90 basis points in the 2019 period.

Operating Costs

•The Retail segment operating cost ratio increased 190 basis points from 9.3% for the 2019 quarter to 11.2% for the 2020 quarter and increased 130 basis points from 8.7% for the 2019 period to 10.0% for the 2020 period. These increases were primarily due to the reinstatement of the non-deductible health insurance industry fee in 2020 and COVID-19 related administrative costs as previously discussed, partially offset by scale efficiencies associated with growth in our Medicare Advantage membership and significant operating cost efficiencies driven by previously disclosed productivity initiatives. The non-deductible health insurance industry fee impacted the operating cost ratio by 160 basis points in the 2020 quarter and period.

Group and Specialty Segment

	September 30,		Change
	2020	2019	Members	Percentage
Membership:
Medical membership:
Fully-insured commercial group	799,500	927,400	(127,900)	(13.8)	%
ASO	502,100	516,800	(14,700)	(2.8)	%
Military services	6,016,400	5,998,700	17,700	0.3	%
Total group medical members	7,318,000	7,442,900	(124,900)	(1.7)	%
Specialty membership (a)	5,325,600	5,411,400	(85,800)	(1.6)	%

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

47

	For the three months ended September 30,						Change
	2020			2019			Dollars		Percentage
	(in millions)
Premiums and Services Revenue:
Premiums:
Fully-insured commercial group	$	1,169		$	1,278		$	(109)	(8.5)	%
Group specialty	424			400			24		6.0	%
Total premiums	1,593			1,678			(85)		(5.1)	%
Services	189			200			(11)		(5.5)	%
Total premiums and services revenue	$	1,782		$	1,878		$	(96)	(5.1)	%
Segment (losses) earnings	$	(160)		$	4		$	(164)	(4100.0)	%
Benefit ratio	93.0		%	86.3		%			6.7	%
Operating cost ratio	25.2		%	21.9		%			3.3	%

	For the nine months ended September 30,						Change
	2020			2019			Dollars		Percentage
	(in millions)
Premiums and Services Revenue:
Premiums:
Fully-insured commercial group	$	3,606		$	3,873		$	(267)	(6.9)	%
Group specialty	1,278			1,160			118		10.2	%
Total premiums	4,884			5,033			(149)		(3.0)	%
Services	576			587			(11)		(1.9)	%
Total premiums and services revenue	$	5,460		$	5,620		$	(160)	(2.8)	%
Segment earnings	$	232		$	174		$	58	33.3	%
Benefit ratio	79.6		%	83.0		%			(3.4)	%
Operating cost ratio	24.0		%	21.9		%			2.1	%

Segment Earnings

•Group and Specialty segment earnings decreased $164 million, from $4 million segment earnings in the 2019 quarter to $160 million segment loss in the 2020 quarter primarily due to higher benefit and operating cost ratios as more fully described below. Group and Specialty segment earnings increased $58 million, or 33.3%, from $174 million in the 2019 period to $232 million in the 2020 period primarily due to the net favorable impact of a lower benefit ratio, partially offset by a higher operating cost ratio as more fully described below.

Enrollment

•Fully-insured commercial group medical membership decreased 127,900 members, or 13.8%, from September 30, 2019 to September 30, 2020. These anticipated declines primarily reflect lower membership in small group accounts due in part to more small group accounts selecting level-funded ASO products, as well as the loss of certain large group accounts due to disciplined pricing in the competitive environment. Additionally, the declines in membership were impacted by the current economic downturn driven by the COVID-19 pandemic resulting in higher unemployment rates and loss of coverage for fully-insured commercial group members. The portion of group fully-insured commercial medical membership in small group accounts was approximately 56% at September 30, 2020 and 60% at September 30, 2019.

48

•Group ASO commercial medical membership decreased 14,700 members, or 2.8%, from September 30, 2019 to September 30, 2020 primarily reflecting the loss of certain large group accounts due to continued discipline in pricing of services for self-funded accounts amid a highly competitive environment and the impact of the current economic downturn driven by the COVID-19 pandemic as previously discussed, partially offset by more small group accounts selecting level-funded ASO products. Small group membership comprised 45% of group ASO medical membership at September 30, 2020 versus 39% at September 30, 2019.

•Military services membership increased 17,700 members, or 0.3%, from September 30, 2019 to September 30, 2020. Membership includes military service members, retirees, and their families to whom we are providing healthcare services under the current TRICARE East Region contract.

•Specialty membership decreased 85,800 members, or 1.6%, from September 30, 2019 to September 30, 2020 primarily due the loss of certain group accounts offering stand-alone dental and vision products, as well as the impact of the current economic downturn driven by the COVID-19 pandemic as previously discussed.

Premiums Revenue

•Group and Specialty segment premiums decreased $85 million, or 5.1%, from $1.7 billion in the 2019 quarter to $1.6 billion in the 2020 quarter and decreased $149 million, or 3.0%, from $5.0 billion in the 2019 period to $4.9 billion in the 2020 period. These decreases were primarily due to the decline in our fully-insured group commercial membership, partially offset by higher stop-loss revenues related to our level-funded ASO accounts resulting from membership growth in this product and higher per member premiums across the fully-insured commercial business.

Services Revenue

•Group and Specialty segment services revenue decreased $11 million, or 5.5%, from $200 million in the 2019 quarter to $189 million in the 2020 quarter and decreased $11 million, or 1.9%, from $587 million in the 2019 period to $576 million the 2020 period. These decreases were primarily due to lower ASO membership described previously.

Benefits Expense

•The Group and Specialty segment benefit ratio increased 670 basis points from 86.3% in the 2019 quarter to 93.0% in the 2020 quarter primarily due to ongoing pandemic relief efforts, primarily surrounding initiatives to ease administrative and financial stress for providers and employers, including premium rate relief for select employer groups and the payment of monthly stipends to support participating dental providers, and meaningful COVID-19 testing and treatment costs for fully-insured commercial group medical members as several of our key commercial markets were located in areas more significantly impacted by COVID-19. These items were partially offset by the reinstatement of the non-deductible health insurance industry fee in 2020 which was contemplated in the pricing and benefit design of our products, the temporary deferral of non-essential care as previously discussed, and higher favorable prior-period medical claims reserve development. Utilization returned faster for fully-insured commercial group members as compared to members in the Retail segment, but remained below historic baseline levels at the close of the 2020 quarter.

•The Group and Specialty segment benefit ratio decreased 340 basis points from 83.0% in the 2019 period to 79.6% in the 2020 period primarily as the result of significantly depressed utilization levels experienced during the first half of 2020 as previously discussed, the reinstatement of the non-deductible health insurance industry fee in 2020 which was contemplated in the pricing and benefit design of our products, as well as higher favorable prior-period medical claims development. These items were partially offset by COVID-19 testing and treatments costs, and our ongoing pandemic relief efforts as previously described.

49

•The Group and Specialty segment's benefits expense included $13 million in favorable prior-period medical claims reserve development in the 2020 quarter versus $1 million in the 2019 quarter. This favorable prior-period medical claims reserve development decreased the Group and Specialty segment benefit ratio by approximately 80 basis points in the 2020 quarter and by approximately 10 basis points in the 2019 quarter. The Group and Specialty segment's benefits expense included the effect of a favorable prior-period medical claims reserve development of $43 million in the 2020 period versus an unfavorable prior-period medical claims reserve development of $35 million in the 2019 period. The favorable prior-period medical claims reserve development for the 2020 period decreased the Group and Specialty segment benefit ratio by approximately 90 basis points and the unfavorable development for the 2019 period increased the Group and Specialty segment benefit ratio 70 basis points.

Operating Costs

•The Group and Specialty segment operating cost ratio increased 330 basis points from 21.9% for the 2019 quarter to 25.2% for the 2020 quarter and increased 210 basis points from 21.9% for the 2019 period to 24.0% for the 2020 period. These increases were primarily due to the reinstatement of the non-deductible health insurance industry fee in 2020 and COVID-19 related administrative costs as previously discussed. These increases were partially offset by significant operating cost efficiencies driven by previously disclosed productivity initiatives. The non-deductible health insurance industry fee impacted the operating cost ratio by 130 basis points in the 2020 quarter and period.

50

Healthcare Services Segment

	For the three months ended September 30,						Change
	2020			2019			Dollars		Percentage
	(in millions)
Revenues:
Services:
Provider services	$	81		$	104		$	(23)	(22.1)	%
Pharmacy solutions	157			53			104		196.2	%
Clinical care services	26			32			(6)		(18.8)	%
Total services revenues	264			189			75		39.7	%
Intersegment revenues:
Pharmacy solutions	6,158			5,673			485		8.5	%
Provider services	573			591			(18)		(3.0)	%
Clinical care services	134			149			(15)		(10.1)	%
Total intersegment revenues	6,865			6,413			452		7.0	%
Total services and intersegment revenues	$	7,129		$	6,602		$	527	8.0	%
Segment earnings	$	249		$	212		$	37	17.5	%
Operating cost ratio	96.4		%	96.2		%			0.2	%

	For the nine months ended September 30,						Change
	2020			2019			Dollars		Percentage
	(in millions)
Revenues:
Services:
Pharmacy solutions	$	425		$	134		$	291	217.2	%
Provider services	236			265			(29)		(10.9)	%
Clinical care services	80			103			(23)		(22.3)	%
Total services revenues	741			502			239		47.6	%
Intersegment revenues:
Pharmacy solutions	18,275			16,335			1,940		11.9	%
Provider services	1,724			1,792			(68)		(3.8)	%
Clinical care services	415			457			(42)		(9.2)	%
Total intersegment revenues	20,414			18,584			1,830		9.8	%
Total services and intersegment revenues	$	21,155		$	19,086		$	2,069	10.8	%
Segment earnings	$	816		$	611		$	205	33.6	%
Operating cost ratio	95.8		%	96.3		%			(0.5)	%

51

Segment Earnings

•Healthcare Services segment earnings increased $37 million, or 17.5%, from $212 million in the 2019 quarter to $249 million in the 2020 quarter and increased $205 million, or 33.6%, from $611 million in the 2019 period to $816 million in the 2020 period. These increases were primarily due to operational improvements and reduced utilization resulting from COVID-19 in our provider services business. These improvements were partially offset by COVID-19 administrative related costs, including expenses associated with additional safety measures for our provider and clinical teams who have continued to provide services to members during the COVID-19 pandemic. The 2020 period was further impacted by higher earnings from our pharmacy operations.

Script Volume

•Humana Pharmacy Solutions script volumes on an adjusted 30-day equivalent basis increased to approximately 119 million in the 2020 quarter, up 3%, versus scripts of approximately 116 million in the 2019 quarter. For the 2020 period, script volumes increased to approximately 356 million, up 5%, versus scripts of approximately 339 million in the 2019 period. These increases were primarily due to the growth associated with higher individual Medicare Advantage and state-based contracts membership along with the impact of early prescription refills as members prepared for extended supply needs in response to COVID-19. These increases were partially offset by the decline in stand-alone PDP membership.

Services Revenues

•Services revenues increased $75 million, or 39.7%, from $189 million in the 2019 quarter to $264 million in the 2020 quarter and increased $239 million, or 47.6%, from $502 million in the 2019 period to $741 million in the 2020 period. These increases were primarily due to the additional pharmacy revenues associated with the acquisition of Enclara in the 2020 period.

Intersegment Revenues

•Intersegment revenues increased $452 million, or 7.0%, from $6.4 billion in the 2019 quarter to $6.9 billion in the 2020 quarter and increased $1.8 billion, or 9.8%, from $18.6 billion in the 2019 period to $20.4 billion in the 2020 period. These increases were primarily due to strong Medicare Advantage membership growth, partially offset by the loss of intersegment revenues associated with the decline in stand-alone PDP membership. The 2020 period was also impacted by the modest increase in pharmacy revenues as a result of us allowing early prescription refills to permit members to prepare for extended supply needs in response to COVID-19 and a slight shift by members to 90-day mail supply.

Operating Costs

•The Healthcare Services segment operating cost ratio increased 20 basis points from 96.2% for the 2019 quarter to 96.4% for the 2020 quarter primarily due to COVID-19 administrative related costs, including expenses associated with additional safety measures taken for our pharmacy, provider, and clinical teams who have continued to provide services to members during the COVID-19 pandemic. The increase further reflects higher costs incurred in the pharmacy business to ensure timely delivery of prescriptions amid the COVID-19 pandemic. These costs were partially offset by operational improvements and reduced utilization resulting from COVID-19 in our provider services business, as well as significant operating cost efficiencies in the 2020 quarter driven by previously disclosed productivity initiatives. The Healthcare Services segment operating cost ratio decreased 50 basis points from 96.3% for the 2019 period to 95.8% for the 2020 period as a result of the net favorable impact of the same factors affecting the 2020 quarter.

52

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, and borrowings. 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).

For additional information on our liquidity risk, please refer to the section entitled “Risk Factors” in our 2019 Form 10-K and Item 1A of Part II of this document.     

Cash and cash equivalents increased to approximately $8.0 billion at September 30, 2020 from $4.1 billion at December 31, 2019. The change in cash and cash equivalents for the nine months ended September 30, 2020 and 2019 is summarized as follows:

	Nine Months Ended
	2020		2019
	(in millions)
Net cash provided by operating activities	$	5,356	$	4,772
Net cash used in investing activities	(3,010)		(477)
Net cash provided by (used in) financing activities	1,585		(1,111)
Increase in cash and cash equivalents	$	3,931	$	3,184

Cash Flow from Operating Activities

Our operating cash flows for the 2020 period increased from the 2019 period due primarily to higher income from operations.

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 September 30, 2020 and December 31, 2019:

	September 30, 2020		December 31, 2019		2020 Period Change		2019 Period Change
	(in millions)
IBNR (1)	$	5,149	$	4,150	$	999	$	656
Reported claims in process (2)	1,167		628		539		467
Other benefits payable (3)	1,892		1,226		666		235
Total benefits payable	$	8,208	$	6,004	$	2,204	$	1,358

(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,

53

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).

(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, 2019 to September 30, 2020 was primarily due to an increase in IBNR primarily as a result of Medicare Advantage membership growth, as well as increases in amounts owed to providers under the capitated and risk sharing arrangements, which were affected by the response to COVID-19 and resulting deferral of care impact on medical claims reserves, and an increase in the amount of processed but unpaid claims which fluctuate due to month-end cutoff. The increases in benefits payable from December 31, 2018 to September 30, 2019 were due to an increase in IBNR primarily as a result of Medicare Advantage membership growth and an increase in the amount of processed but unpaid claims which fluctuate due to month-end cutoff.

The detail of total net receivables was as follows at September 30, 2020 and December 31, 2019:

	September 30, 2020		December 31, 2019		2020 Period Change		2019 Period Change
	(in millions)
Medicare	$	863	$	835	$	28	$	(198)
Commercial and other	209		162		47		17
Military services	141		128		13		8
Allowance for doubtful accounts	(78)		(69)		(9)		6
Total net receivables	$	1,135	$	1,056	$	79	$	(167)
Reconciliation to cash flow statement:
Receivables from disposition (acquisition) of business					3		(12)
Change in receivables per cash flow statement resulting in cash from operations					$	82	$	(179)

The changes in Commercial and other receivables for the 2020 period were primarily as a result of Medicaid membership growth. The changes in Medicare receivables for both the 2020 period and the 2019 period 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

In the first quarter of 2020, we acquired privately held Enclara for cash consideration of approximately $709 million, net of cash received 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,

54

care coordination, regulatory compliance and customer service. Total capital expenditures, excluding acquisitions, were $668 million in the 2020 period and $506 million in the 2019 period.

Net purchases of investment securities in the 2020 period were $1.6 billion as compared to net proceeds from investment securities sales and maturities of $29 million in the 2019 period.

Cash Flow from Financing Activities

Claims payments were $283 million higher than receipts from CMS associated with Medicare Part D claim subsidies for which we do not assume risk in the 2020 period and receipts from CMS associated with Medicare Part D claim subsidies for which we do not assume risk were higher than claims payments by $113 million in the 2019 period.

Under our administrative services only TRICARE contracts, reimbursements from the federal government exceeded health care cost payments for which we do not assume risk by $9 million in the 2020 period and health care cost payments for which we do not assume risk exceeded reimbursements from the federal government by $102 million in the 2019 period.

In March 2020, we issued $600 million of 4.500% senior notes due April 1, 2025 and $500 million of 4.875% senior notes due April 1, 2030. Our net proceeds, reduced for the underwriters' discount and commission and offering expenses paid as of September 30, 2020 were $1,088 million.

In August 2019, we issued $500 million of 3.125% senior notes due August 15, 2029 and $500 million of 3.950% senior notes due August 15, 2049. Our net proceeds, reduced for the underwriters' discount and commission and offering expenses paid as of September 30, 2019 were $987 million. We used the net proceeds from this offering, together with available cash, to repay the $650 million outstanding amount due under our term note in August 2019, and the $400 million aggregate principal amount of our 2.625% senior notes due on its maturity date of October 1, 2019.

On July 31, 2019, we entered into an accelerated stock repurchase agreement, the July 2019 ASR, with Citibank, N.A., or Citi, to repurchase $1 billion of our common stock. On August 2, 2019, we made a payment of $1 billion to Citi and received an initial delivery of 2.7 million shares of our common stock. We also acquired common shares in connection with employee stock plans for an aggregate cost of $30 million in the 2020 period and $10 million in the 2019 period.

In March 2020, we drew $1 billion on our existing term loan commitment.

Net proceeds from the issuance of commercial paper were $21 million in the 2020 period and net repayments from the issuance of commercial paper were $358 million in the 2019 period. The maximum principal amount outstanding at any one time during the 2020 period was $600 million.

We paid dividends to stockholders of $239 million during the 2020 period and $216 million during the 2019 period.

Future Sources and Uses of Liquidity

Dividends

For a detailed discussion of dividends to stockholders, please refer to Note 10 to the condensed consolidated financial statements.

Stock Repurchases

For a detailed discussion of stock repurchases, please refer to Note 10 to the condensed consolidated financial statements.

55

Debt

For a detailed discussion of our debt, including our senior notes, term loan, credit agreement and commercial paper program, please refer to Note 12 to the condensed consolidated financial statements.

Acquisitions and Divestitures

During the 2020 period, we completed the acquisition of privately held Enclara, one of the nation’s largest hospice pharmacy and benefit management providers for cash consideration of approximately $709 million, net of cash received. For a detailed discussion of this transaction, please refer to Note 3 to the condensed consolidated financial statements.

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 September 30, 2020 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 $2.4 billion at September 30, 2020 compared to $1.4 billion at December 31, 2019. This increase primarily was due to the net proceeds from the issuance of senior notes, proceeds from a term loan, and commercial paper issuance. The increase was further impacted by regulated subsidiary dividends and non-regulated subsidiary earnings in our Healthcare Services segment. These increases were partially offset by the Enclara acquisition, capital expenditures, cash dividends to shareholders, and other working capital changes. 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 regulators).

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 state regulatory authorities, or ordinary dividends, is limited based on the entity’s level of statutory income and statutory capital and surplus. If the dividend, together with other dividends paid within the preceding twelve months, exceeds a specified statutory limit or is paid from sources other than earned surplus, it is generally considered an extraordinary dividend requiring prior regulatory approval. In most states, prior notification is provided before paying a dividend even if approval is not required.

56

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 June 30, 2020, our state regulated subsidiaries had aggregate statutory capital and surplus of approximately $9.3 billion, which exceeded aggregate minimum regulatory requirements of $6.4 billion. The amount of dividends paid to our parent company was approximately $360 million during the nine months ended September 30, 2020 compared to $1.4 billion during the nine months ended September 30, 2019. Actual dividends paid may vary year over year due to consideration of excess statutory capital and surplus and expected future surplus requirements related to, for example, premium volume and product mix.

57

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 September 30, 2020. Our net unrealized position increased $280 million from a net unrealized gain position of $211 million at December 31, 2019 to a net unrealized gain position of $491 million at September 30, 2020. At September 30, 2020, we had gross unrealized losses of $14 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 credit allowances during the nine months ended September 30, 2020. While we believe that these securities in an unrealized loss will recover in value over time 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 credit allowances 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 2.1 years as of September 30, 2020 and approximately 2.5 years as of December 31, 2019. The decline in the average duration is reflective of the increased holdings of cash and cash equivalents, along with other portfolio management activities. Based on the duration, including cash equivalents, a 1% increase in interest rates would generally decrease the fair value of our securities by approximately $452 million at September 30, 2020.

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 September 30, 2020.

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 September 30, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

58

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 13 to the condensed consolidated financial statements beginning on page 27 of this Form 10-Q.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, and the risk factor set forth below.

The spread of, and response to, the novel coronavirus, or COVID-19, underscores certain risks we face, including those discussed in our Form 10-K for the fiscal year ended December 31, 2019, and the rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact to us of COVID-19.

In December 2019, a novel strain of coronavirus (COVID-19) emerged which was declared a pandemic by the World Health Organization on March 11, 2020, and has now spread globally including throughout the United States. The spread of COVID-19 underscores certain risks we face in our business, including those discussed in our Form 10-K for the fiscal year ended December 31, 2019.

Governmental and non-governmental organizations may not effectively combat the spread and severity of COVID-19, increasing the potential for harm for our members. If the spread of COVID-19 is not contained, the premiums we charge may prove to be insufficient to cover the cost of health care services delivered to our members, which may increase significantly as a result of higher utilization rates of medical facilities and services and other increases in associated hospital and pharmaceutical costs. Over time, we may also experience increased costs or decreased revenues if, as a result of our members being unable to see their providers due to actions taken to mitigate the spread of COVID-19, we are unable to implement clinical initiatives to manage health care costs and chronic conditions of our members, and appropriately document their risk profiles. In addition, we are offering our members expanded benefit coverage, such as waiving out of pocket costs for COVID-19 diagnostic testing and treatment, certain additional coverages have been mandated by governmental action and we are taking actions designed to help provide financial and administrative relief for the health care provider community. Such measures and any further steps taken by us, or governmental action, to continue to respond to and to address the ongoing impact of COVID-19, including further expansion or modification of the services delivered to our members, the adoption or modification of regulatory requirements associated with those services and the costs and challenges associated with ensuring timely compliance with such requirements, to provide further relief for the health care provider community, or in connection with the relaxation of stay-at-home and physical distancing orders and other restrictions on movement and economic activity, including the potential for widespread testing and therapeutic treatments and a vaccine, once available, as a component of lifting these measures, could adversely impact our profitability.

The spread and impact of COVID-19, or actions taken to mitigate this spread, could have material and adverse effects on our ability to operate effectively, including as a result of the complete or partial closure of facilities or labor shortages. Disruptions in public and private infrastructure, including communications, availability of in-person sales and marketing channels, financial services and supply chains, could materially and adversely disrupt our normal business operations. We have transitioned a significant subset of our employee population to a remote work environment in an effort to mitigate the spread of COVID-19, as have a number of our third-party service providers, which may exacerbate

59

certain risks to our business, including an increased demand for information technology resources, increased risk of phishing and other cybersecurity attacks, and increased risk of unauthorized dissemination of sensitive personal information or proprietary or confidential information about us or our members or other third-parties. The outbreak of COVID-19 has severely impacted global economic activity, including the businesses of some of our commercial customers, and caused significant volatility and negative pressure in the financial markets. In addition to disrupting our operations, these developments may adversely affect the timing of commercial customer premium collections and corresponding claim payments, the value of our investment portfolio, or future liquidity needs.

The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact to us of COVID-19. We are continuing to monitor the spread of COVID-19, changes to our benefit coverages, the ongoing costs and business impacts of dealing with COVID-19, including the potential costs and impacts associated with lifting, or reimposing restrictions on movement and economic activity and related risks. The magnitude and duration of the pandemic and its ultimate impact on our business, results of operations, financial position, and cash flows is uncertain as this continues to evolve globally, but such impacts could be material to our business, results of operations, financial position and cash flows.

60

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 September 30, 2020:

Period	Total Number of Shares Purchased (1)(2)	Average Price Paid per Share		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)
July 2020	—	$	—	—	$	—
August 2020	—	—		—	—
September 2020	—	—		—	—
Total	—	$	—	—

(1)On July 30, 2019, the Board of Directors replaced a previous share repurchase authorization of up to $3 billion with a new authorization for repurchases of up to $3 billion of our common shares exclusive of shares repurchased in connection with employee stock plans, expiring on June 30, 2022. Under our 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. Our remaining repurchase authorization was approximately $2 billion as of November 2, 2020.

(2)Excludes 80,000 shares repurchased in connection with employee stock plans.

Item 3:     Defaults Upon Senior Securities

None.

Item 4:     Mine Safety Disclosures

Not applicable.

Item 5:     Other Information

None.

61

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).
31.1	Principal Executive Officer certification pursuant to Section 302 of Sarbanes–Oxley Act of 2002.
31.2	Principal Financial Officer certification pursuant to Section 302 of Sarbanes–Oxley Act of 2002.
32	Principal 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 iXBRL (Inline Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets at September 30, 2020 and December 31, 2019; (ii) the Condensed Consolidated Statements of Income for the three months and nine months ended September 30, 2020 and 2019; (iii) the Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2020 and 2019; (iv) the Consolidated Statements of Equity for the three and nine months ended September 30, 2020 and 2019; (v) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019; and (vi) Notes to Condensed Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
104	Cover Page Interactive Data File formatted in Inline XBRL and contained in Exhibit 101.

62

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:	November 3, 2020	By:	/s/ CYNTHIA H. ZIPPERLE
			Cynthia H. Zipperle
			Senior Vice President, Chief Accounting Officer and Controller (Principal Accounting Officer)

63

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 Report of Humana Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2020;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4. The registrant’s other certifying officer 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 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:	November 3, 2020
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 Report of Humana Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2020;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4. The registrant’s other certifying officer 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 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:	November 3, 2020
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 Report of Humana Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2020 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

November 3, 2020

/s/ Brian A. Kane

Brian A. Kane
Principal Financial Officer

November 3, 2020

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.

XML

Cover	9 Months Ended
	Sep. 30, 2020 shares
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2020
Document Transition Report	false
Entity File Number	1-5975
Entity Registrant Name	HUMANA INC
Entity Central Index Key	0000049071
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	61-0647538
Entity Address, Address Line One	500 West Main Street
Entity Address, City or Town	Louisville
Entity Address, State or Province	KY
Entity Address, Postal Zip Code	40202
City Area Code	502
Local Phone Number	580-1000
Title of 12(b) Security	Common stock, $0.16 2/3 par value
Trading Symbol	HUM
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding	132,341,451

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 7,985	$ 4,054
Investment securities	12,741	10,972
Receivables, less allowance for doubtful accounts of $78 in 2020 and $69 in 2019	1,135	1,056
Other current assets	5,170	3,806
Total current assets	27,031	19,888
Property and equipment, net	2,228	1,955
Long-term investment securities	1,105	406
Equity method investments	1,160	1,063
Goodwill	4,443	3,928
Other long-term assets	2,510	1,834
Total assets	38,477	29,074
Current liabilities:
Benefits payable	8,208	6,004
Trade accounts payable and accrued expenses	4,472	3,754
Book overdraft	214	225
Unearned revenues	287	247
Short-term debt	1,724	699
Total current liabilities	14,905	10,929
Long-term debt	6,059	4,967
Future policy benefits payable	202	206
Other long-term liabilities	1,543	935
Total liabilities	22,709	17,037
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; 198,648,742 shares issued at September 30, 2020 and 198,629,992 shares issued at December 31, 2019	33	33
Capital in excess of par value	2,940	2,820
Retained earnings	20,872	17,483
Accumulated other comprehensive income	370	156
Treasury stock, at cost, 66,307,291 shares at September 30, 2020 and 66,524,771 shares at December 31, 2019	(8,447)	(8,455)
Total stockholders’ equity	15,768	12,037
Total liabilities and stockholders’ equity	$ 38,477	$ 29,074

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Receivables, allowance for doubtful accounts	$ 78	$ 69
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)	198,648,742	198,629,992
Treasury stock, shares (in shares)	66,307,291	66,524,771

XML

Condensed Consolidated Statements of Income - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Revenues:
Premiums	$ 18,904	$ 15,712	$ 55,822	$ 47,139
Services	457	393	1,331	1,103
Investment income	714	136	940	351
Total revenues	20,075	16,241	58,093	48,593
Operating expenses:
Benefits	15,611	13,357	45,415	40,168
Operating costs	2,513	1,889	6,984	5,252
Depreciation and amortization	128	127	362	343
Total operating expenses	18,252	15,373	52,761	45,763
Income from operations	1,823	868	5,332	2,830
Interest expense	75	62	211	184
Other (income) expense, net	(7)	(82)	63	(217)
Income before income taxes and equity in net earnings	1,755	888	5,058	2,863
Provision for income taxes	450	200	1,485	684
Equity in net earnings	35	1	68	16
Net income	$ 1,340	$ 689	$ 3,641	$ 2,195
Basic earnings per common share (in dollars per share)	$ 10.12	$ 5.16	$ 27.53	$ 16.31
Diluted earnings per common share (in dollars per share)	$ 10.05	$ 5.14	$ 27.37	$ 16.24
Services revenue, type	us-gaap:HealthCareService	us-gaap:HealthCareService	us-gaap:HealthCareService	us-gaap:HealthCareService

XML

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Statement of Comprehensive Income [Abstract]
Net income	$ 1,340	$ 689	$ 3,641	$ 2,195
Other comprehensive income:
Change in gross unrealized investment gains/losses	66	87	332	452
Effect of income taxes	(15)	(20)	(78)	(105)
Total change in unrealized investment gains/losses, net of tax	51	67	254	347
Reclassification adjustment for net realized gains	(1)	(1)	(48)	(7)
Effect of income taxes	0	0	10	2
Total reclassification adjustment, net of tax	(1)	(1)	(38)	(5)
Other comprehensive income, net of tax	50	66	216	342
Comprehensive income (loss) attributable to equity method investments	3	(1)	(2)	(6)
Comprehensive income	$ 1,393	$ 754	$ 3,855	$ 2,531

XML

Condensed Consolidated Statements of Stockholders' Equity - USD ($) shares in Thousands, $ in Millions	Total	Impact of adoption of ASC 326	Common Stock	Capital In Excess of Par Value	Retained Earnings	Retained Earnings Impact of adoption of ASC 326	Accumulated Other Comprehensive Income (Loss)	Treasury Stock
Balances at Dec. 31, 2018	$ 10,161		$ 33	$ 2,535	$ 15,072		$ (159)	$ (7,320)
Balances (in shares) at Dec. 31, 2018			198,595
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	2,195				2,195
Other comprehensive income (loss)	336						336
Common stock repurchases	(1,010)			(50)				(960)
Dividends and dividend equivalents	(222)				(222)
Stock-based compensation	119			119
Restricted stock unit vesting	0			(3)				3
Restricted stock unit vesting (in shares)			32
Stock option exercises	22			7				15
Stock option exercises (in shares)			2
Balances at Sep. 30, 2019	11,601		$ 33	2,608	17,045		177	(8,262)
Balances (in shares) at Sep. 30, 2019			198,629
Balances at Dec. 31, 2018	10,161		$ 33	2,535	15,072		(159)	(7,320)
Balances (in shares) at Dec. 31, 2018			198,595
Balances at Dec. 31, 2019	$ 12,037	$ (2)	$ 33	2,820	17,483	$ (2)	156	(8,455)
Balances (in shares) at Dec. 31, 2019			198,630
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Accounting Standards Update [Extensible List]	us-gaap:AccountingStandardsUpdate201613Member
Balances at Jun. 30, 2019	$ 11,872		$ 33	2,763	16,429		112	(7,465)
Balances (in shares) at Jun. 30, 2019			198,628
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	689				689
Other comprehensive income (loss)	65						65
Common stock repurchases	(1,000)			(200)				(800)
Dividends and dividend equivalents	(73)				(73)
Stock-based compensation	43			43
Restricted stock unit vesting	0			0				0
Restricted stock unit vesting (in shares)			0
Stock option exercises	5			2				3
Stock option exercises (in shares)			1
Balances at Sep. 30, 2019	11,601		$ 33	2,608	17,045		177	(8,262)
Balances (in shares) at Sep. 30, 2019			198,629
Balances at Dec. 31, 2019	12,037	$ (2)	$ 33	2,820	17,483	$ (2)	156	(8,455)
Balances (in shares) at Dec. 31, 2019			198,630
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	3,641				3,641
Other comprehensive income (loss)	214						214
Common stock repurchases	(30)			0				(30)
Common stock repurchases (in shares)			19
Dividends and dividend equivalents	(250)				(250)
Stock-based compensation	129			129
Restricted stock unit vesting	0			(21)				21
Restricted stock unit vesting (in shares)			0
Stock option exercises	29			12				17
Stock option exercises (in shares)			0
Balances at Sep. 30, 2020	15,768		$ 33	2,940	20,872		370	(8,447)
Balances (in shares) at Sep. 30, 2020			198,649
Balances at Jun. 30, 2020	14,416		$ 33	2,898	19,616		317	(8,448)
Balances (in shares) at Jun. 30, 2020			198,630
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	1,340				1,340
Other comprehensive income (loss)	53						53
Common stock repurchases	(5)			0				(5)
Common stock repurchases (in shares)			19
Dividends and dividend equivalents	(84)				(84)
Stock-based compensation	47			47
Restricted stock unit vesting	0			(6)				6
Restricted stock unit vesting (in shares)			0
Stock option exercises	1			1				0
Stock option exercises (in shares)			0
Balances at Sep. 30, 2020	$ 15,768		$ 33	$ 2,940	$ 20,872		$ 370	$ (8,447)
Balances (in shares) at Sep. 30, 2020			198,649

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Cash flows from operating activities
Net income	$ 3,641	$ 2,195
Adjustments to reconcile net income to net cash provided by operating activities:
Gains on investment securities, net	(696)	(23)
Equity in net earnings	(68)	(16)
Stock-based compensation	129	119
Depreciation	390	382
Amortization	66	53
Benefit for deferred income taxes	(3)	(21)
Changes in operating assets and liabilities, net of effect of businesses acquired and dispositions:
Receivables	(82)	179
Other assets	(1,547)	334
Benefits payable	2,204	1,358
Other liabilities	1,257	168
Unearned revenues	40	(9)
Other	25	53
Net cash provided by operating activities	5,356	4,772
Cash flows from investing activities
Acquisitions, net of cash acquired	(709)	0
Purchases of property and equipment	(668)	(506)
Purchases of investment securities	(7,230)	(4,130)
Maturities of investment securities	3,500	1,281
Proceeds from sales of investment securities	2,097	2,878
Net cash used in investing activities	(3,010)	(477)
Cash flows from financing activities
(Withdrawals) receipts from contract deposits, net	(274)	11
Proceeds from issuance of senior notes, net	1,088	987
Proceeds (repayments) from issuance of commercial paper, net	21
Proceeds (repayments) from issuance of commercial paper, net		(358)
Proceeds from term loan	1,000	0
Repayments of Notes Payable	0	(650)
Change in book overdraft	(11)	102
Common stock repurchases	(30)	(1,010)
Dividends paid	(239)	(216)
Proceeds from stock option exercises and other, net	30	23
Net cash provided by (used in) financing activities	1,585	(1,111)
Increase in cash and cash equivalents	3,931	3,184
Cash and cash equivalents at beginning of period	4,054	2,343
Cash and cash equivalents at end of period	7,985	5,527
Supplemental cash flow disclosures:
Interest payments	159	136
Income tax payments, net	$ 778	$ 578

XML

BASIS OF PRESENTATION AND SIGNIFICANT EVENTS

9 Months Ended

Sep. 30, 2020

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, 2019, that was filed with the Securities and Exchange Commission, or the SEC, on February 20, 2020. We refer to the Form 10-K as the “2019 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, 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 2019 Form 10-K for information on accounting policies that we consider in preparing our consolidated financial statements. Since the filing of our 2019 Form 10-K we have received common stock, primarily in Oak Street Health, Inc., or OSH, as part of their initial public offering during the third quarter of 2020. We have updated our accounting policy for investment securities below.

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.

Investment Securities

Investment securities, which consist of debt and equity securities, are stated at fair value. Our debt securities have been categorized as available for sale. Debt securities available for current operations are classified as current assets and debt securities available for our long-term insurance products and professional liability funding requirements, as well as restricted statutory deposits and equity securities, are classified as long-term assets. For the purpose of determining realized gross gains and losses for debt securities sold, which are included as a component of investment income in the consolidated statements of income, the cost of investment securities sold is based upon specific identification. Unrealized holding gains and losses for debt securities, net of applicable deferred taxes, are included as a component of stockholders’ equity and comprehensive income until realized from a sale or other-than-temporary impairment. For the purpose of determining gross gains and losses for equity securities, changes in fair value at the reporting date are included as a component of investment income in the consolidated statements of income.

COVID-19

The temporary deferral of non-essential care resulting from stay-at-home and physical distancing orders and other restrictions on movement and economic activity implemented throughout the country beginning in the second half of March 2020 to reduce the spread of the novel coronavirus, or COVID-19, has impacted our business. Hospital admissions and utilization were significantly depressed in April and increased throughout May and June. Utilization continued to rebound throughout the third quarter of 2020, reaching approximately 95% of historic baseline levels at the close of the third quarter. The impact of the deferral of non-essential care was partially offset by COVID-19 testing and treatment costs, as well as our ongoing pandemic relief efforts.

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 2019 Form 10-K for information on accounting policies that we consider in preparing our consolidated financial statements. See Note 14 for disaggregation of revenue by segment and type.

At September 30, 2020, accounts receivable related to services were $155 million. For the three and nine months ended September 30, 2020, 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 September 30, 2020.

For the three and nine months ended September 30, 2020, services revenue recognized from performance obligations related to prior periods (for example, due to changes in transaction price), was not material. Further, services revenue expected to be recognized in any future year related to remaining performance obligations was not material.

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) enacted significant reforms to various aspects of the U.S. health insurance industry. Certain of these reforms became effective January 1, 2014, including an annual insurance industry premium-based fee. The Continuing Resolution bill, H.R. 195, enacted on January 22, 2018, included a one year suspension in 2019 of the health insurance industry fee, but the fee resumed in calendar year 2020. The Further Consolidated Appropriations Act, 2020, enacted on December 20, 2019, permanently repealed the health insurance industry fee beginning in calendar year 2021.

In September 2020, we paid the federal government $1.2 billion for the annual health insurance industry fee attributed to calendar year 2020. This fee, fixed in amount by law and apportioned to insurance carriers based on market share, is not deductible for tax purposes. On January 1 we recorded a liability for this fee in trade accounts payable and accrued expenses which we carried until the fee was paid. We also recorded 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 $292 million and $884 million for the three and nine months ended September 30, 2020, respectively, resulting from the amortization of the 2020 annual health insurance industry fee.

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. On April 27, 2020, the U.S. Supreme Court ruled that the government is obligated to pay the losses under this risk corridor program, and that Congress did not impliedly repeal the obligation under its appropriations riders. In September 2020, we received a $609 million payment from the U.S Government pursuant to the judgement issued by the Court of Federal Claims on July 7, 2020. The $609 million payment received from the U.S Government and approximately $31 million in related fees and expenses are reflected in "Premiums" revenue and "Operating costs", respectively, in our condensed consolidated statements of income for the three and nine months ended September 30, 2020 and reported in the Corporate segment.

XML

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

9 Months Ended

Sep. 30, 2020

Accounting Standards Update and Change in Accounting Principle [Abstract]

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTSIn 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 was 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 primarily of available for sale debt securities. We adopted the new standard effective January 1, 2020. Due to the high concentration of our financial assets measured at amortized cost being with the federal government resulting in zero nonpayment risk as well as our available for sale debt securities primarily being in an unrealized gain position, the adoption of the new standard did not have a material impact on our results of operations, financial condition, or cash flows.

In September 2018, the FASB issued new guidance related to accounting for long-duration contracts of insurers which revises key elements of the measurement models and disclosure requirements for long-duration contracts issued by insurers and reinsurers. The new guidance is effective for us beginning with annual and interim periods in 2023, with earlier adoption permitted, and requires retrospective application to previously issued annual and interim financial statements. We are currently evaluating the impact on our results of operations, financial position and 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.

XML

ACQUISITIONS AND DIVESTITURES

9 Months Ended

Sep. 30, 2020

Business Combinations [Abstract]

ACQUISITIONS AND DIVESTITURES

ACQUISITIONS AND DIVESTITURES

On January 31, 2020, we purchased privately held Enclara Healthcare, or Enclara, one of the nation’s largest hospice pharmacy and benefit management providers for cash consideration of approximately $709 million, net of cash received. This resulted in a preliminary purchase price allocation to goodwill of $515 million, other intangible assets of $240 million, and net tangible liabilities assumed of $11 million. The goodwill was assigned to the Healthcare Services segment. The other intangible assets, which primarily consist of customer contracts, have an estimated weighted average useful life of 11.4 years. The purchase price allocation is preliminary, subject to completion of valuation analysis, including for example, refining assumptions used to calculate the fair value of intangible assets.

On February 1, 2020, our Partners in Primary Care wholly-owned subsidiary entered into a strategic partnership with Welsh, Carson, Anderson & Stowe, or WCAS, to accelerate the expansion of our primary care model. The WCAS partnership is expected to open approximately 50 payor-agnostic, senior-focused primary care centers over 3 years beginning in 2020. Partners in Primary Care committed to the acquisition of a non-controlling interest in the approximately $600 million entity accounted for under the equity method of accounting. In addition, the agreement includes a series of put and call options through which WCAS may require us to purchase their interest in the entity, and through which we may acquire WCAS’s interest, over the next 5 to 10 years.

During 2020 and 2019, 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 acquired in 2020 and 2019 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 2020 and 2019 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.

XML

INVESTMENT SECURITIES

9 Months Ended

Sep. 30, 2020

Investments, Debt and Equity Securities [Abstract]

INVESTMENT SECURITIES

INVESTMENT SECURITIES

Investment securities classified as current and long-term were as follows at September 30, 2020 and December 31, 2019, respectively:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in millions)
September 30, 2020
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	1,195	$	2	$	(1)	$	1,196
Mortgage-backed securities	3,511		183		(2)		3,692
Tax-exempt municipal securities	1,439		40		(3)		1,476
Commercial mortgage-backed securities	1,020		54		(1)		1,073
Asset-backed securities	1,278		8		(5)		1,281
Corporate debt securities	4,199		218		(2)		4,415
Total debt securities	$	12,642	$	505	$	(14)	13,133
Common stock							713
Total investment securities							$	13,846
December 31, 2019
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	353	$	1	$	—	$	354
Mortgage-backed securities	3,628		85		(3)		3,710
Tax-exempt municipal securities	1,433		30		—		1,463
Commercial mortgage-backed securities	786		18		—		804
Asset-backed securities	1,093		3		(3)		1,093
Corporate debt securities	3,867		82		(2)		3,947
Total debt securities	$	11,160	$	219	$	(8)	11,371
Common stock							7
Total investment securities							$	11,378

Gross unrealized losses and fair values aggregated by investment category and length of time of individual debt securities that have been in a continuous unrealized loss position were as follows at September 30, 2020 and December 31, 2019, 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)
September 30, 2020
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	662	$	(1)	$	—	$	—	$	662	$	(1)
Mortgage-backed securities	450		(2)		—		—		450		(2)
Tax-exempt municipal securities	127		(3)		12		—		139		(3)
Commercial mortgage-backed securities	181		—		36		(1)		217		(1)
Asset-backed securities	121		(1)		537		(4)		658		(5)
Corporate debt securities	275		(1)		98		(1)		373		(2)
Total debt securities	$	1,816	$	(8)	$	683	$	(6)	$	2,499	$	(14)
December 31, 2019
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	48	$	—	$	23	$	—	$	71	$	—
Mortgage-backed securities	315		(1)		204		(2)		519		(3)
Tax-exempt municipal securities	58		—		75		—		133		—
Commercial mortgage-backed securities	118		—		36		—		154		—
Asset-backed securities	20		—		607		(3)		627		(3)
Corporate debt securities	589		(2)		155		—		744		(2)
Total debt securities	$	1,148	$	(3)	$	1,100	$	(5)	$	2,248	$	(8)

Approximately 96% 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 September 30, 2020. 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 1% of our total debt securities. Our investment policy limits investments in a single issuer and requires diversification among various asset types.

Our unrealized losses from all debt securities were generated from approximately 155 positions out of a total of approximately 1,530 positions at September 30, 2020. All issuers of debt securities we own that were trading at an unrealized loss at September 30, 2020 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 these debt securities were purchased. At September 30, 2020, we did not intend to sell any debt securities with an unrealized loss position in accumulated other comprehensive income, and it is not likely that we will be required to sell these debt securities before recovery of their amortized cost basis. Additionally, we did not record any material credit allowances for debt securities that were in an unrealized loss position for the three and nine months ended September 30, 2020.

The detail of gains (losses) related to investment securities and included within investment income was as follows for the three and nine months ended September 30, 2020 and 2019:

	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in millions)
Gross gains on investment securities	$	645	$	41	$	714	$	59
Gross losses on investment securities	—		(23)		(18)		(36)
Net gains on investment securities	$	645	$	18	$	696	$	23

Gross gain on investment securities includes both the gain resulting from the initial conversion of our prior ownership interest in certain privately held companies into common stock upon such companies' initial public offering, or IPO, during the three months ended September 30, 2020, and subsequent changes in the market value of such securities from the IPO through the end of the period, which combined to total $643 million for the three and nine months ended September 30, 2020.

All purchases of and proceeds from investment securities for the three and nine months ended September 30, 2020 and 2019 relate to debt securities.

There were no material other-than-temporary impairments for the three and nine months ended September 30, 2019.

The contractual maturities of debt securities available for sale at September 30, 2020, 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	$	1,487	$	1,490
Due after one year through five years	2,176		2,259
Due after five years through ten years	1,999		2,128
Due after ten years	1,171		1,210
Mortgage and asset-backed securities	5,809		6,046
Total debt securities	$	12,642	$	13,133

XML

FAIR VALUE

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

FAIR VALUE

FAIR VALUE

Financial Assets

The following table summarizes our fair value measurements at September 30, 2020 and December 31, 2019, 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)
September 30, 2020
Cash equivalents	$	7,722	$	7,722	$	—	$	—
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	1,196		—		1,196		—
Mortgage-backed securities	3,692		—		3,692		—
Tax-exempt municipal securities	1,476		—		1,476		—
Commercial mortgage-backed securities	1,073		—		1,073		—
Asset-backed securities	1,281		—		1,281		—
Corporate debt securities	4,415		—		4,415		—
Total debt securities	13,133		—		13,133		—
Common stock	713		713		—		—
Total investment securities	$	21,568	$	8,435	$	13,133	$	—
December 31, 2019
Cash equivalents	$	3,660	$	3,660	$	—	$	—
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	354		—		354		—
Mortgage-backed securities	3,710		—		3,710		—
Tax-exempt municipal securities	1,463		—		1,463		—
Commercial mortgage-backed securities	804		—		804		—
Asset-backed securities	1,093		—		1,093		—
Corporate debt securities	3,947		—		3,947		—
Total debt securities	11,371		—		11,371		—
Common stock	7		7		—		—
Total investment securities	$	15,038	$	3,667	$	11,371	$	—

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 $6,458 million at September 30, 2020 and $5,366 million at December 31, 2019. The fair value of our senior notes debt was $7,674 million at September 30, 2020 and $5,916 million at December 31, 2019. The fair value of our senior note 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 term note and commercial paper borrowings. The term loan outstanding and commercial paper borrowings were $1,325 million as of September 30, 2020. The commercial paper borrowings were $300 million as of December 31, 2019.

Put and Call Options Measured at Fair Value

As part of our investment in Kindred at Home, we entered into a shareholders agreement with TPG Capital, or TPG, and Welsh, Carson, Anderson & Stowe, or WCAS, the Sponsors, that provides for certain rights and obligations of each party. 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 beginning on July 2, 2021 and ending on July 1, 2022. Likewise, 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 on July 2, 2022 and ending on July 1, 2023. The put and call options, which are exercisable at a fixed EBITDA multiple and provide a minimum return on the Sponsor's investment if exercised, are measured at fair value each period using a Monte Carlo simulation.

The put and call options fair values were $151 million and $634 million, respectively, at September 30, 2020, and $28 million and $557 million, respectively, at December 31, 2019. The put option is included within other long-term liabilities and the call option is included within other long-term assets. The change in fair value of the put and call options is reflected as "Other (income) expense, net" in our condensed consolidated statements of income.

The significant unobservable inputs utilized in these Level 3 fair value measurements (and selected values) include the enterprise value of Kindred at Home, annualized volatility and secured credit rate. Enterprise value was derived from a discounted cash flow model, which utilized significant unobservable inputs for long-term net operating profit after tax margin, or NOPAT, to measure underlying cash flows, weighted average cost of capital and long term growth rate. The table below presents the assumptions used for each reporting period.

	September 30, 2020		December 31, 2019
Annualized volatility	44.9	%	19.8	%
Secured credit rate	0.4	%	2.2	%
NOPAT	12.0	%	12.0	%
Weighted average cost of capital	10.0	%	10.0	%
Long term growth rate	3.0	%	3.0	%

The calculation of NOPAT utilized net income plus after tax interest expense. We regularly evaluate each of the assumptions used in establishing these assets and liabilities. Significant changes in assumptions for weighted average cost of capital, long term growth rates, NOPAT, volatility, credit spreads, risk free rate, and underlying cash flow estimates, could result in significantly lower or higher fair value measurements. A change in one of these assumptions is not necessarily accompanied by a change in another assumption.

Other Assets and Liabilities Measured at Fair Value

As disclosed in Note 3, we acquired Enclara during 2020. 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 net tangible liabilities assumed were recorded at their carrying values as of the date 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 this acquisition 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 future cash flows and discount rates used in the present value calculations. Other than assets acquired and liabilities assumed in this acquisition, there were no other material assets or liabilities measured at fair value on a recurring or nonrecurring basis during 2020.

XML

MEDICARE PART D

9 Months Ended

Sep. 30, 2020

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 2019 Form 10-K. The accompanying condensed consolidated balance sheets include the following amounts associated with Medicare Part D at September 30, 2020 and December 31, 2019. 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.

	September 30, 2020				December 31, 2019
	Risk Corridor Settlement		CMS Subsidies/ Discounts		Risk Corridor Settlement		CMS Subsidies/ Discounts
	(in millions)
Other current assets	$	25	$	1,226	$	5	$	585
Trade accounts payable and accrued expenses	(101)		(714)		(120)		(356)
Net current (liability) asset	(76)		512		(115)		229
Other long-term assets	273		—		6		—
Other long-term liabilities	(176)		—		(61)		—
Net long-term asset (liability)	97		—		(55)		—
Total net asset (liability)	$	21	$	512	$	(170)	$	229

XML

GOODWILL AND OTHER INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2020

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 nine months ended September 30, 2020 were as follows:

	Retail		Group and Specialty		Healthcare Services		Total
	(in millions)
Balance at January 1, 2020	$	1,535	$	261	$	2,132	$	3,928
Acquisitions	—		—		515		515
Balance at September 30, 2020	$	1,535	$	261	$	2,647	$	4,443

    The following table presents details of our other intangible assets included in other long-term assets in the accompanying condensed consolidated balance sheets at September 30, 2020 and December 31, 2019.

		September 30, 2020						December 31, 2019
	Weighted Average Life	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
		($ in millions)
Other intangible assets:
Customer contracts/ relationships	9.5 years	$	849	$	553	$	296	$	646	$	496	$	150
Trade names and technology	7.0 years	122		87		35		84		84		—
Provider contracts	11.8 years	70		49		21		70		44		26
Noncompetes and other	7.3 years	29		29		—		29		28		1
Total other intangible assets	9.3 years	$	1,070	$	718	$	352	$	829	$	652	$	177

    For the three months ended September 30, 2020 and 2019, amortization expense for other intangible assets was approximately $23 million and $17 million, respectively. For the nine months ended September 30, 2020 and 2019, amortization expense for other intangible assets was approximately $66 million and $53 million, respectively. The following table presents our estimate of amortization expense remaining for 2020 and each of the five next succeeding years:

	(in millions)
For the years ending December 31,
2020	$	22
2021	56
2022	53
2023	40
2024	33
2025	33

XML

BENEFITS PAYABLE

9 Months Ended

Sep. 30, 2020

Insurance [Abstract]

BENEFITS PAYABLE

BENEFITS PAYABLE

On a consolidated basis, activity in benefits payable, was as follows for the nine months ended September 30, 2020 and 2019:

	For the nine months ended September 30,
	2020		2019
	(in millions)
Balances, beginning of period	$	6,004	$	4,862
Less: Reinsurance recoverables	(68)		(95)
Balances, beginning of period, net	5,936		4,767
Incurred related to:
Current year	45,693		40,499
Prior years	(278)		(331)
Total incurred	45,415		40,168
Paid related to:
Current year	(37,810)		(34,625)
Prior years	(5,334)		(4,158)
Total paid	(43,144)		(38,783)
Reinsurance recoverable	1		68
Balances, end of period	$	8,208	$	6,220

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.

Incurred and Paid Claims Development

The following discussion provides information about incurred and paid claims development for our Retail and Group and Specialty segments as of September 30, 2020 and 2019, net of reinsurance, and the total estimate of benefits payable for claims incurred but not reported, or IBNR, included within the net incurred claims amounts.

Retail Segment

Activity in benefits payable for our Retail segment was as follows for the nine months ended September 30, 2020 and 2019:

	For the nine months ended September 30,
	2020		2019
	(in millions)
Balances, beginning of period	$	5,363	$	4,338
Less: Reinsurance recoverables	(68)		(95)
Balances, beginning of period, net	5,295		4,243
Incurred related to:
Current year	42,186		36,762
Prior years	(235)		(366)
Total incurred	41,951		36,396
Paid related to:
Current year	(34,946)		(31,476)
Prior years	(4,759)		(3,634)
Total paid	(39,705)		(35,110)
Reinsurance recoverable	1		68
Balances, end of period	$	7,542	$	5,597

At September 30, 2020, benefits payable for our Retail segment included IBNR of approximately $4.6 billion, primarily associated with claims incurred in 2020.

Group and Specialty Segment

Activity in benefits payable for our Group and Specialty segment, was as follows for the nine months ended September 30, 2020 and 2019:

	For the nine months ended September 30,
	2020		2019
	(in millions)
Balances, beginning of period	$	641	$	517
Incurred related to:
Current year	3,929		4,142
Prior years	(43)		35
Total incurred	3,886		4,177
Paid related to:
Current year	(3,286)		(3,547)
Prior years	(575)		(524)
Total paid	(3,861)		(4,071)
Balances, end of period	$	666	$	623

At September 30, 2020, benefits payable for our Group and Specialty segment included IBNR of approximately $576 million, primarily associated with claims incurred in 2020.

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
	September 30,
	2020
Net outstanding liabilities	(in millions)
Retail	$	7,541
Group and Specialty	666
Benefits payable, net of reinsurance	8,207
Reinsurance recoverable on unpaid claims
Retail	1
Total benefits payable, gross	$	8,208

XML

EARNINGS PER COMMON SHARE COMPUTATION

9 Months Ended

Sep. 30, 2020

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 and nine months ended September 30, 2020 and 2019:

	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(dollars in millions, except per common share results; number of shares in thousands)
Net income available for common stockholders	$	1,340	$	689	$	3,641	$	2,195
Weighted average outstanding shares of common stock used to compute basic earnings per common share	132,318		133,321		132,234		134,589
Dilutive effect of:
Employee stock options	105		101		95		99
Restricted stock	773		603		681		501
Shares used to compute diluted earnings per common share	133,196		134,025		133,010		135,189
Basic earnings per common share	$	10.12	$	5.16	$	27.53	$	16.31
Diluted earnings per common share	$	10.05	$	5.14	$	27.37	$	16.24
Number of antidilutive stock options and restricted stock excluded from computation	143		302		311		589

XML

STOCKHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2020

Equity [Abstract]

STOCKHOLDERS' EQUITY

STOCKHOLDERS’ EQUITY

Dividends

The following table provides details of dividend payments, excluding dividend equivalent rights for unvested stock awards, in 2019 and 2020 under our Board approved quarterly cash dividend policy:

Record Date	Payment Date	Amount per Share		Total Amount
				(in millions)
2019 payments
12/31/2018	1/25/2019	$	0.50	$	68
3/29/2019	4/26/2019	$	0.55	$	74
6/28/2019	7/26/2019	$	0.55	$	74
9/30/2019	10/25/2019	$	0.55	$	73
2020 payments
12/31/2019	1/31/2020	$	0.55	$	73
3/31/2020	4/24/2020	$	0.625	$	83
6/30/2020	7/31/2020	$	0.625	$	83
9/30/2020	10/30/2020	$	0.625	$	83

In November 2020, the Board declared a cash dividend of $0.625 per share payable on January 29, 2021 to stockholders of record on December 31, 2020.

Stock Repurchases

Our Board of Directors may authorize the purchase of our common stock shares. 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 July 30, 2019, the Board of Directors replaced a previous share repurchase authorization of up to $3 billion (of which approximately $1.03 billion remained unused) with a new authorization for repurchases of up to $3 billion of our common shares exclusive of shares repurchased in connection with employee stock plans, expiring on June 30, 2022.

On July 31, 2019, we entered into an accelerated stock repurchase agreement, the July 2019 ASR, with Citibank, N.A., or Citi, to repurchase $1 billion of our common stock. On August 2, 2019, we made a payment of $1 billion to Citi and received an initial delivery of 2.7 million shares of our common stock. We recorded the payment to Citi as a reduction to stockholders’ equity, consisting of an $800 million increase in treasury stock, which reflects the value of the initial 2.7 million shares received upon initial settlement, and a $200 million decrease in capital in excess of par value, which reflects the value of stock held back by Citi pending final settlement of the July 2019 ASR. Upon final settlement of the July 2019 ASR on December 26, 2019, we received an additional 0.7 million shares as determined by the average daily volume weighted-averages share price of our common stock during the term of the agreement, less a discount, of $296.19, bringing the total shares received under the July 2019 ASR to 3.4 million. In addition, upon settlement we reclassified the $200 million value of stock initially held back by Citi from capital in excess of par value to treasury stock.

Our remaining repurchase authorization was approximately $2 billion of the $3 billion share repurchase program as of November 2, 2020.

In connection with employee stock plans, we acquired 0.08 million common shares for $30 million and 0.03 million common shares for $10 million during the nine months ended September 30, 2020 and 2019, respectively.

XML

INCOME TAXES	9 Months Ended
	Sep. 30, 2020
Income Tax Disclosure [Abstract]
INCOME TAXES	INCOME TAXESThe effective income tax rate was 25.2% and 29.0% for the three and nine months ended September 30, 2020, respectively, compared to 22.5% and 23.8% for the three and nine months ended September 30, 2019, respectively, primarily due to the reinstatement of the non-deductible health insurance industry fee in 2020.

XML

DEBT

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

DEBT

DEBT

The carrying value of debt outstanding, net of unamortized debt issuance costs, was as follows at September 30, 2020 and December 31, 2019:

	September 30, 2020		December 31, 2019
	(in millions)
Short-term debt:
Commercial paper	$	325	$	300
Term note	1,000		—
Senior notes:
$400 million, 2.50% due December 15, 2020	399		399
Total short-term debt	$	1,724	$	699
Long-term debt:
Senior notes:
$600 million, 3.15% due December 1, 2022	$	598	$	598
$400 million, 2.90% due December 15, 2022	398		397
$600 million, 3.85% due October 1, 2024	597		597
$600 million, 4.50% due April 1, 2025	595		—
$600 million, 3.95% due March 15, 2027	596		595
$500 million, 3.125% due August 15, 2029	495		495
$500 million, 4.875% due April 1, 2030	494		—
$250 million, 8.15% due June 15, 2038	262		262
$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	396		396
$500 million, 3.95% due August 15, 2049	493		492
Total long-term debt	$	6,059	$	4,967

Senior Notes    

In March 2020, we issued $600 million of 4.500% senior notes due April 1, 2025 and $500 million of 4.875% senior notes due April 1, 2030. Our net proceeds, reduced for the underwriters' discount and commission and offering expenses paid, were approximately $1,088 million as of September 30, 2020. We intend to use the net proceeds for general corporate purposes, which may include the repayment of existing indebtedness.

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

Our 5-year, $2.0 billion unsecured revolving credit agreement 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. If drawn upon, the revolving credit would revert to using the alternative base rate once LIBOR is discontinued. 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 which could limit our ability to borrow additional funds. In addition, the credit agreement contains customary restrictive covenants and a financial covenant regarding maximum debt to capitalization of 50%, as well as customary events of default. We are in compliance with this financial covenant, with actual debt to capitalization of 33% as measured in accordance with the credit agreement as of September 30, 2020. 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 million incremental loan facility.

At September 30, 2020, we had no borrowings and no letters of credit outstanding under the credit agreement. Accordingly, as of September 30, 2020, 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

Under our commercial paper program we may issue short-term, unsecured commercial paper notes privately placed on a discount basis through certain broker dealers 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 nine months ended September 30, 2020 was $600 million, with $325 million outstanding at September 30, 2020 compared to $300 million outstanding at December 31, 2019. The outstanding commercial paper at September 30, 2020 had a weighted average annual interest rate of 0.35%.

Term Note

In February 2020, we entered into a new $1 billion term loan commitment with a bank that matures 1 year after the first draw, subject to a 1 year extension. In March 2020, we made a draw on the entire term loan commitment of $1 billion. The facility fee, interest rate and financial covenants are consistent with those of our revolving credit agreement. There is no prepayment penalty.

XML

COMMITMENTS, GUARANTEES AND CONTINGENCIES

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS, GUARANTEES AND CONTINGENCIES

COMMITMENTS, GUARANTEES AND CONTINGENCIES

Government Contracts

Our Medicare products, which accounted for approximately 82% of our total premiums and services revenue for the nine months ended September 30, 2020, 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. All material contracts between Humana and CMS relating to our Medicare products have been renewed for 2021 and all of our product offerings have been approved.

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 diagnoses 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 2019, 25% of the risk score was calculated from claims data submitted through EDS. CMS increased that percentage to 50% in 2020 and will increase that percentage to 75% in 2021. For 2022, CMS has proposed to calculate risk scores for payment to MA organizations using only risk adjustment eligible diagnoses identified from EDS data completing the phased-in transition from RAPS to 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 and the Office of the Inspector General of Health and Human Services, or HHS-OIG, are 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 provided that, in calculating the economic impact of audit results for an MA contract, if any, the results of the RADV audit sample would be extrapolated to the entire MA contract after a comparison of the audit results to a similar audit of the government’s traditional fee-for-service Medicare program, or 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 in order to establish actuarial equivalence in payment rates as required under the Medicare statute. 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 CMS RADV contract level audits conducted for contract year 2011 and subsequent years. CMS is currently conducting RADV contract level audits for certain of our Medicare Advantage plans.

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 finalized. 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.

On October 26, 2018, CMS issued a proposed rule and accompanying materials (which we refer to as the “Proposed Rule”) related to, among other things, the RADV audit methodology described above. If implemented, the Proposed Rule would use extrapolation in RADV audits applicable to payment year 2011 contract-level audits and all subsequent audits, without the application of a FFS Adjuster to audit findings. We believe that the Proposed Rule fails to address adequately the statutory requirement of actuarial equivalence, and have provided substantive comments to CMS on the Proposed Rule as part of the notice-and-comment rulemaking process. Whether, and to what extent, CMS finalizes the Proposed Rule, and any related regulatory, industry or company reactions, could 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.

We believe that CMS' statements and policies regarding the requirement to report and return identified overpayments received by MA plans are inconsistent with CMS' 2012 RADV audit methodology, and the Medicare statute's requirements. These statements and policies, such as certain 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 (which we refer to as the "Overpayment Rule"), and the Proposed Rule, appear to equate each Medicare Advantage risk adjustment data error with an “overpayment” without addressing the principles underlying the FFS Adjuster referenced above. On September 7, 2018, the Federal District Court for the District of Columbia vacated CMS's Overpayment Rule, concluding that it violated the Medicare statute, including the requirement for actuarial equivalence, and that the Overpayment Rule was also arbitrary and capricious in departing from CMS's RADV methodology without adequate explanation (among other reasons). CMS has appealed the decision to the Circuit Court of Appeals.

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 September 30, 2020, our military services business, which accounted for approximately 1% of our total premiums and services revenue for the nine months ended September 30, 2020, primarily consisted of the TRICARE T2017 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 6 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 5% of our total premiums and services revenue for the nine months ended September 30, 2020. 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 reviews by regulatory bodies that may compare our Medicare Advantage profitability to our non-Medicare Advantage business profitability, or compare the profitability of various products within our Medicare Advantage business, and require that they remain within certain ranges of each other, or increases in member benefits or member eligibility criteria 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 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 continue to vigorously defend against these allegations since the transfer to the Western District of Kentucky. We have substantially completed discovery with the relator who has pursued the matter on behalf of the United States following its unsealing, and expect the Court to consider our motion for summary judgment.

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. On April 27, 2020, the U.S. Supreme Court ruled that the government is obligated to pay the losses under this risk corridor program, and that Congress did not impliedly repeal the obligation under its appropriations riders. In September 2020, we received a $609 million payment from the U.S Government pursuant to the judgement issued by the Court of Federal Claims on July 7, 2020. The $609 million payment received from

the U.S Government and approximately $31 million in related fees and expenses are reflected in "Premiums" revenue and "Operating costs", respectively, in our condensed consolidated statements of income for the three and nine months ended September 30, 2020.

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, disputes arising from competitive procurement process, general contractual matters, intellectual property matters, and challenges to subrogation practices. 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 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 nonperformance 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.

XML

SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

SEGMENT INFORMATION

SEGMENT INFORMATION

We manage our business with three reportable segments: Retail, Group and Specialty, and Healthcare Services. The reportable segments are based on a combination of the type of health plan customer and adjacent businesses centered on well-being solutions for our health plans and other customers, as described below. These segment groupings are consistent with information used by our Chief Executive Officer, the Chief Operating Decision Maker, to assess performance and allocate resources.

The Retail segment consists of Medicare benefits, marketed to individuals or directly via group Medicare accounts. In addition, the Retail segment also includes our contract with CMS to administer the Limited Income Newly Eligible Transition, or LI-NET, prescription drug plan program and contracts with various states to provide Medicaid, dual eligible, and Long-Term Support Services benefits, which we refer to collectively as our state-based contracts. The Group and Specialty segment consists of employer group commercial fully-insured medical and specialty health insurance benefits marketed to individuals and employer groups, including dental, vision, and other supplemental health benefits, as well as administrative services only, or ASO products. In addition, our Group and Specialty segment includes our military services business, primarily our TRICARE T2017 East Region contract. The Healthcare Services segment includes our services offered to our health plan members as well as to third parties, including pharmacy solutions, provider services, and clinical care service, such as home health and other services and capabilities to promote wellness and advance population health, including our minority investment in Kindred at Home and the strategic partnership with WCAS to develop and operate senior-focused, payor-agnostic, primary care centers.

Our Healthcare Services intersegment revenues primarily relate to managing prescription drug coverage for members of our other segments through Humana Pharmacy Solutions®, or HPS, and includes the operations of Humana Pharmacy, Inc., our mail order pharmacy business. These revenues consist of the prescription price (ingredient cost plus dispensing fee), including the portion to be settled with the member (co-share) or with the government (subsidies), plus any associated administrative fees. Services revenues related to the distribution of prescriptions by third party retail pharmacies in our networks are recognized when the claim is processed and product revenues from dispensing prescriptions from our mail order pharmacies are recorded when the prescription or product is shipped. Our pharmacy operations, which are responsible for designing pharmacy benefits, including defining member co-share responsibilities, determining formulary listings, contracting with retail pharmacies, confirming member eligibility, reviewing drug utilization, and processing claims, act as a principal in the arrangement on behalf of members in our other segments. As principal, our Healthcare Services segment reports revenues on a gross basis, including co-share amounts from members collected by third party retail pharmacies at the point of service.

In addition, our Healthcare Services intersegment revenues include revenues earned by certain owned providers derived from risk-based and non-risk-based managed care agreements with our health plans. Under risk-based agreements, the provider receives a monthly capitated fee that varies depending on the demographics and health status of the member, for each member assigned to these owned providers by our health plans. The owned provider assumes the economic risk of funding the assigned members’ healthcare services. Under non risk-based agreements, our health plans retain the economic risk of funding the assigned members' healthcare services. Our Healthcare Services segment reports provider services revenues associated with risk-based agreements on a gross basis, whereby capitation fee revenue is recognized in the period in which the assigned members are entitled to receive healthcare services. Provider services revenues associated with non-risk-based agreements are presented net of associated healthcare costs.

We present our condensed consolidated results of operations from the perspective of the health plans. As a result, the cost of providing benefits to our members, whether provided via a third party provider or internally through a stand-alone subsidiary, is classified as benefits expense and excludes the portion of the cost for which the health plans do not bear responsibility, including member co-share amounts and government subsidies of $4.4 billion and $4.0 billion for the three months ended September 30, 2020 and 2019, respectively. For the nine months ended September 30, 2020 and 2019 these amounts were $11.9 billion and $10.7 billion, respectively. In addition, depreciation and amortization expense associated with certain businesses in our Healthcare Services segment delivering benefits to our members, primarily associated with our provider services and pharmacy operations, are included with benefits expense. The amount of this expense was $33 million and $32 million for the three months ended September 30, 2020 and 2019, respectively. For the nine months ended September 30, 2020 and 2019, the amount of this expense was $94 million and $92 million, respectively.

Other than those described previously, the accounting policies of each segment are the same and are described in Note 2 to the consolidated financial statements included in our 2019 Form 10-K. Transactions between reportable segments primarily consist of sales of services rendered by our Healthcare Services segment, primarily pharmacy, provider, and clinical care services, to our Retail and Group and Specialty segment customers. Intersegment sales and expenses are recorded at fair value and eliminated in consolidation. Members served by our segments often use the same provider networks, enabling us in some instances to obtain more favorable contract terms with providers. Our segments also share indirect costs and assets. As a result, the profitability of each segment is interdependent. We allocate most operating expenses to our segments. Assets and certain corporate income and expenses are not allocated to the segments, including the portion of investment income not supporting segment operations, interest expense on corporate debt, and certain other corporate expenses. These items are managed at a corporate level. These corporate amounts are reported separately from our reportable segments and are included with intersegment eliminations in the tables presenting segment results below.

Our segment results were as follows for the three and nine months ended September 30, 2020 and 2019:

	Retail		Group and Specialty		Healthcare Services		Eliminations/ Corporate		Consolidated
Three months ended September 30, 2020	(in millions)
External revenues
Premiums:
Individual Medicare Advantage	$	12,949	$	—	$	—	$	—	$	12,949
Group Medicare Advantage	1,880		—		—		—		1,880
Medicare stand-alone PDP	622		—		—		—		622
Total Medicare	15,451		—		—		—		15,451
Fully-insured	177		1,169		—		602		1,948
Specialty	—		424		—		—		424
Medicaid and other	1,081		—		—		—		1,081
Total premiums	16,709		1,593		—		602		18,904
Services revenue:
Provider	—		—		107		—		107
ASO and other	4		189		—		—		193
Pharmacy	—		—		157		—		157
Total services revenue	4		189		264		—		457
Total external revenues	16,713		1,782		264		602		19,361
Intersegment revenues
Services	—		9		4,852		(4,861)		—
Products	—		—		2,013		(2,013)		—
Total intersegment revenues	—		9		6,865		(6,874)		—
Investment income	28		3		2		681		714
Total revenues	16,741		1,794		7,131		(5,591)		20,075
Operating expenses:
Benefits	14,224		1,481		—		(94)		15,611
Operating costs	1,877		452		6,871		(6,687)		2,513
Depreciation and amortization	87		21		46		(26)		128
Total operating expenses	16,188		1,954		6,917		(6,807)		18,252
Income (loss) from operations	553		(160)		214		1,216		1,823
Interest expense	—		—		—		75		75
Other income, net	—		—		—		(7)		(7)
Income (loss) before income taxes and equity in net earnings	553		(160)		214		1,148		1,755
Equity in net earnings	—		—		35		—		35
Segment earnings (loss)	$	553	$	(160)	$	249	$	1,148	$	1,790

	Retail		Group and Specialty		Healthcare Services		Eliminations/ Corporate		Consolidated
Three months ended September 30, 2019	(in millions)
External revenues
Premiums:
Individual Medicare Advantage	$	10,752	$	—	$	—	$	—	$	10,752
Group Medicare Advantage	1,609		—		—		—		1,609
Medicare stand-alone PDP	781		—		—		—		781
Total Medicare	13,142		—		—		—		13,142
Fully-insured	150		1,278		—		—		1,428
Specialty	—		400		—		—		400
Medicaid and other	742		—		—		—		742
Total premiums	14,034		1,678		—		—		15,712
Services revenue:
Provider	—		—		136		—		136
ASO and other	4		200		—		—		204
Pharmacy	—		—		53		—		53
Total services revenue	4		200		189		—		393
Total external revenues	14,038		1,878		189		—		16,105
Intersegment revenues
Services	—		4		4,654		(4,658)		—
Products	—		—		1,759		(1,759)		—
Total intersegment revenues	—		4		6,413		(6,417)		—
Investment income	50		7		—		79		136
Total revenues	14,088		1,889		6,602		(6,338)		16,241
Operating expenses:
Benefits	12,050		1,448		—		(141)		13,357
Operating costs	1,310		413		6,348		(6,182)		1,889
Depreciation and amortization	89		24		43		(29)		127
Total operating expenses	13,449		1,885		6,391		(6,352)		15,373
Income from operations	639		4		211		14		868
Interest expense	—		—		—		62		62
Other income, net	—		—		—		(82)		(82)
Income before income taxes and equity in net earnings	639		4		211		34		888
Equity in net earnings	—		—		1		—		1
Segment earnings	$	639	$	4	$	212	$	34	$	889

	Retail		Group and Specialty		Healthcare Services		Eliminations/ Corporate		Consolidated
Nine months ended September 30, 2020	(in millions)
External revenues
Premiums:
Individual Medicare Advantage	$	38,748	$	—	$	—	$	—	$	38,748
Group Medicare Advantage	5,867		—		—		—		5,867
Medicare stand-alone PDP	2,108		—		—		—		2,108
Total Medicare	46,723		—		—		—		46,723
Fully-insured	509		3,606		—		602		4,717
Specialty	—		1,278		—		—		1,278
Medicaid and other	3,104		—		—		—		3,104
Total premiums	50,336		4,884		—		602		55,822
Services revenue:
Provider	—		—		316		—		316
ASO and other	14		576		—		—		590
Pharmacy	—		—		425		—		425
Total services revenue	14		576		741		—		1,331
Total external revenues	50,350		5,460		741		602		57,153
Intersegment revenues
Services	—		22		14,514		(14,536)		—
Products	—		—		5,900		(5,900)		—
Total intersegment revenues	—		22		20,414		(20,436)		—
Investment income	114		12		2		812		940
Total revenues	50,464		5,494		21,157		(19,022)		58,093
Operating expenses:
Benefits	41,939		3,886		—		(410)		45,415
Operating costs	5,047		1,316		20,274		(19,653)		6,984
Depreciation and amortization	251		60		135		(84)		362
Total operating expenses	47,237		5,262		20,409		(20,147)		52,761
Income from operations	3,227		232		748		1,125		5,332
Interest expense	—		—		—		211		211
Other expense, net	—		—		—		63		63
Income before income taxes and equity in net earnings	3,227		232		748		851		5,058
Equity in net earnings	—		—		68		—		68
Segment earnings	$	3,227	$	232	$	816	$	851	$	5,126

	Retail		Group and Specialty		Healthcare Services		Eliminations/ Corporate		Consolidated
Nine months ended September 30, 2019	(in millions)
External Revenues
Premiums:
Individual Medicare Advantage	$	32,254	$	—	$	—	$	—	$	32,254
Group Medicare Advantage	4,867		—		—		—		4,867
Medicare stand-alone PDP	2,408		—		—		—		2,408
Total Medicare	39,529		—		—		—		39,529
Fully-insured	434		3,873		—		—		4,307
Specialty	—		1,160		—		—		1,160
Medicaid and other	2,143		—		—		—		2,143
Total premiums	42,106		5,033		—		—		47,139
Services revenue:
Provider	—		—		367		—		367
ASO and other	14		587		—		—		601
Pharmacy	—		—		135		—		135
Total services revenue	14		587		502		—		1,103
Total external revenues	42,120		5,620		502		—		48,242
Intersegment revenues
Services	—		13		13,456		(13,469)		—
Products	—		—		5,128		(5,128)		—
Total intersegment revenues	—		13		18,584		(18,597)		—
Investment income	139		17		1		194		351
Total revenues	42,259		5,650		19,087		(18,403)		48,593
Operating expenses:
Benefits	36,396		4,177		—		(405)		40,168
Operating costs	3,664		1,232		18,371		(18,015)		5,252
Depreciation and amortization	239		67		121		(84)		343
Total operating expenses	40,299		5,476		18,492		(18,504)		45,763
Income from operations	1,960		174		595		101		2,830
Interest expense	—		—		—		184		184
Other income, net	—		—		—		(217)		(217)
Income before income taxes and equity in net earnings	1,960		174		595		134		2,863
Equity in net earnings	—		—		16		—		16
Segment earnings	$	1,960	$	174	$	611	$	134	$	2,879

XML

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Policies)

9 Months Ended

Sep. 30, 2020

Accounting Standards Update and Change in Accounting Principle [Abstract]

Basis of Presentation

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, 2019, that was filed with the Securities and Exchange Commission, or the SEC, on February 20, 2020. We refer to the Form 10-K as the “2019 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, 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 2019 Form 10-K for information on accounting policies that we consider in preparing our consolidated financial statements. Since the filing of our 2019 Form 10-K we have received common stock, primarily in Oak Street Health, Inc., or OSH, as part of their initial public offering during the third quarter of 2020. We have updated our accounting policy for investment securities below.

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.

Investment Securities

Investment Securities

Investment securities, which consist of debt and equity securities, are stated at fair value. Our debt securities have been categorized as available for sale. Debt securities available for current operations are classified as current assets and debt securities available for our long-term insurance products and professional liability funding requirements, as well as restricted statutory deposits and equity securities, are classified as long-term assets. For the purpose of determining realized gross gains and losses for debt securities sold, which are included as a component of investment income in the consolidated statements of income, the cost of investment securities sold is based upon specific identification. Unrealized holding gains and losses for debt securities, net of applicable deferred taxes, are included as a component of stockholders’ equity and comprehensive income until realized from a sale or other-than-temporary impairment. For the purpose of determining gross gains and losses for equity securities, changes in fair value at the reporting date are included as a component of investment income in the consolidated statements of income.

Revenue Recognition

Revenue RecognitionOur 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.

Recently Issued Accounting Pronouncements

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 was 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 primarily of available for sale debt securities. We adopted the new standard effective January 1, 2020. Due to the high concentration of our financial assets measured at amortized cost being with the federal government resulting in zero nonpayment risk as well as our available for sale debt securities primarily being in an unrealized gain position, the adoption of the new standard did not have a material impact on our results of operations, financial condition, or cash flows.

In September 2018, the FASB issued new guidance related to accounting for long-duration contracts of insurers which revises key elements of the measurement models and disclosure requirements for long-duration contracts issued by insurers and reinsurers. The new guidance is effective for us beginning with annual and interim periods in 2023, with earlier adoption permitted, and requires retrospective application to previously issued annual and interim financial statements. We are currently evaluating the impact on our results of operations, financial position and 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.

XML

INVESTMENT SECURITIES (Tables)

9 Months Ended

Sep. 30, 2020

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 September 30, 2020 and December 31, 2019, respectively:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in millions)
September 30, 2020
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	1,195	$	2	$	(1)	$	1,196
Mortgage-backed securities	3,511		183		(2)		3,692
Tax-exempt municipal securities	1,439		40		(3)		1,476
Commercial mortgage-backed securities	1,020		54		(1)		1,073
Asset-backed securities	1,278		8		(5)		1,281
Corporate debt securities	4,199		218		(2)		4,415
Total debt securities	$	12,642	$	505	$	(14)	13,133
Common stock							713
Total investment securities							$	13,846
December 31, 2019
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	353	$	1	$	—	$	354
Mortgage-backed securities	3,628		85		(3)		3,710
Tax-exempt municipal securities	1,433		30		—		1,463
Commercial mortgage-backed securities	786		18		—		804
Asset-backed securities	1,093		3		(3)		1,093
Corporate debt securities	3,867		82		(2)		3,947
Total debt securities	$	11,160	$	219	$	(8)	11,371
Common stock							7
Total investment securities							$	11,378

Schedule of Gross Unrealized Losses and Fair Value of Securities

Gross unrealized losses and fair values aggregated by investment category and length of time of individual debt securities that have been in a continuous unrealized loss position were as follows at September 30, 2020 and December 31, 2019, 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)
September 30, 2020
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	662	$	(1)	$	—	$	—	$	662	$	(1)
Mortgage-backed securities	450		(2)		—		—		450		(2)
Tax-exempt municipal securities	127		(3)		12		—		139		(3)
Commercial mortgage-backed securities	181		—		36		(1)		217		(1)
Asset-backed securities	121		(1)		537		(4)		658		(5)
Corporate debt securities	275		(1)		98		(1)		373		(2)
Total debt securities	$	1,816	$	(8)	$	683	$	(6)	$	2,499	$	(14)
December 31, 2019
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	48	$	—	$	23	$	—	$	71	$	—
Mortgage-backed securities	315		(1)		204		(2)		519		(3)
Tax-exempt municipal securities	58		—		75		—		133		—
Commercial mortgage-backed securities	118		—		36		—		154		—
Asset-backed securities	20		—		607		(3)		627		(3)
Corporate debt securities	589		(2)		155		—		744		(2)
Total debt securities	$	1,148	$	(3)	$	1,100	$	(5)	$	2,248	$	(8)

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

The detail of gains (losses) related to investment securities and included within investment income was as follows for the three and nine months ended September 30, 2020 and 2019:

	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in millions)
Gross gains on investment securities	$	645	$	41	$	714	$	59
Gross losses on investment securities	—		(23)		(18)		(36)
Net gains on investment securities	$	645	$	18	$	696	$	23

Schedule of Contractual Maturity of Debt Securities Available for Sale

The contractual maturities of debt securities available for sale at September 30, 2020, 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	$	1,487	$	1,490
Due after one year through five years	2,176		2,259
Due after five years through ten years	1,999		2,128
Due after ten years	1,171		1,210
Mortgage and asset-backed securities	5,809		6,046
Total debt securities	$	12,642	$	13,133

XML

FAIR VALUE (Tables)

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

Schedule of Financial Assets Measured at Fair Value on Recurring Basis

The following table summarizes our fair value measurements at September 30, 2020 and December 31, 2019, 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)
September 30, 2020
Cash equivalents	$	7,722	$	7,722	$	—	$	—
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	1,196		—		1,196		—
Mortgage-backed securities	3,692		—		3,692		—
Tax-exempt municipal securities	1,476		—		1,476		—
Commercial mortgage-backed securities	1,073		—		1,073		—
Asset-backed securities	1,281		—		1,281		—
Corporate debt securities	4,415		—		4,415		—
Total debt securities	13,133		—		13,133		—
Common stock	713		713		—		—
Total investment securities	$	21,568	$	8,435	$	13,133	$	—
December 31, 2019
Cash equivalents	$	3,660	$	3,660	$	—	$	—
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	354		—		354		—
Mortgage-backed securities	3,710		—		3,710		—
Tax-exempt municipal securities	1,463		—		1,463		—
Commercial mortgage-backed securities	804		—		804		—
Asset-backed securities	1,093		—		1,093		—
Corporate debt securities	3,947		—		3,947		—
Total debt securities	11,371		—		11,371		—
Common stock	7		7		—		—
Total investment securities	$	15,038	$	3,667	$	11,371	$	—

Schedule of Assumptions Used For Inputs In Fair Value Measurement

The table below presents the assumptions used for each reporting period.

	September 30, 2020		December 31, 2019
Annualized volatility	44.9	%	19.8	%
Secured credit rate	0.4	%	2.2	%
NOPAT	12.0	%	12.0	%
Weighted average cost of capital	10.0	%	10.0	%
Long term growth rate	3.0	%	3.0	%

XML

MEDICARE PART D (Tables)

9 Months Ended

Sep. 30, 2020

Insurance [Abstract]

Schedule of Balance Sheet Amounts Associated With Medicare Part D

The accompanying condensed consolidated balance sheets include the following amounts associated with Medicare Part D at September 30, 2020 and December 31, 2019. 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.

	September 30, 2020				December 31, 2019
	Risk Corridor Settlement		CMS Subsidies/ Discounts		Risk Corridor Settlement		CMS Subsidies/ Discounts
	(in millions)
Other current assets	$	25	$	1,226	$	5	$	585
Trade accounts payable and accrued expenses	(101)		(714)		(120)		(356)
Net current (liability) asset	(76)		512		(115)		229
Other long-term assets	273		—		6		—
Other long-term liabilities	(176)		—		(61)		—
Net long-term asset (liability)	97		—		(55)		—
Total net asset (liability)	$	21	$	512	$	(170)	$	229

XML

GOODWILL AND OTHER INTANGIBLE ASSETS (Tables)

9 Months Ended

Sep. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Changes in Carrying Amount of Goodwill By Reportable Segments

Changes in the carrying amount of goodwill for our reportable segments for the nine months ended September 30, 2020 were as follows:

	Retail		Group and Specialty		Healthcare Services		Total
	(in millions)
Balance at January 1, 2020	$	1,535	$	261	$	2,132	$	3,928
Acquisitions	—		—		515		515
Balance at September 30, 2020	$	1,535	$	261	$	2,647	$	4,443

Schedule 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 September 30, 2020 and December 31, 2019.

		September 30, 2020						December 31, 2019
	Weighted Average Life	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
		($ in millions)
Other intangible assets:
Customer contracts/ relationships	9.5 years	$	849	$	553	$	296	$	646	$	496	$	150
Trade names and technology	7.0 years	122		87		35		84		84		—
Provider contracts	11.8 years	70		49		21		70		44		26
Noncompetes and other	7.3 years	29		29		—		29		28		1
Total other intangible assets	9.3 years	$	1,070	$	718	$	352	$	829	$	652	$	177

Schedule of Estimated Amortization Expense

The following table presents our estimate of amortization expense remaining for 2020 and each of the five next succeeding years:

	(in millions)
For the years ending December 31,
2020	$	22
2021	56
2022	53
2023	40
2024	33
2025	33

XML

BENEFITS PAYABLE (Tables)

9 Months Ended

Sep. 30, 2020

Insurance [Abstract]

Schedule of Activity in Benefits Payable

On a consolidated basis, activity in benefits payable, was as follows for the nine months ended September 30, 2020 and 2019:

	For the nine months ended September 30,
	2020		2019
	(in millions)
Balances, beginning of period	$	6,004	$	4,862
Less: Reinsurance recoverables	(68)		(95)
Balances, beginning of period, net	5,936		4,767
Incurred related to:
Current year	45,693		40,499
Prior years	(278)		(331)
Total incurred	45,415		40,168
Paid related to:
Current year	(37,810)		(34,625)
Prior years	(5,334)		(4,158)
Total paid	(43,144)		(38,783)
Reinsurance recoverable	1		68
Balances, end of period	$	8,208	$	6,220

Activity in benefits payable for our Retail segment was as follows for the nine months ended September 30, 2020 and 2019:

	For the nine months ended September 30,
	2020		2019
	(in millions)
Balances, beginning of period	$	5,363	$	4,338
Less: Reinsurance recoverables	(68)		(95)
Balances, beginning of period, net	5,295		4,243
Incurred related to:
Current year	42,186		36,762
Prior years	(235)		(366)
Total incurred	41,951		36,396
Paid related to:
Current year	(34,946)		(31,476)
Prior years	(4,759)		(3,634)
Total paid	(39,705)		(35,110)
Reinsurance recoverable	1		68
Balances, end of period	$	7,542	$	5,597

Activity in benefits payable for our Group and Specialty segment, was as follows for the nine months ended September 30, 2020 and 2019:

	For the nine months ended September 30,
	2020		2019
	(in millions)
Balances, beginning of period	$	641	$	517
Incurred related to:
Current year	3,929		4,142
Prior years	(43)		35
Total incurred	3,886		4,177
Paid related to:
Current year	(3,286)		(3,547)
Prior years	(575)		(524)
Total paid	(3,861)		(4,071)
Balances, end of period	$	666	$	623

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
	September 30,
	2020
Net outstanding liabilities	(in millions)
Retail	$	7,541
Group and Specialty	666
Benefits payable, net of reinsurance	8,207
Reinsurance recoverable on unpaid claims
Retail	1
Total benefits payable, gross	$	8,208

XML

EARNINGS PER COMMON SHARE COMPUTATION (Tables)

9 Months Ended

Sep. 30, 2020

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 and nine months ended September 30, 2020 and 2019:

	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(dollars in millions, except per common share results; number of shares in thousands)
Net income available for common stockholders	$	1,340	$	689	$	3,641	$	2,195
Weighted average outstanding shares of common stock used to compute basic earnings per common share	132,318		133,321		132,234		134,589
Dilutive effect of:
Employee stock options	105		101		95		99
Restricted stock	773		603		681		501
Shares used to compute diluted earnings per common share	133,196		134,025		133,010		135,189
Basic earnings per common share	$	10.12	$	5.16	$	27.53	$	16.31
Diluted earnings per common share	$	10.05	$	5.14	$	27.37	$	16.24
Number of antidilutive stock options and restricted stock excluded from computation	143		302		311		589

XML

STOCKHOLDERS' EQUITY (Tables)

9 Months Ended

Sep. 30, 2020

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 2019 and 2020 under our Board approved quarterly cash dividend policy:

Record Date	Payment Date	Amount per Share		Total Amount
				(in millions)
2019 payments
12/31/2018	1/25/2019	$	0.50	$	68
3/29/2019	4/26/2019	$	0.55	$	74
6/28/2019	7/26/2019	$	0.55	$	74
9/30/2019	10/25/2019	$	0.55	$	73
2020 payments
12/31/2019	1/31/2020	$	0.55	$	73
3/31/2020	4/24/2020	$	0.625	$	83
6/30/2020	7/31/2020	$	0.625	$	83
9/30/2020	10/30/2020	$	0.625	$	83

XML

DEBT (Tables)

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Schedule of Carrying Value of Debt Outstanding

The carrying value of debt outstanding, net of unamortized debt issuance costs, was as follows at September 30, 2020 and December 31, 2019:

	September 30, 2020		December 31, 2019
	(in millions)
Short-term debt:
Commercial paper	$	325	$	300
Term note	1,000		—
Senior notes:
$400 million, 2.50% due December 15, 2020	399		399
Total short-term debt	$	1,724	$	699
Long-term debt:
Senior notes:
$600 million, 3.15% due December 1, 2022	$	598	$	598
$400 million, 2.90% due December 15, 2022	398		397
$600 million, 3.85% due October 1, 2024	597		597
$600 million, 4.50% due April 1, 2025	595		—
$600 million, 3.95% due March 15, 2027	596		595
$500 million, 3.125% due August 15, 2029	495		495
$500 million, 4.875% due April 1, 2030	494		—
$250 million, 8.15% due June 15, 2038	262		262
$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	396		396
$500 million, 3.95% due August 15, 2049	493		492
Total long-term debt	$	6,059	$	4,967

XML

SEGMENT INFORMATION (Tables)

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Schedule of Segment Results

Our segment results were as follows for the three and nine months ended September 30, 2020 and 2019:

	Retail		Group and Specialty		Healthcare Services		Eliminations/ Corporate		Consolidated
Three months ended September 30, 2020	(in millions)
External revenues
Premiums:
Individual Medicare Advantage	$	12,949	$	—	$	—	$	—	$	12,949
Group Medicare Advantage	1,880		—		—		—		1,880
Medicare stand-alone PDP	622		—		—		—		622
Total Medicare	15,451		—		—		—		15,451
Fully-insured	177		1,169		—		602		1,948
Specialty	—		424		—		—		424
Medicaid and other	1,081		—		—		—		1,081
Total premiums	16,709		1,593		—		602		18,904
Services revenue:
Provider	—		—		107		—		107
ASO and other	4		189		—		—		193
Pharmacy	—		—		157		—		157
Total services revenue	4		189		264		—		457
Total external revenues	16,713		1,782		264		602		19,361
Intersegment revenues
Services	—		9		4,852		(4,861)		—
Products	—		—		2,013		(2,013)		—
Total intersegment revenues	—		9		6,865		(6,874)		—
Investment income	28		3		2		681		714
Total revenues	16,741		1,794		7,131		(5,591)		20,075
Operating expenses:
Benefits	14,224		1,481		—		(94)		15,611
Operating costs	1,877		452		6,871		(6,687)		2,513
Depreciation and amortization	87		21		46		(26)		128
Total operating expenses	16,188		1,954		6,917		(6,807)		18,252
Income (loss) from operations	553		(160)		214		1,216		1,823
Interest expense	—		—		—		75		75
Other income, net	—		—		—		(7)		(7)
Income (loss) before income taxes and equity in net earnings	553		(160)		214		1,148		1,755
Equity in net earnings	—		—		35		—		35
Segment earnings (loss)	$	553	$	(160)	$	249	$	1,148	$	1,790

	Retail		Group and Specialty		Healthcare Services		Eliminations/ Corporate		Consolidated
Three months ended September 30, 2019	(in millions)
External revenues
Premiums:
Individual Medicare Advantage	$	10,752	$	—	$	—	$	—	$	10,752
Group Medicare Advantage	1,609		—		—		—		1,609
Medicare stand-alone PDP	781		—		—		—		781
Total Medicare	13,142		—		—		—		13,142
Fully-insured	150		1,278		—		—		1,428
Specialty	—		400		—		—		400
Medicaid and other	742		—		—		—		742
Total premiums	14,034		1,678		—		—		15,712
Services revenue:
Provider	—		—		136		—		136
ASO and other	4		200		—		—		204
Pharmacy	—		—		53		—		53
Total services revenue	4		200		189		—		393
Total external revenues	14,038		1,878		189		—		16,105
Intersegment revenues
Services	—		4		4,654		(4,658)		—
Products	—		—		1,759		(1,759)		—
Total intersegment revenues	—		4		6,413		(6,417)		—
Investment income	50		7		—		79		136
Total revenues	14,088		1,889		6,602		(6,338)		16,241
Operating expenses:
Benefits	12,050		1,448		—		(141)		13,357
Operating costs	1,310		413		6,348		(6,182)		1,889
Depreciation and amortization	89		24		43		(29)		127
Total operating expenses	13,449		1,885		6,391		(6,352)		15,373
Income from operations	639		4		211		14		868
Interest expense	—		—		—		62		62
Other income, net	—		—		—		(82)		(82)
Income before income taxes and equity in net earnings	639		4		211		34		888
Equity in net earnings	—		—		1		—		1
Segment earnings	$	639	$	4	$	212	$	34	$	889

	Retail		Group and Specialty		Healthcare Services		Eliminations/ Corporate		Consolidated
Nine months ended September 30, 2020	(in millions)
External revenues
Premiums:
Individual Medicare Advantage	$	38,748	$	—	$	—	$	—	$	38,748
Group Medicare Advantage	5,867		—		—		—		5,867
Medicare stand-alone PDP	2,108		—		—		—		2,108
Total Medicare	46,723		—		—		—		46,723
Fully-insured	509		3,606		—		602		4,717
Specialty	—		1,278		—		—		1,278
Medicaid and other	3,104		—		—		—		3,104
Total premiums	50,336		4,884		—		602		55,822
Services revenue:
Provider	—		—		316		—		316
ASO and other	14		576		—		—		590
Pharmacy	—		—		425		—		425
Total services revenue	14		576		741		—		1,331
Total external revenues	50,350		5,460		741		602		57,153
Intersegment revenues
Services	—		22		14,514		(14,536)		—
Products	—		—		5,900		(5,900)		—
Total intersegment revenues	—		22		20,414		(20,436)		—
Investment income	114		12		2		812		940
Total revenues	50,464		5,494		21,157		(19,022)		58,093
Operating expenses:
Benefits	41,939		3,886		—		(410)		45,415
Operating costs	5,047		1,316		20,274		(19,653)		6,984
Depreciation and amortization	251		60		135		(84)		362
Total operating expenses	47,237		5,262		20,409		(20,147)		52,761
Income from operations	3,227		232		748		1,125		5,332
Interest expense	—		—		—		211		211
Other expense, net	—		—		—		63		63
Income before income taxes and equity in net earnings	3,227		232		748		851		5,058
Equity in net earnings	—		—		68		—		68
Segment earnings	$	3,227	$	232	$	816	$	851	$	5,126

	Retail		Group and Specialty		Healthcare Services		Eliminations/ Corporate		Consolidated
Nine months ended September 30, 2019	(in millions)
External Revenues
Premiums:
Individual Medicare Advantage	$	32,254	$	—	$	—	$	—	$	32,254
Group Medicare Advantage	4,867		—		—		—		4,867
Medicare stand-alone PDP	2,408		—		—		—		2,408
Total Medicare	39,529		—		—		—		39,529
Fully-insured	434		3,873		—		—		4,307
Specialty	—		1,160		—		—		1,160
Medicaid and other	2,143		—		—		—		2,143
Total premiums	42,106		5,033		—		—		47,139
Services revenue:
Provider	—		—		367		—		367
ASO and other	14		587		—		—		601
Pharmacy	—		—		135		—		135
Total services revenue	14		587		502		—		1,103
Total external revenues	42,120		5,620		502		—		48,242
Intersegment revenues
Services	—		13		13,456		(13,469)		—
Products	—		—		5,128		(5,128)		—
Total intersegment revenues	—		13		18,584		(18,597)		—
Investment income	139		17		1		194		351
Total revenues	42,259		5,650		19,087		(18,403)		48,593
Operating expenses:
Benefits	36,396		4,177		—		(405)		40,168
Operating costs	3,664		1,232		18,371		(18,015)		5,252
Depreciation and amortization	239		67		121		(84)		343
Total operating expenses	40,299		5,476		18,492		(18,504)		45,763
Income from operations	1,960		174		595		101		2,830
Interest expense	—		—		—		184		184
Other income, net	—		—		—		(217)		(217)
Income before income taxes and equity in net earnings	1,960		174		595		134		2,863
Equity in net earnings	—		—		16		—		16
Segment earnings	$	1,960	$	174	$	611	$	134	$	2,879

XML

BASIS OF PRESENTATION AND SIGNIFICANT EVENTS (Details) - USD ($) $ in Millions	1 Months Ended	3 Months Ended	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2020	Sep. 30, 2020	Dec. 31, 2019	Nov. 02, 2017
Receivables and Other [Line Items]
Hospital utilization as a percentage of historic baseline levels	95.00%	95.00%	95.00%
Accounts receivable	$ 1,135	$ 1,135	$ 1,135	$ 1,056
Amortization of deferred costs		292	884
US Risk Corridor Premium Stabilization Program
Receivables and Other [Line Items]
Litigation recoveries sought					$ 611
Payment received upon judgement	609	609	609
Related legal fees and expenses		31	31
Health Care Reform
Receivables and Other [Line Items]
Payment of annual health insurance industry fee	1,200
Services Accounts Receivable
Receivables and Other [Line Items]
Accounts receivable	$ 155	$ 155	$ 155

XML

ACQUISITIONS AND DIVESTITURES (Details) $ in Millions			9 Months Ended
	Feb. 01, 2020 USD ($) primary_care_center	Jan. 31, 2020 USD ($)	Sep. 30, 2020 USD ($)
Business Acquisition [Line Items]
Goodwill, acquired during period			$ 515
WCAS
Business Acquisition [Line Items]
Expected number of payor-agnostic, senior-focused primary care centers to be opened by strategic partnership | primary_care_center	50
Expected time frame for opening primary care centers	3 years
Value of partnership entity	$ 600
Time frame for put and call option activity per partnership agreement, minimum	5 years
Time frame for put and call option activity per partnership agreement, maximum	10 years
Enclara
Business Acquisition [Line Items]
Cash consideration for acquisition		$ 709
Goodwill, acquired during period		515
Other intangible assets acquired		240
Net tangible liabilities assumed		$ 11
Other intangible assets, weighted average useful life		11 years 4 months 24 days

XML

INVESTMENT SECURITIES - Securities Classified as Current and Long-Term (Details) - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
Investment Securities, Available-for-sale Amortized Cost to Fair Value
Amortized Cost	$ 12,642	$ 11,160
Gross Unrealized Gains	505	219
Gross Unrealized Losses	(14)	(8)
Fair Value	13,133	11,371
Common stock	713	7
Total investment securities	13,846	11,378
U.S. Treasury and agency obligations
Investment Securities, Available-for-sale Amortized Cost to Fair Value
Amortized Cost	1,195	353
Gross Unrealized Gains	2	1
Gross Unrealized Losses	(1)	0
Fair Value	1,196	354
Mortgage-backed securities
Investment Securities, Available-for-sale Amortized Cost to Fair Value
Amortized Cost	3,511	3,628
Gross Unrealized Gains	183	85
Gross Unrealized Losses	(2)	(3)
Fair Value	3,692	3,710
Tax-exempt municipal securities
Investment Securities, Available-for-sale Amortized Cost to Fair Value
Amortized Cost	1,439	1,433
Gross Unrealized Gains	40	30
Gross Unrealized Losses	(3)	0
Fair Value	1,476	1,463
Commercial mortgage-backed securities
Investment Securities, Available-for-sale Amortized Cost to Fair Value
Amortized Cost	1,020	786
Gross Unrealized Gains	54	18
Gross Unrealized Losses	(1)	0
Fair Value	1,073	804
Asset-backed securities
Investment Securities, Available-for-sale Amortized Cost to Fair Value
Amortized Cost	1,278	1,093
Gross Unrealized Gains	8	3
Gross Unrealized Losses	(5)	(3)
Fair Value	1,281	1,093
Corporate debt securities
Investment Securities, Available-for-sale Amortized Cost to Fair Value
Amortized Cost	4,199	3,867
Gross Unrealized Gains	218	82
Gross Unrealized Losses	(2)	(2)
Fair Value	$ 4,415	$ 3,947

XML

INVESTMENT SECURITIES - Gross Unrealized Losses and Fair Values of Securities (Details) - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
Fair Value
Less than 12 months	$ 1,816	$ 1,148
12 months or more	683	1,100
Total	2,499	2,248
Gross Unrealized Losses
Less than 12 months	(8)	(3)
12 months or more	(6)	(5)
Total	(14)	(8)
U.S. Treasury and agency obligations
Fair Value
Less than 12 months	662	48
12 months or more	0	23
Total	662	71
Gross Unrealized Losses
Less than 12 months	(1)	0
12 months or more	0	0
Total	(1)	0
Mortgage-backed securities
Fair Value
Less than 12 months	450	315
12 months or more	0	204
Total	450	519
Gross Unrealized Losses
Less than 12 months	(2)	(1)
12 months or more	0	(2)
Total	(2)	(3)
Tax-exempt municipal securities
Fair Value
Less than 12 months	127	58
12 months or more	12	75
Total	139	133
Gross Unrealized Losses
Less than 12 months	(3)	0
12 months or more	0	0
Total	(3)	0
Commercial mortgage-backed securities
Fair Value
Less than 12 months	181	118
12 months or more	36	36
Total	217	154
Gross Unrealized Losses
Less than 12 months	0	0
12 months or more	(1)	0
Total	(1)	0
Asset-backed securities
Fair Value
Less than 12 months	121	20
12 months or more	537	607
Total	658	627
Gross Unrealized Losses
Less than 12 months	(1)	0
12 months or more	(4)	(3)
Total	(5)	(3)
Corporate debt securities
Fair Value
Less than 12 months	275	589
12 months or more	98	155
Total	373	744
Gross Unrealized Losses
Less than 12 months	(1)	(2)
12 months or more	(1)	0
Total	$ (2)	$ (2)

XML

INVESTMENT SECURITIES - Narrative (Details) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2020 USD ($) position	Sep. 30, 2020 USD ($) position
Investments, Debt and Equity Securities [Abstract]
Percentage of debt securities considered to be of investment-grade (percent)	96.00%	96.00%
Maximum individual state general bond obligation as a percentage of total debt securities (percent)		1.00%
Securities in unrealized loss positions, number of positions	155	155
Securities, number of positions	1,530	1,530
Gain on equity securities | $	$ 643	$ 643

XML

INVESTMENT SECURITIES - Gains (Losses) Within Investment Income (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Investments, Debt and Equity Securities [Abstract]
Gross gains on investment securities	$ 645	$ 41	$ 714	$ 59
Gross losses on investment securities	0	(23)	(18)	(36)
Net gains on investment securities	$ 645	$ 18	$ 696	$ 23

XML

INVESTMENT SECURITIES - Contractual Maturities of Debt Securities Available for Sale (Details) - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
Amortized Cost
Due within one year	$ 1,487
Due after one year through five years	2,176
Due after five years through ten years	1,999
Due after ten years	1,171
Mortgage and asset-backed securities	5,809
Amortized Cost	12,642	$ 11,160
Fair Value
Due within one year	1,490
Due after one year through five years	2,259
Due after five years through ten years	2,128
Due after ten years	1,210
Mortgage and asset-backed securities	6,046
Fair Value	$ 13,133	$ 11,371

XML

FAIR VALUE - Financial Assets Measured on Recurring Basis (Details) - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	$ 13,133	$ 11,371
Common stock	713	7
U.S. Treasury and agency obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	1,196	354
Mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	3,692	3,710
Tax-exempt municipal securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	1,476	1,463
Commercial mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	1,073	804
Asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	1,281	1,093
Corporate debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	4,415	3,947
Recurring Basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	7,722	3,660
Debt securities	13,133	11,371
Common stock	713	7
Total investment securities	21,568	15,038
Recurring Basis | U.S. Treasury and agency obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	1,196	354
Recurring Basis | Mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	3,692	3,710
Recurring Basis | Tax-exempt municipal securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	1,476	1,463
Recurring Basis | Commercial mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	1,073	804
Recurring Basis | Asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	1,281	1,093
Recurring Basis | Corporate debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	4,415	3,947
Recurring Basis | Quoted Prices in Active Markets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	7,722	3,660
Debt securities	0	0
Common stock	713	7
Total investment securities	8,435	3,667
Recurring Basis | Quoted Prices in Active Markets (Level 1) | U.S. Treasury and agency obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
Recurring Basis | Quoted Prices in Active Markets (Level 1) | Mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
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
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
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
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
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	13,133	11,371
Common stock	0	0
Total investment securities	13,133	11,371
Recurring Basis | Other Observable Inputs (Level 2) | U.S. Treasury and agency obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	1,196	354
Recurring Basis | Other Observable Inputs (Level 2) | Mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	3,692	3,710
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	1,476	1,463
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	1,073	804
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	1,281	1,093
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	4,415	3,947
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	0	0
Common stock	0	0
Total investment securities	0	0
Recurring Basis | Unobservable Inputs (Level 3) | U.S. Treasury and agency obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
Recurring Basis | Unobservable Inputs (Level 3) | Mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	0	0
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
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
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
Recurring Basis | Unobservable Inputs (Level 3) | Corporate debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities	$ 0	$ 0

XML

FAIR VALUE - Narrative (Details) - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
Term loan and commercial paper
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Short-term debt	$ 1,325
Commercial paper
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Short-term debt	325	$ 300
Carrying Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt outstanding	6,458	5,366
Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt outstanding	$ 7,674	$ 5,916

XML

FAIR VALUE - Put and Call Options Measured at Fair Value (Details) $ in Millions	Sep. 30, 2020 USD ($)	Dec. 31, 2019 USD ($)
Put option | Other long-term liabilities
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Fair value of financial liability	$ 151	$ 28
Call option | Other long-term assets
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Fair value of financial asset	$ 634	$ 557
Options | Level 3 fair value measurement | Annualized volatility
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Significant unobservable inputs	0.449	0.198
Options | Level 3 fair value measurement | Secured credit rate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Significant unobservable inputs	0.004	0.022
Options | Level 3 fair value measurement | NOPAT
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Significant unobservable inputs	0.120	0.120
Options | Level 3 fair value measurement | Weighted average cost of capital
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Significant unobservable inputs	0.100	0.100
Options | Level 3 fair value measurement | Long term growth rate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Significant unobservable inputs	0.030	0.030

XML

MEDICARE PART D (Details) - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
Segment Reporting Information [Line Items]
Other current assets	$ 5,170	$ 3,806
Trade accounts payable and accrued expenses	(4,472)	(3,754)
Other long-term assets	2,510	1,834
Other long-term liabilities	(1,543)	(935)
Risk Corridor Settlement
Segment Reporting Information [Line Items]
Other current assets	25	5
Trade accounts payable and accrued expenses	(101)	(120)
Net current (liability) asset	(76)	(115)
Other long-term assets	273	6
Other long-term liabilities	(176)	(61)
Net long-term asset (liability)	97	(55)
Total net asset (liability)	21	(170)
CMS Subsidies/ Discounts
Segment Reporting Information [Line Items]
Other current assets	1,226	585
Trade accounts payable and accrued expenses	(714)	(356)
Net current (liability) asset	512	229
Other long-term assets	0	0
Other long-term liabilities	0	0
Net long-term asset (liability)	0	0
Total net asset (liability)	$ 512	$ 229

XML

GOODWILL AND OTHER INTANGIBLE ASSETS - Goodwill by Segments (Details) $ in Millions	9 Months Ended
	Sep. 30, 2020 USD ($)
Goodwill [Roll Forward]
Goodwill, beginning balance	$ 3,928
Acquisitions	515
Goodwill, ending balance	4,443
Retail
Goodwill [Roll Forward]
Goodwill, beginning balance	1,535
Acquisitions	0
Goodwill, ending balance	1,535
Group and Specialty
Goodwill [Roll Forward]
Goodwill, beginning balance	261
Acquisitions	0
Goodwill, ending balance	261
Healthcare Services
Goodwill [Roll Forward]
Goodwill, beginning balance	2,132
Acquisitions	515
Goodwill, ending balance	$ 2,647

XML

GOODWILL AND OTHER INTANGIBLE ASSETS - Intangible Assets Included in Other Long-Term Assets (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2020	Dec. 31, 2019
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted Average Life	9 years 3 months 18 days
Cost	$ 1,070	$ 829
Accumulated Amortization	718	652
Net	$ 352	177
Customer contracts/ relationships
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted Average Life	9 years 6 months
Cost	$ 849	646
Accumulated Amortization	553	496
Net	$ 296	150
Trade names and technology
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted Average Life	7 years
Cost	$ 122	84
Accumulated Amortization	87	84
Net	$ 35	0
Provider contracts
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted Average Life	11 years 9 months 18 days
Cost	$ 70	70
Accumulated Amortization	49	44
Net	$ 21	26
Noncompetes and other
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted Average Life	7 years 3 months 18 days
Cost	$ 29	29
Accumulated Amortization	29	28
Net	$ 0	$ 1

XML

GOODWILL AND OTHER INTANGIBLE ASSETS - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense for other intangible assets	$ 23	$ 17	$ 66	$ 53

XML

GOODWILL AND OTHER INTANGIBLE ASSETS - Amortization and Estimated Future Amortization Expense (Details) $ in Millions	Sep. 30, 2020 USD ($)
Estimated amortization remaining for the years ending December 31,
2020	$ 22
2021	56
2022	53
2023	40
2024	33
2025	$ 33

XML

BENEFITS PAYABLE - Activity in Benefits Payable (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward]
Balances, beginning of period	$ 6,004	$ 4,862
Less: Reinsurance recoverables	(68)	(95)
Balances, beginning of period, net	5,936	4,767
Incurred related to:
Current year	45,693	40,499
Prior years	(278)	(331)
Total incurred	45,415	40,168
Paid related to:
Current year	(37,810)	(34,625)
Prior years	(5,334)	(4,158)
Total paid	(43,144)	(38,783)
Reinsurance recoverable	1	68
Balances, end of period	8,208	6,220
Retail
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward]
Balances, beginning of period	5,363	4,338
Less: Reinsurance recoverables	(68)	(95)
Balances, beginning of period, net	5,295	4,243
Incurred related to:
Current year	42,186	36,762
Prior years	(235)	(366)
Total incurred	41,951	36,396
Paid related to:
Current year	(34,946)	(31,476)
Prior years	(4,759)	(3,634)
Total paid	(39,705)	(35,110)
Reinsurance recoverable	1	68
Balances, end of period	7,542	5,597
Total IBNR included in benefits payable	4,600
Group and Specialty
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward]
Balances, beginning of period	641	517
Incurred related to:
Current year	3,929	4,142
Prior years	(43)	35
Total incurred	3,886	4,177
Paid related to:
Current year	(3,286)	(3,547)
Prior years	(575)	(524)
Total paid	(3,861)	(4,071)
Balances, end of period	666	$ 623
Total IBNR included in benefits payable	$ 576

XML

BENEFITS PAYABLE - Reconciliation to Consolidated (Details) - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019	Sep. 30, 2019	Dec. 31, 2018
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Benefits payable, net of reinsurance	$ 8,207
Reinsurance recoverable on unpaid claims	1	$ 68	$ 68	$ 95
Benefits payable	8,208	6,004	6,220	4,862
Retail
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Benefits payable, net of reinsurance	7,541
Reinsurance recoverable on unpaid claims	1	68	68	95
Benefits payable	7,542	5,363	5,597	4,338
Group and Specialty
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Benefits payable, net of reinsurance	666
Benefits payable	$ 666	$ 641	$ 623	$ 517

XML

EARNINGS PER COMMON SHARE COMPUTATION (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Net income available for common stockholders	$ 1,340	$ 689	$ 3,641	$ 2,195
Weighted average outstanding shares of common stock used to compute basic earnings per common share (in shares)	132,318	133,321	132,234	134,589
Shares used to compute diluted earnings per common share (in shares)	133,196	134,025	133,010	135,189
Basic earnings per common share (in dollars per share)	$ 10.12	$ 5.16	$ 27.53	$ 16.31
Diluted earnings per common share (in dollars per share)	$ 10.05	$ 5.14	$ 27.37	$ 16.24
Number of antidilutive stock options and restricted stock excluded from computation (in shares)	143	302	311	589
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)	105	101	95	99
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)	773	603	681	501

XML

STOCKHOLDERS' EQUITY - Details of Dividend Payments (Details) - USD ($) $ / shares in Units, $ in Millions	Nov. 03, 2020	Oct. 30, 2020	Jul. 31, 2020	Apr. 24, 2020	Jan. 31, 2020	Oct. 25, 2019	Jul. 26, 2019	Apr. 26, 2019	Jan. 25, 2019
Dividends
Amount per Share (in dollars per share)			$ 0.625	$ 0.625	$ 0.55	$ 0.55	$ 0.55	$ 0.55	$ 0.50
Total Amount			$ 83	$ 83	$ 73	$ 73	$ 74	$ 74	$ 68
Subsequent Event
Dividends
Amount per Share (in dollars per share)		$ 0.625
Total Amount		$ 83
Dividends declared (in dollars per share)	$ 0.625

XML

STOCKHOLDERS' EQUITY - Narrative (Details) - USD ($) $ / shares in Units, shares in Thousands			3 Months Ended		5 Months Ended	9 Months Ended
	Dec. 26, 2019	Aug. 02, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 26, 2019	Sep. 30, 2020	Sep. 30, 2019	Nov. 02, 2020	Jul. 31, 2019	Jul. 30, 2019	Dec. 14, 2017
Equity, Class of Treasury Stock [Line Items]
Increase in treasury stock from stock repurchases			$ 5,000,000	$ 1,000,000,000		$ 30,000,000	$ 1,010,000,000
Common shares acquired in connection with employee stock plans (in shares)						80	30
Common shares acquired in connection with employee stock plans, amount						$ 30,000,000	$ 10,000,000
July 2019 ASR
Equity, Class of Treasury Stock [Line Items]
Accelerated stock repurchase agreement amount									$ 1,000,000,000
Accelerated stock repurchase payment		$ 1,000,000,000
Shares received (in shares)	700	2,700			3,400
Increase in treasury stock from stock repurchases		$ 800,000,000
Decrease in capital in excess of par value		$ 200,000,000
Average daily volume weighted-average share price of common stock during term of agreement (in dollars per share)					$ 296.19
Reclassification from capital in excess of par value to treasury stock	$ 200,000,000
December 2017 Authorization
Equity, Class of Treasury Stock [Line Items]
Share repurchase authorization											$ 3,000,000,000
Remaining share repurchase authorization at replacement										$ 1,030,000,000.00
July 2019 Authorization
Equity, Class of Treasury Stock [Line Items]
Share repurchase authorization										$ 3,000,000,000
Subsequent Event | July 2019 Authorization
Equity, Class of Treasury Stock [Line Items]
Share repurchase authorization								$ 3,000,000,000
Remaining authorized amount								$ 2,000,000,000

XML

INCOME TAXES (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Income Tax Disclosure [Abstract]
Effective income tax rate (percent)	25.20%	22.50%	29.00%	23.80%

XML

DEBT - Debt Outstanding (Details) - USD ($)	Sep. 30, 2020	Mar. 31, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Total short-term debt	$ 1,724,000,000		$ 699,000,000
Long-term debt	6,059,000,000		4,967,000,000
Commercial paper
Debt Instrument [Line Items]
Short-term debt	325,000,000		300,000,000
Term note
Debt Instrument [Line Items]
Short-term debt	1,000,000,000		0
Senior notes | $400 million, 2.50% due December 15, 2020
Debt Instrument [Line Items]
Face amount	$ 400,000,000
Stated interest rate (percent)	2.50%
Long-term debt, current maturities	$ 399,000,000		399,000,000
Senior notes | $600 million, 3.15% due December 1, 2022
Debt Instrument [Line Items]
Face amount	$ 600,000,000
Stated interest rate (percent)	3.15%
Long-term debt	$ 598,000,000		598,000,000
Senior notes | $400 million, 2.90% due December 15, 2022
Debt Instrument [Line Items]
Face amount	$ 400,000,000
Stated interest rate (percent)	2.90%
Long-term debt	$ 398,000,000		397,000,000
Senior notes | $600 million, 3.85% due October 1, 2024
Debt Instrument [Line Items]
Face amount	$ 600,000,000
Stated interest rate (percent)	3.85%
Long-term debt	$ 597,000,000		597,000,000
Senior notes | $600 million, 4.50% due April 1, 2025
Debt Instrument [Line Items]
Face amount	$ 600,000,000	$ 600,000,000
Stated interest rate (percent)	4.50%	4.50%
Long-term debt	$ 595,000,000		0
Senior notes | $600 million, 3.95% due March 15, 2027
Debt Instrument [Line Items]
Face amount	$ 600,000,000
Stated interest rate (percent)	3.95%
Long-term debt	$ 596,000,000		595,000,000
Senior notes | $500 million, 3.125% due August 15, 2029
Debt Instrument [Line Items]
Face amount	$ 500,000,000
Stated interest rate (percent)	3.125%
Long-term debt	$ 495,000,000		495,000,000
Senior notes | $500 million, 4.875% due April 1, 2030]
Debt Instrument [Line Items]
Face amount	$ 500,000,000	$ 500,000,000
Stated interest rate (percent)	4.875%	4.875%
Long-term debt	$ 494,000,000		0
Senior notes | $250 million, 8.15% due June 15, 2038
Debt Instrument [Line Items]
Face amount	$ 250,000,000
Stated interest rate (percent)	8.15%
Long-term debt	$ 262,000,000		262,000,000
Senior notes | $400 million, 4.625% due December 1, 2042
Debt Instrument [Line Items]
Face amount	$ 400,000,000
Stated interest rate (percent)	4.625%
Long-term debt	$ 396,000,000		396,000,000
Senior notes | $750 million, 4.95% due October 1, 2044
Debt Instrument [Line Items]
Face amount	$ 750,000,000
Stated interest rate (percent)	4.95%
Long-term debt	$ 739,000,000		739,000,000
Senior notes | $400 million, 4.80% due March 15, 2047
Debt Instrument [Line Items]
Face amount	$ 400,000,000
Stated interest rate (percent)	4.80%
Long-term debt	$ 396,000,000		396,000,000
Senior notes | $500 million, 3.95% due August 15, 2049
Debt Instrument [Line Items]
Face amount	$ 500,000,000
Stated interest rate (percent)	3.95%
Long-term debt	$ 493,000,000		$ 492,000,000

XML

DEBT - Senior Notes (Details) - Senior notes - USD ($)	9 Months Ended
	Sep. 30, 2020	Mar. 31, 2020
Debt Instrument [Line Items]
Net proceeds from issuance of notes	$ 1,088,000,000
Redemption price, percentage	100.00%
$600 million, 4.50% due April 1, 2025
Debt Instrument [Line Items]
Face amount	$ 600,000,000	$ 600,000,000
Stated interest rate (percent)	4.50%	4.50%
$500 million, 4.875% due April 1, 2030]
Debt Instrument [Line Items]
Face amount	$ 500,000,000	$ 500,000,000
Stated interest rate (percent)	4.875%	4.875%
$250 million, 8.15% due June 15, 2038
Debt Instrument [Line Items]
Face amount	$ 250,000,000
Stated interest rate (percent)	8.15%

XML

DEBT - Credit Agreement (Details) - Line of Credit - Unsecured Revolving Credit Agreement	9 Months Ended
	Sep. 30, 2020 USD ($)
Revolving Credit Facility
Line of Credit Facility [Line Items]
Debt instrument term (in years)	5 years
Maximum borrowing capacity	$ 2,000,000,000.0
Facility fee (percent)	0.15%
Debt to capitalization percentage, maximum	50.00%
Actual debt to capitalization percentage (percent)	33.00%
Maximum borrowing capacity including uncommitted incremental loan facility	$ 2,500,000,000
Uncommitted incremental loan facility	500,000,000
Line of credit, outstanding borrowings	0
Remaining borrowing capacity	$ 2,000,000,000.0
Revolving Credit Facility | Minimum
Line of Credit Facility [Line Items]
Facility fee (percent)	0.09%
Revolving Credit Facility | Maximum
Line of Credit Facility [Line Items]
Facility fee (percent)	0.25%
Revolving Credit Facility | LIBOR
Line of Credit Facility [Line Items]
Basis spread on variable rate (percent)	1.10%
Revolving Credit Facility | LIBOR | Minimum
Line of Credit Facility [Line Items]
Basis spread on variable rate (percent)	0.91%
Revolving Credit Facility | LIBOR | Maximum
Line of Credit Facility [Line Items]
Basis spread on variable rate (percent)	1.50%
Letter of Credit
Line of Credit Facility [Line Items]
Line of credit, outstanding borrowings	$ 0

XML

DEBT - Commercial Paper (Details) - Commercial paper - USD ($)	9 Months Ended
	Sep. 30, 2020	Dec. 31, 2019
Short-term Debt [Line Items]
Maximum borrowing capacity	$ 2,000,000,000
Maximum amount outstanding during period	600,000,000
Short-term debt outstanding	$ 325,000,000	$ 300,000,000
Weighted average annual interest rate (percent)	0.35%

XML

DEBT - Term Note (Details) - USD ($)	1 Months Ended		9 Months Ended
	Mar. 31, 2020	Feb. 29, 2020	Sep. 30, 2020	Sep. 30, 2019
Short-term Debt [Line Items]
Draw on term note commitment			$ 1,000,000,000	$ 0
2020 Term Loan | Term note
Short-term Debt [Line Items]
Face amount		$ 1,000,000,000
Debt instrument term (in years)		1 year
Extension period term (in years)		1 year
Draw on term note commitment	$ 1,000,000,000

XML

COMMITMENTS, GUARANTEES AND CONTINGENCIES (Details) beneficiary in Millions, $ in Millions	1 Months Ended	3 Months Ended	9 Months Ended	12 Months Ended
	Sep. 30, 2020 USD ($) State	Sep. 30, 2020 USD ($) State	Sep. 30, 2020 USD ($) beneficiary State	Dec. 31, 2021	Dec. 31, 2019	Nov. 02, 2017 USD ($)
Loss Contingencies [Line Items]
Percentage of risk score calculated from claims submitted through EDS			50.00%		25.00%
Number of states comprising TRICARE beneficiaries | State	32	32	32
Number of TRICARE beneficiaries | beneficiary			6
US Risk Corridor Premium Stabilization Program
Loss Contingencies [Line Items]
Litigation recoveries sought						$ 611
Payment received upon judgement	$ 609	$ 609	$ 609
Related legal fees and expenses		$ 31	$ 31
Tricare East Region Contract
Loss Contingencies [Line Items]
Contract term years			5 years
Medicare
Loss Contingencies [Line Items]
Percentage of premiums and services revenue			82.00%
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			5.00%
Forecast
Loss Contingencies [Line Items]
Percentage of risk score calculated from claims submitted through EDS				75.00%

XML

SEGMENT INFORMATION - Narrative (Details) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($) Segment	Sep. 30, 2019 USD ($)
Segment Reporting [Abstract]
Number of reportable segments | Segment			3
Member co-share amounts and government subsidies	$ 4,400	$ 4,000	$ 11,900	$ 10,700
Depreciation and amortization classified as benefit expense	$ 33	$ 32	$ 94	$ 92

XML

SEGMENT INFORMATION - Segment Results (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Segment Reporting Information [Line Items]
Premiums	$ 18,904	$ 15,712	$ 55,822	$ 47,139
Services revenue	457	393	1,331	1,103
Total external revenues	19,361	16,105	57,153	48,242
Intersegment revenues	0	0	0	0
Investment income	714	136	940	351
Total revenues	20,075	16,241	58,093	48,593
Benefits	15,611	13,357	45,415	40,168
Operating costs	2,513	1,889	6,984	5,252
Depreciation and amortization	128	127	362	343
Total operating expenses	18,252	15,373	52,761	45,763
Income from operations	1,823	868	5,332	2,830
Interest expense	75	62	211	184
Other (income) expense, net	(7)	(82)	63	(217)
Income before income taxes and equity in net earnings	1,755	888	5,058	2,863
Equity in net earnings	35	1	68	16
Segment earnings (loss)	1,790	889	5,126	2,879
Individual Medicare Advantage
Segment Reporting Information [Line Items]
Premiums	12,949	10,752	38,748	32,254
Group Medicare Advantage
Segment Reporting Information [Line Items]
Premiums	1,880	1,609	5,867	4,867
Medicare stand-alone PDP
Segment Reporting Information [Line Items]
Premiums	622	781	2,108	2,408
Total Medicare
Segment Reporting Information [Line Items]
Premiums	15,451	13,142	46,723	39,529
Fully-insured
Segment Reporting Information [Line Items]
Premiums	1,948	1,428	4,717	4,307
Specialty
Segment Reporting Information [Line Items]
Premiums	424	400	1,278	1,160
Medicaid and other
Segment Reporting Information [Line Items]
Premiums	1,081	742	3,104	2,143
Provider
Segment Reporting Information [Line Items]
Services revenue	107	136	316	367
ASO and other
Segment Reporting Information [Line Items]
Services revenue	193	204	590	601
Pharmacy
Segment Reporting Information [Line Items]
Services revenue	157	53	425	135
Services
Segment Reporting Information [Line Items]
Intersegment revenues	0	0	0	0
Products
Segment Reporting Information [Line Items]
Intersegment revenues	0	0	0	0
Operating Segments | Retail
Segment Reporting Information [Line Items]
Premiums	16,709	14,034	50,336	42,106
Services revenue	4	4	14	14
Total external revenues	16,713	14,038	50,350	42,120
Intersegment revenues	0	0	0	0
Investment income	28	50	114	139
Total revenues	16,741	14,088	50,464	42,259
Benefits	14,224	12,050	41,939	36,396
Operating costs	1,877	1,310	5,047	3,664
Depreciation and amortization	87	89	251	239
Total operating expenses	16,188	13,449	47,237	40,299
Income from operations	553	639	3,227	1,960
Interest expense	0	0	0	0
Other (income) expense, net	0	0	0	0
Income before income taxes and equity in net earnings	553	639	3,227	1,960
Equity in net earnings	0	0	0	0
Segment earnings (loss)	553	639	3,227	1,960
Operating Segments | Retail | Individual Medicare Advantage
Segment Reporting Information [Line Items]
Premiums	12,949	10,752	38,748	32,254
Operating Segments | Retail | Group Medicare Advantage
Segment Reporting Information [Line Items]
Premiums	1,880	1,609	5,867	4,867
Operating Segments | Retail | Medicare stand-alone PDP
Segment Reporting Information [Line Items]
Premiums	622	781	2,108	2,408
Operating Segments | Retail | Total Medicare
Segment Reporting Information [Line Items]
Premiums	15,451	13,142	46,723	39,529
Operating Segments | Retail | Fully-insured
Segment Reporting Information [Line Items]
Premiums	177	150	509	434
Operating Segments | Retail | Specialty
Segment Reporting Information [Line Items]
Premiums	0	0	0	0
Operating Segments | Retail | Medicaid and other
Segment Reporting Information [Line Items]
Premiums	1,081	742	3,104	2,143
Operating Segments | Retail | Provider
Segment Reporting Information [Line Items]
Services revenue	0	0	0	0
Operating Segments | Retail | ASO and other
Segment Reporting Information [Line Items]
Services revenue	4	4	14	14
Operating Segments | Retail | Pharmacy
Segment Reporting Information [Line Items]
Services revenue	0	0	0	0
Operating Segments | Retail | Services
Segment Reporting Information [Line Items]
Intersegment revenues	0	0	0	0
Operating Segments | Retail | Products
Segment Reporting Information [Line Items]
Intersegment revenues	0	0	0	0
Operating Segments | Group and Specialty
Segment Reporting Information [Line Items]
Premiums	1,593	1,678	4,884	5,033
Services revenue	189	200	576	587
Total external revenues	1,782	1,878	5,460	5,620
Intersegment revenues	9	4	22	13
Investment income	3	7	12	17
Total revenues	1,794	1,889	5,494	5,650
Benefits	1,481	1,448	3,886	4,177
Operating costs	452	413	1,316	1,232
Depreciation and amortization	21	24	60	67
Total operating expenses	1,954	1,885	5,262	5,476
Income from operations	(160)	4	232	174
Interest expense	0	0	0	0
Other (income) expense, net	0	0	0	0
Income before income taxes and equity in net earnings	(160)	4	232	174
Equity in net earnings	0	0	0	0
Segment earnings (loss)	(160)	4	232	174
Operating Segments | Group and Specialty | Individual Medicare Advantage
Segment Reporting Information [Line Items]
Premiums	0	0	0	0
Operating Segments | Group and Specialty | Group Medicare Advantage
Segment Reporting Information [Line Items]
Premiums	0	0	0	0
Operating Segments | Group and Specialty | Medicare stand-alone PDP
Segment Reporting Information [Line Items]
Premiums	0	0	0	0
Operating Segments | Group and Specialty | Total Medicare
Segment Reporting Information [Line Items]
Premiums	0	0	0	0
Operating Segments | Group and Specialty | Fully-insured
Segment Reporting Information [Line Items]
Premiums	1,169	1,278	3,606	3,873
Operating Segments | Group and Specialty | Specialty
Segment Reporting Information [Line Items]
Premiums	424	400	1,278	1,160
Operating Segments | Group and Specialty | Medicaid and other
Segment Reporting Information [Line Items]
Premiums	0	0	0	0
Operating Segments | Group and Specialty | Provider
Segment Reporting Information [Line Items]
Services revenue	0	0	0	0
Operating Segments | Group and Specialty | ASO and other
Segment Reporting Information [Line Items]
Services revenue	189	200	576	587
Operating Segments | Group and Specialty | Pharmacy
Segment Reporting Information [Line Items]
Services revenue	0	0	0	0
Operating Segments | Group and Specialty | Services
Segment Reporting Information [Line Items]
Intersegment revenues	9	4	22	13
Operating Segments | Group and Specialty | Products
Segment Reporting Information [Line Items]
Intersegment revenues	0	0	0	0
Operating Segments | Healthcare Services
Segment Reporting Information [Line Items]
Premiums	0	0	0	0
Services revenue	264	189	741	502
Total external revenues	264	189	741	502
Intersegment revenues	6,865	6,413	20,414	18,584
Investment income	2	0	2	1
Total revenues	7,131	6,602	21,157	19,087
Benefits	0	0	0	0
Operating costs	6,871	6,348	20,274	18,371
Depreciation and amortization	46	43	135	121
Total operating expenses	6,917	6,391	20,409	18,492
Income from operations	214	211	748	595
Interest expense	0	0	0	0
Other (income) expense, net	0	0	0	0
Income before income taxes and equity in net earnings	214	211	748	595
Equity in net earnings	35	1	68	16
Segment earnings (loss)	249	212	816	611
Operating Segments | Healthcare Services | Individual Medicare Advantage
Segment Reporting Information [Line Items]
Premiums	0	0	0	0
Operating Segments | Healthcare Services | Group Medicare Advantage
Segment Reporting Information [Line Items]
Premiums	0	0	0	0
Operating Segments | Healthcare Services | Medicare stand-alone PDP
Segment Reporting Information [Line Items]
Premiums	0	0	0	0
Operating Segments | Healthcare Services | Total Medicare
Segment Reporting Information [Line Items]
Premiums	0	0	0	0
Operating Segments | Healthcare Services | Fully-insured
Segment Reporting Information [Line Items]
Premiums	0	0	0	0
Operating Segments | Healthcare Services | Specialty
Segment Reporting Information [Line Items]
Premiums	0	0	0	0
Operating Segments | Healthcare Services | Medicaid and other
Segment Reporting Information [Line Items]
Premiums	0	0	0	0
Operating Segments | Healthcare Services | Provider
Segment Reporting Information [Line Items]
Services revenue	107	136	316	367
Operating Segments | Healthcare Services | ASO and other
Segment Reporting Information [Line Items]
Services revenue	0	0	0	0
Operating Segments | Healthcare Services | Pharmacy
Segment Reporting Information [Line Items]
Services revenue	157	53	425	135
Operating Segments | Healthcare Services | Services
Segment Reporting Information [Line Items]
Intersegment revenues	4,852	4,654	14,514	13,456
Operating Segments | Healthcare Services | Products
Segment Reporting Information [Line Items]
Intersegment revenues	2,013	1,759	5,900	5,128
Eliminations/ Corporate
Segment Reporting Information [Line Items]
Premiums	602	0	602	0
Services revenue	0	0	0	0
Total external revenues	602	0	602	0
Intersegment revenues	(6,874)	(6,417)	(20,436)	(18,597)
Investment income	681	79	812	194
Total revenues	(5,591)	(6,338)	(19,022)	(18,403)
Benefits	(94)	(141)	(410)	(405)
Operating costs	(6,687)	(6,182)	(19,653)	(18,015)
Depreciation and amortization	(26)	(29)	(84)	(84)
Total operating expenses	(6,807)	(6,352)	(20,147)	(18,504)
Income from operations	1,216	14	1,125	101
Interest expense	75	62	211	184
Other (income) expense, net	(7)	(82)	63	(217)
Income before income taxes and equity in net earnings	1,148	34	851	134
Equity in net earnings	0	0	0	0
Segment earnings (loss)	1,148	34	851	134
Eliminations/ Corporate | Individual Medicare Advantage
Segment Reporting Information [Line Items]
Premiums	0	0	0	0
Eliminations/ Corporate | Group Medicare Advantage
Segment Reporting Information [Line Items]
Premiums	0	0	0	0
Eliminations/ Corporate | Medicare stand-alone PDP
Segment Reporting Information [Line Items]
Premiums	0	0	0	0
Eliminations/ Corporate | Total Medicare
Segment Reporting Information [Line Items]
Premiums	0	0	0	0
Eliminations/ Corporate | Fully-insured
Segment Reporting Information [Line Items]
Premiums	602	0	602	0
Eliminations/ Corporate | Specialty
Segment Reporting Information [Line Items]
Premiums	0	0	0	0
Eliminations/ Corporate | Medicaid and other
Segment Reporting Information [Line Items]
Premiums	0	0	0	0
Eliminations/ Corporate | Provider
Segment Reporting Information [Line Items]
Services revenue	0	0	0	0
Eliminations/ Corporate | ASO and other
Segment Reporting Information [Line Items]
Services revenue	0	0	0	0
Eliminations/ Corporate | Pharmacy
Segment Reporting Information [Line Items]
Services revenue	0	0	0	0
Eliminations/ Corporate | Services
Segment Reporting Information [Line Items]
Intersegment revenues	(4,861)	(4,658)	(14,536)	(13,469)
Eliminations/ Corporate | Products
Segment Reporting Information [Line Items]
Intersegment revenues	$ (2,013)	$ (1,759)	$ (5,900)	$ (5,128)