SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2022

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, including Temporary Assistance for Needy Families, or TANF, dual eligible demonstration, 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 pharmacy, provider, and home services, along with other services and capabilities to promote wellness and advance population health. The segment also includes the company's strategic partnerships with WCAS to develop and operate senior-focused, payor-agnostic, primary care centers. Services offered by this segment are designed to enhance the overall healthcare experience. These services may lead to lower utilization associated with improved member health and/or lower drug costs.

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 revenue 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 revenue 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 revenue 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 $5.4 billion and $5.0 billion for the three months ended September 30, 2022 and 2021, respectively. For the nine months ended September 30, 2022 and 2021 these amounts were $14.2 billion and $12.9 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 $30 million and $28 million for the three months ended September 30, 2022 and 2021, respectively. For the nine months ended September 30, 2022 and 2021, the amount of this expense was $89 million and $80 million, respectively.

Other than those described previously, the accounting policies of each segment are the same. For additional information regarding our accounting policies refer to Note 2 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in our 2021 Form 10-K. Transactions between reportable segments primarily consist of sales of services rendered by our Healthcare Services segment, primarily pharmacy, provider, and home solutions 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, 2022 and 2021:

	Retail		Group and Specialty		Healthcare Services		Eliminations/ Corporate		Consolidated
Three months ended September 30, 2022	(in millions)
External revenues
Premiums:
Individual Medicare Advantage	$	16,007	$	—	$	—	$	—	$	16,007
Group Medicare Advantage	1,792		—		—		—		1,792
Medicare stand-alone PDP	534		—		—		—		534
Total Medicare	18,333		—		—		—		18,333
Fully-insured	188		912		—		—		1,100
Specialty	—		425		—		—		425
Medicaid and other	1,610		—		—		—		1,610
Total premiums	20,131		1,337		—		—		21,468
Services revenue:
Home solutions	—		—		519		—		519
Provider	—		—		159		—		159
ASO and other	10		197		—		—		207
Pharmacy	—		—		274		—		274
Total services revenue	10		197		952		—		1,159
Total external revenues	20,141		1,534		952		—		22,627
Intersegment revenues
Services	—		14		5,466		(5,480)		—
Products	—		—		2,459		(2,459)		—
Total intersegment revenues	—		14		7,925		(7,939)		—
Investment income	48		3		3		118		172
Total revenues	20,189		1,551		8,880		(7,821)		22,799
Operating expenses:
Benefits	17,420		1,052		—		(88)		18,384
Operating costs	1,903		427		8,435		(7,704)		3,061
Depreciation and amortization	137		23		50		(28)		182
Total operating expenses	19,460		1,502		8,485		(7,820)		21,627
Income (loss) from operations	729		49		395		(1)		1,172
Gain on sale of KAH Hospice	—		—		(240)		—		(240)
Interest expense	—		—		—		102		102
Other expense, net	—		—		—		13		13
Income (loss) before income taxes and equity in net earnings	729		49		635		(116)		1,297
Equity in net earnings (losses)	8		—		(5)		—		3
Segment earnings (loss)	$	737	$	49	$	630	$	(116)	$	1,300
Net loss attributable to noncontrolling interests	2		—		—		—		2
Segment earnings (loss) attributable to Humana	$	739	$	49	$	630	$	(116)	$	1,302

	Retail		Group and Specialty		Healthcare Services		Eliminations/ Corporate		Consolidated
Three months ended September 30, 2021	(in millions)
External revenues
Premiums:
Individual Medicare Advantage	$	14,642	$	—	$	—	$	—	$	14,642
Group Medicare Advantage	1,737		—		—		—		1,737
Medicare stand-alone PDP	541		—		—		—		541
Total Medicare	16,920		—		—		—		16,920
Fully-insured	185		1,052		—		—		1,237
Specialty	—		432		—		—		432
Medicaid and other	1,296		—		—		—		1,296
Total premiums	18,401		1,484		—		—		19,885
Services revenue:
Home solutions	—		—		374		—		374
Provider	—		—		110		—		110
ASO and other	—		198		—		—		198
Pharmacy	—		—		163		—		163
Total services revenue	—		198		647		—		845
Total external revenues	18,401		1,682		647		—		20,730
Intersegment revenues
Services	1		10		5,087		(5,098)		—
Products	—		—		2,303		(2,303)		—
Total intersegment revenues	1		10		7,390		(7,401)		—
Investment income (loss)	38		3		1		(75)		(33)
Total revenues	18,440		1,695		8,038		(7,476)		20,697
Operating expenses:
Benefits	16,207		1,282		—		(173)		17,316
Operating costs	1,669		421		7,634		(7,121)		2,603
Depreciation and amortization	108		20		46		(24)		150
Total operating expenses	17,984		1,723		7,680		(7,318)		20,069
Income (loss) from operations	456		(28)		358		(158)		628
Interest expense	—		—		—		88		88
Other income, net	—		—		—		(1,096)		(1,096)
Income (loss) before income taxes and equity in net earnings	456		(28)		358		850		1,636
Equity in net earnings	—		—		15		—		15
Segment earnings (loss)	$	456	$	(28)	$	373	$	850	$	1,651

	Retail		Group and Specialty		Healthcare Services		Eliminations/ Corporate		Consolidated
Nine months ended September 30, 2022	(in millions)
External revenues
Premiums:
Individual Medicare Advantage	$	49,751	$	—	$	—	$	—	$	49,751
Group Medicare Advantage	5,524		—		—		—		5,524
Medicare stand-alone PDP	1,779		—		—		—		1,779
Total Medicare	57,054		—		—		—		57,054
Fully-insured	555		2,827		—		—		3,382
Specialty	—		1,281		—		—		1,281
Medicaid and other	4,720		—		—		—		4,720
Total premiums	62,329		4,108		—		—		66,437
Services revenue:
Home solutions	—		—		1,997		—		1,997
Provider services	—		—		409		—		409
ASO and other	24		588		—		—		612
Pharmacy solutions	—		—		754		—		754
Total services revenue	24		588		3,160		—		3,772
Total external revenues	62,353		4,696		3,160		—		70,209
Intersegment revenues
Services	—		42		15,970		(16,012)		—
Products	—		—		7,394		(7,394)		—
Total intersegment revenues	—		42		23,364		(23,406)		—
Investment income	133		10		6		73		222
Total revenues	62,486		4,748		26,530		(23,333)		70,431
Operating expenses:
Benefits	54,352		3,143		—		(387)		57,108
Operating costs	5,309		1,255		25,089		(22,533)		9,120
Depreciation and amortization	391		68		153		(85)		527
Total operating expenses	60,052		4,466		25,242		(23,005)		66,755
Income (loss) from operations	2,434		282		1,288		(328)		3,676
Gain on sale of KAH Hospice	—		—		(240)		—		(240)
Interest expense	—		—		—		293		293
Other income, net	—		—		—		(16)		(16)
Income (loss) before income taxes and equity in net earnings	2,434		282		1,528		(605)		3,639
Equity in net earnings (losses)	16		—		(15)		—		1
Segment earnings (loss)	$	2,450	$	282	$	1,513	$	(605)	$	3,640
Net loss (income) attributable to noncontrolling interests	2		—		(1)		—		1
Segment earnings (loss) attributable to Humana	$	2,452	$	282	$	1,512	$	(605)	$	3,641

	Retail		Group and Specialty		Healthcare Services		Eliminations/ Corporate		Consolidated
Nine months ended September 30, 2021	(in millions)
External Revenues
Premiums:
Individual Medicare Advantage	$	44,042	$	—	$	—	$	—	$	44,042
Group Medicare Advantage	5,267		—		—		—		5,267
Medicare stand-alone PDP	1,867		—		—		—		1,867
Total Medicare	51,176		—		—		—		51,176
Fully-insured	545		3,229		—		—		3,774
Specialty	—		1,298		—		—		1,298
Medicaid and other	3,739		—		—		—		3,739
Total premiums	55,460		4,527		—		—		59,987
Services revenue:
Home solutions	—		—		423		—		423
Provider services	—		—		298		—		298
ASO and other	17		582		—		—		599
Pharmacy solutions	—		—		482		—		482
Total services revenue	17		582		1,203		—		1,802
Total external revenues	55,477		5,109		1,203		—		61,789
Intersegment revenues
Services	1		30		14,838		(14,869)		—
Products	—		—		6,716		(6,716)		—
Total intersegment revenues	1		30		21,554		(21,585)		—
Investment income	155		11		3		52		221
Total revenues	55,633		5,150		22,760		(21,533)		62,010
Operating expenses:
Benefits	48,574		3,674		—		(487)		51,761
Operating costs	4,653		1,227		21,749		(20,903)		6,726
Depreciation and amortization	320		63		127		(74)		436
Total operating expenses	53,547		4,964		21,876		(21,464)		58,923
Income (loss) from operations	2,086		186		884		(69)		3,087
Interest expense	—		—		—		235		235
Other income, net	—		—		—		(562)		(562)
Income before income taxes and equity in net earnings	2,086		186		884		258		3,414
Equity in net earnings	—		—		69		—		69
Segment earnings	$	2,086	$	186	$	953	$	258	$	3,483