Segment Information

12 Months Ended

Dec. 31, 2010

Segment Information [Abstract]

Segment Information

17. SEGMENT INFORMATION

During the first quarter of 2011, we realigned our business segments to reflect our evolving business model. As a result, we reassessed and changed our operating and reportable segments in the first quarter of 2011 to reflect management's new view of the business and to align our external financial reporting with our new operating and internal financial reporting model. All respective amounts related to the segment change have been retrospectively adjusted throughout the financial statements as discussed in Note 2. Our new reportable segments and the basis for determining those segments are discussed below.

We currently manage our business with three reportable segments: Retail, Employer Group, and Health and Well-Being Services. In addition, we include businesses that are not individually reportable because they do not meet the quantitative thresholds required by generally accepted accounting principles in an Other Businesses category. These segments are based on a combination of the type of health plan customer and adjacent businesses centered on well-being solutions for our health plans and other customers, as described below. These segment groupings are consistent with information used by our Chief Executive Officer to assess performance and allocate resources.

The Retail segment consists of Medicare and commercial fully-insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health and financial protection products, marketed directly to individuals. The Employer Group segment consists of Medicare and commercial fully-insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health and financial protection products, as well as administrative services only products marketed to employer groups. The Health and Well-Being Services segment includes services offered to our health plan members as well as to third parties that promote health and wellness, including primary care, pharmacy, integrated wellness, and home care services. The Other Businesses category consists of our Military services, primarily our TRICARE South Region contract, Medicaid, and closed-block long-term care businesses as well as our contract with CMS to administer the LI-NET program.

Our Health and Well-Being 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 RightSourceRx^®, 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. Service 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, selecting and establishing prices charged by 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 Health and Well-Being 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.

We present our consolidated results of operations from the perspective of the health plans. As a result, the cost of providing benefits to our members, whether provided via a third party provider or internally through a stand-alone subsidiary, is classified as benefits expense and excludes the portion of the cost for which the health plans do not bear responsibility, including member co-share amounts and government subsidies of $3.5 billion, $3.5 billion, and $4.6 billion for years ended December 31, 2010, 2009, and 2008, respectively.

Other than those described previously, the accounting policies of each segment are the same and are described in Note 2. Transactions between reportable segments consist of sales of services rendered by our Health and Well-Being Services segment, primarily pharmacy and behavioral health services, to our Retail and Employer Group customers. Intersegment sales and expenses are recorded at fair value and eliminated in consolidation. Members served by our segments often utilize 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 do not report total assets by segment since this is not a metric used to assess performance and allocate resources. We allocate most operating expenses to our segments. Certain corporate income and expenses are not allocated to the segments, including 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 included with intersegment eliminations in the tables presenting segment results below.

Our segment results were as follows for the years ended December 31, 2010, 2009, and 2008:

	Retail		Employer Group		Health and Well-Being Services		Other Businesses			Eliminations/ Corporate			Consolidated
	(in thousands)
2010
Revenues - external customers
Premiums:
Medicare Advantage	$	16,265,839	$	3,020,282	$	0	$	0		$	0		$	19,286,121
Medicare stand-alone PDP		1,960,063		4,598		0		355,399			0			2,320,060
Total Medicare		18,225,902		3,024,880		0		355,399			0			21,606,181
Fully-insured		745,329		5,168,713		0		0			0			5,914,042
Specialty		81,481		885,310		0		0			0			966,791
Military services		0		0		0		3,462,544			0			3,462,544
Medicaid and other		0		0		0		762,765			0			762,765
Total premiums		19,052,712		9,078,903		0		4,580,708			0			32,712,323
Services revenue:
Provider		0		0		34,104		0			0			34,104
ASO and other		11,105		394,950		0		115,021			0			521,076
Total services revenue		11,105		394,950		34,104		115,021			0			555,180
Total revenues - external customers		19,063,817		9,473,853		34,104		4,695,729			0			33,267,503
Intersegment revenues
Services		0		13,137		7,493,941		0			(7,507,078	)		0
Products		0		0		1,291,572		0			(1,291,572	)		0
Total intersegment revenues		0		13,137		8,785,513		0			(8,798,650	)		0
Investment income		80,525		42,205		0		42,581			164,021			329,332
Total revenues		19,144,342		9,529,195		8,819,617		4,738,310			(8,634,629	)		33,596,835
Operating expenses:
Benefits		15,625,243		7,485,497		0		4,252,333			(246,004	)		27,117,069
Operating costs		2,113,011		1,662,166		8,575,077		475,463			(8,445,398	)		4,380,319
Depreciation and amortization		117,219		93,478		25,622		11,865			(3,359	)		244,825
Total operating expenses		17,855,473		9,241,141		8,600,699		4,739,661			(8,694,761	)		31,742,213
Income from operations		1,288,869		288,054		218,918		(1,351	)		60,132			1,854,622
Interest expense		0		0		0		0			105,060			105,060
Income (loss) before income taxes	$	1,288,869	$	288,054	$	218,918	$	(1,351	)	$	(44,928	)	$	1,749,562

Premium and services revenues derived from our contracts with the federal government, as a percentage of our total premium and services revenues, were approximately 76% for 2010, 73% for 2009 and 72% for 2008.

Retail segment benefit expenses for 2010 include $198.4 million related to prior year favorable reserve releases not in the ordinary course of business as discussed more fully in Note 9. Retail segment operating costs for 2010 include $147.5 million for the write-down of deferred acquisition costs associated with our individual major medical policies as discussed more fully in Note 18.

Employer Group segment benefit expenses for 2010 include $32.8 million related to prior year favorable reserve releases not in the ordinary course of business as discussed more fully in Note 9.

Benefit expenses for Other Businesses for 2010 include $138.9 million for reserve strengthening associated with our closed block of long-term care policies as discussed more fully in Note 18.

	Retail		Employer Group			Health and Well-Being Services		Other Businesses		Eliminations/ Corporate			Consolidated
	(in thousands)
2009
Revenues - external customers
Premiums:
Medicare Advantage	$	15,333,225	$	1,080,076		$	0	$	0	$	0		$	16,413,301
Medicare stand-alone PDP		2,322,432		4,986			0		0		0			2,327,418
Total Medicare		17,655,657		1,085,062			0		0		0			18,740,719
Fully-insured		638,044		5,547,114			0		0		0			6,185,158
Specialty		54,837		834,413			0		0		0			889,250
Military services		0		0			0		3,426,739		0			3,426,739
Medicaid and other		0		0			0		684,885		0			684,885
Total premiums		18,348,538		7,466,589			0		4,111,624		0			29,926,751
Services revenue:
Provider		0		0			16,412		0		0			16,412
ASO and other		10,049		369,684			0		123,362		0			503,095
Total services revenue		10,049		369,684			16,412		123,362		0			519,507
Total revenues - external customers		18,358,587		7,836,273			16,412		4,234,986		0			30,446,258
Intersegment revenues
Services		0		13,814			8,002,820		0		(8,016,634	)		0
Products		0		0			949,095		0		(949,095	)		0
Total intersegment revenues		0		13,814			8,951,915		0		(8,965,729	)		0
Investment income		88,013		47,573			0		23,361		137,370			296,317
Total revenues		18,446,600		7,897,660			8,968,327		4,258,347		(8,828,359	)		30,742,575
Operating expenses:
Benefits		14,987,915		6,289,033			0		3,704,460		(197,832	)		24,783,576
Operating costs		1,984,817		1,533,069			8,767,686		431,051		(8,702,639	)		4,013,984
Depreciation and amortization		115,102		88,861			18,111		25,001		(9,663	)		237,412
Total operating expenses		17,087,834		7,910,963			8,785,797		4,160,512		(8,910,134	)		29,034,972
Income from operations		1,358,766		(13,303	)		182,530		97,835		81,775			1,707,603
Interest expense		0		0			0		0		105,843			105,843
Income (loss) before income taxes	$	1,358,766	$	(13,303	)	$	182,530	$	97,835	$	(24,068	)	$	1,601,760

	Retail		Employer Group		Health and Well-Being Services		Other Businesses		Eliminations/ Corporate			Consolidated
	(in thousands)
2008
Revenues - external customers
Premiums:
Medicare Advantage	$	12,987,639	$	790,360	$	0	$	0	$	0		$	13,777,999
Medicare stand-alone PDP		3,375,636		4,764		0		0		0			3,380,400
Total Medicare		16,363,275		795,124		0		0		0			17,158,399
Fully-insured		519,077		5,650,326		0		0		0			6,169,403
Specialty		66,338		819,249		0		0		0			885,587
Military services		0		0		0		3,218,270		0			3,218,270
Medicaid and other		0		0		0		633,185		0			633,185
Total premiums		16,948,690		7,264,699		0		3,851,455		0			28,064,844
Services revenue:
Provider		0		0		14,845		0		0			14,845
ASO and other		10,965		352,769		0		89,660		0			453,394
Total services revenue		10,965		352,769		14,845		89,660		0			468,239
Total revenues - external customers		16,959,655		7,617,468		14,845		3,941,115		0			28,533,083
Intersegment revenues
Services		0		12,706		10,505,782		0		(10,518,488	)		0
Products		0		0		836,828		0		(836,828	)		0
Total intersegment revenues		0		12,706		11,342,610		0		(11,355,316	)		0
Investment income		60,399		36,515		0		7,316		115,985			220,215
Total revenues		17,020,054		7,666,689		11,357,455		3,948,431		(11,239,331	)		28,753,298
Operating expenses:
Benefits		14,398,572		6,057,804		0		3,438,619		(164,889	)		23,730,106
Operating costs		1,848,651		1,433,365		11,187,070		420,459		(11,149,890	)		3,739,655
Depreciation and amortization		101,663		78,872		14,343		23,773		(8,251	)		210,400
Total operating expenses		16,348,886		7,570,041		11,201,413		3,882,851		(11,323,030	)		27,680,161
Income from operations		671,168		96,648		156,042		65,580		83,699			1,073,137
Interest expense		0		0		0		0		80,289			80,289
Income before income taxes	$	671,168	$	96,648	$	156,042	$	65,580	$	3,410		$	992,848