Segment Information

12 Months Ended

Dec. 31, 2011

Segment Information [Abstract]

Segment Information

16. 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 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. 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, 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 $4.2 billion, $3.5 billion, and $3.5 billion for years ended December 31, 2011, 2010, and 2009, 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 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 included with intersegment eliminations in the tables presenting segment results below.

Our segment results were as follows for the years ended December 31, 2011, 2010, and 2009:

	Retail		Employer Group		Health and Well-Being Services		Other Businesses		Eliminations/ Corporate			Consolidated
	(in millions)
2011
Revenues—external customers
Premiums:
Medicare Advantage	$	18,100	$	3,152	$	0	$	0	$	0		$	21,252
Medicare stand-alone PDP		2,317		8		0		253		0			2,578
Total Medicare		20,417		3,160		0		253		0			23,830
Fully-insured		861		4,782		0		0		0			5,643
Specialty		124		935		0		0		0			1,059
Military services		0		0		0		3,616		0			3,616
Medicaid and other		0		0		0		958		0			958
Total premiums		21,402		8,877		0		4,827		0			35,106
Services revenue:
Provider		0		0		892		0		0			892
ASO and other		16		356		0		85		0			457
Pharmacy		0		0		11		0		0			11
Total services revenue		16		356		903		85		0			1,360
Total revenues—external customers		21,418		9,233		903		4,912		0			36,466
Intersegment revenues
Services		0		14		8,510		0		(8,524	)		0
Products		0		0		1,820		0		(1,820	)		0
Total intersegment revenues		0		14		10,330		0		(10,344	)		0
Investment income		76		48		0		54		188			366
Total revenues		21,494		9,295		11,233		4,966		(10,156	)		36,832
Operating expenses:
Benefits		17,383		7,318		0		4,411		(289	)		28,823
Operating costs		2,405		1,650		10,798		461		(9,919	)		5,395
Depreciation and amortization		119		85		82		10		(26	)		270
Total operating expenses		19,907		9,053		10,880		4,882		(10,234	)		34,488
Income from operations		1,587		242		353		84		78			2,344
Interest expense		0		0		0		0		109			109
Income (loss) before income taxes	$	1,587	$	242	$	353	$	84	$	(31	)	$	2,235

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 2011, 76% for 2010 and 73% for 2009.

Retail segment benefit expenses for 2011 and 2010 include $147 million and $198 million, respectively, 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 million for the write-down of deferred acquisition costs associated with our individual commercial medical policies as discussed more fully in Note 17.

Employer Group segment benefit expenses for 2011 and 2010 include $52 million and $33 million, respectively, 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 $139 million for reserve strengthening associated with our closed block of long-term care policies as discussed more fully in Note 17.

	Retail		Employer Group		Health and Well-Being Services		Other Businesses			Eliminations/ Corporate			Consolidated
	(in millions)
2010
Revenues—external customers
Premiums:
Medicare Advantage	$	16,265	$	3,021	$	0	$	0		$	0		$	19,286
Medicare stand-alone PDP		1,959		5		0		355			0			2,319
Total Medicare		18,224		3,026		0		355			0			21,605
Fully-insured		746		5,169		0		0			0			5,915
Specialty		82		885		0		0			0			967
Military services		0		0		0		3,462			0			3,462
Medicaid and other		0		0		0		763			0			763
Total premiums		19,052		9,080		0		4,580			0			32,712
Services revenue:
Provider		0		0		34		0			0			34
ASO and other		11		395		0		115			0			521
Pharmacy		0		0		0		0			0			0
Total services revenue		11		395		34		115			0			555
Total revenues—external customers		19,063		9,475		34		4,695			0			33,267
Intersegment revenues
Services		0		12		7,494		0			(7,506	)		0
Products		0		0		1,292		0			(1,292	)		0
Total intersegment revenues		0		12		8,786		0			(8,798	)		0
Investment income		80		42		0		43			164			329
Total revenues		19,143		9,529		8,820		4,738			(8,634	)		33,596
Operating expenses:
Benefits		15,624		7,486		0		4,253			(246	)		27,117
Operating costs		2,113		1,662		8,575		475			(8,445	)		4,380
Depreciation and amortization		117		93		26		12			(3	)		245
Total operating expenses		17,854		9,241		8,601		4,740			(8,694	)		31,742
Income (loss) from operations		1,289		288		219		(2	)		60			1,854
Interest expense		0		0		0		0			105			105
Income (loss) before income taxes	$	1,289	$	288	$	219	$	(2	)	$	(45	)	$	1,749

	Retail		Employer Group			Health and Well-Being Services		Other Businesses		Eliminations/ Corporate			Consolidated
	(in millions)
2009
Revenues—external customers
Premiums:
Medicare Advantage	$	15,333	$	1,080		$	0	$	0	$	0		$	16,413
Medicare stand-alone PDP		2,323		5			0		0		0			2,328
Total Medicare		17,656		1,085			0		0		0			18,741
Fully-insured		638		5,547			0		0		0			6,185
Specialty		55		834			0		0		0			889
Military services		0		0			0		3,427		0			3,427
Medicaid and other		0		0			0		685		0			685
Total premiums		18,349		7,466			0		4,112		0			29,927
Services revenue:
Provider		0		0			17		0		0			17
ASO and other		10		370			0		123		0			503
Pharmacy		0		0			0		0		0			0
Total services revenue		10		370			17		123		0			520
Total revenues—external customers		18,359		7,836			17		4,235		0			30,447
Intersegment revenues
Services		0		14			8,003		0		(8,017	)		0
Products		0		0			949		0		(949	)		0
Total intersegment revenues		0		14			8,952		0		(8,966	)		0
Investment income		88		48			0		23		137			296
Total revenues		18,447		7,898			8,969		4,258		(8,829	)		30,743
Operating expenses:
Benefits		14,988		6,289			0		3,705		(198	)		24,784
Operating costs		1,985		1,533			8,768		431		(8,703	)		4,014
Depreciation and amortization		115		89			18		25		(10	)		237
Total operating expenses		17,088		7,911			8,786		4,161		(8,911	)		29,035
Income (loss) from operations		1,359		(13	)		183		97		82			1,708
Interest expense		0		0			0		0		106			106
Income (loss) before income taxes	$	1,359	$	(13	)	$	183	$	97	$	(24	)	$	1,602