Humana 2011 Annual Report Download - page 130

Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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.
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