Humana 2012 Annual Report Download - page 14

designed to spread risk among insurers, an annual insurance industry premium-based assessment, and a
three-year commercial reinsurance fee. Implementation dates of the Health Insurance Reform Legislation began
in September 2010 and continue through 2018. The Health Insurance Reform Legislation is discussed more fully
in Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations under the
section titled “Health Insurance Reform.”
Business Segments
We manage our business with three reportable segments: Retail, Employer Group, and Health and
Well-Being Services. In addition, the Other Businesses category includes businesses that are not individually
reportable because they do not meet the quantitative thresholds required by generally accepted accounting
principles. 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 provider services, 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 Limited Income Newly Eligible Transition program, or the LI-NET program.
The results of each segment are measured by income before income taxes. Transactions between reportable
segments consist of sales of services rendered by our Health and Well-Being Services segment, primarily
pharmacy, behavioral health, and provider 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
the corporate level. These corporate amounts are reported separately from our reportable segments and included
with intersegment eliminations.
Our Products
Our medical and specialty insurance products allow members to access health care services primarily
through our networks of health care providers with whom we have contracted. These products may vary in the
degree to which members have coverage. Health maintenance organizations, or HMOs, generally require a
referral from the member’s primary care provider before seeing certain specialty physicians. Preferred provider
organizations, or PPOs, provide members the freedom to choose a health care provider without requiring a
referral. However PPOs generally require the member to pay a greater portion of the provider’s fee in the event
the member chooses not to use a provider participating in the PPO’s network. Point of Service, or POS, plans
combine the advantages of HMO plans with the flexibility of PPO plans. In general, POS plans allow members to
choose, at the time medical services are needed, to seek care from a provider within the plan’s network or outside
the network. In addition, we offer services to our health plan members as well as to third parties that promote
health and wellness, including pharmacy, provider services, integrated wellness, and home care services. At the
core of our strategy is our integrated care delivery model, which unites quality care, high member engagement,
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