Humana 2014 Annual Report Download - page 126

Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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damages is not permitted. In addition, insurance coverage for all or certain forms of liability has become increasingly
costly and may become unavailable or prohibitively expensive in the future.
We record accruals for the contingencies discussed in both sections above to the extent that we conclude it is
probable that a liability has been incurred and the amount of the loss can be reasonably estimated. No estimate of the
possible loss or range of loss in excess of amounts accrued, if any, can be made at this time regarding the matters
specifically described above because of the inherently unpredictable nature of legal proceedings, which also may be
exacerbated by various factors, including: (i) the damages sought in the proceedings are unsubstantiated or
indeterminate; (ii) discovery is not complete; (iii) the proceeding is in its early stages; (iv) the matters present legal
uncertainties; (v) there are significant facts in dispute; (vi) there are a large number of parties (including where it is
uncertain how liability, if any, will be shared among multiple defendants); or (vii) there is a wide range of potential
outcomes.
The outcome of any current or future litigation or governmental or internal investigations, including the matters
described above, cannot be accurately predicted, nor can we predict any resulting judgments, penalties, fines or other
sanctions that may be imposed at the discretion of federal or state regulatory authorities or as a result of actions by
third parties. Nevertheless, it is reasonably possible that any such outcome of litigation, judgments, penalties, fines or
other sanctions could be substantial, and the outcome of these matters may have a material adverse effect on our results
of operations, financial position, and cash flows, and may also affect our reputation.
17. SEGMENT INFORMATION
On January 1, 2014, we reclassified certain of our businesses from our Healthcare Services segment to our Employer
Group segment to correspond with internal management reporting changes. Our reportable segments remain the same
and prior period segment financial information has been recast to conform to the 2014 presentation.
We manage our business with three reportable segments: Retail, Employer Group, and Healthcare 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, and includes our contract with CMS to administer the LI-NET prescription drug plan program and
contracts with various states to provide Medicaid, dual eligible, and Long-Term Support Services benefits, collectively
our state-based contracts. 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 voluntary benefit
products, as well as administrative services only, or ASO, products and our health and wellness products primarily
marketed to employer groups. The Healthcare Services segment includes services offered to our health plan members
as well as to third parties including pharmacy solutions, provider services, home based services, integrated behavioral
health services, and predictive modeling and informatics services. The Other Businesses category consists of our military
services, primarily our TRICARE South Region contract, Puerto Rico Medicaid, and closed-block long-term care
insurance policies.
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
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, contracting with retail pharmacies, confirming member eligibility, reviewing drug