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Item 9A. Controls and Procedures

2023-02-16 compared with 2022-02-17 · 44 added, 79 removed, 379 unchanged (25% of the section changed)

12 unchanged sentences

We have established disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to members of senior management and the Board of Directors.

Based on our evaluation as of December 31, 2021, which excluded the impact of the acquisition of Kindred at Home, or KAH, discussed below, we as the principal executive officer, the principal financial officer and the principal accounting officer of the Company have concluded that the Company’s disclosure controls and procedures (as defined in the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported as specified in Securities and Exchange Commission rules and forms.

On August 17, 2021, we acquired the remaining 60% interest in KAH.

We excluded KAH in our evaluation of internal controls over financial reporting and related disclosure controls and procedures.

Total KAH assets and revenues excluded from our evaluation represent 2% and 1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2021.

Based on our evaluation as of December 31, 2022, we as the principal executive officer, the principal financial officer and the principal accounting officer of the Company have concluded that the Company’s disclosure controls and procedures (as defined in the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported as specified in Securities and Exchange Commission rules and forms.

Management’s Report on Internal Control Over Financial Reporting

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A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of

management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate or that the degree of compliance with the policies or procedures may deteriorate.

We assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, which excluded the impact of the acquisition of KAH mentioned above.

We assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022.

In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013).

Based on our assessment, we determined that, as of December 31, 2022, the Company’s internal control over financial reporting was effective based on those criteria.

The effectiveness of our internal control over financial reporting, which excluded the impact of the acquisition of KAH mentioned above, as of December 31, 2021 has been audited by PricewaterhouseCoopers LLP, our independent registered public accounting firm, who also audited the Company’s consolidated financial statements included in our Annual Report on Form 10-K, as stated in their report which appears on pages 122-125.

The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by PricewaterhouseCoopers LLP, our independent registered public accounting firm, who also audited the Company’s consolidated financial statements included in our Annual Report on Form 10-K, as stated in their report which appears on pages 127-129.

Changes in Internal Control over Financial Reporting

Other than the KAH acquisition mentioned above, there have been no changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

There have been no changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

OTHER INFORMATION

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The information required by this Item is herein incorporated by reference from our Definitive Proxy Statement for the Annual Meeting of Stockholders scheduled to be held on April 20, 2023 appearing under the caption “Audit Committee Report” of such Definitive Proxy Statement.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) The financial statements, Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ), financial statement schedules and exhibits set forth below are filed as part of this report.

EXHIBITS, FINANCIAL STATEMENT SCHEDULE

(a) The financial statements, Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ), financial statement schedule and exhibits set forth below are filed as part of this report.

(1) Financial Statements – The response to this portion of Item 15 is submitted as Item 8 of Part II of this report.

(2) The following Consolidated Financial Statement Schedules are included herein:

(2) The following Consolidated Financial Statement Schedule is included herein:

Schedule I Parent Company Condensed Financial Information at December 31, 2022 and 2021 and for the years ended December 31, 2022, 2021 and 2020

Schedule II Valuation and Qualifying Accounts for the years ended December 31, 2021, 2020 and 2019

All other schedules have been omitted because they are not applicable.

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33-49305) filed February 2, 1994).

Amended and Restated By-Laws of Humana Inc., effective as of December 14, 2017 (incorporated herein by reference to Exhibit 3(b) to Humana Inc.’s Current Report on Form 8-K filed on December 14, 2017).

Amended and Restated By-laws, effective as of December 8, 2022 (incorporated herein by reference to Exhibit 3(b) to Humana Inc.’s Current Report on Form 8-K filed on December 8, 2022).

Indenture, dated as of August 5, 2003, by and between Humana Inc.

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agrees to furnish copies of all such instruments defining the rights of the holders of such indebtedness not otherwise filed as an Exhibit to this Annual Report on Form 10-K to the Commission upon request.

Fifth Supplemental Indenture, dated as of December 10, 2012, by and between Humana Inc.

and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.1 to Humana Inc.’s Current Report on Form 8-K filed on December 10, 2012).

Sixth Supplemental Indenture, dated as of December 10, 2012, by and between Humana Inc.

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and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.4 to Humana Inc.’s Current Report on Form 8-K filed on March 16, 2017).

Thirteenth Supplemental Indenture, dated December 21, 2017, between Humana Inc.

and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.4 to Humana Inc.’s Current Report on Form 8-K filed on December 21, 2017).

Fourteenth Supplemental Indenture, dated August 15, 2019, between Humana Inc.

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Twentieth Supplemental Indenture, dated August 3, 2021, between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.6 to Humana Inc.’s Current Report on Form 8-K filed on August 3, 2021).

Twenty-First Supplemental Indenture, dated March 23, 2022, between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.2 to Humana Inc.’s Current Report on Form 8-K filed on March 23, 2022).

Twenty-Second Supplemental Indenture, dated November 22, 2022, between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.2 to Humana Inc.’s Current Report on Form 8-K filed on November 22, 2022).

Twenty-Third Supplemental Indenture, dated November 22, 2022, between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.4 to Humana Inc.’s Current Report on Form 8-K filed on November 22, 2022).

Description of Securities (incorporated herein by reference to Exhibit 4(o) to Humana Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019).

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as Agent and as CAF Loan Agent, Bank of America, N.A.

and Goldman Sachs Bank USA as Syndication Agents, Citibank, N.A., PNC Capital Markets LLC, National Association, U.S.

as Syndication Agent, Citibank, N.A., Goldman Sachs Bank USA, PNC Capital Markets LLC, U.S.

Bank National Association and Wells Fargo Securities, LLC, as Documentation Agents, and JPMorgan Chase Bank, N.A., BofA Securities, Inc., Goldman Sachs Bank USA, Citibank, N.A., PNC Capital Markets LLC, U.S.

Bank National Association and Wells Fargo Securities, LLC, as Joint-Lead Arrangers and Joint Bookrunners (incorporated herein by reference to Exhibit 10.1 to Humana Inc.’s Current Report on Form 8-K filed on June 3, 2022).

$2.0 Billion Term Loan Credit Agreement, dated as of October 29, 2021, among Humana Inc., and JPMorgan Chase Bank, N.A.

as Agent, Bank of America, N.A., as Syndication Agent, PNC Capital Markets LLC, U.S.

Bank, National Association, Wells Fargo Securities, LLC, Citibank, N.A., and Truist Bank, as Documentation Agents, and JPMorgan Chase Bank, N.A., BofA Securities, Inc., PNC Capital Markets LLC, U.S.

Bank, National Association, Wells Fargo Securities, LLC, Citibank, N.A., and Truist Securities, Inc., as Joint Lead Arrangers and Joint Bookrunners (incorporated herein by reference to Exhibit 10.4 to Humana Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021).

$500 Million Delayed Draw Term Loan Credit Agreement, dated as of May 28, 2021, among Humana Inc., and JPMorgan Chase Bank, N.A.

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Stock Incentive Plan (incorporated herein by reference to Appendix A to Humana Inc.’s Proxy Statement with respect to the Annual Meeting of Stockholders held on April 18, 2019).

Form of Company’s Restricted Stock Unit Agreement and Agreement not to Compete or Solicit under the Amended and Restated Humana Inc.

Stock Incentive Plan (with retirement provisions) (incorporated herein by reference to Exhibit 10.2 to Humana Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019).

Form of Company’s Restricted Stock Unit Agreement and Agreement not to Compete or Solicit under the Amended and Restated Humana Inc.

Stock Incentive Plan (without retirement provisions) (incorporated herein by reference to Exhibit 10.3 to Humana Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019).

Form of Company’s Restricted Stock Unit Agreement with Performance Vesting and Agreement not to Compete or Solicit under the Amended and Restated Humana Inc.

Stock Incentive Plan (incorporated herein by reference to Exhibit 10.4 to Humana Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019).

Form of Company’s Incentive Stock Option Agreement and Agreement not to Compete or Solicit under the Amended and Restated Humana Inc.

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104 Cover Page Interactive Data File formatted in Inline XBRL and contained in Exhibit 101.

*Exhibits 10(a) through and including 10(k), and Exhibits 10(w) through and including 10(aa), as well as Exhibits 10(cc) through and including Exhibit 10(ss) are compensatory plans or management contracts.

*Exhibits 10(a) through and including 10(k), and Exhibits 10(v) through and including 10(z), as well as Exhibits 10(bb) through and including Exhibit 10(oo) are compensatory plans or management contracts.

**Pursuant to Rule 24b-2 of the Exchange Act, confidential portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

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Property and equipment, net 2,393 2,223

Investments in subsidiaries 26,885 17,005

Equity method investment 52 1,147

Long-term investment securities 207 836

Investment in subsidiaries 27,905 26,885

Other long-term assets 282 666

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Payable to operating subsidiaries $ 5,421 $ 2,056

Short-term debt 2,092 1,953

Current portion of notes payable to operating subsidiaries 36 36

Book overdraft 73 68

Short-term debt 1,953 600

Other current liabilities 1,425 1,460

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300,000,000 shares authorized;

198,648,742 shares issued at December 31, 2021 and December 31, 2020

198,666,598 shares issued at December 31, 2022 and 198,648,742 shares issued at December 31, 2021

Capital in excess of par value 3,246 3,082

Retained earnings 25,492 23,086

Accumulated other comprehensive income (loss) 42 391

Treasury stock, at cost, 69,846,758 shares at December 31, 2021

and 69,787,914 shares at December 31, 2020

Accumulated other comprehensive (loss) income ( 1,304 ) 42

Treasury stock, at cost, 73,691,955 shares at December 31, 2022 and 69,846,758 shares at December 31, 2021

( 12,156 ) ( 10,163 )

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Investment and other (loss) income, net ( 88 ) ( 266 ) 763

1,367 2,979 1,817

Total revenues 1,466 1,367 2,979

Operating costs 1,700 1,404 2,204

1 unchanged sentence

Interest 400 313 283

2,205 2,884 2,206

Total expenses 2,681 2,205 2,884

Other (income) expense, net — ( 672 ) 60

1 unchanged sentence

(Benefit) provision for income taxes ( 266 ) ( 259 ) 18

Income before equity in net earnings of subsidiaries 93 17 90

(Loss) income before equity in net earnings of subsidiaries ( 949 ) 93 17

Equity in net earnings of subsidiaries 3,751 2,761 3,269

Equity in net earnings of Kindred at Home 79 81 14

Equity in net earnings of equity method investments — 79 81

Net income $ 2,802 $ 2,933 $ 3,367

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Reclassification adjustment for net realized

gains included in investment income ( 103 ) ( 90 ) ( 34 )

losses (gains) included in investment income 72 ( 103 ) ( 90 )

Effect of income taxes ( 17 ) 23 20

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Other comprehensive (loss) income, net of tax ( 1,346 ) ( 355 ) 234

Comprehensive income (loss) attributable to our equity method

investment in Kindred at Home 6 1 ( 4 )

Comprehensive income $ 2,584 $ 3,602 $ 3,022

Comprehensive income attributable to equity method

investments — 6 1

Comprehensive income attributable to Humana $ 1,460 $ 2,584 $ 3,602

See accompanying notes to the parent company financial statements.

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Capital contributions to operating subsidiaries ( 484 ) ( 2,580 ) ( 538 )

Purchases of property and equipment, net ( 931 ) ( 958 ) ( 785 )

Purchases of investment securities ( 63 ) ( 200 ) ( 460 )

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Maturities of investment securities 30 122 411

Purchases of property and equipment, net ( 958 ) ( 785 ) ( 585 )

Net cash used in investing activities ( 1,317 ) ( 7,732 ) ( 2,068 )

1 unchanged sentence

Proceeds from issuance of senior notes, net 1,976 2,953 1,088

Repayment of senior notes — ( 400 ) ( 400 )

Proceeds (repayments) from issuance of commercial paper, net 352 295 ( 360 )

Proceeds from term loan 2,500 1,000 —

Repayments of senior notes ( 1,000 ) — ( 400 )

(Repayments) proceeds from issuance of commercial paper, net ( 376 ) 352 295

Proceeds from issuance of term loan — 2,500 1,000

Repayment of term loan ( 2,000 ) — ( 1,000 )

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Proceeds from stock option exercises and other 40 29 47

Net cash provided by (used in) financing activities 5,349 ( 1,033 ) ( 1,725 )

Increase (decrease) in cash and cash equivalents 470 ( 570 ) 741

Net cash (used in) provided by financing activities ( 3,843 ) 5,349 ( 1,033 )

(Decrease) increase in cash and cash equivalents ( 292 ) 470 ( 570 )

Cash and cash equivalents at beginning of year 906 436 1,006

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TRANSACTIONS WITH SUBSIDIARIES

Management Fee

Through intercompany service agreements approved, if required, by state regulatory authorities, Humana Inc., our parent company, charges a management fee for reimbursement of certain centralized services provided to its subsidiaries including information systems, disbursement, investment and cash administration, marketing, legal, finance, and medical and executive management oversight.

Through intercompany service agreements approved, if required, by state regulatory authorities, Humana Inc., our parent company, charges a services fee for reimbursement of certain centralized services provided to its subsidiaries including information systems, disbursement, investment and cash administration, marketing, legal, finance, and medical and executive management oversight.

Cash dividends received from subsidiaries and included as a component of net cash provided by operating activities were $ 1.3 billion in 2022, $ 1.6 billion in 2021, and $ 1.3 billion in 2020.

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Our use of operating cash flows derived from our non-insurance subsidiaries, such as in our Healthcare Services segment, is generally not restricted by state departments of insurance (or comparable state regulators).

Refer to Note 3 of the notes to consolidated financial statements in this Annual Report on Form 10-K for a description of certain acquisitions.

Refer to Note 3 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Form 10-K for a description of certain acquisitions.

During 2022, 2021 and 2020, we funded certain non-regulated subsidiary acquisitions with contributions from Humana Inc., our parent company, included in capital contributions in the condensed statement of cash flows.

Refer to Note 12 of the notes to consolidated financial statements included in this Annual Report on Form 10-K for a description of income taxes.

Refer to Note 13 of the notes to consolidated financial statements included in this Annual Report on Form 10-K for a description of debt.

Refer to Note 12 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Form 10-K for a description of income taxes.

Refer to Note 13 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Form 10-K for a description of debt.

STOCKHOLDERS' EQUITY

Refer to Note 16 of the notes to consolidated financial statements included in this Annual Report on Form 10-K for a description of stockholders’ equity, including stock repurchases and stockholder dividends.

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

For the Years Ended December 31, 2021, 2020, and 2019

(in millions)

of Period Charged

(Credited) to

Expenses Charged to

Accounts (1) Deductions

Write-offs Balance at

Allowance for loss on receivables:

2021 $ 72 $ 21 $ ( 3 ) $ ( 7 ) $ 83

2020 69 36 ( 1 ) ( 32 ) 72

2019 79 ( 1 ) — ( 9 ) 69

Deferred tax asset valuation allowance:

2021 ( 37 ) ( 28 ) — — ( 65 )

2020 ( 45 ) 8 — — ( 37 )

2019 ( 54 ) 9 — — ( 45 )

(1) Represents changes in retroactive membership adjustments to premiums revenue and contractual allowances adjustments to services revenue as more fully described in Note 2 to the consolidated financial statements included in this annual report on Form 10-K.

Refer to Note 16 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Form 10-K for a description of stockholders’ equity, including stock repurchases and stockholder dividends.

FORM 10-K SUMMARY

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(Principal Financial Officer) February 16, 2023

/s/ CYNTHIA H.

ZIPPERLE Senior Vice President, Chief Accounting Officer and Controller (Principal Accounting Officer) February 17, 2022

/s/ JOHN-PAUL W.

FELTER Senior Vice President, Chief Accounting Officer and Controller (Principal Accounting Officer) February 16, 2023

BROUSSARD President and Chief Executive Officer,

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D’AMELIO Director February 16, 2023

FEINBERG, M.D.

Director February 16, 2023

Feinberg, M.D.

FREDERICK, M.D.

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O’BRIEN Director February 16, 2023

/s/ MARISSA T.

PETERSON Director February 17, 2022

SMITH Director February 16, 2023

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures