2013 Annual Report
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“ UnitedHealth Group’s capabilities continue to grow
to serve and enable a more effective, modern health care
system, and to respond to a national imperative to improve
the performance of health care and reduce its costs.”
–Steve Hemsley, President and CEO, UnitedHealth Group
UnitedHealth Group is the largest, most diversifi ed health care enterprise in
the United States. We serve more than 85 million individuals worldwide. Our
complementary business platforms, UnitedHealthcare for health benefi ts, and
Optum for health services, share three core competencies: experience and
resources in clinical care; data and information; and empowering technology.
Table of Contents
02 Performance Highlights
03 Letter to Shareholders
04 UnitedHealth Group
06 UnitedHealthcare
08 Optum
10 Delivering Value
Dedicated to innovation, service and trustworthy execution, UnitedHealthcare
11 Our Culture and Mission
and Optum are improving health system performance, helping people live
healthier lives and providing distinctive returns to shareholders.
12 Our Leadership
13 Form 10-K
Investor Information
(inside back cover)
UNITEDHEALTH GROUP
1
In everything we do,
we value integrity,
compassion, respect
for individuals and
relationships, innovation
and accountable
performance.
Performance
Highlights
Consolidated Financial Results
Revenues (in millions)
$110,618
$122,489
2012
2013
Net Earnings*(in millions)
$5,526
$5,625
2012
2013
Net Earnings Per Share*
$5.28
$5.50
2012
2013
* Amounts attributable to UnitedHealth Group
common shareholders.
$14.7B
returned to shareholders
over the past four years
We have returned $14.7 billion to shareholders
over the past four years through dividends and
share repurchases — this is more than 50 percent
of cash fl ows from operations. Our dividend rate
has grown by a compound rate of 29 percent
over the same period, and share repurchase
activity has been strong and consistent.
2
To our shareholders:
As we send this annual report to you, 2013 and our many
We expect to grow, strengthen and further diversify to
accomplishments that year seem well in the past. Today,
meet the changing needs of consumers, care providers and
health care markets in the United States remain active and
benefi ts sponsors, and continue to evolve and adapt to
continue to evolve as new policies and regulations and
the opportunities we see for the future. As we have done
the long-standing pressures on the health care system are
throughout our history, we will bring to bear the power
meeting market realities. This is the beginning of an era of
of information, clinical insight and enabling technology
change and adjustment in which we will need to keep the
to increase the value we are delivering in new and more
ultimate goal clearly in all our minds — an improved health
modern ways across more vibrant and effective health care
care system where our health care resources are better
markets, better serving more people.
deployed and accessed . . . delivered to more Americans
at lower costs, to them and to our society.
What will not change will be our dedication to our mission:
to help people live healthier lives and to help make the
We are seeing similar dynamics as we deepen our
health system work better for everyone. We will continue
engagement in countries outside the United States: the
to embrace a culture of integrity, compassion, innovation,
desire by governments, payers and providers to make
relationships and accountable performance, all anchored
more effi cient and consistent use of resources and respond
by fundamental execution disciplines and service to others.
more effectively to the growing needs of their people.
And we remain steadfast in the fi scal responsibilities and
The employees of UnitedHealthcare, Optum and
UnitedHealth Group have never been more engaged in
disciplines that sustain our enterprise and provide an
appropriate return for the capital you entrust to us.
these essential efforts. Working together in 2013, they
Thank you.
meaningfully advanced the performance capabilities of this
enterprise and delivered real value to those we are privileged
Sincerely,
Steve Hemsley
President and Chief Executive Offi cer
to serve. As a consequence, our enterprise continued to
grow and diversify. The consistency of our employees’
commitment to performance and service translates into
measurable improvements that have a positive impact
on people’s health and in their lives. We thank them for
their remarkable efforts on behalf of those we serve and
those of you who invest in this enterprise.
The culture and capabilities of our enterprise are powerfully
aligned with our mission — striving for a better health care
environment that better serves at both the individual and
national level. We see more change and further challenges
continuing over the next few years as new social policies and
higher expectations for better quality and more affordable
care settle into the health care economy. We are well
deployed across the health system and participating in
many aspects of these changing market dynamics.
UNITEDHEALTH GROUP
3
Advancing health care
in an evolving market
UnitedHealth Group continues to meet the shifting demands of an evolving health care
environment through broad diversifi cation, a highly adaptable business model and an
intense focus on innovation.
The U.S. marketplace for health benefi ts is in fl ux. Millions more people are gaining
access to health care — through public and private exchanges as individual consumers,
through Medicaid and government-sponsored programs for the military and federal
and state employees, and through an accelerating expansion of Medicare as the
population ages.
Growing access to health benefi ts in turn exerts pressure downstream on health
care delivery and the market for health services — clinical and cost management,
payment models and transactions, improvements in information sharing and
advanced technology, and increasing demand for better quality and affordability.
Our health benefi ts platform, UnitedHealthcare, is well-positioned to serve virtually every
market for health benefi ts. We combine deep experience in local market dynamics, a
wide array of choice in plans and price points, and the national scale to help customers
and the people we serve better navigate a complex health care system.
Optum, our health services platform, is dedicated to engaging consumers, aligning care
delivery to improve quality and reduce costs, and modernizing the infrastructure and
technology of the health care system itself.
Working separately and together, Optum and UnitedHealthcare are helping create
a brighter future for health care in America and around the world.
4
The U.S. marketplace for health
benefi ts is in fl ux. Millions more
people are gaining access to
health care.
85M
We serve more than 85 million
individuals worldwide.
UnitedHealthcare and Optum serve members
in all 50 states in the United States and in
more than 125 other countries.
$160B
In 2013, we managed more than
$160 billion in aggregate health care
spending on behalf of the constituents
and consumers we served.
UNITEDHEALTH GROUP
5
Helping people live healthier lives
UnitedHealthcare is the fastest growing health benefi ts provider in the industry, today serving more
than 45 million people domestically and internationally by offering consumers and customers an
unparalleled array of health products and services.
UnitedHealthcare aligns modern benefi t designs with strong consumer engagement, empowerment,
tools, programs and incentives. Targeted clinical management and wellness programs channel care
through a focused set of care provider networks with proven performance capability and higher
levels of care provider fi nancial incentives for quality outcomes and patient satisfaction.
UnitedHealthcare’s approach drives differentiated value to the market, enables us to thrive amid
market change and positions us well for the future.
UnitedHealthcare Community & State supports 24 states and the District of Columbia in serving
benefi ciaries of acute and long-term care Medicaid plans, the Children’s Health Insurance Program
(CHIP), Special Needs Plans, and other federal and state health care programs that care for the
economically disadvantaged and the medically underserved.
UnitedHealthcare Employer & Individual offers a comprehensive array of consumer-oriented
health benefi t plans and services for large national employers, public sector employers, midsized
employers, small businesses and individuals nationwide.
UnitedHealthcare Medicare & Retirement is dedicated to serving the growing health and well-
being needs of individuals over the age of 50. It is the market leader in Medicare Advantage health
benefi t products, and under a longstanding relationship with AARP, the largest provider of Medicare
supplement plans, as well as the nation’s largest provider of Medicare Part D prescription drug plans.
UnitedHealthcare Military & Veterans serves the health care needs of approximately 3 million
active duty and retired U.S. military personnel and their families in the TRICARE West Region,
providing access to cost-effective, quality, innovative care.
UnitedHealthcare International serves nearly 5 million people with medical benefi ts through Amil,
the largest health care company in Brazil. In addition, this business offers a broad range of tools and
techniques to improve the effi ciency and quality of health care delivery systems in a variety of settings
worldwide. Clients include multi-national and local businesses, governments, non-U.S. health insurers
and travel insurers, reinsurers, and individuals and their families.
6
$65B
$28B
2013
2018E
Performance-Based Care
$28 billion of UnitedHealthcare’s annual
physician and hospital reimbursements are
tied to accountable care programs, centers
of excellence and performance-based
programs. UnitedHealthcare projects this
will reach $65 billion by 2018.
4.5M
Additional People Served
UnitedHealthcare grew to serve more than
4.5 million additional people in 2013 —
entirely through organic growth. This
business has grown by more than 13 million
people over the past four years.
820,000
Contracted Physicians
UnitedHealthcare contracts directly
with more than 820,000 physicians
and care professionals, and
approximately 6,000 hospitals
and other care facilities nationwide.
UNITEDHEALTH GROUP
7
UnitedHealthcare aligns modern
benefi t designs with strong
consumer engagement,
empowerment, tools,
programs and incentives.
Helping make the health system
work better for everyone
Optum provides broad health services capabilities that improve the delivery, quality and
cost-effectiveness of health care. This business combines deep experience in clinical care
and population health management, administration and health care transactions and
information and analytics, to engage consumers, align care delivery and modernize the
infrastructure of the health system overall. Today, Optum works with physicians, hospitals,
employers, insurers, government agencies and individuals. Increasingly, Optum is delivering
larger, deeper and much more comprehensive solutions to its customers across the industry.
OptumHealth serves the physical, emotional and fi nancial needs of more than 62 million
individuals, enabling consumer health management and collaborative care delivery through
programs offered by employers, payers, government agencies and, increasingly, directly
with the care delivery system. OptumHealth’s solutions reduce costs for customers, improve
workforce productivity and consumer satisfaction, and optimize the overall health and
well-being of populations.
OptumInsight is a health information, technology, services and consulting company,
providing software and information products, advisory consulting services, and business
process outsourcing to participants in the health care industry. Hospitals, physicians,
commercial health plans, government agencies, life sciences companies and other
organizations that comprise the health care system work with OptumInsight to reduce
costs, meet compliance mandates, improve clinical performance and adapt to the
changing health system landscape.
OptumRx provides pharmacy benefi t management (PBM) services for nearly 28 million
people nationwide. This business annually processes more than 500 million adjusted
retail, mail and specialty drug prescriptions. OptumRx is dedicated to helping people
achieve optimal health while maximizing cost savings.
8
Increasingly, Optum is delivering
larger, deeper and much more
comprehensive solutions to its
customers across the industry.
A New Venture
A new venture, Optum360, was launched in
partnership with Dignity Health to simplify
billing and increase cost transparency for
patients, and modernize administration for
hospitals, care providers and payers.
12M
OptumRx Transition
OptumRx completed the largest pharmacy
benefi ts management transition in
history, successfully insourcing 12 million
new or migrating UnitedHealthcare
pharmacy customers.
$2.3B
$1.3B
$1.4B
2011
2012
2013
Operating Earnings
Optum’s operating earnings of $2.3 billion
grew 61 percent, or $875 million, over 2012,
and are now up 84 percent over its 2011
baseline year.
UNITEDHEALTH GROUP
9
Delivering value through
execution, innovation and diversity
Our enterprise is committed to our mission of serving individuals and the health system itself. To meet today’s demands for better,
more affordable, quality care, we know it takes high performance and innovation on our part, driven by employees who are as
diverse in their backgrounds and perspectives as the people and communities we serve. During the last year, we were honored
to be recognized for our work.
Rankings and Ratings
Product and Service Performance
Innovation
No. 1 in the insurance and managed
OptumRx was honored by the International
care sector on Fortune’s 2013 “World’s
Customer Management Institute with a
Most Admired Companies” list for the
Global Call Center Award for the Best
third straight year. No. 1 for Innovation
Quality Assurance Program.
for the fourth consecutive year.
No. 17 on the Fortune 500 for 2013.
Member, Dow Jones Industrial
Average since 2012.
Listed on the Dow Jones Sustainability
World Index and Dow Jones North
The J.D. Power 2013 Vision Plan
Satisfaction Report ranked UnitedHealthcare
Vision highest in customer satisfaction.
UnitedHealthcare was ranked No.1 in claims
processing accuracy by the American
Health Awards.
Medical Association’s 2013 National Health
Baby Blocks healthy pregnancy
Insurer Report Card.
America Index annually since 1999.
Community Service
100 percent on the 2013 Human
Rights Campaign Corporate Equality
Index.
UnitedHealth Group was recognized as one
of America’s most community-minded
companies in the Civic 50 and ranked fi rst
in the health care industry.
Project NOT ME SM diabetes
prevention program received a
Regional Emmy® Award from the
National Academy of Television
Arts and Sciences, was named
an International CES Innovations
2014 Design and Engineering Award
Honoree and was recognized by Web
program was awarded the Medicaid
Health Plans of America 2013 Best
Practice Award for Technology.
Health4Me, UnitedHealthcare’s mobile
application, earned the 2013 eValue8
Innovation award for addressing critical
Received Best in Biz awards – Gold
in Consumer Service for myClaims
Manager; Silver in Consumer Products
for Health4Me; and Bronze in Website
Amil was recognized in 2013 as one of
Second Harvest Heartland, one of the nation’s
health care issues, and an Appy Award
the top 100 Brazilian companies with
largest food banks, recognized UnitedHealth
for creativity and excellence in design.
the best reputations (Exame magazine),
Group with a 2013 Hunger Hero award in
one of the most valuable brands in
the Volunteer category.
Corporate Responsibility magazine ranked
UnitedHealth Group in the top 10 for
“Industry Sector Best Corporate Citizens.”
of the Year for UHC.TV.
Workplace Leadership
Named a 2013 Diversity Leader by Profi les
in Diversity Journal.
Recognized as a Top 100 Military Friendly
Employer by Victory Media, the publisher
of G.I. Jobs and Military Spouse magazines.
Brazil (Isto É Dinheiro magazine) and
one of the most admired companies
in the country (Carta Capital magazine).
10
Our Culture
Our Mission
The people of this company are aligned around basic values that inspire our
behavior as individuals and as an institution:
Integrity. We are dedicated to the highest levels of personal and institutional
Our mission is to help people
live healthier lives and to help
integrity. We make honest commitments and work to consistently honor
make the health system work
those commitments. We do not compromise ethics. We strive to deliver on
better for everyone.
our promises and we have the courage to acknowledge mistakes and do
whatever is needed to address them.
Compassion. We try to walk in the shoes of the people we serve and the
people we work with across the health care community. Our job is to listen
with empathy and then respond appropriately and quickly with service and
advocacy for each individual, each group or community and for society as
a whole. We celebrate our role in serving people and society in an area so
vitally human as their health.
Relationships. We build trust through cultivating relationships and working
in productive collaboration with government, employers, physicians, nurses
and other health care professionals, hospitals and the individual consumers
(cid:127) We seek to enhance the performance
of the health system and improve the
overall health and well-being of the
people we serve and their communities.
(cid:127) We work with health care professionals
and other key partners to expand access
to quality health care so people get the
care they need at an affordable price.
of health care. Trust is earned and preserved through truthfulness, integrity,
(cid:127) We support the physician/patient
active engagement and collaboration with our colleagues and clients. We
relationship and empower people with
encourage the variety of thoughts and perspectives that refl ect the diversity
the information, guidance and tools
they need to make personal health
choices and decisions.
of our markets, customers and workforce.
Innovation. We pursue a course of continuous, positive and practical
innovation, using our deep experience in health care to be thoughtful
advocates of change and to use the insights we gain to invent a better future
that will make the health care environment work and serve everyone more
fairly, productively and consistently.
Performance. We are committed to deliver and demonstrate excellence in
everything we do. We will be accountable and responsible for consistently
delivering high-quality and superior results that make a difference in the lives
of the people we touch. We continue to challenge ourselves to strive for
even better outcomes in all key performance areas.
UNITEDHEALTH GROUP 11
Our Leadership
Douglas W. Leatherdale
Retired Chairman
and Chief Executive Offi cer,
The St. Paul Companies, Inc.
Glenn M. Renwick
Chairman, President and
Chief Executive Offi cer,
The Progressive Corporation
Kenneth I. Shine, M.D.
Special Advisor to the Chancellor
for Health Affairs,
The University of Texas System
Gail R. Wilensky, Ph.D.
Senior Fellow,
Project HOPE, an international
health foundation
Audit Committee
Glenn M. Renwick, Chair
Robert J. Darretta
Michele J. Hooper
Nominating and Corporate
Governance Committee
Michele J. Hooper, Chair
William C. Ballard, Jr.
Douglas W. Leatherdale
Compensation and
Human Resources Committee
Rodger A. Lawson, Chair
William C. Ballard, Jr.
Douglas W. Leatherdale
Public Policy Strategies
and Responsibility Committee
Gail R. Wilensky, Ph.D., Chair
Edson Bueno, M.D.
Kenneth I. Shine, M.D.
Anthony Welters
Executive Vice President
David S. Wichmann
Executive Vice President
and Chief Financial Offi cer,
UnitedHealth Group
and President,
UnitedHealth Group Operations
D. Ellen Wilson
Executive Vice President,
Human Capital
Board of Directors
William C. Ballard, Jr.
Former Of Counsel,
Bingham Greenebaum Doll LLP
Edson Bueno, M.D.
Founder and
Chief Executive Offi cer,
Amil
Richard T. Burke
Non-Executive Chairman,
UnitedHealth Group
Robert J. Darretta
Retired Vice Chairman
and Chief Financial Offi cer,
Johnson & Johnson
Stephen J. Hemsley
President and
Chief Executive Offi cer,
UnitedHealth Group
Michele J. Hooper
President and Chief Executive Offi cer,
The Directors’ Council, a company
focused on improving the governance
processes of corporate boards
Rodger A. Lawson
Chairman,
E*TRADE Financial Corporation
and Retired President
and Chief Executive Offi cer,
Fidelity Investments —
Financial Services
Executive Offi cers and Leaders
Stephen J. Hemsley
President and
Chief Executive Offi cer
Cory Alexander
Senior Vice President,
Government Affairs
Gail K. Boudreaux
Executive Vice President,
UnitedHealth Group
and Chief Executive Offi cer,
UnitedHealthcare
Edson Bueno, M.D.
Founder and
Chief Executive Offi cer,
Amil
Richard Migliori, M.D.
Executive Vice President,
Medical Affairs and
Chief Medical Offi cer
William A. Munsell
Executive Vice President
Don Nathan
Senior Vice President and
Chief Communications Offi cer
John S. Penshorn
Senior Vice President,
Capital Markets Communications
and Strategy
Eric S. Rangen
Senior Vice President
and Chief Accounting Offi cer
Larry C. Renfro
Executive Vice President,
UnitedHealth Group and
Chief Executive Offi cer,
Optum
Jeannine M. Rivet
Executive Vice President
Marianne D. Short
Executive Vice President
and Chief Legal Offi cer
12
Form 10-K
For the fiscal year ended December 31, 2013
THIS PAGE INTENTIONALLY LEFT BLANK.
THIS PAGE INTENTIONALLY LEFT BLANK.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
5
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2013
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number: 1-10864
UnitedHealth Group Incorporated
(Exact name of registrant as specified in its charter)
Minnesota
(State or other jurisdiction of
incorporation or organization)
UnitedHealth Group Center
9900 Bren Road East
Minnetonka, Minnesota
(Address of principal executive offices)
41-1321939
(I.R.S. Employer Identification No.)
55343
(Zip Code)
(952) 936-1300
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, $.01 PAR VALUE
(Title of each class)
NEW YORK STOCK EXCHANGE, INC.
(Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files). Yes o No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one)
Large accelerated filer
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No
The aggregate market value of voting stock held by non-affiliates of the registrant as of June 30, 2013 was $64,914,032,649 (based on the
last reported sale price of $65.48 per share on June 30, 2013, on the New York Stock Exchange), excluding only shares of voting stock held
beneficially by directors, executive officers and subsidiaries of the registrant.
As of January 31, 2014, there were 989,191,844 shares of the registrant’s Common Stock, $.01 par value per share, issued and outstanding.
Smaller reporting company o
Non-accelerated filer o
Accelerated filer o
The information required by Part III of this report, to the extent not set forth herein, is incorporated by reference from the registrant’s
definitive proxy statement relating to its 2014 Annual Meeting of Stockholders. Such proxy statement will be filed with the Securities and
Exchange Commission within 120 days after the end of the fiscal year to which this report relates.
DOCUMENTS INCORPORATED BY REFERENCE
UNITEDHEALTH GROUP
TABLE OF CONTENTS
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
PART I
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Market for Registrant's Common Equity,
Related Stockholder Matters and Issuer Purchases
of Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Quantitative and Qualitative Disclosures about
Market Risk
Financial Statements
Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
Controls and Procedures
Other Information
PART III
Directors, Executive Officers and
Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial
Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions,
and Director Independence
Item 14.
Principal Accountant Fees and Services
PART IV
Item 15.
Exhibits and Financial Statement Schedules
Signatures
Exhibit Index
1
13
23
23
23
23
23
26
26
45
47
81
81
84
84
84
84
85
85
85
93
94
PART I
ITEM 1.
Business
INTRODUCTION
OVERVIEW
UnitedHealth Group is a diversified health and well-being
company dedicated to helping people live healthier lives
and making the health system work better for everyone.
The terms “we,” “our,” “us,” “UnitedHealth Group,” or the
“Company” used in this report refer to UnitedHealth Group
Incorporated and our subsidiaries.
Through our diversified family of businesses, we leverage
core competencies in advanced, enabling technology;
health care data, information and intelligence; and clinical
care management and coordination to help meet the
demands of the health system. These core competencies are
deployed within our two distinct, but strategically aligned,
business platforms: health benefits operating under
UnitedHealthcare and health services operating under
Optum.
UnitedHealthcare provides health care benefits to a full
spectrum of customers and markets. UnitedHealthcare
Employer & Individual serves employers ranging from sole
proprietorships to large, multi-site and national employers,
as well as students and other individuals, and serves the
nation’s active and retired military and their families
through the TRICARE program. UnitedHealthcare Medicare
& Retirement delivers health and well-being benefits for
Medicare beneficiaries and retirees. UnitedHealthcare
Community & State manages health care benefit programs
on behalf of state Medicaid and community programs and
their participants. UnitedHealthcare International includes
Amil, a health care company providing health and dental
benefits and hospital and clinical services to individuals in
Brazil, and other diversified global health businesses.
Optum is a health services business serving the broad
health care marketplace, including payers, care providers,
employers, government, life sciences companies and
consumers, through its OptumHealth, OptumInsight and
OptumRx businesses. These businesses have dedicated
units that help improve overall health system performance
including optimizing care quality, reducing costs and
improving consumer experience and care provider
performance across eight business markets: integrated
care delivery, care management, consumer engagement,
distribution services, health financial services, operational
services and support, health care information technology
and pharmacy services.
Through UnitedHealthcare and Optum, in 2013, we
managed over $160 billion in aggregate health care
spending on behalf of the constituents and consumers we
served. Our revenues are derived from premiums on risk-
based products; fees from management, administrative,
technology and consulting services; sales of a wide variety
of products and services related to the broad health and
well-being industry; and investment and other income.
2013 FORM 10-K
1
Our two business platforms have four reportable segments:
• UnitedHealthcare, which includes UnitedHealthcare
Employer & Individual, UnitedHealthcare Medicare
& Retirement, UnitedHealthcare Community & State
and UnitedHealthcare International;
• OptumHealth;
• OptumInsight; and
• OptumRx.
For our financial results and the presentation of certain
other financial information by segment, including revenues
and long-lived fixed assets by geographic source, see Note
13 of Notes to the Consolidated Financial Statements
included in Item 8, “Financial Statements.”
2014 BUSINESS REALIGNMENT
On January 1, 2014, we realigned certain of our businesses
to respond to changes in the markets we serve and the
opportunities that are emerging as the health system
evolves. Our Optum business platform took responsibility
for certain technology operations and business processing
activities with the intention of pursuing additional third-
party commercial opportunities in addition to continuing
to serve UnitedHealthcare. These activities, which were
historically a corporate function, will be included in
OptumInsight’s results of operations. Our periodic filings
with the Securities and Exchange Commission (SEC)
beginning with our first quarter 2014 Form 10-Q will
include historical segment results restated to reflect the
effect of this realignment and will continue to present
the same four reportable segments (UnitedHealthcare,
OptumHealth, OptumInsight and OptumRx).
UNITEDHEALTHCARE
UnitedHealthcare is advancing strategies to improve
the way health care is delivered and financed, offering
consumers a simpler, more affordable health care
experience. Our market position is built on:
• a national scale;
• strong local market relationships;
• the breadth of product offerings, which are responsive
to many distinct market segments in health care;
• service and advanced technology;
• competitive medical and operating cost positions;
• effective clinical engagement;
• extensive expertise in distinct market segments; and
• innovation for customers.
UnitedHealthcare utilizes the expertise of UnitedHealth
Group affiliates for capabilities in specialized areas, such as
OptumRx pharmacy benefit products and services, certain
OptumHealth care management and integrated care
delivery services and OptumInsight health information and
technology solutions, consulting and other services.
In the United States, UnitedHealthcare arranges for
discounted access to care through networks that include
a total of over 820,000 physicians and other health care
professionals and approximately 6,000 hospitals and other
facilities.
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UNITEDHEALTH GROUP
UnitedHealthcare is subject to extensive regulations.
See further discussion of our regulatory environment
below under “Government Regulation” and in Item
7, “Management Discussion and Analysis of Financial
Condition and Results of Operations.”
UnitedHealthcare Employer & Individual
UnitedHealthcare Employer & Individual offers a
comprehensive array of consumer-oriented health benefit
plans and services for large national employers, public
sector employers, mid-sized employers, small businesses,
individuals, and the military, specifically TRICARE west
region members. UnitedHealthcare Employer & Individual
provides over 30 million Americans access to health care
as of December 31, 2013. Large employer groups typically
use self-funded arrangements where UnitedHealthcare
Employer & Individual earns a service fee. Smaller employer
groups are more likely to purchase risk-based products
because they are less willing or able to bear a greater
potential liability for health care expenditures.
Through its risk-based product offerings,
UnitedHealthcare Employer & Individual assumes the risk
of both medical and administrative costs for its customers
in return for a monthly premium, which is typically at a
fixed rate per individual served for a one-year period.
When providing administrative and other management
services to customers that elect to self-fund the health
care costs of their employees and employees’ dependants,
UnitedHealthcare Employer & Individual receives a fixed
service fee per individual served. These customers retain the
risk of financing medical benefits for their employees and
employees’ dependants, while UnitedHealthcare Employer
& Individual provides services such as coordination and
facilitation of medical and related services to customers,
consumers and health care professionals, administration of
transaction processing and access to a contracted network
of physicians, hospitals and other health care professionals,
including dental and vision.
UnitedHealthcare Employer & Individual also offers
a variety of non-employer based insurance options for
purchase by individuals, including students, which are
designed to meet the health coverage needs of these
consumers and their families. As part of the new public
health care exchange market that opened October 1, 2013,
UnitedHealthcare Employer & Individual now offers health
benefit plans through exchanges in 10 states and District
of Columbia, including four individual exchanges and nine
small group (SHOP) exchanges.
The consolidated purchasing capacity represented by the
individuals UnitedHealth Group serves makes it possible
for UnitedHealthcare Employer & Individual to contract
for cost-effective access to a large number of conveniently
located care professionals.
UnitedHealthcare Employer & Individual typically
distributes its products through consultant or direct sales
in the larger employer and public sector segments. In the
smaller group size segment of the commercial marketplace,
UnitedHealthcare Employer & Individual’s distribution
system consists primarily of direct sales and producers,
including brokers and agents. UnitedHealthcare Employer &
Individual also distributes products through general agents,
each of which is a wholesale agent or agency that contracts
with a carrier to distribute individual or group benefits,
providing extensive services to customers. In recent years,
UnitedHealthcare Employer & Individual has diversified its
model more extensively, distributing through professional
employer organizations, associations, private equity
relationships and, increasingly, through both multi-carrier
and its own proprietary private exchange marketplaces.
UnitedHealthcare Employer & Individual offers its products
through affiliates that are licensed as insurance companies,
health maintenance organizations (HMOs), or third party
administrators (TPAs).
Direct-to-consumer sales will be supported by industry
participation in multi-carrier health insurance marketplaces
for individuals and small groups through state or federally
led exchanges for coverage effective January 1, 2014.
Additionally, UnitedHealthcare Employer & Individual has
expanded distribution to include retail offerings responsive
to the needs of individual consumers. Over the last few
years, UnitedHealthcare Employer & Individual has opened
several retail storefronts in various locations across the
United States that provide solutions to consumers at all
stages in life, from individual plans to employer coverage,
as well as solutions for Medicare-Medicaid eligible (MME)
individuals.
UnitedHealthcare Employer & Individual’s diverse product
portfolio offers a continuum of benefit designs, price points
and approaches to consumer engagement, which provide
the flexibility to meet the needs of employers of all sizes as
well as individuals shopping for health benefits coverage.
UnitedHealthcare Employer & Individual emphasizes local
markets and leverages its national scale to adapt products
to meet specific local market needs. UnitedHealthcare
Employer & Individual’s major product families include:
Traditional Products. Traditional products include a full
range of medical benefits and network options from
managed plans such as Choice and Options PPO to more
traditional indemnity offerings. The plans offer a full
spectrum of covered services, including preventive care,
direct access to specialists and catastrophic protection.
Consumer Engagement Products and Tools. Consumer
engagement products couple plan design with financial
accounts to increase employee responsibility for their
health and well-being. This suite of products includes high-
deductible consumer-driven benefit plans, which include
health reimbursement accounts (HRAs), health savings
accounts (HSAs) and consumer activation services such as
personalized behavioral incentive programs and consumer
education information. For example, UnitedHealthcare
Employer & Individual’s Diabetes Health Plan emphasizes
health engagement for diabetics and prediabetics, with
personalized health action plans, scorecards and benefits
that are specifically designed to encourage consumers to
participate actively in maintaining their health. During
2013, more than 45,000 employer-sponsored benefit
plans, including nearly 270 employers in the large group
self-funded market, purchased an HRA or HSA product.
UnitedHealthcare Employer & Individual’s consumer
engagement tools provide members with online and/or
mobile access to benefit, cost and quality information, such
as myHealthcare Cost Estimator, Health4Me, and myClaims
Manager with online bill payment.
Value-Based Products. UnitedHealthcare Employer
& Individual’s suite of consumer incentive products
increases individual awareness for heightened consumer
responsibility and behavior change. These products include:
Small Business Wellness, which is a packaged wellness
and incentives product offering gym reimbursement and
encouraging completion of important wellness activities.
For mid-sized clients, SimplyEngaged is a scalable activity-
based reward program that ties incentives to completion
of health improvement activities, while SimplyEngaged
Plus provides richer incentives for achieving health
outcome goals. For large, self-funded customers, the
UnitedHealthcare Healthy Rewards program offers a
flexible incentive design for employers to choose the right
activities and biometric outcomes that best fit the needs
of their population. Additionally, UnitedHealth Personal
Rewards leverages a tailored approach to incentives by
combining personalized scorecards with financial incentives
for improving biometric scores, compliance with key health
treatments and preventive care.
Essential Benefits Products. UnitedHealthcare Employer &
Individual’s portfolio of products drives value to consumers
with lower costs, innovative designs and unique network
programs that guide people to physicians recognized for
providing high-quality, cost-efficient care to their patients.
These approaches are designed to deliver sustainable
health care costs for employers, enabling them to continue
to offer their employees coverage at more affordable
prices through benefit and local network access tradeoffs.
UnitedHealthcare Employer & Individual’s tiered benefit
plans offer enhanced benefits in the form of greater
coinsurance coverage and/or lower copays for using
UnitedHealth Premium® designated care providers.
Clinical and Pharmacy Products. UnitedHealthcare
Employer & Individual offers a comprehensive suite of
clinical and pharmacy benefits management programs,
which complement our service offerings by improving
quality of care, engaging members and providing cost-
saving options. All UnitedHealthcare Employer & Individual
members are provided access to clinical products that help
them make better health care decisions and better use of
their medical benefits, improving health and decreasing
medical expenses.
Each medical plan has a core set of clinical programs
embedded in the offering, with additional services
available depending on funding type (fully insured and self-
funded), line of business (e.g., small business, key accounts,
public sector and national accounts), and clinical need.
UnitedHealthcare Employer & Individual’s spectrum of
clinical programs include:
2013 FORM 10-K
3
• wellness programs;
• decision support;
• utilization management;
• case and disease management;
• complex condition management;
• on-site programs, including Know Your Numbers
(biometrics) and flu shots;
• incentives to reinforce positive behavior change;
• mental health/substance use disorder management;
and
• employee assistance programs.
UnitedHealthcare Employer & Individual’s comprehensive
and integrated pharmaceutical management services
promote lower costs by using formulary programs to drive
better unit costs, encouraging consumers to use drugs that
offer better value and outcomes, and by supporting the
appropriate use of drugs based on clinical evidence through
physician and consumer programs.
Specialty Offerings. UnitedHealthcare Employer &
Individual also delivers dental, vision, life, and disability
product offerings through an integrated approach
including a network of more than 58,000 vision
professionals in private and retail settings, and more than
250,000 dental providers.
UnitedHealthcare Military & Veterans. UnitedHealthcare
Military & Veterans is the provider of health care services
for more than 2.9 million active duty and retired military
service members and their families in 21 states (West
Region) under the Department of Defense’s (DoD) TRICARE
Managed Care Support contract. The contract began on
April 1, 2013 and includes a transition period and five one-
year renewals at the government’s option.
UnitedHealthcare Military & Veterans’ responsibility as a
contractor is to augment the military’s direct care system
by providing managed care support services, provider
networks, medical management, claims/enrollment
administration, and customer services.
UnitedHealthcare Medicare & Retirement
UnitedHealthcare Medicare & Retirement provides health
and well-being services to individuals age 50 and older,
addressing their unique needs for preventive and acute
health care services as well as for services dealing with
chronic disease and other specialized issues for older
individuals. UnitedHealthcare Medicare & Retirement
is fully dedicated to serving this growing senior market
segment, providing products and services in all 50 states,
the District of Columbia, and most U.S. territories. It
has distinct pricing, underwriting, clinical program
management and marketing capabilities dedicated to
health products and services in this market.
UnitedHealthcare Medicare & Retirement offers a
spectrum of risk-based Medicare products which may be
purchased by individuals or on a group basis, including
Medicare Advantage plans, Medicare Prescription Drug
Benefit (Medicare Part D) and Medicare Supplement/
Medigap products that supplement traditional fee-
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UNITEDHEALTH GROUP
for-service coverage. UnitedHealthcare Medicare &
Retirement services include care management and clinical
management programs, a nurse health line service, 24-hour
access to health care information, access to discounted
health services from a network of care providers and
administrative services.
Premium revenues from the Centers for Medicare &
Medicaid Services (CMS) represented 29% of UnitedHealth
Group’s total consolidated revenues for the year ended
December 31, 2013, most of which were generated by
UnitedHealthcare Medicare & Retirement under a number
of contracts.
UnitedHealthcare Medicare & Retirement has extensive
distribution capabilities and experience, including direct
marketing to consumers on behalf of its key clients: AARP,
the nation’s largest membership organization dedicated
to the needs of people age 50 and over; state and U.S.
government agencies; and employer groups. Products are
also offered through employer groups and agent channels.
UnitedHealthcare Medicare & Retirement’s major product
categories include:
Medicare Advantage. UnitedHealthcare Medicare &
Retirement provides health care coverage for seniors and
other eligible Medicare beneficiaries primarily through
the Medicare Advantage program administered by CMS,
including Medicare Advantage HMO plans, preferred
provider organization (PPO) plans, Point-of-Service plans,
Private-Fee-for-Service plans and Special Needs Plans (SNPs).
Under the Medicare Advantage program, UnitedHealthcare
Medicare & Retirement provides health insurance coverage
in exchange for a fixed monthly premium per member
from CMS and in some cases consumer premiums. Premium
amounts vary based on the geographic areas in which
members reside; demographic factors such as age, gender,
and institutionalized status; and the health status of the
individual. UnitedHealthcare Medicare & Retirement had
approximately 3 million people enrolled in its Medicare
Advantage products as of December 31, 2013.
Medicare Advantage plans are designed at the local level
taking into account member and care provider preferences,
competitor offerings, our historical financial results, our
quality and cost initiatives and the long-term payment
rate outlook for that geographic area. Starting in 2012,
and phased in through 2017, the Medicare Advantage
rate structure and quality rating bonuses are changing
significantly, see Item 7, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations”
for further information.
UnitedHealthcare Medicare & Retirement offers
innovative care management, disease management and
other clinical programs, integrating federal, state and
personal funding through its continuum of Medicare
Advantage products. For high-risk patients in certain care
settings and programs, UnitedHealthcare Medicare &
Retirement uses proprietary, automated medical record
software that enables clinical care teams to capture and
track patient data and clinical encounters, creating a
comprehensive set of care information that bridges across
home, hospital and nursing home care settings. Proprietary
predictive modeling tools help identify members at high
risk and allow care managers to outreach to members
to create individualized care plans and to help members
obtain the right care, in the right place, at the right time.
Medicare Part D. UnitedHealthcare Medicare & Retirement
provides Medicare Part D benefits to beneficiaries
throughout the United States and its territories through
its Medicare Advantage and stand-alone Medicare
Part D plans. UnitedHealthcare Medicare & Retirement
offers two standalone Medicare Part D plans: the AARP
Medicare Rx Preferred and the AARP Medicare Rx Saver
plans. The stand-alone Medicare Part D plans address a
large spectrum of beneficiaries’ needs and preferences
for their prescription drug coverage, including low cost
prescription options. Each of the plans cover the majority
of the drugs covered by Medicare and provides varying
levels of coverage to meet the diverse needs of Medicare
beneficiaries. As of December 31, 2013, UnitedHealthcare
had enrolled approximately 8 million people in the
Medicare Part D program, including approximately 5
million individuals in the stand-alone Medicare Part D plans
and approximately 3 million in its Medicare Advantage
plans incorporating Medicare Part D coverage.
Medicare Supplement. UnitedHealthcare Medicare &
Retirement is currently serving more than 4 million
seniors through various Medicare Supplement products
in association with AARP. UnitedHealthcare Medicare
& Retirement offers plans in all 50 states, the District of
Columbia, and most U.S. territories. These products cover
varying levels of coinsurance and deductible gaps that
seniors are exposed to in the traditional Medicare program.
UnitedHealthcare Community & State
UnitedHealthcare Community & State is dedicated to
providing diversified solutions to states’ programs that
care for the economically disadvantaged, the medically
underserved and those without the benefit of employer-
funded health care coverage in exchange for a fixed
monthly premium per member from the applicable
state. UnitedHealthcare Community & State’s primary
customers oversee Medicaid plans, Children’s Health
Insurance Programs (CHIP), and other federal, state and
community health care programs. As of December 31,
2013, UnitedHealthcare Community & State participated
in programs in 24 states and the District of Columbia,
and served more than 4 million beneficiaries. The Patient
Protection and Affordable Care Act and a reconciliation
measure, the Health Care and Education Reconciliation
Act of 2010 (together, Health Reform Legislation) provides
for optional Medicaid expansion effective January 1, 2014.
Currently, more than half of our state customers have
elected to expand Medicaid. For further discussion of the
Medicaid expansion under Health Reform Legislation, see
Item 7, “Management Discussion and Analysis of Financial
Condition and Results of Operations.”
States using managed care services for Medicaid
beneficiaries select health plans by using a formal bid process
or by awarding individual contracts. A number of factors are
considered by UnitedHealthcare Community & State when
choosing programs for participation including the state’s
commitment and consistency of support for its Medicaid
managed care program in terms of service, innovation and
funding; the eligible population base, both immediate and
long term; and the structure of the projected program.
UnitedHealthcare Community & State works with its state
customers to advocate for actuarially sound rates that are
commensurate with medical cost trends.
The primary categories of eligibility for the programs
served by UnitedHealthcare Community & State and our
participation are:
• Temporary Assistance to Needy Families, primarily young
women and children – 19 markets;
• CHIP – 19 markets;
• Dual SNP – 18 markets;
• Aged, Blind and Disabled (ABD) – 14 markets;
• Long-Term Care (LTC) – 10 markets;
• childless adults & programs for the uninsured – 7
markets;
• other programs (e.g., developmentally disabled,
rehabilitative services) – 5 markets; and
• administrative service offering – 1 market.
The health plans and care programs offered are designed
to address the complex needs of the populations they
serve, including the chronically ill, those with disabilities
and people with a higher risk of medical, behavioral and
social conditions. UnitedHealthcare Community & State
leverages the national capabilities of UnitedHealth Group,
delivering them at the local market level to support effective
care management, strong regulatory partnerships, greater
administrative efficiency, improved clinical outcomes and
the ability to adapt to a changing market environment.
UnitedHealthcare Community & State coordinates resources
among family, physicians, other health care providers,
and government and community-based agencies and
organizations to facilitate continuous and effective care.
UnitedHealthcare Community & State administers benefits
for the unique needs of children, pregnant women, adults,
seniors and those who are eligible for care in nursing
homes and assisted living. They often live in areas that are
medically underserved and are less likely to have a consistent
relationship with the medical community or a care provider.
They also tend to face significant social and economic
challenges. UnitedHealthcare Community & State recognizes
that within these broad groups, there exist individuals whose
collective physical, behavioral and social challenges are
so significant that they drive an inordinate percentage of
UnitedHealthcare Community & State’s total medical costs.
In UnitedHealthcare Community & State’s insured Medicaid
population, approximately 1% of its membership accounts
for about 30% of total costs. Care providers sometimes refer
to this group as super utilizers.
The LTC market represents only 6% of the total Medicaid
population, yet accounts for more than 30% of total
Medicaid expenditures. The LTC population is made up
of nearly 4 million individuals who qualify for additional
2013 FORM 10-K
5
benefits under LTC programs and represent a subset of the
more than 15 million ABD Americans. Currently, only one-
quarter of the ABD population and less than 20% of the LTC
eligible population are served by managed care programs.
States are increasingly looking for solutions to not only help
control costs, but to improve quality for the complex medical
challenges faced by this population and are moving with
greater speed to managed care programs.
There are nearly 10 million individuals eligible for both
Medicare and Medicaid. This group has historically been
referred to as dually eligible. MME beneficiaries typically
have complex conditions with costs of care that are far
higher than a typical Medicare or Medicaid beneficiary.
While these individuals’ health needs are more complex and
more costly, they have been historically served in unmanaged
environments. This market provides UnitedHealthcare
an opportunity to integrate Medicare and Medicaid
funding and optimize people’s health status through close
coordination of care.
Total annual expenditures for dually eligibles are
estimated at more than $300 billion, or more than 10%
of the total health care costs in the United States. As of
December 31, 2013, UnitedHealthcare served more than
275,000 people in legacy dually eligible programs through
Medicare Advantage and SNPs. In 2013, UnitedHealthcare
Community & State implemented a managed fee-for-service
demonstration model in the state of Washington. In 2014,
UnitedHealthcare Community & State will help implement
MME programs in the states of Ohio, Washington and
Michigan. These programs are among the first in the country
to leverage CMS’ demonstrations to serve MMEs.
UnitedHealthcare International
UnitedHealthcare International participates in international
markets through national “in country” and cross-border
strategic approaches. UnitedHealthcare International’s
cross-border health care business provides comprehensive
health benefits, care management and care delivery for
multinational employers, governments and individuals
around the world. UnitedHealthcare International’s goal
is to create business solutions that are based on local
infrastructure, culture and needs, and that blend local
expertise with experiences from the U.S. health care industry.
As of December 31, 2013, UnitedHealthcare International
provided medical benefits to 4.8 million people, principally in
Brazil, but also residing in more than 125 countries.
Amil. In 2012, UnitedHealthcare International acquired
Amil, which provides health and dental benefits to nearly
7 million people and also operates 25 acute hospitals,
as well as specialty clinics, primary care, and emergency
services across Brazil, principally for the benefit of its
members. Amil’s patients are also treated in its contracted
provider network of 21,000 physicians and other health
care professionals, 2,100 hospitals and 7,900 laboratories
and diagnostic imaging centers. Amil offers a diversified
product portfolio with a wide range of product offerings,
benefit designs, price points and value, including indemnity
products. Amil’s products include various administrative
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UNITEDHEALTH GROUP
services such as network access and administration, care
management and personal health services and claims
processing.
Other Operations. UnitedHealthcare International also
includes other diversified global health services operations
with a variety of offerings for international customers,
including:
• net work access and care coordination in the United
States and overseas;
• TP A products and services for health plans and TPAs;
• br okerage services;
• pr actice management services for care providers;
• gover nment and corporate consulting services for
improving quality and efficiency; and
• global expat riate insurance solutions.
OPTUM
Optum is a health services business serving the broad health
care marketplace, including:
• Thos e who need care: the consumers and patients who
need the right support, information, resources and
products to achieve their health goals.
• Thos e who provide care: physicians and other care
providers, hospitals and clinical facilities seeking to
modernize in ways that enable the best patient care
and experience possible, delivered cost-effectively.
• Thos e who pay for care: insurers, employers and
government agencies devoted to ensuring that those
they sponsor receive high-quality care, administered
and delivered efficiently.
• Thos e who innovate for care: life sciences and research
focused organizations dedicated to developing more
effective approaches, enabling technologies and
medicines that improve the delivery and quality of
care.
Using advanced data, analytics and technology, Optum
helps improve overall health system performance by
optimizing care quality, reducing costs and improving
the consumer experience and care provider performance.
Optum is organized in three reportable segments:
• OptumHealth focuses on care management, integrated
care delivery, and consumer solutions, including
financial services;
• OptumInsight delivers operational services and support
and health information technology services; and
• Opt umRx specializes in pharmacy services.
OPTUMHEALTH
OptumHealth is a diversified health and wellness business
serving the physical, emotional and financial needs of more
than 62 million unique individuals and enabling consumer
health management through programs offered by
employers, payers, government entities and, increasingly,
directly through the care delivery system. OptumHealth’s
products and services can be deployed individually or
integrated to provide more comprehensive solutions,
addressing a broad base of needs within the health care
system. These solutions are focused on improving quality
and patient satisfaction and lowering costs by working to
optimize the care delivery system through the creation of
high-performing networks, centers of excellence across
the care continuum, working directly with physicians to
advance population health management and focusing on
caring for the most medically complex patients.
OptumHealth offers its products on a risk basis, where it
assumes responsibility for health care costs in exchange for
a fixed monthly premium per individual served, and on an
administrative fee basis whereby it manages or administers
delivery of the products or services in exchange for a fixed
fee per individual served. For its financial services offerings,
OptumHealth charges fees and earns investment income on
managed funds.
OptumHealth sells its products primarily through its
direct sales force, strategic collaborations and external
producers in three markets: employers (which includes
the sub-markets of large, mid-sized and small employers),
payers (which includes the sub-markets of health plans,
TPAs, underwriter/stop-loss carriers and individual market
intermediaries) and government entities (which includes
states, CMS, DoD, Veterans Administration and other
federal procurement agencies). As provider reimbursement
models evolve, care providers are emerging as a fourth
market for the health management, financial services and
integrated care delivery businesses.
OptumHealth is organized into two major operating
groups: Physician Solutions and Consumer Solutions.
Physician Solutions. Physician Solutions includes the
Specialty Networks and Integrated Care Delivery offerings.
• Specialty Networks. Within Specialty Networks,
OptumHealth serves nearly 57 million people in
two primary ways: 1) creating access to networks
of provider specialists in the areas of behavioral
health management (e.g., mental health, substance
abuse), global well-being (e.g., international work/
life solutions), chronic physical health management
(e.g., chiropractic, physical therapy), and complex
medical conditions (e.g., transplant, infertility);
and 2) managing the care and health needs for
consumers through a variety of programs utilizing
predictive modeling, evidence-based clinical
outcomes management and peer support. Specialty
Networks address areas likely to have significant
variation in clinical practice, where a disciplined,
evidence-based approach can drive improved health
outcomes and reduced costs. These range from more
commonly accessed services (e.g., behavioral health
and chiropractic) to less common procedures (e.g.,
transplant, infertility, bariatric surgery and kidney
disease/end stage renal disease).
• Integrated Care Delivery. Integrated Care Delivery
serves patients through a collaborative network
aligned around total population health management
and outcomes-based reimbursement. Within its local
care delivery systems, OptumHealth works directly with
medical groups and Independent Practice Associations
to deploy a core set of technology, risk management,
analytical and clinical capabilities and tools to assist
physicians in delivering high-quality care across the
populations they serve. Integrated Care Delivery’s
complex population management services focus on
improving care for patients with very challenging
medical conditions by providing the optimal care in the
most desirable setting. Integrated Care Delivery’s LHI
business designs and implements mobile care delivery
solutions, providing occupational health, medical and
dental readiness services, treatments and immunization
programs for the U.S. military and U.S. Department of
Health and Human Services (HHS), as well as for many
commercial companies.
Consumer Solutions. Consumer Solutions includes health
management solutions, distribution and financial services
operations.
• Health Management Solutions: OptumHealth serves
over 37 million people through population health
management services including care management,
complex conditions (e.g., cancer, neonatal and
maternity) health and wellness, and advocacy decision
support solutions. This set of services helps consumers
navigate the health care system and make decisions
about their care and treatment, resulting in better
clinical outcomes and lower medical costs.
• Distribution: This business provides capabilities to
help payers, aggregators and employers meet the
needs of the consumers they serve. The consumer
engagement and sales distribution platform is backed
by a spectrum of health and wellness services. The
consumer engagement platform is a technology-
enabled engagement model that is helping health care
companies, including health plans, grow and manage
their consumer relationships. OptumHealth provides
call center support, multi-modal communications
software, data analysis and trained nurses that help
clients acquire, retain and service large populations of
health care consumers.
• Financial Services: This business is dedicated solely
to providing financial solutions for the health care
market, serving the needs of individuals, employers,
health care professionals and payers. OptumHealth is
a leading provider of consumer health care accounts
including health savings, health reimbursement, health
incentive, retiree reimbursement and flexible spending
accounts, that help people plan and save for current
and future health care expenses. Payers, health care
professionals and employers rely upon OptumHealth’s
electronic payment solutions to manage compliance
and improve the administrative efficiency of electronic
claim payments. OptumHealth also offers health care
related lending and credit to health care providers
to support the modernization of their practices, and
financial risk protection for third-party payers and
self-funded employers. As of December 31, 2013,
Financial Services and its wholly owned subsidiary,
Optum Bank, had $2.3 billion in customer assets under
management and during 2013 processed $78 billion in
medical payments to physicians and other health care
providers.
2013 FORM 10-K
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OPTUMINSIGHT
OptumInsight provides technology, operational and
consulting services to participants in the health care industry.
Hospitals, physicians, commercial health plans, government
agencies, life sciences companies and other organizations
that comprise the health care system use OptumInsight to
help them reduce costs, meet compliance mandates, improve
clinical performance and adapt to the changing health
system landscape.
Many of OptumInsight’s software and information
products, advisory consulting arrangements, and outsourcing
contracts are performed over an extended period, often
several years. OptumInsight maintains an order backlog
to track unearned revenues under these long-term
arrangements. The backlog consists of estimated revenue
from signed contracts, other legally binding agreements
and anticipated contract renewals based on historical
experience that either have not started but are anticipated
to begin in the near future, or are in process and have not
been completed. OptumInsight’s aggregate backlog at
December 31, 2013 was $5.5 billion, of which $2.7 billion
is expected to be realized within the next 12 months. This
includes $1.1 billion related to intersegment agreements, all
of which are included in the current portion of the backlog.
OptumInsight’s aggregate backlog at December 31, 2012 was
$4.6 billion. The increase in 2013 backlog was attributable
to the partnership with Dignity Health that established
the Optum360 provider revenue management business.
OptumInsight cannot provide any assurance that it will be
able to realize all of the revenues included in backlog due to
uncertainty regarding the timing and scope of services, the
potential for cancellation, non-renewal, or early termination
of service arrangements.
OptumInsight’s products and services are sold primarily
through a direct sales force. OptumInsight’s products are also
supported and distributed through an array of alliance and
business partnerships with other technology vendors, who
integrate and interface OptumInsight’s products with their
applications.
OptumInsight provides capabilities targeted to the
needs of four primary market segments: care providers
(e.g., physician practices and hospitals), commercial payers,
governments and life sciences.
Care Providers. Serving four out of five U.S. hospitals and
tens of thousands of physician practices, OptumInsight
provides capabilities that help drive financial performance,
meet compliance requirements, and deliver health
intelligence. OptumInsight’s offerings in clinical workflow,
revenue management, health IT and analytics helps
hospitals and physician practices improve patient outcomes,
strengthen financial performance and meet quality
measurement and compliance requirements, as well as
transition to new collaborative and accountable care
business models.
Commercial Payers. OptumInsight serves approximately
300 health plans with employer, individual, Medicare,
and Medicaid membership. OptumInsight applies its
solutions across the payer’s operations, helping clients
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UNITEDHEALTH GROUP
to improve operational and administrative efficiency,
meet clinical performance and compliance goals, develop
strong provider networks, manage risk and drive growth.
OptumInsight is also helping payer clients adapt to new
market models, including health insurance exchanges,
consumer driven health care and engagement, pay-for-
value contracting, and population health management.
Governments. OptumInsight provides services to state,
federal and municipal agencies and departments, across
35 states and the District of Columbia. Services include
financial management and program integrity services,
policy and compliance consulting, data and analytics
technology, systems integration and expertise to improve
medical quality, access and costs.
Life Sciences. OptumInsight’s Life Sciences business provides
services to more than 400 global life sciences organizations.
OptumInsight’s services use real-world evidence to support
market access and positioning of their products, to deliver
strategic regulatory services, to provide insights into patient
reported outcomes and to optimize and manage risk.
OPTUMRX
OptumRx provides a range of pharmacy benefit
management (PBM) services to nearly 28 million people
nationwide, managing approximately $33 billion in
pharmaceutical spending annually and processing an
annual run rate of more than one-half billion adjusted
retail, mail and specialty drug prescriptions. OptumRx’s
PBM services include retail pharmacy network management
services, mail order and specialty pharmacy services,
manufacturer rebate contracting and administration,
benefit plan design and consultation, claims processing,
Medicare Part D services, and a variety of clinical
programs such as formulary management and compliance,
drug utilization review and disease and drug therapy
management services. OptumRx has a network of more
than 67,000 retail pharmacies and two mail services
facilities in California and Kansas.
The mail order and specialty pharmacy fulfillment
capabilities of OptumRx are an important strategic
component of its business, providing patients with
convenient access to maintenance medications, offering
a broad range of complex drug therapies and patient
management services for individuals with chronic health
conditions, and enabling OptumRx to manage its clients’
drug costs through operating efficiencies and economies of
scale.
OptumRx provides PBM services to UnitedHealthcare
members enrolled in benefit plans that offer pharmacy
benefits. Throughout the course of 2013, OptumRx
transitioned 12 million new or migrating UnitedHealthcare
commercial members. Additionally, OptumRx managed
specialty pharmacy benefits across nearly all of
UnitedHealthcare’s businesses with services including
patient support and clinical programs that ensure quality
and value for consumers. Specialty drug management is
important in managing overall drug spend, as biologicals
and other specialty medications are fast growing pharmacy
expenditures. OptumRx also provides PBM services to
non-affiliated external clients, including public and private
sector employer groups, insurance companies, Taft-Hartley
Trust Funds, TPAs, managed care organizations (MCOs),
Medicare-contracted plans, Medicaid plans and other
sponsors of health benefit plans and individuals throughout
the United States. OptumRx’s distribution system consists
primarily of health insurance brokers and other health care
consultants and direct sales.
GOVERNMENT REGULATION
Most of our health and well-being businesses are subject
to comprehensive federal, state and international laws
and regulations. We are regulated by federal, state and
international regulatory agencies that generally have
discretion to issue regulations and interpret and enforce
laws and rules. These regulations can vary significantly
from jurisdiction to jurisdiction, and the interpretation
of existing laws and rules also may change periodically.
Domestic and international governments continue to enact
and consider various legislative and regulatory proposals
that could materially impact certain aspects of the health
care system. New laws, regulations and rules, or changes in
the interpretation of existing laws, regulations and rules,
including as a result of changes in the political climate, could
adversely affect our business.
In the event we fail to comply with, or we fail to respond
quickly and appropriately to changes in, applicable laws,
regulations and rules, our business, results of operations,
financial position and cash flows could be materially
and adversely affected. See Item 1A, “Risk Factors” for a
discussion of the risks related to compliance with federal,
state and international laws and regulations.
FEDERAL LAWS AND REGULATION
We are subject to various levels of U.S. federal
regulation. For example, when we contract with the
federal government, we are subject to federal laws and
regulations relating to the award, administration and
performance of U.S. government contracts. CMS regulates
our UnitedHealthcare businesses, and certain aspects of
our Optum businesses. Payments by CMS to our businesses
are subject to regulations including the submission of
information relating to the health status of enrollees for
purposes of determining the amount of certain payments
to us. CMS also has the right to audit our performance
to determine our compliance with CMS contracts and
regulations and the quality of care we provide to Medicare
beneficiaries. Our commercial business will also be subject
to audits related to risk adjustment and reinsurance data
when the programs are implemented starting in 2014.
UnitedHealthcare Community & State has Medicaid
and CHIP contracts that are subject to federal regulations
regarding services to be provided to Medicaid enrollees,
payment for those services and other aspects of these
programs. There are many regulations affecting Medicare
and Medicaid compliance, and the regulatory environment
with respect to these programs has become and will
continue to become increasingly complex as a result of
Health Reform Legislation. We are also subject to federal
law and regulations relating to the administration of
contracts with federal agencies that are held by our Optum
businesses and UnitedHealthcare Military & Veterans
business, such as our TRICARE West Region contract with
the DoD.
Certain of our businesses, such as UnitedHealthcare’s
eyeglass manufacturing activities and Optum’s high acuity
clinical workflow software, hearing aid products and
clinical research activities, are subject to regulation by the
U.S. Food and Drug Administration (FDA). Optum’s clinical
research activities are subject to laws and regulations
outside of the United States that regulate clinical trials. Our
business is also subject to laws and regulations relating to
consumer protection, anti-fraud and abuse, anti-kickbacks,
false claims, prohibited referrals, inappropriately reducing
or limiting health care services, anti-money laundering,
securities and antitrust.
Health Care Reform. Health Reform Legislation expands
access to coverage and modifies aspects of the commercial
insurance market, as well as the Medicaid and Medicare
programs, CHIP and other aspects of the health care system.
Among other requirements, Health Reform Legislation
has expanded dependant coverage to age 26, expanded
benefit requirements, eliminated certain annual and
lifetime maximum limits, eliminated certain pre-existing
condition limits, required coverage for preventative services
without cost to members, required premium rebates if
certain medical loss ratios (MLRs) are not met, granted
members new and additional appeal rights, created new
premium rate review processes, established a system of
state and federal exchanges through which consumers
can purchase health coverage, imposed new requirements
on the format and content of communications (such as
explanations of benefits) between health insurers and
their members, reduced the Medicare Part D coverage gap
and reduced payments to private plans offering Medicare
Advantage.
Health Reform Legislation and the related federal
and state regulations are affecting how we do business
and could impact our results of operations, financial
position and cash flows. The full impact of Health Reform
Legislation remains difficult to predict and is not yet
fully known. See also Item 1A, “Risk Factors” and Item
7, “Management Discussion and Analysis of Financial
Condition and Results of Operations” for a discussion of
the risks related to Health Reform Legislation and related
matters.
Privacy, Security, and Data Standards Regulation.
The administrative simplification provisions of the Health
Insurance Portability and Accountability Act of 1996, as
amended (HIPAA), apply to both the group and individual
health insurance markets, including self-funded employee
benefit plans. Federal regulations related to HIPAA contain
minimum standards for electronic transactions and code
sets, and for the privacy and security of protected health
2013 FORM 10-K
9
information. ICD-9, the current system of assigning codes
to diagnoses and procedures associated with hospital
utilization in the United States, will be replaced by ICD-
10 code sets on October 1, 2014, and health plans and
providers will be required to use ICD-10 codes for such
diagnoses and procedures for dates of services on or after
such date.
The Health Information Technology for Economic and
Clinical Health Act (HITECH) significantly expanded the
privacy and security provisions of HIPAA. HITECH imposes
additional requirements on uses and disclosures of health
information; includes new contracting requirements
for HIPAA business associate agreements; extends parts
of HIPAA privacy and security provisions to business
associates; adds new federal data breach notification
requirements for covered entities and business associates
and new reporting requirements to HHS and the Federal
Trade Commission and, in some cases, to the local media;
strengthens enforcement and imposes higher financial
penalties for HIPAA violations and, in certain cases, imposes
criminal penalties for individuals, including employees. In
the conduct of our business, we may act, depending on
the circumstances, as either a covered entity or a business
associate. Federal consumer protection laws may also apply
in some instances to privacy and security practices related
to personally identifiable information.
The use and disclosure of individually identifiable health
data by our businesses is also regulated in some instances
by other federal laws, including the Gramm-Leach-Bliley
Act (GLBA) or state statutes implementing GLBA. These
federal laws and state statutes generally require insurers to
provide customers with notice regarding how their non-
public personal health and financial information is used
and the opportunity to “opt out” of certain disclosures
before the insurer shares such information with a third
party, and generally require safeguards for the protection
of personal information. Neither the GLBA nor HIPAA
privacy regulations preempt more stringent state laws and
regulations that may apply to us, as discussed below.
ERISA. The Employee Retirement Income Security Act of
1974, as amended (ERISA), regulates how our services
are provided to or through certain types of employer-
sponsored health benefit plans. ERISA is a set of laws
and regulations that is subject to periodic interpretation
by the DOL as well as the federal courts. ERISA places
controls on how our business units may do business
with employers who sponsor employee benefit health
plans, particularly those that maintain self-funded plans.
Regulations established by the DOL subject us to additional
requirements for claims payment and member appeals
under health care plans governed by ERISA.
STATE LAWS AND REGULATION
Health Care Regulation. Our insurance and HMO
subsidiaries must be licensed by the jurisdictions in which
they conduct business. All of the states in which our
subsidiaries offer insurance and HMO products regulate
those products and operations. These states require
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UNITEDHEALTH GROUP
periodic financial reports and establish minimum capital
or restricted cash reserve requirements. The National
Association of Insurance Commissioners (NAIC) has
adopted model regulations that, where implemented
by states, require expanded governance practices and
risk and solvency assessment reporting. Most states have
adopted these or similar measures expanding the scope of
regulations relating to corporate governance and internal
control activities of HMOs and insurance companies. The
NAIC also established the Risk Management and Own
Risk and Solvency Assessment Model Act that by 2015
will require us to conduct additional group solvency
assessments, maintain a risk management framework and
file additional reports with state insurance regulators.
Certain states have also adopted their own regulations for
minimum MLRs with which health plans must comply. In
addition, a number of state legislatures have enacted or are
contemplating significant reforms of their health insurance
markets, either independent of or to comply with or be
eligible for grants or other incentives in connection with
Health Reform Legislation, which may affect our operations
and our financial results.
Health plans and insurance companies are regulated
under state insurance holding company regulations. Such
regulations generally require registration with applicable
state departments of insurance and the filing of reports
that describe capital structure, ownership, financial
condition, certain intercompany transactions and general
business operations. Some state insurance holding company
laws and regulations require prior regulatory approval of
acquisitions and material intercompany transfers of assets,
as well as transactions between the regulated companies
and their parent holding companies or affiliates. These laws
may restrict the ability of our regulated subsidiaries to pay
dividends to our holding companies.
Some of our business activity is subject to other
health care-related regulations and requirements,
including PPO, MCO, utilization review (UR), or TPA-
related regulations and licensure requirements. These
regulations differ from state to state, and may contain
network, contracting, product and rate, and financial and
reporting requirements. There are laws and regulations
that set specific standards for delivery of services, appeals,
grievances and payment of claims, adequacy of health
care professional networks, fraud prevention, protection
of consumer health information, pricing and underwriting
practices and covered benefits and services. State health
care anti-fraud and abuse prohibitions encompass a wide
range of activities, including kickbacks for referral of
members, billing unnecessary medical services and improper
marketing. Certain of our businesses are subject to state
general agent, broker, and sales distributions laws and
regulations. Our UnitedHealthcare Community & State
and certain Optum businesses are subject to regulation
by state Medicaid agencies that oversee the provision of
benefits to our Medicaid and CHIP beneficiaries and to our
dually eligible (for Medicare and Medicaid) beneficiaries.
We also contract with state governmental entities and are
subject to state laws and regulations relating to the award,
administration and performance of state government
contracts.
Guaranty Fund Assessments. Under state guaranty fund
laws, certain insurance companies (and HMOs in some
states) doing business in those states, including those
issuing health, long-term care, life and accident insurance
policies, can be assessed (up to prescribed limits) for
certain obligations to the policyholders and claimants of
insolvent insurance companies that write the same line
or lines of business. Assessments generally are based on a
formula relating to premiums in the state compared to the
premiums of other insurers and could be spread out over
a period of years. Some states permit member insurers to
recover assessments paid through full or partial premium
tax offsets.
Pharmacy Regulation. OptumRx’s mail order pharmacies
must be licensed as pharmacies in the states in which
they are located. Our mail order pharmacies must also
register with the U.S. Drug Enforcement Administration
and individual state controlled substance authorities to
dispense controlled substances. In addition to the laws and
regulations in the states where our mail order pharmacies
are located, laws and regulations in non-resident states
where we deliver pharmaceuticals may also apply, including
the requirement to register with the board of pharmacy in
the non-resident state. These non-resident states generally
expect our mail order pharmacies to follow the laws of
the state in which the pharmacies are located, but some
states also require us to comply with the laws of that non-
resident state when pharmaceuticals are delivered there.
Our mail order pharmacies maintain certain Medicare
and state Medicaid provider numbers as pharmacies
providing services under these programs. Participation in
these programs requires the pharmacies to comply with
the applicable Medicare and Medicaid provider rules and
regulations. Other laws and regulations affecting our mail
order pharmacies include federal and state statutes and
regulations governing the labeling, packaging, advertising
and adulteration of prescription drugs and dispensing of
controlled substances. See Item 1A, “Risk Factors” for a
discussion of the risks related to our PBM businesses.
State Privacy and Security Regulations. A number of states
have adopted laws and regulations that may affect our
privacy and security practices, for example, state laws that
govern the use, disclosure and protection of social security
numbers and sensitive health information or that are
designed to implement GLBA or protect credit card account
data. State and local authorities increasingly focus on the
importance of protecting individuals from identity theft,
with a significant number of states enacting laws requiring
businesses to notify individuals of security breaches involving
personal information. State consumer protection laws
may also apply to privacy and security practices related to
personally identifiable information, including information
related to consumers and care providers. Additionally,
different approaches to state privacy and insurance
regulation and varying enforcement philosophies in the
different states may materially and adversely affect our
ability to standardize our products and services across state
lines. See Item 1A, “Risk Factors” for a discussion of the
risks related to compliance with state privacy and security
regulations.
Corporate Practice of Medicine and Fee-Splitting Laws.
Certain of our businesses function as direct service
providers to care delivery systems and, as such, are subject
to additional laws and regulations. Some states have
corporate practice of medicine laws that prohibit certain
entities from practicing medicine or employing physicians
to practice medicine. Additionally, some states prohibit
certain entities from sharing in the fees or revenues of a
professional practice (fee-splitting). These prohibitions may
be statutory or regulatory, or may be a matter of judicial
or regulatory interpretation. These laws, regulations and
interpretations have, in certain states, been subject to
limited judicial and regulatory interpretation and are
subject to change.
Consumer Protection Laws. Certain of our businesses
participate in direct-to-consumer activities and are
subject to emerging regulations applicable to on-line
communications and other general consumer protection
laws and regulations.
BANKING REGULATION
Optum Bank is subject to regulation by federal banking
regulators, including the Federal Deposit Insurance
Corporation, which performs annual examinations to
ensure that the bank is operating in accordance with
federal safety and soundness requirements, and the
Consumer Financial Protection Bureau, which may
perform periodic examinations to ensure that the bank
is in compliance with applicable consumer protection
statutes, regulations and agency guidelines. Optum Bank
is also subject to supervision and regulation by the Utah
State Department of Financial Institutions, which carries
out annual examinations to ensure that the bank is
operating in accordance with state safety and soundness
requirements and performs periodic examinations of
the bank’s compliance with applicable state banking
statutes, regulations and agency guidelines. In the event
of unfavorable examination results from any of these
agencies, the bank could be subjected to increased
operational expenses and capital requirements, enhanced
governmental oversight and monetary penalties.
INTERNATIONAL REGULATION
Certain of our businesses and operations are international
in nature and are subject to regulation in the jurisdictions
in which they are organized or conduct business. These
regulatory regimes encompass, among other matters,
tax, licensing, tariffs, intellectual property, investment,
capital (including minimum solvency margin and reserve
requirements), management control, labor, anti-fraud,
anti-corruption and privacy and data protection regulations
(including requirements for cross-border data transfers)
that vary from jurisdiction to jurisdiction. We currently
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11
operate outside of the United States and may in the future
acquire or commence additional businesses based outside
of the United States, increasing our exposure to non-
U.S. regulatory regimes. For example, our Amil business
subjects us to Brazilian laws and regulations affecting the
managed care and insurance industries and regulation
by Brazilian regulators including the national regulatory
agency for private health insurance and plans, the Agência
Nacional de Saúde Suplementar (ANS), whose approach to
the interpretation, implementation and enforcement of
industry regulations could differ from the approach taken
by U.S. regulators. In addition, our non-U.S. businesses
and operations are subject to U.S. laws that regulate the
conduct and activities of U.S.-based businesses operating
abroad, such as the Foreign Corrupt Practices Act, which
prohibits offering, promising, providing or authorizing
others to give anything of value to a foreign government
official to obtain or retain business or otherwise secure a
business advantage.
COMPETITION
As a diversified health and well-being services company,
we operate in highly competitive markets. Our competitors
include managed health care companies, insurance
companies, HMOs, TPAs and business services outsourcing
companies, health care professionals that have formed
networks to contract directly with employers or with CMS,
specialty benefit providers, government entities, disease
management companies, and various health information
and consulting companies. For our UnitedHealthcare
businesses, our competitors include Aetna Inc., Cigna
Corporation, Health Net, Inc., Humana Inc., Kaiser
Permanente, WellPoint, Inc., numerous for-profit and
not-for-profit organizations operating under licenses
from the Blue Cross Blue Shield Association, and, with
respect to our Brazilian operations, several established
competitors in Brazil, and other enterprises that serve more
limited geographic areas. For our OptumRx businesses, our
competitors include CVS Caremark Corporation, Express
Scripts, Inc. and Catamaran Corporation. New entrants into
the markets in which we compete, as well as consolidation
within these markets, also contribute to a competitive
environment. We compete on the basis of the sales,
marketing and pricing of our products and services; product
innovation; consumer engagement and satisfaction;
the level and quality of products and services; care
delivery; network and clinical management capabilities;
market share; product distribution systems; efficiency
of administration operations; financial strength; and
marketplace reputation. If we fail to compete effectively
to maintain or increase our market share, including
maintaining or increasing enrollments in businesses
providing health benefits, our results of operations,
financial position and cash flows could be materially
and adversely affected. See Item 1A, “Risk Factors,” for
additional discussion of our risks related to competition.
12
UNITEDHEALTH GROUP
INTELLECTUAL PROPERTY RIGHTS
We have obtained trademark registration for the
UnitedHealth Group, UnitedHealthcare and Optum names
and logos. We own registrations for certain of our other
trademarks in the United States and abroad. We hold a
portfolio of patents and have patent applications pending
from time to time. We are not substantially dependent on
any single patent or group of related patents.
EXECUTIVE OFFICERS OF THE REGISTRANT
Unless otherwise noted, trademarks appearing in
this report are trademarks owned by us. We disclaim
proprietary interest in the marks and names of others.
EMPLOYEES
As of December 31, 2013, we employed approximately
156,000 individuals.
The following sets forth certain information regarding our executive officers as of February 12, 2014, including the business
experience of each executive officer during the past five years:
Name
Stephen J. Hemsley
David S. Wichmann
Gail K. Boudreaux
Eric S. Rangen
Larry C. Renfro
Age
Position
61
51
53
57
60
President and Chief Executive Officer
Executive Vice President and Chief Financial Officer of UnitedHealth
Group and President of UnitedHealth Group Operations
Executive Vice President of UnitedHealth Group and Chief Executive
Officer of UnitedHealthcare
Senior Vice President and Chief Accounting Officer
Executive Vice President of UnitedHealth Group and Chief Executive
Officer of Optum
Marianne D. Short
62
Executive Vice President and Chief Legal Officer
Our Board of Directors elects executive officers annually.
Our executive officers serve until their successors are duly
elected and qualified.
Mr. Hemsley is President and Chief Executive Officer of
UnitedHealth Group, has served in that capacity since
November 2006, and has been a member of the Board of
Directors since February 2000.
Mr. Wichmann is Executive Vice President and Chief
Financial Officer of UnitedHealth Group and President of
UnitedHealth Group Operations and has served in that
capacity since January 2011. Mr. Wichmann has served as
Executive Vice President and President of UnitedHealth
Group Operations since April 2008.
Ms. Boudreaux is Executive Vice President of UnitedHealth
Group and Chief Executive Officer of UnitedHealthcare
and has served in that capacity since January 2011.
Ms. Boudreaux served as Executive Vice President of
UnitedHealth Group and President of UnitedHealthcare
from May 2008 to January 2011.
Mr. Rangen is Senior Vice President and Chief Accounting
Officer of UnitedHealth Group and has served in that
capacity since December 2006.
Mr. Renfro is Executive Vice President of UnitedHealth
Group and Chief Executive Officer of Optum and has
served in that capacity since July 2011. From January 2011
to July 2011, Mr. Renfro served as Executive Vice President
of UnitedHealth Group. From October 2009 to January
2011, Mr. Renfro served as Executive Vice President of
UnitedHealth Group and Chief Executive Officer of the
Public and Senior Markets Group. From January 2009 to
October 2009, Mr. Renfro served as Executive Vice President
of UnitedHealth Group and Chief Executive Officer of
Ovations (now UnitedHealthcare Medicare & Retirement).
Ms. Short is Executive Vice President and Chief Legal Officer
of UnitedHealth Group and has served in that capacity
since January 2013. Prior to joining UnitedHealth Group,
Ms. Short served as the Managing Partner at Dorsey &
Whitney LLP, an international law firm, from January 2007
to December 2012.
ADDITIONAL INFORMATION
UnitedHealth Group Incorporated was incorporated in
January 1977 in Minnesota. Our executive offices are
located at UnitedHealth Group Center, 9900 Bren Road East,
Minnetonka, Minnesota 55343; our telephone number is
(952) 936-1300.
You can access our website at
www.unitedhealthgroup.com
to learn more about our Company. From that site, you
can download and print copies of our annual reports to
shareholders, annual reports on Form 10-K, quarterly
reports on Form 10-Q, and current reports on Form 8-K,
along with amendments to those reports. You can also
download from our website our Articles of Incorporation,
bylaws and corporate governance policies, including our
Principles of Governance, Board of Directors Committee
Charters, and Code of Conduct. We make periodic reports
and amendments available, free of charge, as soon as
reasonably practicable after we file or furnish these
reports to the SEC. We will also provide a copy of any
of our corporate governance policies published on our
website free of charge, upon request. To request a copy
of any of these documents, please submit your request
to: UnitedHealth Group Incorporated, 9900 Bren Road
East, Minnetonka, MN 55343, Attn: Corporate Secretary.
Information on or linked to our website is neither part of
nor incorporated by reference into this Annual Report on
Form 10-K or any other SEC filings.
Our transfer agent, Wells Fargo Shareowner Services,
can help you with a variety of shareholder-related services,
including change of address, lost stock certificates, transfer
of stock to another person and other administrative
services. You can write to our transfer agent at: Wells Fargo
Shareowner Services, P.O. Box 64854, St. Paul, Minnesota
55164-0854, email stocktransfer@wellsfargo.com, or
telephone (800) 468-9716 or (651) 450-4064.
ITEM 1A.
Risk Factors
CAUTIONARY STATEMENTS
The statements, estimates, projections or outlook
contained in this Annual Report on Form 10-K include
forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 (PSLRA).
When used in this Annual Report on Form 10-K and in
future filings by us with the SEC, in our news releases,
presentations to securities analysts or investors, and in
oral statements made by or with the approval of one of
our executive officers, the words or phrases “believe,”
“expect,” “intend,” “estimate,” “anticipate,” “forecast,”
“plan,” “project,” “should” or similar expressions are
intended to identify such forward-looking statements.
These statements are intended to take advantage of the
“safe harbor” provisions of the PSLRA. These forward-
looking statements involve risks and uncertainties that
may cause our actual results to differ materially from the
expectations expressed or implied in the forward-looking
statements. Any forward-looking statement speaks only as
of the date of this report and, except as required by law;
we undertake no obligation to update any forward-looking
statement to reflect events or circumstances, including
unanticipated events, after the date of this report.
The following discussion contains cautionary statements
regarding our business that investors and others should
consider. We do not undertake to address in future filings
or communications regarding our business or results of
operations how any of these factors may have caused our
results to differ from discussions or information contained
in previous filings or communications. In addition, any of
the matters discussed below may have affected past, as
well as current, forward-looking statements about future
results. Any or all forward-looking statements in this
Annual Report on Form 10-K and in any other public filings
or statements we make may turn out to be wrong. They can
be affected by inaccurate assumptions we might make or
by known or unknown risks and uncertainties. Many factors
2013 FORM 10-K
13
discussed below will be important in determining future
results. By their nature, forward-looking statements are not
guarantees of future performance or results and are subject
to risks, uncertainties and assumptions that are difficult to
predict or quantify.
If we fail to effectively estimate, price for and manage our
medical costs, the profitability of our risk-based products
and services could decline and could materially and
adversely affect our results of operations, financial position
and cash flows.
Through our risk-based benefit products, we assume
the risk of both medical and administrative costs for our
customers in return for monthly premiums. Premium
revenues from risk-based benefits products comprise
approximately 90% of our total consolidated revenues. We
generally use approximately 80% to 85% of our premium
revenues to pay the costs of health care services delivered
to these customers. The profitability of our products
depends in large part on our ability to predict, price for,
and effectively manage medical costs. In this regard,
Health Reform Legislation established minimum MLRs for
certain health plans and authorized HHS to maintain an
annual price increase review process for commercial health
plans, which could make it more difficult for us to price
our products competitively. In addition, our OptumHealth
Integrated Care Delivery business negotiates capitation
arrangements with commercial third-party payers. Under
the typical capitation arrangement, the health care
provider receives a fixed percentage of a third-party
payer’s premiums to cover all or a defined portion of the
medical costs provided to the capitated member. If we
fail to accurately predict, price for or manage the costs of
providing care to our capitated members, our results of
operations could be materially and adversely affected.
We manage medical costs through underwriting criteria,
product design, negotiation of favorable provider contracts
and care management programs. Total medical costs are
affected by the number of individual services rendered,
the cost of each service and the type of service rendered.
Our premium revenue on commercial policies is typically
at a fixed rate per individual served for a 12-month period
and is generally priced one to four months before the
contract commences. Our revenue on Medicare policies
is based on bids submitted in June the year before the
contract year. Although we base the premiums we charge
and our Medicare bids on our estimates of future medical
costs over the fixed contract period, many factors may
cause actual costs to exceed those estimated and reflected
in premiums or bids. These factors may include medical
cost inflation, increased use of services, increased cost of
individual services, natural catastrophes or other large-scale
medical emergencies, epidemics, the introduction of new or
costly treatments and technology, new mandated benefits
(such as the expansion of essential benefits coverage)
or other regulatory changes and insured population
characteristics. Relatively small differences between
predicted and actual medical costs or utilization rates as a
percentage of revenues can result in significant changes in
www.unitedhealthgroup.com
14
UNITEDHEALTH GROUP
our financial results. For example, if our 2013 medical costs
for commercial insured products were 1% higher, without
proportionally higher revenues from such products, our
annual net earnings for 2013 would have been reduced
by approximately $200 million, excluding any offsetting
impact from premium rebates.
In addition, the financial results we report for any
particular period include estimates of costs that have
been incurred for which claims are still outstanding. These
estimates involve an extensive degree of judgment. If these
estimates prove too low, our results of operations could be
materially and adversely affected.
Our business activities are highly regulated and new laws
or regulations or changes in existing laws or regulations
or their enforcement or application could materially and
adversely affect our results of operations, financial position
and cash flows.
We are regulated by federal, state and local governments
in the United States and other countries where we do
business. Our insurance and HMO subsidiaries must be
licensed by and are subject to the regulations of the
jurisdictions in which they conduct business. For example,
states require periodic financial reports and enforce
minimum capital or restricted cash reserve requirements.
Health plans and insurance companies are also regulated
under state insurance holding company regulations, and
some of our activities may be subject to other health care-
related regulations and requirements, including those
relating to PPOs, MCOs, UR and TPA-related regulations
and licensure requirements. Some of our UnitedHealthcare
and Optum businesses hold or provide services related to
government contracts and are subject to U.S. federal and
state and non-U.S. self-referral, anti-kickback, medical
necessity, risk adjustment, false claims, and other laws
and regulations governing government contractors and
the use of government funds. In addition, under state
guaranty fund laws, certain health, life and accident
insurance companies and, in certain cases, HMOs can be
assessed (up to prescribed limits) for certain obligations
to the policyholders and claimants of insolvent insurance
companies that write the same line or lines of business in
these states, which would expose our business to the risk of
insolvency of a competitor in these states.
Certain of our businesses provide products or services to
various government agencies. Our relationships with these
government agencies are subject to the terms of contracts
that we hold with the agencies and to laws and regulations
regarding government contracts. Among others, certain
laws and regulations restrict or prohibit companies from
performing work for government agencies that might be
viewed as an actual or potential conflict of interest. These
laws may limit our ability to pursue and perform certain
types of work, thereby materially and adversely affecting
our results of operations, financial position and cash flows.
Certain of our Optum businesses are also subject to
regulations, which are distinct from those faced by our
insurance and HMO subsidiaries, including, for example,
FDA regulations, state telemedicine regulations, debt
collection laws, and state corporate practice of medicine
doctrines and fee-splitting rules, some of which could
impact our relationships with physicians, hospitals and
customers. Additionally, we participate in the emerging
private exchange markets and it is not yet known to what
extent the states will issue new regulations that apply
to private exchanges. These risks and uncertainties may
materially and adversely affect our ability to market our
products and services, or to do so at targeted margins,
or may increase the regulatory burdens under which we
operate.
The laws and rules governing our business and
interpretations of those laws and rules are subject to
frequent change, and the integration into our businesses
of entities that we acquire may affect the way in which
existing laws and rules apply to us. The broad latitude
given to the agencies administering, interpreting and
enforcing current and future regulations governing our
business could force us to change how we do business,
restrict revenue and enrollment growth, increase our health
care and administrative costs and capital requirements,
or expose us to increased liability in courts for coverage
determinations, contract interpretation and other actions.
We must also obtain and maintain regulatory approvals
to market many of our products, increase prices for certain
regulated products, and complete certain acquisitions and
dispositions or integrate certain acquisitions. For example,
premium rates for our health insurance and/or managed
care products are subject to regulatory review or approval
in many states and by the federal government, and a
number of states have enhanced (or are proposing to
enhance) their rate review processes. Additionally, the final
market reform rules released in February 2013 require that
we submit data on all proposed rate increases to HHS for
monitoring purposes on many of our products. Moreover,
geographic and product expansions may be subject to
state and federal regulatory approvals. Delays in obtaining
necessary approvals or our failure to obtain or maintain
adequate approvals could materially and adversely affect
our results of operations, financial position and cash flows.
Some of our businesses and operations are international
in nature and consequently face political, economic, legal,
compliance, regulatory, operational and other risks and
exposures that are unique and vary by jurisdiction. The
regulatory environments and associated requirements
and uncertainties regarding tax, licensing, tariffs,
intellectual property, privacy, data protection, investment,
capital (including minimum solvency margin and reserve
requirements), management control, labor relations, fraud
and corruption present compliance requirements and
uncertainties for us that are different from those faced by
U.S.-based businesses. We have acquired and may in the
future acquire or commence additional businesses based
outside of the United States. For example, our acquisition
of Amil subjects us to Brazilian laws and regulations
affecting the managed care and insurance industries, which
vary from comparable U.S. laws and regulations, and to
regulation by Brazilian regulators, whose approach to
the interpretation, implementation and enforcement of
industry regulations could differ from the approach taken
by U.S. regulators. In addition, our non-U.S. businesses and
operations are also subject to U.S. laws that regulate the
conduct and activities of U.S.-based businesses operating
abroad, such as the Foreign Corrupt Practices Act. Our
failure to comply with U.S. or non-U.S. laws and regulations
governing our conduct outside the United States or to
establish constructive relations with non-U.S. regulators
could adversely affect our ability to market our products
and services, or to do so at targeted margins, which may
have a material adverse effect on our business, financial
condition and results of operations.
The health care industry is also regularly subject to
negative publicity, including as a result of governmental
investigations, adverse media coverage and political
debate surrounding industry regulation, such as the
implementation of Health Reform Legislation and
associated exchanges. Negative publicity may adversely
affect our stock price and damage our reputation in various
markets.
Health Reform Legislation could materially and adversely
affect the manner in which we conduct business and our
results of operations, financial position and cash flows.
Due to its complexity and ongoing implementation,
Health Reform Legislation’s impact remains difficult to
predict, is not yet fully known and could adversely affect us.
For example, if we do not maintain certain minimum MLRs,
we are required to rebate ratable portions of our premiums
to our customers annually. Beginning in 2014, commercial
MLRs will need to factor in the effect of new premium
stabilization provisions (risk adjustment, risk corridor and
transitional reinsurance) for individual and small group
markets. These factors, along with uncertainties in how
MLR rules may be amended to address other changes
required by Health Reform Legislation, decrease the
predictability of medical loss rebates. Some state Medicaid
programs are also imposing MLR requirements on Medicaid
MCOs, which generally require such plans to rebate ratable
portions of their premiums to their state customers if
they cannot demonstrate they have met the minimum
MLRs. Depending on our calculations of the MLR for
each of our plans and the manner in which we adjust our
business model in light of these requirements, there could
be meaningful disruptions in our market share, results
of operations, financial position and cash flows could be
materially and adversely affected.
Several states have indicated they may not expand their
Medicaid programs based on concerns over the costs of
such programs when expanded federal funding is reduced
starting in 2017. The extent to which states expand their
Medicaid programs, or discontinue current expansion
programs, could adversely impact our Medicaid enrollment
levels, which could in turn materially and adversely affect
our results of operations, financial position and cash flows.
Health Reform Legislation also includes a “maintenance
of effort” (MOE) provision that requires states to maintain
their eligibility rules for adults covered by Medicaid,
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until the Secretary of HHS determines that an insurance
exchange is operational in a given state, and for children
covered by Medicaid or CHIP, through the end of the 2019
federal fiscal year. States with, or projecting, a budget
deficit may apply for an exception to the MOE provision. If
states are successful in obtaining MOE waivers and allow
certain Medicaid programs to expire, we could experience
reduced Medicaid enrollment, which could materially and
adversely affect our results of operations, financial position
and cash flows.
In addition, Health Reform Legislation requires the
establishment of state based health insurance exchanges
for individuals and small employers by 2014. The types of
exchange participation requirements ultimately enacted by
each state, the availability of federal subsidies for premiums
and cost-sharing reductions within exchanges, the potential
for differential imposition of state benefit mandates inside
and outside the exchanges, the operation of reinsurance,
risk corridors and risk adjustment mechanisms inside and
outside the exchanges and the possibility that certain states
may restrict the ability of health plans to continue to offer
coverage to individuals and small employers outside of the
exchanges could result in disruptions in local health care
markets and adversely affect our results of operations,
financial position and cash flows.
Health Reform Legislation also includes for 2014 specific
reforms for the individual and small group marketplace,
including guaranteed availability of coverage, adjusted
community rating requirements (which include elimination
of health status and gender rating factors), essential health
benefit requirements (resulting in benefit changes for
many members) and actuarial value requirements resulting
in expanded benefits or reduced member cost sharing
(or a combination of both) for many policyholders. These
changes may lead to significant disruptions in local health
care markets, which could materially and adversely affect
our results of operations, financial position and cash flows.
Further, while risk adjustment will apply to most individual
and small group plans in the commercial markets beginning
in 2014, the availability of transitional relief makes the full
extent of its impact difficult to predict and could further
disrupt underlying exchange risk pools, impact pricing and
market strategies, and result in adverse consequences to
the marketplace. While we have made certain assumptions
in our premium rate development relating to projected risk
adjustment transfers, actual risk adjustment calculations
and transfers could materially differ from our assumptions.
Premium increases or benefit reductions will be necessary
to offset Health Reform Legislation’s impact on our
medical and operating costs. These premium increases
are often subject to state regulatory approval, and the
federal government is encouraging states to intensify
their reviews of requests for rate increases by commercial
health plans and providing funding to assist in those state-
level reviews. If we are not able to secure approval for
adequate premium increases to offset increases in our cost
structure or if consumers forego coverage as a result of
such premium increases, our margins, results of operations,
financial position and cash flows could be materially and
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UNITEDHEALTH GROUP
adversely affected. In addition, plans deemed to have a
history of “unreasonable” rate increases may be prohibited
from participating in the state-based exchanges that
become active under Health Reform Legislation in 2014.
Our results of operations, financial position and cash
flows could be materially and adversely affected if fewer
individuals gain coverage under Health Reform Legislation
than we expect, if we are unable to attract these new
individuals to our UnitedHealthcare offerings, or if the
demand for Health Reform Legislation related products and
capabilities offered by our Optum businesses is less than
anticipated.
As a result of our participation in various government
health care programs, both as a payer and as a service
provider to payers, we are exposed to additional risks
associated with program funding, enrollments, payment
adjustments, audits and government investigations that
could materially and adversely affect our business, results
of operations, financial position and cash flows.
We participate in various federal, state and local
government health care coverage programs, including
as a payer in Medicare Advantage, Medicare Part D,
various Medicaid programs, CHIP and our TRICARE West
Region contract with the DoD, and receive substantial
revenues from these programs. We also provide services
to payers through our Optum businesses. A reduction
or less than expected increase, or a protracted delay, in
government funding for these programs or change in
allocation methodologies, or, as is a typical feature of many
government contracts, termination of the contract for
the convenience of the government, may materially and
adversely affect our results of operations, financial position
and cash flows.
The government health care programs in which we
participate generally are subject to frequent changes,
including changes that may reduce the number of
persons enrolled or eligible for coverage, reduce the
amount of reimbursement or payment levels, reduce
our participation in certain service areas or markets,
or increase our administrative or medical costs under
such programs. Revenues for these programs depend
on periodic funding from the federal government or
applicable state governments and allocation of the funding
through various payment mechanisms. Funding for these
government programs depends on many factors outside
of our control, including general economic conditions and
budgetary constraints at the federal or applicable state
level. For example, CMS has in the past reduced or frozen
Medicare Advantage benchmarks and additional cuts to
Medicare Advantage benchmarks are expected in the
next few years. In addition, from time to time, CMS makes
changes to the way it calculates Medicare Advantage risk
adjustment payments. For 2014, CMS has asked plans to
submit additional information indicating whether or not
medical conditions were diagnosed in a clinical setting.
CMS has indicated that it will publish further guidance
on the treatment of risk adjustment data in early 2015,
including with respect to diagnoses made during “risk
assessments,” that may change the way in which Medicare
Advantage payments are determined. Although we have
adjusted members’ benefits and premiums on a selective
basis, ceased to offer benefit plans in certain counties,
and intensified both our medical and operating cost
management in response to the benchmark reductions
and other funding pressures, these or other strategies may
not fully address the funding pressures in the Medicare
Advantage program. In addition, payers in the Medicare
Advantage program may be subject to reductions in
payments from CMS as a result of decreased funding or
recoupment pursuant to government audit.
Under the Medicaid Managed Care program, state
Medicaid agencies are periodically required by federal law
to seek bids from eligible health plans to continue their
participation in the acute care Medicaid health programs.
If we are not successful in obtaining renewals of state
Medicaid Managed Care contracts, we risk losing the
members that were enrolled in those Medicaid plans. Under
the Medicare Part D program, to qualify for automatic
enrollment of low income members, our bids must result
in an enrollee premium below a regional benchmark,
which is calculated by the government after all regional
bids are submitted. If the enrollee premium is not below
the government benchmark, we risk losing the members
who were auto-assigned to us and will not have additional
members auto-assigned to us. In general, our bids are based
upon certain assumptions regarding enrollment, utilization,
medical costs, and other factors. In the event any of these
assumptions are materially incorrect, either as a result of
unforeseen changes to the Medicare program or other
programs on which we bid, or our competitors submit bids
at lower rates than our bids, our results of operations,
financial position and cash flows could be materially and
adversely affected.
Many of the government health care coverage
programs in which we participate are subject to the prior
satisfaction of certain conditions or performance standards
or benchmarks. For example, as part of Health Reform
Legislation, CMS has a system that provides various quality
bonus payments to plans that meet certain quality star
ratings at the local plan level. In addition, under Health
Reform Legislation, Congress authorized CMS and the
states to implement MME managed care demonstration
programs to serve dually eligible beneficiaries to improve
the coordination of their care. Health plan participation in
these demonstration programs is subject to CMS approval
of specified care delivery models and the satisfaction of
conditions to participation, including meeting certain
performance requirements. Any changes in standards or
care delivery models that apply to government health care
programs, including Medicare, Medicaid and the MME
demonstration programs for dually eligible beneficiaries, or
our inability to improve our quality scores and star ratings
to meet government performance requirements or to
match the performance of our competitors could result in
limitations to our participation in or exclusion from these or
other government programs, which in turn could materially
and adversely affect our results of operations, financial
position and cash flows.
CMS uses various payment mechanisms to allocate
funding for Medicare programs, including adjusting
monthly capitation payments to Medicare Advantage
plans and Medicare Part D plans according to the predicted
health status of each beneficiary as supported by data
from health care providers for Medicare Advantage
plans, as well as, for Medicare Part D plans, risk-sharing
provisions based on a comparison of costs predicted in
our annual bids to actual prescription drug costs. Some
state Medicaid programs utilize a similar process. For
example, our UnitedHealthcare Medicare & Retirement and
UnitedHealthcare Community & State businesses submit
information relating to the health status of enrollees to
CMS or state agencies for purposes of determining the
amount of certain payments to us. CMS and the Office
of Inspector General for HHS periodically perform risk
adjustment data validation (RADV) audits of selected
Medicare health plans to validate the coding practices of
and supporting documentation maintained by health care
providers, and certain of our local plans have been selected
for audit. Such audits have in the past resulted and could in
the future result in retrospective adjustments to payments
made to our health plans, fines, corrective action plans
or other adverse action by CMS. In February 2012, CMS
published a final RADV audit and payment adjustment
methodology. The methodology contains provisions
allowing retroactive contract level payment adjustments for
the year audited, beginning with 2011 payments, using an
extrapolation of the “error rate” identified in audit samples
and, for Medicare Advantage plans, after considering a
fee-for-service “error rate” adjuster that will be used in
determining the payment adjustment. Depending on the
error rate found in those audits, if any, potential payment
adjustments could have a material adverse effect on our
results of operations, financial position and cash flows.
We have been and may in the future become involved in
routine, regular, and special governmental investigations,
audits, reviews and assessments. Certain of our businesses
have been reviewed or are currently under review,
including for, among other matters, compliance with
coding and other requirements under the Medicare risk-
adjustment model. Such investigations, audits or reviews
sometimes arise out of or prompt claims by private
litigants or whistleblowers that, among other allegations,
we failed to disclose certain business practices or, as a
government contractor, submitted false claims to the
government. Governmental investigations, audits, reviews
and assessments could lead to government actions, which
could result in the assessment of damages, civil or criminal
fines or penalties, or other sanctions, including restrictions
or changes in the way we conduct business, loss of licensure
or exclusion from participation in government programs,
any of which could have a material adverse effect on our
business, results of operations, financial position and cash
flows.
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If we fail to comply with applicable privacy, security,
and data laws, regulations and standards, including
with respect to third-party service providers that utilize
sensitive personal information on our behalf, our business,
reputation, results of operations, financial position and
cash flows could be materially and adversely affected.
The collection, maintenance, protection, use,
transmission, disclosure and disposal of sensitive
personal information are regulated at the federal, state,
international and industry levels and requirements are
imposed on us by contracts with customers. These laws,
rules and requirements are subject to change. Compliance
with new privacy and security laws, regulations and
requirements may result in increased operating costs, and
may constrain or require us to alter our business model or
operations. For example, the HITECH amendments to HIPAA
may further restrict our ability to collect, disclose and use
sensitive personal information and may impose additional
compliance requirements on our business. While we have
prepared for the transition to ICD-10 as a HIPAA-regulated
entity, if unforeseen circumstances arise, it is possible that
we could be exposed to investigations and allegations
of noncompliance, which could have a material adverse
effect on our results of operations, financial position
and cash flows. In addition, if some providers continue
to use ICD-9 codes on claims after October 1, 2014, we
will have to reject such claims, which may lead to claim
resubmissions, increased call volume and provider and
customer dissatisfaction. Further, providers may use ICD-10
codes differently than they used ICD-9 codes in the past,
which could result in lost revenues under risk adjustment.
During the transition to ICD-10, certain claims processing
and payment information we have historically used to
establish our reserves may not be reliable or available in a
timely manner.
Many of our businesses are also subject to the
Payment Card Industry Data Security Standard, which is a
multifaceted security standard that is designed to protect
credit card account data as mandated by payment card
industry entities.
HIPAA also requires business associates as well as
covered entities to comply with certain privacy and security
requirements. While we provide for appropriate protections
through our contracts with our third-party service providers
and in certain cases assess their security controls, we have
limited oversight or control over their actions and practices.
Several of our businesses act as business associates to their
covered entity customers and as a result, they collect,
use, disclose and maintain sensitive personal information
in order to provide services to these customers. HHS has
announced that it will continue its audit program to assess
HIPAA compliance efforts by covered entities and expand it
to include business associates. An audit resulting in findings
or allegations of noncompliance could have a material
adverse effect on our results of operations, financial
position and cash flows.
Through our Optum businesses, including our Optum
Labs business, we maintain a database of administrative
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UNITEDHEALTH GROUP
and clinical data that is statistically de-identified in
accordance with HIPAA standards. Noncompliance or
findings of noncompliance with applicable laws, regulations
or requirements, or the occurrence of any privacy or
security breach involving the misappropriation, loss or other
unauthorized disclosure of sensitive personal information,
whether by us or by one of our third-party service
providers, could have a material adverse effect on our
reputation and business, including mandatory disclosure
to the media, loss of existing or new customers, significant
increases in the cost of managing and remediating privacy
or security incidents, and material fines, penalties and
litigation awards, among other consequences, any of which
could have a material and adverse effect on our results of
operations, financial position and cash flows.
Our businesses providing PBM services face regulatory
and other risks and uncertainties associated with the PBM
industry that may differ from the risks of our business of
providing managed care and health insurance products.
We provide PBM services through our OptumRx and
UnitedHealthcare businesses. Each business is subject to
federal and state anti-kickback and other laws that govern
the relationships of the business with pharmaceutical
manufacturers, physicians, pharmacies, customers and
consumers. OptumRx also conducts business as a mail order
pharmacy and specialty pharmacy, which subjects it to
extensive federal, state and local laws and regulations. In
addition, federal and state legislatures regularly consider
new regulations for the industry that could materially
and adversely affect current industry practices, including
the receipt or disclosure of rebates from pharmaceutical
companies, the development and use of formularies, and
the use of average wholesale prices.
Our PBM businesses would be materially and adversely
affected by an inability to contract on favorable terms with
pharmaceutical manufacturers and other suppliers, and
could face potential claims in connection with purported
errors by our mail order or specialty pharmacies, including
in connection with the risks inherent in the packaging
and distribution of pharmaceuticals and other health care
products. Disruptions at any of our mail order or specialty
pharmacies due to an accident or an event that is beyond
our control could affect our ability to process and dispense
prescriptions in a timely manner and could materially and
adversely affect our results of operations, financial position
and cash flows.
In addition, our PBM businesses provide services to
sponsors of health benefit plans that are subject to ERISA.
The DOL, which is the agency that enforces ERISA, could
assert that the fiduciary obligations imposed by the
statute apply to some or all of the services provided by our
PBM businesses even where our PBM businesses are not
contractually obligated to assume fiduciary obligations.
In the event a court were to determine that fiduciary
obligations apply to our PBM businesses in connection with
services for which our PBM businesses are not contractually
obligated to assume fiduciary obligations, we could be
subject to claims for breaches of fiduciary obligations or
claims that we entered into certain prohibited transactions.
If we fail to compete effectively to maintain or increase
our market share, including maintaining or increasing
enrollments in businesses providing health benefits, our
results of operations, financial position and cash flows
could be materially and adversely affected.
Our businesses compete throughout the United States
and face significant competition in all of the geographic
markets in which we operate. In particular markets, our
competitors, compared to us, may have greater capabilities,
resources or market share; a more established reputation;
superior supplier or health care professional arrangements;
better existing business relationships; or other factors that
give such competitors a competitive advantage. In addition,
our competitive position may be adversely affected by
significant merger and acquisition activity that has occurred
in the industries in which we operate, both among our
competitors and suppliers (including hospitals, physician
groups and other care professionals). Consolidation may
make it more difficult for us to retain or increase our
customer base, improve the terms on which we do business
with our suppliers, or maintain or increase profitability. Our
business, results of operations, financial position and cash
flows could be materially and adversely affected if we do
not compete effectively in our markets, if we set rates too
high or too low in highly competitive markets, if we do not
design and price our products properly and competitively,
if we are unable to innovate and deliver products and
services that demonstrate value to our customers, if we do
not provide a satisfactory level of services, if membership or
demand for other services does not increase as we expect
or declines, or if we lose accounts with more profitable
products while retaining or increasing membership in
accounts with less profitable products.
If we fail to develop and maintain satisfactory relationships
with physicians, hospitals, and other health care providers,
our business could be materially and adversely affected.
We contract with physicians, hospitals, pharmaceutical
benefit service providers, pharmaceutical manufacturers,
and other health care providers for services. Our results
of operations and prospects are substantially dependent
on our continued ability to contract for these services at
competitive prices. Any failure to develop and maintain
satisfactory relationships with health care providers,
whether in-network or out-of-network, could materially
and adversely affect our business, results of operations,
financial position and cash flows. In addition, certain
activities related to network design, provider participation
in networks and provider payments could result in disputes
that may be costly, distract managements’ attention and
result in negative publicity.
In any particular market, physicians and health care
providers could refuse to contract, demand higher
payments, or take other actions that could result in higher
medical costs, less desirable products for customers or
difficulty meeting regulatory or accreditation requirements.
In some markets, certain health care providers, particularly
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hospitals, physician/hospital organizations or multi-specialty
physician groups, may have significant market positions
or near monopolies that could result in diminished
bargaining power on our part. In addition, accountable
care organizations, practice management companies, which
aggregate physician practices for administrative efficiency
and marketing leverage, and other organizational
structures that physicians, hospitals and other care
providers choose may change the way in which these
providers interact with us and may change the competitive
landscape. Such organizations or groups of physicians may
compete directly with us, which could adversely affect
our operations, and our results of operations, financial
position and cash flows by impacting our relationships
with these providers or affecting the way that we price
our products and estimate our costs, which might require
us to incur costs to change our operations. In addition, if
these providers refuse to contract with us, use their market
position to negotiate favorable contracts or place us at a
competitive disadvantage, our ability to market products
or to be profitable in those areas could be materially and
adversely affected.
The success of certain businesses, including OptumHealth
Integrated Care Delivery and Amil, depend on maintaining
satisfactory physician relationships. The primary care
physicians that practice medicine or contract with our
affiliated physician organizations could terminate their
provider contracts or otherwise become unable or unwilling
to continue practicing medicine or contracting with us.
There is and will likely be heightened competition in
the markets where we operate to acquire or manage
physician practices or to employ or contract with
individual physicians. If we are unable to maintain or grow
satisfactory relationships with primary care physicians, or
to acquire, recruit or, in some instances, employ physicians,
or to retain enrollees following the departure of a
physician, our revenues could be materially and adversely
affected. In addition, our affiliated physician organizations
contract with health insurance and HMO competitors of
UnitedHealthcare. Our business could suffer if our affiliated
physician organizations fail to maintain relationships
with these health insurance or HMO companies, or to
adequately price their contracts with these third-party
payers.
We have capitation arrangements with some physicians,
In addition, physicians, hospitals, pharmaceutical
hospitals and other health care providers. Capitation
arrangements limit our exposure to the risk of increasing
medical costs, but expose us to risk related to the adequacy
of the financial and medical care resources of the health
care provider. To the extent that a capitated health
care provider organization faces financial difficulties or
otherwise is unable to perform its obligations under the
capitation arrangement, we may be held responsible
for unpaid health care claims that should have been the
responsibility of the capitated health care provider and
for which we have already paid the provider under the
capitation arrangement. Further, payment or other disputes
between a primary care provider and specialists with
whom the primary care provider contracts could result in a
disruption in the provision of services to our members or a
reduction in the services available to our members. Health
care providers with whom we contract may not properly
manage the costs of services, maintain financial solvency
or avoid disputes with other providers. Any of these events
could have a material adverse effect on the provision of
services to our members and our operations.
Some providers that render services to our members
do not have contracts with us. In those cases, we do not
have a pre-established understanding about the amount
of compensation that is due to the provider for services
rendered to our members. In some states, the amount of
compensation due to these out-of-network providers is
defined by law or regulation, but in most instances, the
amount is either not defined or is established by a standard
that does not clearly specify dollar terms. In some instances,
providers may believe that they are underpaid for their
services and may either litigate or arbitrate their dispute
with us or try to recover from our members the difference
between what we have paid them and the amount they
charged us.
benefit service providers, pharmaceutical manufacturers,
and certain health care providers are customers of our
Optum businesses. Given the importance of health care
providers and other constituents to our businesses, failure
to maintain satisfactory relationships with them could
materially and adversely affect our results of operations,
financial position and cash flows.
Because of the nature of our business, we are routinely
subject to various litigation actions, which could damage
our reputation and, if resolved unfavorably, could result
in substantial penalties and/or monetary damages and
materially and adversely affect our results of operations,
financial position and cash flows.
Because of the nature of our business, we are routinely
made party to a variety of legal actions related to, among
other matters, the design, management and delivery of our
product and service offerings. These matters have included
or could in the future include claims related to health care
benefits coverage and payment (including disputes with
enrollees, customers, and contracted and non-contracted
physicians, hospitals and other health care professionals),
tort (including claims related to the delivery of health
care services, such as medical malpractice by health care
practitioners who are employed by us, have contractual
relationships with us, or serve as providers to our managed
care networks), contract and labor disputes, tax claims and
claims related to disclosure of certain business practices. We
are also party to certain class action lawsuits brought by
health care professional groups and consumers. In addition,
we periodically acquire businesses or commence operations
in jurisdictions outside of the United States, where
contractual rights, tax positions and applicable regulations
may be subject to interpretation or uncertainty to a
greater degree than in the United States, and therefore
subject to dispute by customers, government authorities or
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UNITEDHEALTH GROUP
others. We are largely self-insured with regard to litigation
risks. Although we maintain excess liability insurance
with outside insurance carriers for claims in excess of our
self-insurance, certain types of damages, such as punitive
damages in some circumstances, are not covered by
insurance. Although we record liabilities for our estimates
of the probable costs resulting from self-insured matters,
it is possible that the level of actual losses will significantly
exceed the liabilities recorded.
We cannot predict the outcome of significant legal
actions in which we are involved and are incurring expenses
in resolving these matters. The legal actions we face or may
face in the future could further increase our cost of doing
business and materially and adversely affect our results of
operations, financial position and cash flows. In addition,
certain legal actions could result in adverse publicity, which
could damage our reputation and materially and adversely
affect our ability to retain our current business or grow our
market share in select markets and businesses.
Any failure by us to manage successfully our strategic
alliances or complete, manage or integrate acquisitions
and other significant strategic transactions or relationships
could materially and adversely affect our business,
prospects, results of operations, financial position and cash
flows.
As part of our business strategy, we frequently engage
in discussions with third parties regarding possible
investments, acquisitions, divestitures, strategic alliances,
joint ventures, and outsourcing transactions and often
enter into agreements relating to such transactions. For
example, we have a strategic alliance with AARP under
which we provide AARP-branded Medicare Supplement
insurance to AARP members and other AARP-branded
products and services to Medicare beneficiaries. If we
fail to meet the needs of our alliance or joint venture
partners, including by developing additional products
and services, providing high levels of service, pricing
our products and services competitively or responding
effectively to applicable federal and state regulatory
changes, our alliances and joint ventures could be damaged
or terminated, which in turn could adversely impact our
reputation, business and results of operations. Further, if
we fail to identify and complete successfully transactions
that further our strategic objectives, we may be required
to expend resources to develop products and technology
internally, we may be placed at a competitive disadvantage
or we may be adversely affected by negative market
perceptions, any of which may have a material adverse
effect on our results of operations, financial position or
cash flows. For acquisitions, success is also dependent
upon efficiently integrating the acquired business into
our existing operations, including our internal control
environment, which may present challenges that are
different from those presented by organic growth and
that may be difficult for us to manage. If we are unable to
successfully integrate and grow these acquisitions and to
realize contemplated revenue synergies and cost savings,
our business, prospects, results of operations, financial
position and cash flows could be materially and adversely
affected.
As we continue to expand our business outside the
United States, acquired non-U.S. businesses, such as Amil,
will present challenges that are different from those
presented by acquisitions of domestic businesses, including
challenges in adapting to new markets, business, labor
and cultural practices and regulatory environments that
are different from those with which we are familiar in
our U.S. operations. Adapting to these challenges could
require us to devote significant senior management and
other resources to the acquired businesses before we
realize anticipated benefits or synergies from the acquired
businesses. These challenges vary widely by country and
may include political instability, government intervention,
discriminatory regulation, and currency exchange controls
or other restrictions that could prevent us from transferring
funds from these operations out of the countries in which
our acquired businesses operate or converting local
currencies that we hold into U.S. dollars or other currencies.
If we are unable to manage successfully our non-U.S.
acquisitions, our business, prospects, results of operations
and financial position could be materially and adversely
affected.
Foreign currency exchange rates and fluctuations may
have an impact on our shareholders’ equity from period
to period, which could adversely affect our debt to debt-
plus-equity ratio, and our future revenues, costs and cash
flows from international operations. Any measures we may
implement to reduce the effect of volatile currencies may
be costly or ineffective.
Our sales performance will suffer if we do not adequately
attract, retain and provide support to a network of
independent producers and consultants.
Our products and services are sold in part through
independent producers and consultants who assist in the
sales and servicing of our business. We typically do not have
long-term contracts with our producers and consultants,
who generally do not provide services to us exclusively,
but instead typically also market health care products and
services of our competitors. As a result, we must compete
intensely for their services and allegiance. Our sales would
be materially and adversely affected if we were unable to
attract or retain independent producers and consultants
or if we do not adequately provide support, training and
education to them regarding our product portfolio, or
if our sales strategy is not appropriately aligned across
distribution channels.
Producer commissions will be under the same cost
reduction pressures as other administrative costs. For
example, such commissions are included as administrative
expenses under MLR requirements of Health Reform
Legislation and, therefore, are not included in the
minimum MLR calculation. Our relationships with producers
could be materially and adversely impacted by changes in
our business practices and the nature of our relationships
to address these pressures, including potential reductions in
commissions.
A number of investigations have been conducted regarding
the marketing practices of producers selling health care
products and the payments they receive. These have
resulted in enforcement actions against companies in
our industry and producers marketing and selling those
companies’ products. These investigations and enforcement
actions could result in penalties and the imposition
of corrective action plans, which could materially and
adversely impact our ability to market our products.
Unfavorable economic conditions could materially and
adversely affect our revenues and our results of operations.
Unfavorable economic conditions may impact demand
for certain of our products and services. For example, high
unemployment rates have caused and could continue to
cause lower enrollment or lower rates of renewal in our
employer group plans and our non-employer individual
plans. Unfavorable economic conditions have also caused
and could continue to cause employers to stop offering
certain health care coverage as an employee benefit or
elect to offer this coverage on a voluntary, employee-
funded basis as a means to reduce their operating costs.
In addition, unfavorable economic conditions could
adversely impact our ability to increase premiums or result
in the cancellation by certain customers of our products
and services. All of these could lead to a decrease in
our membership levels and premium and fee revenues
and could materially and adversely affect our results of
operations, financial position and cash flows.
During a prolonged unfavorable economic environment,
state and federal budgets could be materially and adversely
affected, resulting in reduced reimbursements or payments
in our federal and state government health care coverage
programs, including Medicare, Medicaid and CHIP. A
reduction in state Medicaid reimbursement rates could be
implemented retrospectively to apply to payments already
negotiated and/or received from the government and could
materially and adversely affect our results of operations,
financial position and cash flows. In addition, state and
federal budgetary pressures could cause the affected
governments to impose new or a higher level of taxes or
assessments for our commercial programs, such as premium
taxes on insurance companies and HMOs and surcharges or
fees on select fee-for-service and capitated medical claims.
Any of these developments or actions could materially and
adversely affect our results of operations, financial position
and cash flows.
A prolonged unfavorable economic environment also
could adversely impact the financial position of hospitals
and other care providers, which could materially and
adversely affect our contracted rates with these parties and
increase our medical costs or materially and adversely affect
their ability to purchase our service offerings. Further,
unfavorable economic conditions could adversely impact
the customers of our Optum businesses, including health
plans, HMOs, hospitals, care providers, employers and
others, which could, in turn, materially and adversely affect
Optum’s financial results.
2013 FORM 10-K
21
Our investment portfolio may suffer losses, which could
materially and adversely affect our results of operations,
financial position and cash flows.
Market fluctuations could impair our profitability and
capital position. Volatility in interest rates affects our
interest income and the market value of our investments
in debt securities of varying maturities, which comprise
the vast majority of the fair value of our investments as
of December 31, 2013. Relatively low interest rates on
investments, such as those experienced during recent years,
have adversely impacted our investment income, and the
continuation of the current low interest rate environment
could further adversely affect our investment income. In
addition, a delay in payment of principal and/or interest by
issuers, or defaults by issuers (primarily from investments
in corporate and municipal bonds), could reduce our net
investment income and require us to write down the value
of our investments, which could materially and adversely
affect our profitability and shareholders’ equity.
There can be no assurance that our investments will
produce total positive returns or that we will not sell
investments at prices that are less than their carrying
values. Changes in the value of our investment assets,
as a result of interest rate fluctuations, changes in issuer
financial conditions, illiquidity or otherwise, could have
an adverse effect on our shareholders’ equity. In addition,
if it became necessary for us to liquidate our investment
portfolio on an accelerated basis, such an action could have
a material adverse effect on our results of operations and
the capital position of regulated subsidiaries.
If the value of our intangible assets is materially impaired,
our results of operations, shareholders’ equity and credit
ratings could be materially and adversely affected.
Goodwill and other intangible assets were $35.4 billion
as of December 31, 2013, representing 43% of our total
consolidated assets. We periodically evaluate our goodwill
and other intangible assets to determine whether all or
a portion of their carrying values may be impaired, in
which case a charge to earnings may be necessary. For
example, the manner in or the extent to which Health
Reform Legislation is implemented may impact our ability
to maintain the value of our goodwill and other intangible
assets in our business. Similarly, the value of our goodwill
may be materially and adversely impacted if businesses
that we acquire perform in a manner that is inconsistent
with our assumptions. In addition, from time to time we
divest businesses, and any such divestiture could result
in significant asset impairment and disposition charges,
including those related to goodwill and other intangible
assets. Any future evaluations requiring an impairment of
our goodwill and other intangible assets could materially
and adversely affect our results of operations and
shareholders’ equity in the period in which the impairment
occurs. A material decrease in shareholders’ equity could,
in turn, adversely impact our credit ratings and potentially
impact our compliance with the covenants in our bank
credit facilities.
22
UNITEDHEALTH GROUP
If we fail to maintain properly the integrity or availability
of our data or successfully consolidate, integrate, upgrade
or expand our existing information systems, or if our
technology products do not operate as intended, our
business could be materially and adversely affected.
Our ability to price adequately our products and services,
to provide effective service to our customers in an efficient
and uninterrupted fashion, and to report accurately our
results of operations depends on the integrity of the data
in our information systems. As a result of technology
initiatives and recently enacted regulations, changes in
our system platforms and integration of new business
acquisitions, we periodically consolidate, integrate,
upgrade and expand our information systems capabilities.
Our information systems require an ongoing commitment
of significant resources to maintain, protect and enhance
existing systems and develop new systems to keep pace
with continuing changes in information processing
technology, evolving systems and regulatory standards,
and changing customer patterns. If the information we
rely upon to run our businesses is found to be inaccurate
or unreliable or if we fail to maintain or protect our
information systems and data integrity effectively, we
could lose existing customers, have difficulty attracting new
customers, experience problems in determining medical
cost estimates and establishing appropriate pricing, have
difficulty preventing, detecting and controlling fraud, have
disputes with customers, physicians and other health care
professionals, become subject to regulatory sanctions or
penalties, incur increases in operating expenses or suffer
other adverse consequences. There can be no assurance
that our process of consolidating the number of systems
we operate, upgrading and expanding our information
systems capabilities, enhancing our systems and developing
new systems to keep pace with continuing changes in
information processing technology will be successful or
that additional systems issues will not arise in the future.
Failure to protect, consolidate and integrate our systems
successfully could result in higher than expected costs and
diversion of management’s time and energy, which could
materially and adversely affect our results of operations,
financial position and cash flows.
Certain of our businesses sell and install hardware and
software products that may contain unexpected design
defects or may encounter unexpected complications
during installation or when used with other technologies
utilized by the customer. Connectivity among competing
technologies is becoming increasingly important in the
health care industry. A failure of our technology products
to operate as intended and in a seamless fashion with other
products could materially and adversely affect our results of
operations, financial position and cash flows.
Uncertain and rapidly evolving U.S. federal and state,
non-U.S. and international laws and regulations related
to the health information technology market may present
compliance challenges and could materially and adversely
affect the configuration of our information systems and
platforms, and our ability to compete in this market.
We could suffer a loss of revenue and increased costs,
exposure to significant liability, reputational harm and
other serious negative consequences if we sustain cyber-
attacks or other privacy or data security incidents, that
result in security breaches that disrupt our operations
or result in the unintended dissemination of sensitive
personal information or proprietary or confidential
information.
We routinely process, store and transmit large amounts
of data in our operations, including sensitive personal
information as well as proprietary or confidential
information relating to our business or a third-party. We
may be subject to breaches of the information technology
systems we use for these purposes. Experienced computer
programmers and hackers may be able to penetrate
our layered security controls and misappropriate or
compromise sensitive personal information or proprietary
or confidential information or that of third-parties, create
system disruptions or cause shutdowns. They also may
be able to develop and deploy viruses, worms, and other
malicious software programs that attack our systems or
otherwise exploit any security vulnerabilities. Our facilities
may also be vulnerable to security incidents or security
attacks; acts of vandalism or theft; coordinated attacks by
activist entities; misplaced or lost data; human errors; or
other similar events that could negatively affect our systems
and our and our customer’s data.
The costs to eliminate or address the foregoing security
threats and vulnerabilities before or after a cyber-incident
could be significant. Our remediation efforts may not
be successful and could result in interruptions, delays,
or cessation of service, and loss of existing or potential
customers. In addition, breaches of our security measures
and the unauthorized dissemination of sensitive personal
information or proprietary information or confidential
information about us or our customers or other third-
parties, could expose our customers’ private information
and our customers to the risk of financial or medical
identity theft, or expose us or other third-parties to a risk
of loss or misuse of this information, result in litigation and
potential liability for us, damage our brand and reputation,
or otherwise harm our business.
If we are not able to protect our proprietary rights to our
databases, software and related products, our ability to
market our knowledge and information-related businesses
could be hindered and our results of operations, financial
position and cash flows could be materially and adversely
affected.
We rely on our agreements with customers,
confidentiality agreements with employees, and our
trademarks, trade secrets, copyrights and patents to
protect our proprietary rights. These legal protections
and precautions may not prevent misappropriation of
our proprietary information. In addition, substantial
litigation regarding intellectual property rights exists in the
software industry, and we expect software products to be
increasingly subject to third-party infringement claims as
the number of products and competitors in this industry
segment grows. Such litigation and misappropriation of our
proprietary information could hinder our ability to market
and sell products and services and our results of operations,
financial position and cash flows could be materially and
adversely affected.
Our ability to obtain funds from some of our subsidiaries
is restricted and if we are unable to obtain sufficient funds
from our subsidiaries to fund our obligations, our results
of operations, financial position and cash flow could be
materially and adversely affected.
Because we operate as a holding company, we are
dependent upon dividends and administrative expense
reimbursements from some of our subsidiaries to fund our
obligations. Many of these subsidiaries are regulated by
departments of insurance or similar regulatory authorities
outside the United States such as the ANS in Brazil.
We are also required by law or regulation to maintain
specific prescribed minimum amounts of capital in these
subsidiaries. The levels of capitalization required depend
primarily upon the volume of premium revenues generated
by the applicable subsidiary. A significant increase in
premium volume will require additional capitalization from
us. In most states, we are required to seek prior approval
by state regulatory authorities before we transfer money or
pay dividends from our regulated subsidiaries that exceed
specified amounts. An inability of our regulated subsidiaries
to pay dividends to their parent companies in the desired
amounts or at the time of our choosing could adversely
affect our ability to reinvest in our business through capital
expenditures or business acquisitions, as well as our ability
to maintain our corporate quarterly dividend payment
cycle, repurchase shares of our common stock and repay
our debt. If we are unable to obtain sufficient funds from
our subsidiaries to fund our obligations, our results of
operations, financial position, and cash flow could be
materially and adversely affected.
Any downgrades in our credit ratings could adversely
affect our business, financial condition and results of
operations.
Claims paying ability, financial strength, and credit
ratings by Nationally Recognized Statistical Rating
Organizations are important factors in establishing the
competitive position of insurance companies. Ratings
information is broadly disseminated and generally used
throughout the industry. We believe our claims paying
ability and financial strength ratings are important factors
in marketing our products to certain of our customers. Our
credit ratings impact both the cost and availability of future
borrowings. Each of the credit rating agencies reviews its
ratings periodically. Our ratings reflect each credit rating
agency’s opinion of our financial strength, operating
performance and ability to meet our debt obligations or
obligations to policyholders. There can be no assurance that
our current credit ratings will be maintained in the future.
Downgrades in our credit ratings, should they occur, could
materially increase our costs of or ability to access funds
in the debt and capital markets and otherwise materially
increase our operating costs.
2013 FORM 10-K
23
ITEM 1B.
Unresolved Staff Comments
None.
ITEM 2.
Properties
To support our business operations in the United States
and other countries we own and lease real properties. Our
various reportable segments use these facilities for their
respective business purposes, and we believe these current
facilities are suitable for their respective uses and are
adequate for our anticipated future needs.
ITEM 3.
Legal Proceedings
The information required by this Item 3 is incorporated
herein by reference to the information set forth under
the captions “Litigation Matters” and “Governmental
Investigations, Audits and Reviews” in Note 12 of Notes to
the Consolidated Financial Statements included in Item 8,
“Financial Statements.”
ITEM 4.
Mine Safety Disclosures
Not Applicable.
PART II
ITEM 5.
Market For Registrant’s Common
Equity, Related Stockholder
Matters And Issuer Purchases Of
Equity Securities
MARKET PRICES AND HOLDERS
Our common stock is traded on the New York Stock
Exchange (NYSE) under the symbol UNH. On January 31,
2014, there were 14,575 registered holders of record of
our common stock. The per share high and low common
stock sales prices reported by the NYSE and cash dividends
declared were as follows:
2013
First quarter
Second quarter
Third quarter
Fourth quarter
2012
First quarter
Second quarter
Third quarter
Fourth quarter
High
$58.26
$66.19
$75.88
$75.54
Low
$51.36
$57.01
$64.65
$66.72
Cash
Dividends
Declared
$0.2125
$0.2800
$0.2800
$0.2800
$59.43
$60.75
$59.31
$58.29
$49.82
$53.78
$50.32
$51.09
$0.1625
$0.2125
$0.2125
$0.2125
24
UNITEDHEALTH GROUP
DIVIDEND POLICY
In June 2013, our Board of Directors increased the Company’s cash dividend to shareholders to an annual dividend rate of
$1.12 per share, paid quarterly. Since June 2012, we had paid an annual cash dividend of $0.85 per share, paid quarterly.
Declaration and payment of future quarterly dividends is at the discretion of the Board and may be adjusted as business
needs or market conditions change.
ISSUER PURCHASES OF EQUITY SECURITIES
Issuer Purchases of Equity Securities (a)
Fourth Quarter 2013
For the Month Ended
October 31, 2013
November 30, 2013
December 31, 2013
Total
Total Number
of Shares
Purchased
(in millions)
1
—
11
12
Average Price
Paid per Share
$
$
68
—
71
71
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
Maximum Number
of Shares That May
Yet Be Purchased
Under The Plans
or Programs
(in millions)
1
—
11
12
(in millions)
94
94
83
(a) In November 1997, our Board of Directors adopted a share repurchase program, which the Board evaluates periodically.
In June 2013, the Board renewed and expanded our share repurchase program with an authorization to repurchase up
to 110 million shares of our common stock in open market purchases or other types of transactions (including structured
repurchase programs). There is no established expiration date for the program.
PERFORMANCE GRAPHS
The following two performance graphs compare our
total return to shareholders with the returns of indexes
of other specified companies and the S&P 500 Index.
The first graph compares the cumulative five-year total
return to shareholders on our common stock relative to
the cumulative total returns of the S&P 500 index and a
customized peer group of certain Fortune 50 companies
(the “Fortune 50 Group”) for the five-year period ended
December 31, 2013. The second graph compares our
cumulative total return to shareholders with the S&P 500
Index and an index of a group of peer companies selected
by us for the five-year period ended December 31, 2013.
We are not included in either the Fortune 50 Group index
in the first graph or the peer group index in the second
graph. In calculating the cumulative total shareholder
return of the indexes, the shareholder returns of the
Fortune 50 Group companies in the first graph and the
peer group companies in the second graph are weighted
according to the stock market capitalizations of the
companies at January 1 of each year. The comparisons
assume the investment of $100 on December 31, 2008 in
our common stock and in each index, and that dividends
were reinvested when paid.
FORTUNE 50 GROUP
The Fortune 50 Group consists of the following companies: American International Group, Inc., Berkshire Hathaway Inc.,
Cardinal Health, Inc., Citigroup Inc., General Electric Company, International Business Machines Corporation and Johnson &
Johnson. Although there are differences among the companies in terms of size and industry, like UnitedHealth Group, all of
these companies are large multi-segment companies using a well-defined operating model in one or more broad sectors of
the economy.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among UnitedHealth Group, the S&P 500 Index, and Fortune 50 Group
2013 FORM 10-K
25
$350
$300
$250
$200
$150
$100
$50
0
12/08
12/09
12/10
12/11
12/12
12/13
UnitedHealth Group
S&P 500
Fortune 50 Group
UnitedHealth Group
S&P 500 Index
Fortune 50 Group
12/08
$ 100.00
100.00
100.00
12/09
$ 114.75
126.46
111.82
12/10
$ 137.58
145.51
132.11
12/11
$ 195.62
148.59
132.08
12/12
$ 212.42
172.37
156.49
12/13
$ 299.58
228.19
200.00
The stock price performance included in this graph is not necessarily indicative of future stock price performance.
PEER GROUP
The companies included in our peer group are Aetna Inc., Cigna Corporation, Humana Inc. and WellPoint, Inc. We believe
that this peer group reflects publicly traded peers to our UnitedHealthcare businesses.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among UnitedHealth Group, the S&P 500 Index, and a Peer Group
$350
$300
$250
$200
$150
$100
$50
$0
12/08
12/09
12/10
12/11
12/12
12/13
UnitedHealth Group
S&P 500
Peer Group
UnitedHealth Group
S&P 500 Index
Peer Group
12/08
$ 100.00
100.00
100.00
12/09
$ 114.75
126.46
134.91
12/010
$ 137.58
145.51
137.44
12/11
$ 195.62
148.59
178.55
12/12
$ 212.42
172.37
180.35
12/13
$ 299.58
228.19
280.25
The stock price performance included in this graph is not necessarily indicative of future stock price performance.
26
UNITEDHEALTH GROUP
ITEM 6.
Selected Financial Data
FINANCIAL HIGHLIGHTS
(in millions, except percentages and per share data)
Consolidated operating results
Revenues
Earnings from operations
Net earnings attributable to
UnitedHealth Group common shareholders
Return on equity (b)
Basic earnings per share attributable to
UnitedHealth Group common shareholders
Diluted earnings per share attributable to
UnitedHealth Group common shareholders
Cash dividends declared per common share
Consolidated cash flows from (used for)
Operating activities
Investing activities
Financing activities
Consolidated financial condition
(as of December 31)
Cash and investments
Total assets
Total commercial paper and long-term debt
Redeemable noncontrolling interests
Shareholders’ equity
Debt to debt-plus-equity ratio
2013
For the Year Ended December 31,
2012 (a)
2010
2011
2009
$ 122,489
9,623
$ 110,618
9,254
$ 101,862
8,464
$ 94,155
7,864
$ 87,138
6,359
5,625
17.7%
5,526
18.7%
5,142
18.9%
4,634
18.7%
3,822
17.3%
$
5.59
$
5.38
$ 4.81
$
4.14
$
3.27
5.50
1.0525
5.28
0.8000
4.73
0.6125
4.10
0.4050
3.24
0.0300
$ 6,991
(3,089)
(4,946)
$ 7,155
(8,649)
471
$ 6,968
(4,172)
(2,490)
$ 6,273
(5,339)
(1,611)
$ 5,625
(976)
(2,275)
$ 28,818
81,882
16,860
1,175
32,149
$ 29,148
80,885
16,754
2,121
31,178
$ 28,172
67,889
11,638
—
28,292
$ 25,902
63,063
11,142
—
25,825
$ 24,350
59,045
11,173
—
23,606
34.4%
35.0%
29.1%
30.1%
32.1%
(a) Includes the effects of the October 2012 Amil acquisition and related debt and equity issuances.
(b) Return on equity is calculated as net earnings divided by average equity. Average equity is calculated using the equity
balance at the end of the preceding year and the equity balances at the end of the four quarters of the year presented.
Financial Highlights should be read with the accompanying “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” in Item 7 and the Consolidated Financial Statements and Notes to the Consolidated Financial
Statements included in Item 8, “Financial Statements.”
ITEM 7.
Management’s Discussion And
Analysis Of Financial Condition
And Results Of Operations
The following discussion should be read together with the
accompanying Consolidated Financial Statements and Notes
to the Consolidated Financial Statements thereto. Readers
are cautioned that the statements, estimates, projections
or outlook contained in this report, including discussions
regarding financial prospects, economic conditions, trends
and uncertainties contained in this Item 7, may constitute
forward-looking statements within the meaning of the
PSLRA. These forward-looking statements involve risks and
uncertainties that may cause our actual results to differ
materially from the expectations expressed or implied in
the forward-looking statements. A description of some of
the risks and uncertainties can be found further below in
this Item 7 and in Item 1A, “Risk Factors.”
EXECUTIVE OVERVIEW
GENERAL
UnitedHealth Group is a diversified health and well-being
company dedicated to helping people live healthier lives
and making the health system work better for everyone.
We offer a broad spectrum of products and services
through two distinct platforms: UnitedHealthcare, which
provides health care coverage and benefits services; and
Optum, which provides information and technology-
enabled health services.
We have four reportable segments across our two
business platforms, UnitedHealthcare and Optum:
• UnitedHealthcare, which includes UnitedHealthcare
Employer & Individual, UnitedHealthcare Medicare &
Retirement, UnitedHealthcare Community & State and
UnitedHealthcare International;
• OptumHealth;
• Opt umInsight; and
• Opt umRx.
Further information on our business and reportable
segments is presented in Item 1, “Business” and in Note
13 to the Consolidated Financial Statements in Item 8,
“Financial Statements.”
2014 Business Realignment. On January 1, 2014, we
realigned certain of our businesses to respond to
changes in the markets we serve and the opportunities
that are emerging as the health system evolves. Our
Optum business platform took responsibility for certain
technology operations and business processing activities
with the intention of pursuing additional third-party
commercial opportunities in addition to continuing to serve
UnitedHealthcare. These activities, which were historically
a corporate function, will be included in OptumInsight’s
results of operations. Our periodic filings with the SEC
beginning with our first quarter 2014 Form 10-Q will
include historical segment results restated to reflect the
effect of this realignment and will continue to present
the same four reportable segments (UnitedHealthcare,
OptumHealth, OptumInsight and OptumRx).
BUSINESS TRENDS
Our businesses participate in the U.S., Brazilian and certain
other international health economies. In the United States,
health care spending comprises approximately 18% of
gross domestic product and has grown consistently for
many years. We expect overall spending on health care to
continue to grow in the future, due to inflation, medical
technology and pharmaceutical advancement, regulatory
requirements, demographic trends in the population and
national interest in health and well-being. The rate of
market growth may be affected by a variety of factors,
including macro-economic conditions and regulatory
changes, including enacted health care reforms in the
United States, which could also impact our results of
operations.
Pricing Trends. We seek to price our health care benefit
products consistent with anticipated underlying
medical trends, while balancing growth, margins, and
competitive dynamics (such as product positioning and
price competitiveness) and legislative and regulatory
changes such as cost increases for the industry fees and
tax provisions of Health Reform Legislation. We continue
to expect premium rates to be under pressure from
ongoing market competition in commercial products
and from government payment rates. Aggregating
UnitedHealthcare’s businesses, and before giving effect to
Health Reform Legislation taxes, we believe the medical
care ratio will rise over time as we continue to grow in the
senior and public markets and participate in the emerging
public health benefit exchange market.
In response to Health Reform Legislation, HHS established
a review threshold of annual commercial premium rate
increases generally at or above 10% and enacted a new
rule requiring the production of information for any
proposed rate increase. HHS review does not supersede
2013 FORM 10-K
27
existing state review and approval procedures. We have
experienced regulatory challenges to appropriate premium
rate increases in several states, including California and
New York. The competitive forces common in our markets
do not support unjustifiable rate increases. Further,
our rates and rate filings are developed using methods
consistent with the standards of actuarial practices and
we endeavor to sustain a commercial medical care ratio
in a stable range for an equivalent mix of business. We
have requested and received rate increases above 10% in
a number of markets due to the combination of medical
cost trends and the incremental costs of health care reform.
We expect commercial pricing to continue to be highly
competitive. The intensity of pricing competition depends
on local market conditions and competitive dynamics.
Overall, the industry has experienced lower medical costs
trends due to moderated utilization, which has impacted
pricing trends. Conversely, carriers are generally reflecting
the 2014 Health Reform Legislation industry fees in their
pricing. In some markets, competitors have adjusted their
pricing to reflect recent medical cost trend experience
as well as the implication of rate review rules and new
benefit changes from Health Reform Legislation. In other
areas we are seeing greater price competition due to
pricing adjustments and other varied approaches used by
competitors.
The Medicare Advantage rate structure is changing
and funding has been cut in recent years, with additional
reductions to take effect in 2014 and 2015, as discussed
below in “Regulatory Trends and Uncertainties.” We expect
these factors to result in year-over-year pressure on gross
margin percentages for our Medicare business during 2014.
States are struggling to balance budget pressures with
increases in their Medicaid expenditures. During 2013,
rate changes for some Medicaid programs were slightly
negative year-over-year. In general, we expect continued
pressure on net margin percentages due to the Medicaid
reimbursement rate environment, which we expect will
remain tight due to the potential non-collectability of
the insurer fee primarily related to Medicare Dual SNP
programs and Medicaid. We continue to work with our
state customers to advocate for actuarially sound rates that
are commensurate with our medical cost trends, including
fees and related taxes, and to take a prudent, market-
sustainable posture for both new bids and maintenance of
existing Medicaid contracts.
Medical Cost Trends. We expect our 2014 commercial
medical cost trend to be in the range of 6.0% plus or
minus 50 basis points, compared to approximately 5% in
2013. In 2014, we expect relatively consistent unit cost
and utilization trends compared to 2013, before taking
into account reform impacts. The impact of Health Reform
Legislation and mandates is expected to pressure 2014
medical cost trends. Driving the increases are mandated
essential health benefits and limits on out-of-pocket
maximums. Consistent with recent years, our 2014 trend
is expected to be driven primarily by continued unit cost
pressure from health care providers. We expect 2014
28
UNITEDHEALTH GROUP
pharmacy trends to be consistent with 2013. The primary
drivers of prescription drug trends continue to be unit
cost pressure on brand name drugs and a shift towards
expensive new specialty drugs. In recent years, the recent
weak economic environment combined with our medical
cost management strategies has had a favorable impact
on utilization trends. We believe the expected stability in
the utilization trends in 2014 is influenced by our medical
management strategies, our continued focus on value-
based contracting arrangements and greater consumer
engagement.
Delivery System and Payment Modernization. The health
care market is changing based on demographic shifts, new
regulations, political forces and both payer and patient
expectations. Health plans and care providers are being
called upon to work together to close gaps in care and
improve overall care for people, improve the health of
populations and reduce costs. The focus on delivery system
modernization and payment reform is critical and the
alignment of incentives between key constituents remains
an important theme.
Through expansion of our existing programs and the
creation of new programs, we are increasingly rewarding
care providers for delivering improvements in quality
and cost-efficiency. As of December 31, 2013, more than
2 million people we serve were directly aligned through
the most progressive of these arrangements, including
full risk, shared risk and bundled episode of care payment
approaches.
This trend is also creating needs for health management
services that can coordinate care around the primary care
physician, including new primary care channels, and for
investment in new clinical and administrative information
and management systems, providing growth opportunities
for our Optum business platform.
Government Reliance on Private Sector. The government,
as a benefit sponsor, has been increasingly relying on
private sector programs. We expect this trend to continue
as we believe the private sector provides a more flexible,
better managed, higher quality health care experience than
do traditional passive indemnity programs typically used in
governmental benefit programs.
Many states are expanding their interest in managed
care with particular emphasis on consumers who have
complex and expensive health care needs. Medicaid
managed care is increasingly viewed as an effective method
to improve quality and manage costs. For example, there
are nearly 10 million dually eligible beneficiaries who
typically have complex conditions, with costs of care
that are far higher than those of a typical Medicare or
Medicaid beneficiary. Similarly, a small but complex group
of nearly 4 million individuals who qualify for additional
benefits under LTC programs represent only 6% of the
total Medicaid population yet account for more than
30% of total Medicaid expenditures. The long-term care
market represents a portion of the more than 15 million
ABD Americans. While these individuals’ health needs are
more complex and more costly, they have primarily been
historically served in unmanaged environments. These
markets provide UnitedHealthcare and Optum with an
opportunity to work with governments to improve the
health status of these populations through coordination
of care. As of December 31, 2013, UnitedHealthcare
served more than 275,000 people in legacy dually eligible
programs through Medicare Advantage and SNPs. In the
first half of 2014, UnitedHealthcare Community & State will
help implement Integrated MME program awards in three
states.
REGULATORY TRENDS AND UNCERTAINTIES
Following is a summary of management’s view of the trends
and uncertainties related to some of the key provisions of
Health Reform Legislation and other regulatory items; for
additional information regarding Health Reform Legislation
and regulatory trends and uncertainties, see Item 1,
“Business - Government Regulation” and Item 1A, “Risk
Factors.”
Medicare Advantage Rates and Minimum Loss Ratios.
Medicare Advantage payment benchmarks have been
cut over the last several years, including 2013, with
additional funding reductions to be phased-in through
2017. Additionally, Congress passed the Budget Control
Act of 2011, which as amended by the American Taxpayer
Relief Act of 2012, triggered automatic across-the-board
budget cuts (known as sequestration), including a 2%
reduction in Medicare Advantage and Medicare Part D
payments beginning April 1, 2013. The CMS final notice of
2014 Medicare Advantage benchmark rates and payment
policies includes significant reductions to 2014 Medicare
Advantage payments, including the benchmark reductions
described previously. These reductions and Health Reform
Legislation insurance industry tax described below result in
revenue reductions and incremental assessments totaling
more than 4% in 2014, against a typical industry forward
medical cost trend outlook of 3%. The impact of these cuts
to our Medicare Advantage revenues is partially mitigated
by reductions in provider reimbursements for those care
providers with rates indexed to Medicare Advantage
revenues or Medicare fee-for-service reimbursement rates.
Compared to 2013, and prior to any efforts to mitigate
these funding reductions, we estimate that the net impact
on our 2014 consolidated after-tax earnings will be
approximately $0.9 billion. These factors affected our plan
benefit designs, market participation, growth prospects
and earnings potential for our Medicare Advantage plans
in 2014. Further, beginning in 2014, Medicare Advantage
and Medicare Part D plans will be required to have
minimum MLRs of 85%. We do not believe the minimum
MLR standard will have a material impact on our earnings.
CMS is expected to release the proposed 2015 Medicare
Advantage Rates on February 21, 2014. We expect sustained
Medicare Advantage rate pressures in 2015 due to the
continuing effect of the factors described above.
Health Reform Legislation directed HHS to establish a
program to reward high-quality Medicare Advantage plans
beginning in 2012. Accordingly, our Medicare Advantage
rates are currently enhanced by CMS quality bonuses in
certain counties based on a plan’s star rating. The level of
star ratings from CMS, based upon specified clinical and
operational performance standards, will impact future
quality bonuses. In addition, star ratings affect the amount
of savings a plan has to generate to offer supplemental
benefits, which ultimately may affect the plan’s revenue.
The current expanded stars bonus program that pays
bonuses to qualifying plans rated 3 stars or higher is set to
expire after 2014. In 2015, quality bonus payments will only
be paid to 4 and 5 star plans. For the 2014 payment year,
approximately 57% of our current Medicare Advantage
members are enrolled in plans that will be rated 3.5 stars or
higher and approximately 9% are enrolled in plans that will
be rated 4 stars or higher. For the 2015 payment year, based
on scoring released by CMS in October 2013, approximately
70% of our current Medicare Advantage members are
enrolled in plans that will be rated 3.5 stars or higher and
approximately 24% are enrolled in plans that will be rated
4 stars or higher.
The ongoing reductions to Medicare Advantage
funding place continued importance on effective medical
management and ongoing improvements in administrative
efficiency. There are a number of adjustments we can make
and are making to partially offset these rate reductions.
These adjustments will impact the majority of the seniors
we serve through Medicare Advantage. For example,
we seek to intensify our medical and operating cost
management, make changes to the size and composition
of our care provider networks, adjust members’ benefits,
implement or increase member premiums over and above
the monthly payments we receive from the government,
and decide on a county-by-county basis where we will offer
Medicare Advantage plans. The depth of the underfunding
of these benefits has caused us to exit certain plans and
market areas for 2014 in which we served approximately
150,000 Medicare Advantage beneficiaries in 2013. In other
markets, we may experience some reduction in membership
in the plans with the greatest benefit cuts, but expect
stable or growing membership in our strongest markets.
We are dedicating substantial resources to improving our
quality scores and star ratings to improve the performance
and sustainability of our local market programs for 2016
and beyond.
In the longer term, we also may be able to mitigate
some of the effects of reduced funding by increasing
enrollment due, in part, to the increasing number of
people eligible for Medicare in coming years. As Medicare
Advantage reimbursement changes, other products may
become relatively more attractive to Medicare beneficiaries
increasing the demand for other senior health benefits
products such as our Medicare Supplement and Medicare
Part D insurance offerings.
Industry Fees and Taxes. Health Reform Legislation includes
an annual, non-deductible insurance industry tax to be
levied proportionally across the insurance industry for risk-
based products, beginning January 1, 2014. The industry-
2013 FORM 10-K
29
wide amount of the annual tax is $8 billion in 2014, $11.3
billion in 2015 and 2016, $13.9 billion in 2017 and $14.3
billion in 2018. For 2019 and beyond, the amount will equal
the annual tax for the preceding year increased by the rate
of premium growth for the preceding year. The annual
tax will be allocated to each market participant based
on the ratio of the entity’s net premiums written during
the preceding calendar year to the total health insurance
industry’s net premiums written for any U.S. health risk-
based products during the preceding calendar year, subject
to certain exceptions. This tax will first be expensed ratably
throughout 2014 and our first payment will be made in
September 2014.
With the introduction of state health insurance exchanges
and other significant market reforms in the individual and
small group markets in 2014, Health Reform Legislation
includes three programs designed to stabilize the
health insurance markets. These programs encompass: a
transitional reinsurance program; a temporary risk corridors
program; and a permanent risk adjustment program.
The transitional reinsurance program is a temporary
program that will be funded on a per capita basis from all
commercial lines of business including insured and self-
funded arrangements, $25 billion over a three-year period
beginning in 2014 of which $20 billion, subject to increases
based on state decisions, will fund the reinsurance pool and
$5 billion will fund the U.S. Treasury (Reinsurance Program).
While funding for the Reinsurance Program will come from
all commercial lines of business, only non-grandfathered,
market reform compliant individual business will be eligible
for reinsurance recoveries.
We expect our share of the industry fee to be
approximately $1.3 billion to $1.4 billion in 2014. We
estimate a significant increase of approximately 500 basis
points in our 2014 effective income tax rate because this
fee is not deductible. We estimate that the 2014 effect
on earnings from operations due to our tax deductible
contributions to the Reinsurance Program will be
approximately $0.5 billion in 2014, payable in 2015. We
do not expect material payments or receipts related to
the temporary risk corridors program, permanent risk
adjustment program or reinsurance recoveries in 2014. Our
2014 results of operations will include estimates related to
these fees and programs. To the extent possible, we include
the reform fees and related tax impacts in our pricing,
which is expected to result in $1.4 billion to $1.6 billion of
additional premium in 2014. Since the industry fee will be
included in operating costs, we expect our medical care
ratio to decrease in 2014 compared to historical results;
the industry fee cost will be factored in, however, when
calculating minimum MLR rebates.
Exchanges and Coverage Expansion. Across markets,
we and our competitors are adapting product, network
and marketing strategies to anticipate new distribution
or expanding distribution channels including public
exchanges, private exchanges and off exchange purchasing.
Effective in 2014, states may create their own public
exchange, enter a partnership exchange or rely on the
30
UNITEDHEALTH GROUP
federally facilitated exchange for individuals and small
employers, with enrollment processes that commenced
in October 2013. Exchanges create new market dynamics
that could impact our existing businesses, depending on
the ultimate member migration patterns for each market,
the pace of migration in the market and the impact of the
migration on our established membership. For example,
over time certain employers may no longer offer health
benefits to their employees and some employers purchasing
full risk products could convert to self-funded programs.
Our level of participation in public exchanges has been and
will continue to be determined on a state-by-state basis.
Each state is evaluated based on factors such as growth
opportunities, our current local presence, our competitive
positioning, our ability to honor our commitments to
our local customers and members and the regulatory
environment. In 2014, we are participating in 13 exchanges
in 10 states and the District of Columbia, including four
individual and nine SHOP exchanges.
Health Reform Legislation and related U.S. Supreme
Court ruling also provide for optional expanded Medicaid
coverage effective in January 2014. These measures remain
subject to implementation at the state level, with varying
levels of state adoption planned for January 1, 2014. We
participate in programs in 24 states and the District of
Columbia, and of these, more than half have opted to
expand Medicaid.
Individual & Small Group Market Reforms. Health Reform
Legislation includes several provisions, for most individual
and small group plans with plan years beginning on
January 1, 2014, that are expected to alter the individual
and small group marketplace, including, among other
matters: (1) adjusted community rating requirements,
which will change how individual and small group plans
are priced in many states; (2) essential health benefit
requirements, which will result in benefit changes for
many individual and small group policyholders; (3)
actuarial value requirements, which will significantly
impact benefit designs in the individual market, such as
member cost sharing requirements; and (4) guaranteed
issue requirements, which will require carriers to provide
coverage to any qualified group or individual. These
changes have resulted in significant benefit design and
pricing changes for a substantial portion of the fully
insured individual and small group markets. In 2014, we
expect a decrease in individual membership due to a
reduction in the number of states in which we will offer
policies to new customers.
RESULTS SUMMARY
The following table summarizes our consolidated results of operations and other financial information:
2013 FORM 10-K
31
(in millions, except percentages and per share data)
Revenues:
Premiums
Services
Products
Investment and other income
For the Years Ended December 31,
2012
2011
2013
Increase/
(Decrease)
2013 vs. 2012
Increase/
(Decrease)
2012 vs. 2011
$109,557
8,997
3,190
745
$ 99,728
7,437
2,773
680
$ 91,983
6,613
2,612
654
$ 9,829
1,560
417
65
10% $ 7,745
824
21
161
15
26
10
8%
12
6
4
Total revenues
122,489
110,618
101,862
11,871
11
8,756
9
Operating costs:
Medical costs
Operating costs
Cost of products sold
Depreciation and amortization
Total operating costs
Earnings from operations
Interest expense
Earnings before income taxes
Provision for income taxes
Net earnings
Earnings attributable to noncontrolling interests
89,290
19,362
2,839
1,375
112,866
80,226
17,306
2,523
1,309
101,364
74,332
15,557
2,385
1,124
93,398
9,064
2,056
316
66
11,502
9,623
(708)
9,254
(632)
8,464
(505)
8,915
(3,242)
8,622
(3,096)
7,959
(2,817)
369
76
293
146
11
12
13
5
11
4
12
3
5
5,673 5,526 5,142 147
(48) — —
3
48 —
5,894
1,749
138
185
7,966
790
127
663
279
384
—
8
11
6
16
9
9
25
8
10
7
nm
Net earnings attributable to
UnitedHealth Group common shareholders $ 5,625 $ 5,526 $ 5,142 $
99 2% $
384
7%
Diluted earnings per share attributable to
UnitedHealth Group common shareholders
Medical care ratio (a)
Operating cost ratio
Operating margin
Tax rate
Net margin
Return on equity (b)
$
5.50 $
81.5%
15.8
7.9
36.4
4.6
17.7%
5.28 $
80.4%
15.6
8.4
35.9
5.0
18.7 %
0.22
4.73 $
80.8% 1.1%
15.3
8.3
35.4
5.0
18.9 %
0.2
(0.5)
0.5
(0.4)
(1.0)%
4% $
0.55
12%
(0.4)%
0.3
0.1
0.5
—
(0.2)%
nm= not meaningful
(a) Medical care ratio is calculated as medical costs divided by premium revenue.
(b) Return on equity is calculated as net earnings divided by average equity. Average equity is calculated using the equity
balance at the end of the preceding year and the equity balances at the end of the four quarters in the year presented.
SELECTED OPERATING PERFORMANCE AND
OTHER SIGNIFICANT ITEMS
The following represents a summary of select 2013 year-
over-year operating comparisons to 2012 and other 2013
significant items.
• Cons olidated revenues increased by 11%,
UnitedHealthcare revenues increased by 10% and
Optum revenues grew by 26%.
• Ear nings from operations increased by 4%, including a
decrease of 6% at UnitedHealthcare and an increase of
61% at Optum.
• U nitedHealthcare medical enrollment grew organically
by 4.5 million people, including 2.9 million military
beneficiaries through the TRICARE contract. Medicare
Part D stand-alone membership grew by 725,000
people.
• OptumRx completed the insourcing of pharmacy services
for 12 million new and migrating customers served by
UnitedHealthcare.
• The consolidated medical care ratio of 81.5% increased
110 basis points.
• As of December 31, 2013, there was $1.0 billion of cash
available for general corporate use and 2013 cash flows
from operations were $7.0 billion.
32
UNITEDHEALTH GROUP
2013 RESULTS OF OPERATIONS
COMPARED TO 2012 RESULTS
CONSOLIDATED FINANCIAL RESULTS
Revenues
The increases in revenues during 2013 were primarily driven
by the full year effect of 2012 acquisitions, including Amil,
growth in the number of individuals served through benefit
products and overall organic growth in each of Optum’s
major businesses. The revenue impact of these factors was
partially offset by the reduction in Medicare Advantage
rates. Also offsetting the revenue increase was the first
quarter conversion of a large fully-insured commercial
customer from a risk-based to a fee-based arrangement
affecting 1.1 million members. While this conversion
reduced our full-year 2013 consolidated revenues by $2.3
billion, the impact to earnings from operations and cash
flows was negligible.
Medical Costs and Medical Care Ratio
Medical costs during 2013 increased due to risk-based
membership growth in our international and public and
senior markets businesses, partially offset by the funding
conversion of the large client discussed above. The year-
over-year medical care ratio increased primarily due to
funding reductions for Medicare Advantage products,
changes in business mix favoring governmental benefit
programs, and reduced levels of favorable medical cost
reserve development for the year ended December 31,
2013 of $680 million, compared to $860 million for the year
ended December 31, 2012.
Operating Costs
The increase in our operating costs during 2013 was due
to business growth, including an increase in fee-based
benefits and fee-based service revenues and a greater
mix of international business, which carry comparatively
higher operating costs, partially offset by our ongoing cost
containment efforts.
The following table presents reportable segment financial information:
(in millions, except percentages)
Revenues:
UnitedHealthcare
OptumHealth
OptumInsight
OptumRx
Total Optum
Eliminations
Consolidated revenues
Earnings from operations
UnitedHealthcare
OptumHealth
OptumInsight
OptumRx
Total Optum
For the Years Ended December 31,
2012
2013
2011
2013 FORM 10-K
33
Increase/
(Decrease)
2013 vs. 2012
Increase/
(Decrease)
2012 vs. 2011
$ 113,829 $ 103,419 $ 95,336 $ 10,410 10%
$ 8,083
8%
9,855
3,174
24,006
8,147
2,882
18,359
6,704
2,671
22
8
19,278 5,647 31 (919) (5)
1,708 21
292 10
1,443
211
37,035
(28,375)
29,388
(22,189)
28,653
(22,127)
7,647 26
6,186 28
735
3
62 —
$ 122,489 $ 110,618 $ 101,862 $ 11,871 11% $ 8,756
9%
$ 7,309 $ 7,815 $ 7,203 $ (506) (6)% $
612
8%
976
603
735
2,314
561
485
393
1,439
415 74 138 33
423
381
27
118 24
457 342 87 (64) (14)
14
875 61
178
104
1,261
Consolidated earnings from operations
$ 9,623 $ 9,254 $ 8,464 $
369
4%
$
790
9%
Operating margin
UnitedHealthcare
OptumHealth
OptumInsight
OptumRx
Total Optum
Consolidated operating margin
6.4%
9.9
19.0
3.1
6.2
7.9%
7.6%
6.9
16.8
2.1
4.9
8.4%
7.6% (1.2)%
6.3
14.3
3.0
2.2
2.4 1.0
4.4
1.3
8.3% (0.5)%
—%
0.6
2.5
(0.3)
0.5
0.1%
UnitedHealthcare
The following table summarizes UnitedHealthcare revenue by business:
(in millions, except percentages)
UnitedHealthcare Employer & Individual
UnitedHealthcare Medicare & Retirement
UnitedHealthcare Community & State
UnitedHealthcare International
For the Years Ended December 31,
2012
2011
2013
Increase/
(Decrease)
2013 vs. 2012
Increase/
(Decrease)
2012 vs. 2011
$ 44,951 $ 46,596 $ 45,404 $ (1,645) (4)% $ 1,192
12
4,324
44,225
1,468
18,268
10
1,099 nm
6,385
4,968 13
1,846 11
5,241 nm
39,257
16,422
1,144
34,933
14,954
45
3%
Total UnitedHealthcare revenue
$ 113,829 $ 103,419 $ 95,336 $ 10,410 10%
$ 8,083
8%
nm = not meaningful
34
UNITEDHEALTH GROUP
The following table summarizes the number of individuals served by our UnitedHealthcare businesses, by major market
segment and funding arrangement:
(in thousands, except percentages)
Commercial risk-based
Commercial fee-based
Commercial fee-based TRICARE
Total commercial
Medicare Advantage
Medicaid
Medicare Supplement (Standardized)
Total public and senior
International
December 31,
2012
2011
2013
Increase/
(Decrease)
2013 vs. 2012
Increase/
(Decrease)
2012 vs. 2011
8,185
19,055
2,920
9,340
17,585
—
9,550
16,320
—
(1,155) (12)%
8
1,470
2,920 nm
(210) (2)%
1,265
8
— nm
30,160
26,925
25,870
3,235 12
1,055
2,990
4,035
3,455
10,480
4,805
2,565
3,830
3,180
9,575
4,425
2,165
3,600
2,935
8,700
—
425 17
5
205
9
275
905
380
9
9
4
18
6
8
10
400
230
245
875
4,425 nm
Total UnitedHealthcare - medical
45,445
40,925
34,570
4,520 11%
6,355
18%
Supplemental Data:
Medicare Part D stand-alone
nm= not meaningful
4,950
4,225
4,855 725 17%
(630) (13)%
The number of people served under commercial risk-
based arrangements decreased in 2013 primarily due to
the conversion of 1.1 million risk-based consumers of a
large public sector client to a fee-based arrangement.
The number of individuals in commercial fee-based
arrangements increased due to this conversion as well as
new business awards and strong customer retention. On
April 1, 2013, UnitedHealthcare Military & Veterans began
service under the TRICARE West Region Managed Care
Support Contract. This administrative services contract
for health care operations added 2.9 million people and
includes a transition period and five one-year renewals
at the government’s option. Medicare Advantage
participation increased due to solid execution in product
design, marketing and local engagement, which drove
sales growth. Medicaid growth was due to a combination
of winning new state accounts and growth within existing
state customers, partially offset by the first quarter 2013
divestiture of our Medicaid business in South Carolina and
a fourth quarter 2012 market withdrawal from one product
in Wisconsin, which combined affected 235,000 Medicaid
beneficiaries. Medicare Supplement growth reflected
strong customer retention and new sales. In our Medicare
Part D stand-alone business, the number of people served
increased primarily as a result of new product introductions
and strong customer retention in the market. International
represents commercial customers in Brazil added in the
fourth quarter of 2012 as a result of the Amil acquisition,
and subsequent organic growth.
UnitedHealthcare’s revenue growth in 2013 was primarily
attributable to the impact of 2012 acquisitions and the
growth in the number of individuals served. The effect
of these factors was partially offset by the government
funding reductions described previously and the customer
funding conversion discussed above.
UnitedHealthcare’s earnings from operations and
operating margins in 2013 decreased compared to the prior
year as operating margins were pressured by the funding
reductions that decreased revenues and by decreased levels
of favorable reserve development.
Optum
Total revenues increased in 2013 primarily due to broad-
based growth across Optum’s services portfolio with
growth in each of Optum’s major businesses led by
pharmacy growth from the insourcing of UnitedHealthcare
commercial customers and external clients.
Optum’s earnings from operations and operating
margin in 2013 increased significantly compared to 2012,
reflecting progress on Optum’s plan to accelerate growth
and improve productivity by strengthening integration and
business alignment.
The results by segment were as follows:
OptumHealth
Revenue increases at OptumHealth in 2013 were primarily
due to market expansion, including growth related to 2012
acquisitions in local care delivery, and organic growth.
Earnings from operations and operating margins in
2013 increased primarily due to revenue growth and an
improved cost structure across the business, including local
care delivery, population health and wellness solutions, and
health-related financial services offerings.
OptumInsight
Revenues at OptumInsight in 2013 increased primarily due
to the impact of a 2012 acquisition and growth in services
to commercial payers.
The increases in earnings from operations and operating
margins in 2013 reflected increased revenues, changes
in product mix and continuing improvements in business
alignment and efficiency.
OptumRx
The increase in OptumRx revenues in 2013 were due to
the insourcing of UnitedHealthcare’s commercial pharmacy
benefit programs and growth in both UnitedHealthcare’s
Medicare Part D members and external clients. Over the
course of 2013, we completed our transition of 12 million
migrating and new members to the OptumRx platform
from a third party.
Earnings from operations and operating margins in 2013
increased primarily due to strong revenue growth, pricing
disciplines, and greater use of generic medications.
2012 RESULTS OF OPERATIONS
COMPARED TO 2011 RESULTS
CONSOLIDATED FINANCIAL RESULTS
Revenues
Revenue increases in 2012 were driven by growth in
the number of individuals served and premium rate
increases related to underlying medical cost trends in our
UnitedHealthcare businesses and growth in our Optum
health service and technology offerings.
Medical Costs
Medical costs increased in 2012 due to risk-based
membership growth in our public and senior markets
businesses, unit cost inflation across all businesses and
continued moderate increases in health system use,
partially offset by an increase in favorable medical
reserve development. Unit cost increases represented the
primary driver of our medical cost trend, with the largest
contributor being price increases to hospitals.
Operating Costs
The increases in operating costs for 2012 were due to
business growth, including increases in revenues from
UnitedHealthcare fee-based benefits and Optum services,
which carry comparatively higher operating costs, as well
as investments in the OptumRx pharmacy management
services and UnitedHealthcare Military & Veterans
businesses.
Income Tax Rate
The increase in our effective income tax rate for 2012 was
due to the favorable resolution of various tax matters in
2011, which lowered the 2011 effective income tax rate.
REPORTABLE SEGMENTS
UnitedHealthcare
UnitedHealthcare’s revenue growth in 2012 was primarily
due to growth in the number of individuals served,
commercial premium rate increases related to expected
increases in underlying medical cost trends and the impact
of lower premium rebates.
UnitedHealthcare’s earnings from operations for 2012
increased compared to the prior year primarily due to
the factors that increased revenues combined with an
improvement in the medical care ratio that was driven
by effective management of medical costs and increased
2013 FORM 10-K
35
favorable medical reserve development. The favorable
development for 2012 was driven by lower than expected
health system utilization levels and increased efficiency in
claims handling and processing.
Optum
Total revenues increased in 2012 due to business growth
and 2011 acquisitions at OptumHealth, partially offset by a
reduction in pharmacy service revenues related to reduced
levels of UnitedHealthcare Medicare Part D prescription drug
membership and related prescription volumes.
Optum’s earnings from operations and operating margin
for 2012 increased compared to 2011 due to improvements
in operating cost structure stemming from advances in
business simplification, integration and overall efficiency and
revenue growth in higher margin products.
The results by segment were as follows:
OptumHealth
Revenue increases at OptumHealth for 2012 were primarily
due to market expansion, including growth related to 2011
acquisitions in integrated care delivery, and strong overall
business growth.
Earnings from operations for 2012 and operating
margins increased compared to 2011 primarily due to gains
in operating efficiency and cost management as well as
increases in earnings from integrated care operations.
OptumInsight
Revenues at OptumInsight for 2012 increased primarily due
to the impact of growth in compliance services for care
providers and payment integrity offerings for commercial
payers, which was partially offset by the June 2011
divestiture of the clinical trials services business.
The increases in earnings from operations and operating
margins for 2012 reflect an improved mix of services and
advances in operating efficiency and cost management.
OptumRx
The decreases in OptumRx revenues in 2012 were due to
the reduction in UnitedHealthcare Medicare Part D plan
participants.
OptumRx earnings from operations and operating
margins for 2012 decreased primarily due to decreased
prescription volume in the Medicare Part D business and
investments to support growth initiatives, which were
partially offset by earnings contributions from specialty
pharmacy growth and greater use of generic medications.
LIQUIDITY, FINANCIAL CONDITION
AND CAPITAL RESOURCES
LIQUIDITY
Introduction
We manage our liquidity and financial position in the
context of our overall business strategy. We continually
forecast and manage our cash, investments, working capital
balances and capital structure to meet the short-term and
long-term obligations of our businesses while seeking
36
UNITEDHEALTH GROUP
to maintain liquidity and financial flexibility. Cash flows
generated from operating activities are principally from
earnings before non-cash expenses.
Our regulated subsidiaries generate significant cash flows
from operations and are subject to financial regulations
and standards in their respective jurisdictions. These
standards, among other things, require these subsidiaries
to maintain specified levels of statutory capital, as defined
by each jurisdiction, and restrict the timing and amount
of dividends and other distributions that may be paid to
their parent companies. In the United States, most of these
regulations and standards are generally consistent with
model regulations established by the NAIC. Except in the
case of extraordinary dividends, these standards generally
permit dividends to be paid from statutory unassigned
surplus of the regulated subsidiary and are limited based on
the regulated subsidiary’s level of statutory net income and
statutory capital and surplus. These dividends are referred to
as “ordinary dividends” and generally may be paid without
prior regulatory approval. If the dividend, together with
other dividends paid within the preceding twelve months,
exceeds a specified statutory limit or is paid from sources
other than earned surplus, the entire dividend is generally
considered an “extraordinary dividend” and must receive
prior regulatory approval.
In 2013, based on the 2012 statutory net income and
statutory capital and surplus levels, the maximum amount of
ordinary dividends that could be paid by our U.S. regulated
subsidiaries to their parent companies was $4.3 billion. In
2013, our regulated subsidiaries paid their parent companies
dividends of $3.2 billion, including $430 million of
extraordinary dividends. This level of dividends maintained
our target consolidated risk-based capital level. In 2012, our
regulated subsidiaries paid their parent companies dividends
of $4.9 billion, including $1.2 billion of extraordinary
dividends.
Our non-regulated businesses also generate cash flows
from operations that are available for general corporate
use. Cash flows generated by these entities, combined
with dividends from our regulated entities and financing
through the issuance of long-term debt as well as issuance
of commercial paper or the ability to draw under our
committed credit facilities, further strengthen our operating
and financial flexibility. We use these cash flows to expand
our businesses through acquisitions, reinvest in our
businesses through capital expenditures, repay debt, and
return capital to our shareholders through shareholder
dividends and/or repurchases of our common stock,
depending on market conditions.
Summary of our Major Sources and Uses of Cash
(in millions)
Sources of cash:
Cash provided by operating activities
Proceeds from common stock issuances
Proceeds from issuances of long-term debt and
commercial paper, net of repayments
Other
Total sources of cash
Uses of cash:
For the Years Ended December 31,
2012
2013
2011
$ 6,991 $ 7,155 $ 6,968
381
1,078
598
2013 FORM 10-K
37
Increase/
(Decrease)
2013 vs. 2012
Increase/
(Decrease)
2012 vs. 2011
$ (164)
(480)
$ 187
697
152
4,567
31 —
346
428
(4,415)
31
4,221
(428)
7,772
12,800
8,123
Common stock repurchases
Cash paid for acquisitions and noncontrolling interest
(3,170)
(3,084)
(2,994)
(86)
(90)
shares, net of cash assumed and dispositions
(1,791)
(6,599)
(1,459)
4,808 (5,140)
Purchases of investments,
net of sales and maturities
Purchases of property, equipment and
(1,611)
(1,299)
(1,695)
(312)
396
capitalized software, net
(91)
Cash dividends paid
(236)
Customer funds administered — (324) — 324
600
Other
(627) —
(1,161)
(1,056)
(1,070)
(820)
(1,018)
(651)
(27)
(52)
(169)
(324)
(627)
Total uses of cash
Effect of exchange rate changes on cash
and cash equivalents
(8,816)
(13,823)
(7,817)
(86) — — nm
nm
Net (decrease) increase in cash
$ (1,130) $ (1,023) $ 306 $ (107)
$(1,329)
nm= not meaningful
2013 Cash Flows Compared to 2012 Cash Flows
Cash flows provided by operating activities in 2013
decreased due to the net effects of changes in operating
assets and liabilities, including: (a) an increase in pharmacy
rebates receivables stemming from the increased
membership at OptumRx, the effects of which were
partially offset by (b) increases in medical costs payable due
to the growth in the number of individuals served in our
public and senior markets and international businesses.
Other significant items contributing to the overall
decrease in cash year-over-year included: (a) decreased
investments in acquisitions and noncontrolling interest
shares (the activity in 2013 primarily related to the
acquisition of the remaining publicly traded shares of Amil
during the second quarter of 2013 for $1.5 billion); (b) a
decrease in net proceeds from commercial paper and long-
term debt, as proceeds from 2013 debt issuances were fully
offset by scheduled maturities and the redemption of all
of our outstanding subsidiary debt (in 2012, the increased
cash flows from common stock issuances and proceeds from
issuances of commercial paper and long-term debt primarily
related to the Amil acquisition); and (c) increased net
purchases of investments.
2012 Cash Flows Compared to 2011 Cash Flows
Cash flows from operating activities for 2012 increased
due to increased net income and related tax accruals,
which were partially offset by the payment in 2012 of 2011
premium rebate obligations as 2012 was the first year in
which rebate payments were made under Health Reform
Legislation.
Other significant items contributing to the overall
decrease in cash year-over-year included: (a) increased
investments in acquisitions in 2012; (b) increases in long-
term debt, commercial paper and common stock issuances,
primarily related to the Amil acquisition; (c) increases in
cash paid for customer funds related to Medicare Part D
and increased shareholder dividend payments.
FINANCIAL CONDITION
As of December 31, 2013, our cash, cash equivalent and
available-for-sale investment balances of $28.3 billion
included $7.3 billion of cash and cash equivalents (of which
$1.0 billion was available for general corporate use), $19.4
billion of debt securities and $1.6 billion of investments
in equity securities and venture capital funds. Given the
significant portion of our portfolio held in cash equivalents,
we do not anticipate fluctuations in the aggregate fair
value of our financial assets to have a material impact
on our liquidity or capital position. The use of different
market assumptions or valuation methodologies, especially
those used in valuing our $311 million of available-
for-sale Level 3 securities (those securities priced using
significant unobservable inputs), may have an effect on the
estimated fair value amounts of our investments. Due to
the subjective nature of these assumptions, the estimates
38
UNITEDHEALTH GROUP
may not be indicative of the actual exit price if we had sold
the investment at the measurement date. Other sources
of liquidity, primarily from operating cash flows and our
commercial paper program, which is supported by our
bank credit facilities, reduce the need to sell investments
during adverse market conditions. See Note 4 of Notes to
the Consolidated Financial Statements included in Item 8,
“Financial Statements” for further detail concerning our
fair value measurements.
Our cash, cash equivalent and available-for-sale debt
portfolio had a weighted-average duration of 2.5 years.
Our available-for-sale debt portfolio had a weighted-
average duration of 3.6 years and a weighted-average
credit rating of “AA” as of December 31, 2013. Included
in the debt securities balance was $1.4 billion of state and
municipal obligations that are guaranteed by a number
of third parties. Due to the high underlying credit ratings
of the issuers, the weighted-average credit rating of these
securities with and without the guarantee was “AA” as
of December 31, 2013. We do not have any significant
exposure to any single guarantor (neither indirect through
the guarantees, nor direct through investment in the
guarantor). When multiple credit ratings are available for
an individual security, the average of the available ratings is
used to determine the weighted-average credit rating.
CAPITAL RESOURCES AND USES OF LIQUIDITY
In addition to cash flow from operations and cash and cash
equivalent balances available for general corporate use, our
capital resources and uses of liquidity are as follows:
Commercial Paper. We maintain a $4.0 billion commercial
paper borrowing program, which facilitates the private
placement of unsecured debt through third-party broker-
dealers. The commercial paper program is supported by the
bank credit facilities described below. As of December 31,
2013, we had $1.1 billion of commercial paper outstanding
at a weighted-average annual interest rate of 0.2%.
Bank Credit Facilities. We have $3.0 billion five-year and
$1.0 billion 364-day revolving bank credit facilities with
23 banks, which mature in November 2018 and November
2014, respectively. These facilities provide liquidity support
for our commercial paper program and are available
for general corporate purposes. There were no amounts
outstanding under these facilities as of December 31, 2013.
The interest rates on borrowings are variable depending on
term and are calculated based on the LIBOR plus a credit
spread based on our senior unsecured credit ratings. As of
December 31, 2013, the annual interest rates on both bank
credit facilities, had they been drawn, would have ranged
from 1.0% to 1.2%.
Our bank credit facilities contain various covenants,
including covenants requiring us to maintain a debt to
debt-plus-equity ratio of not more than 50%. Our debt
to debt-plus-equity ratio, calculated as the sum of debt
divided by the sum of debt and shareholders’ equity, which
reasonably approximates the actual covenant ratio, was
34.4% as of December 31, 2013. We were in compliance
with our debt covenants as of December 31, 2013.
Long-term Debt. Periodically, we access capital markets
and issue long-term debt for general corporate purposes,
for example, to meet our working capital requirements,
to refinance debt, to finance acquisitions or for share
repurchases.
In February 2013, we issued $2.25 billion in senior
unsecured notes, which included: $250 million of floating-
rate notes due August 2014, $500 million of 1.625% fixed-
rate notes due March 2019, $750 million of 2.875% fixed-
rate notes due March 2023 and $750 million of 4.250%
fixed-rate notes due March 2043.
In March and April of 2013, we redeemed all of our
outstanding subsidiary variable rate debt for $619 million.
Credit Ratings. Our credit ratings at December 31, 2013 were as follows:
Senior unsecured debt
Commercial paper
Moody’s
Ratings
A3
P-2
Outlook
Stable
n/a
Standard & Poor’s
Ratings
A
A-1
Outlook
Positive
n/a
Fitch
Ratings
A-
F1
Outlook
Stable
n/a
A.M. Best
Ratings Outlook
Stable
n/a
bbb+
AMB-2
The availability of financing in the form of debt or equity
is influenced by many factors, including our profitability,
operating cash flows, debt levels, credit ratings, debt
covenants and other contractual restrictions, regulatory
requirements and economic and market conditions. For
example, a significant downgrade in our credit ratings or
conditions in the capital markets may increase the cost of
borrowing for us or limit our access to capital. We have
adopted strategies and actions toward maintaining financial
flexibility to mitigate the impact of such factors on our
ability to raise capital.
Share Repurchase Program. Under our Board of Directors’
authorization, we maintain a share repurchase program.
The objectives of the share repurchase program are to
optimize our capital structure and cost of capital, thereby
improving returns to shareholders, as well as to offset the
dilutive impact of share-based awards. Repurchases may
be made from time to time in open market purchases or
other types of transactions (including structured share
repurchase programs), subject to certain Board restrictions.
In June 2013, our Board renewed and expanded our share
repurchase program with an authorization to repurchase up
to 110 million shares of our common stock. As of December
31, 2013, we had Board authorization to purchase up to an
additional 83 million shares of our common stock.
Dividends. In June 2013, our Board of Directors increased
our cash dividend to shareholders to an annual dividend
rate of $1.12 per share, paid quarterly. Since June 2012, we
had paid an annual cash dividend of $0.85 per share, paid
quarterly. Declaration and payment of future quarterly
dividends is at the discretion of the Board and may be
adjusted as business needs or market conditions change.
2013 FORM 10-K
39
Amil Tender Offer. We acquired all of Amil’s remaining
public shares for $1.5 billion in the second quarter of 2013,
bringing our ownership in Amil to 90%.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
The following table summarizes future obligations due by period as of December 31, 2013, under our various contractual
obligations and commitments:
(in millions)
Debt (a)
Operating leases
Purchase obligations (b)
Future policy benefits (c)
Unrecognized tax benefits (d)
Other liabilities recorded on the
Consolidated Balance Sheet (e)
Other obligations (f)
Redeemable noncontrolling interests (g)
$
2014
2015 to 2016 2017 to 2018
2,644
487
250
136
—
186
94
54
$
3,450
800
174
258
—
43
113
158
$
3,411
572
14
267
—
—
49
963
Thereafter
$ 18,147
544
—
1,940
78
Total
$ 27,652
2,403
438
2,601
78
1,482
12
—
1,711
268
1,175
Total contractual obligations
$
3,851
$
4,996
$
5,276
$ 22,203
$ 36,326
(a) Includes interest coupon payments and maturities at par or put values. For variable rate debt, the rates in effect
at December 31, 2013 were used to calculate the interest coupon payments. The table also assumes amounts are
outstanding through their contractual term. See Note 8 of Notes to the Consolidated Financial Statements included in
Item 8, “Financial Statements” for more detail.
(b) Includes fixed or minimum commitments under existing purchase obligations for goods and services, including
agreements that are cancelable with the payment of an early termination penalty. Excludes agreements that are
cancelable without penalty and excludes liabilities to the extent recorded in our Consolidated Balance Sheets as of
December 31, 2013.
(c) Future policy benefits represent account balances that accrue to the benefit of the policyholders, excluding surrender
charges, for universal life and investment annuity products and for long-duration health policies sold to individuals for
which some of the premium received in the earlier years is intended to pay benefits to be incurred in future years. See
Note 2 of Notes to the Consolidated Financial Statements included in Item 8, “Financial Statements” for more detail.
(d) As the timing of future settlements is uncertain, they have been classified as due “Thereafter.”
(e) Includes obligations associated with contingent consideration and other payments related to business acquisitions,
certain employee benefit programs, and various other long-term liabilities. Due to uncertainty regarding payment
timing, obligations for employee benefit programs, charitable contributions and other liabilities have been classified as
“Thereafter.”
(f) Includes remaining capital commitments for venture capital funds and other funding commitments.
(g) Includes commitments for redeemable shares of our subsidiaries, primarily the shares owned by Amil’s remaining non
public shareholders.
We do not have other significant contractual obligations or commitments that require cash resources. However, we
continually evaluate opportunities to expand our operations, which include internal development of new products,
programs and technology applications, and may include acquisitions.
40
UNITEDHEALTH GROUP
OFF-BALANCE SHEET ARRANGEMENTS
As of December 31, 2013, we were not involved in any off-
balance sheet arrangements, which have or are reasonably
likely to have a material effect on our financial condition,
results of operations or liquidity.
RECENTLY ISSUED ACCOUNTING STANDARDS
We have determined that there have been no recently issued,
but not yet adopted, accounting standards that will have a
material impact on our Consolidated Financial Statements.
CRITICAL ACCOUNTING ESTIMATES
Critical accounting estimates are those estimates that
require management to make challenging, subjective or
complex judgments, often because they must estimate the
effects of matters that are inherently uncertain and may
change in subsequent periods. Critical accounting estimates
involve judgments and uncertainties that are sufficiently
sensitive and may result in materially different results under
different assumptions and conditions.
Medical Costs Payable
Each reporting period, we estimate our obligations for
medical care services that have been rendered on behalf
of insured consumers but for which claims have either
not yet been received or processed and for liabilities for
physician, hospital and other medical cost disputes. We
develop estimates for medical care services incurred but
not reported using an actuarial process that is consistently
applied, centrally controlled and automated. The actuarial
models consider factors such as time from date of service
to claim receipt, claim processing backlogs, seasonal
variances in medical care consumption, health care
professional contract rate changes, medical care utilization
and other medical cost trends, membership volume and
demographics, the introduction of new technologies,
benefit plan changes, and business mix changes related
to products, customers and geography. Depending on the
health care professional and type of service, the typical
billing lag for services can be up to 90 days from the date
of service. Substantially all claims related to medical care
services are known and settled within nine to twelve
months from the date of service. As of December 31,
2013, our days outstanding in medical payables was 47
days, calculated as total medical payables divided by total
medical costs times 365 days.
Each period, we re-examine previously established
medical costs payable estimates based on actual claim
submissions and other changes in facts and circumstances.
As more complete claim information becomes available, we
adjust the amount of the estimates and include the changes
in estimates in medical costs in the period in which the
change is identified. Therefore, in every reporting period,
our operating results include the effects of more completely
developed medical costs payable estimates associated with
previously reported periods. If the revised estimate of prior
period medical costs is less than the previous estimate, we
will decrease reported medical costs in the current period
(favorable development). If the revised estimate of prior
period medical costs is more than the previous estimate, we
will increase reported medical costs in the current period
(unfavorable development). Medical costs in 2013, 2012,
and 2011 included favorable medical cost development
related to prior years of $680 million, $860 million and $720
million, respectively.
In developing our medical costs payable estimates, we
apply different estimation methods depending on the
month for which incurred claims are being estimated. For
example, we actuarially calculate completion factors using
an analysis of claim adjudication patterns over the most
recent 36-month period. A completion factor is an actuarial
estimate, based upon historical experience and analysis of
current trends, of the percentage of incurred claims during
a given period that have been adjudicated by us at the date
of estimation. For months prior to the most recent three
months, we apply the completion factors to actual claims
adjudicated-to-date to estimate the expected amount of
ultimate incurred claims for those months. For the most
recent three months, we estimate claim costs incurred
primarily by applying observed medical cost trend factors to
the average per member per month (PMPM) medical costs
incurred in prior months for which more complete claim
data is available, supplemented by a review of near-term
completion factors.
Completion factors. Completion factors are the most
significant factors we use in developing our medical costs
payable estimates for older periods, generally periods
prior to the most recent three months. Completion factors
include judgments in relation to claim submissions such
as the time from date of service to claim receipt, claim
inventory levels and claim processing backlogs as well
as other factors. If actual claims submission rates from
providers (which can be influenced by a number of factors
including provider mix and electronic versus manual
submissions) or our claim processing patterns are different
than estimated, our reserves may be significantly impacted.
The following table illustrates the sensitivity of these
factors and the estimated potential impact on our
medical costs payable estimates for those periods as of
December 31, 2013:
Completion Factors
Increase (Decrease) in Factors
Increase (Decrease)
In Medical Costs Payable
(in millions)
(0.75)%
(0.50)
(0.25)
0.25
0.50
0.75
$
291
194
97
(96)
(192)
(287)
Medical cost PMPM trend factors. Medical cost PMPM
trend factors are significant factors we use in developing
our medical costs payable estimates for the most recent
three months. Medical cost trend factors are developed
through a comprehensive analysis of claims incurred in
prior months, provider contracting and expected unit costs,
benefit design, and by reviewing a broad set of health
care utilization indicators including, but not limited to,
pharmacy utilization trends, inpatient hospital census
data and incidence data from the National Centers for
Disease Control. We also consider macroeconomic variables
such as gross-domestic product growth, employment and
disposable income. A large number of factors can cause the
medical cost trend to vary from our estimates including:
our ability and practices to manage medical costs, changes
in level and mix of services utilized, mix of benefits offered
including the impact of co-pays and deductibles, changes in
medical practices, catastrophes and epidemics.
The following table illustrates the sensitivity of these
factors and the estimated potential impact on our medical
costs payable estimates for the most recent three months as
of December 31, 2013:
Medical Costs PMPM Trend
Increase (Decrease) in Factors
3%
2
1
(1)
(2)
(3)
$
Increase (Decrease)
In Medical Costs Payable
(in millions)
573
382
191
(191)
(382)
(573)
The completion factors and medical costs PMPM trend
factors analyses above include outcomes that are considered
reasonably likely based on our historical experience estimating
liabilities for incurred but not reported benefit claims.
Our estimate of medical costs payable represents
management’s best estimate of our liability for unpaid
medical costs as of December 31, 2013, developed using
consistently applied actuarial methods. Management
believes the amount of medical costs payable is reasonable
and adequate to cover our liability for unpaid claims as of
December 31, 2013; however, actual claim payments may
differ from established estimates as discussed above. Assuming
a hypothetical 1% difference between our December 31, 2013
estimates of medical costs payable and actual medical costs
payable, excluding AARP Medicare Supplement Insurance
and any potential offsetting impact from premium rebates,
2013 net earnings would have increased or decreased by $65
million.
REVENUES
We derive a substantial portion of our revenues from health
care insurance premiums. We recognize premium revenues in
the period eligible individuals are entitled to receive health
care services. Customers are typically billed monthly at a
contracted rate per eligible person multiplied by the total
number of people eligible to receive services.
Our Medicare Advantage and Medicare Part D premium
revenues are subject to periodic adjustment under CMS’ risk
adjustment payment methodology. The CMS risk adjustment
model provides higher per member payments for enrollees
2013 FORM 10-K
41
diagnosed with certain conditions and lower payments for
enrollees who are healthier. We and health care providers
collect, capture, and submit available diagnosis data to CMS
within prescribed deadlines. CMS uses submitted diagnosis
codes, demographic information, and special statuses to
determine the risk score for most Medicare Advantage
beneficiaries. CMS also retroactively adjusts risk scores
during the year based on additional data. We estimate risk
adjustment revenues based upon the data submitted and
expected to be submitted to CMS. As a result of the variability
of factors that determine such estimations, the actual amount
of CMS’ retroactive payments could be materially more
or less than our estimates. This may result in favorable or
unfavorable adjustments to our Medicare premium revenue
and, accordingly, our profitability. Risk adjustment data for
certain of our plans is subject to review by the federal and
state governments, including audit by regulators. See Note 12
of Notes to the Consolidated Financial Statements included
in Item 8, “Financial Statements” for additional information
regarding these audits. Additionally, beginning in 2014,
Medicare Advantage and Medicare Part D plans will be
subject to a minimum MLR threshold of 85%. We will include
in our estimates of premiums to be recognized the expected
premium minimum MLR rebates, if any.
U.S. commercial health plans with MLRs on fully insured
products, as calculated under the definitions in Health
Reform Legislation, that fall below certain targets (85%
for large employer groups, 80% for small employer groups
and 80% for individuals) are required to rebate ratable
portions of their premiums to their customers annually.
Premium revenues are recognized based on the estimated
premiums earned net of projected rebates because we are
able to reasonably estimate the ultimate premiums of these
contracts. Each period, we estimate premium rebates based
on the expected financial performance of the applicable
contracts within each defined aggregation set (e.g., by state,
group size and licensed subsidiary). The most significant
factors in estimating the financial performance are current
and future premiums and medical claim experience,
effective tax rates and expected changes in business mix. The
estimated ultimate premium is revised each period to reflect
current and projected experience.
GOODWILL AND INTANGIBLE ASSETS
Goodwill. Goodwill represents the amount of the purchase
price in excess of the fair values assigned to the underlying
identifiable net assets of acquired businesses. Goodwill is
not amortized, but is subject to an annual impairment test.
Impairment tests are performed more frequently if events
occur or circumstances change that would more likely than
not reduce the fair value of the reporting unit below its
carrying amount.
To determine whether goodwill is impaired, we perform a
multi-step impairment test. First, we can elect to perform a
qualitative assessment of each reporting unit to determine
whether facts and circumstances support a determination
that their fair values are greater than their carrying values.
If the qualitative analysis is not conclusive, or if we elect
to proceed directly with quantitative testing, we will
42
UNITEDHEALTH GROUP
then measure the fair values of the reporting units and
compare them to their aggregate carrying values, including
goodwill. If the fair value is less than the carrying value
of the reporting unit, then the implied value of goodwill
would be calculated and compared to the carrying amount
of goodwill to determine whether goodwill is impaired.
We estimate the fair values of our reporting units using
discounted cash flows, which include assumptions about
a wide variety of internal and external factors. Significant
assumptions used in the impairment analysis include
financial projections of free cash flow (including significant
assumptions about operations, capital requirements and
income taxes), long-term growth rates for determining
terminal value beyond the discretely forecasted periods,
and discount rates. For each reporting unit, comparative
market multiples are used to corroborate the results of our
discounted cash flow test.
Forecasts and long-term growth rates used for our
reporting units are consistent with, and use inputs from,
our internal long-term business plan and strategies. Key
assumptions used in these forecasts include:
• Revenue t rends. Key revenue drivers for each reporting
unit are determined and assessed. Significant factors
include: membership growth, medical trends, and the
impact and expectations of regulatory environments.
Additional macro-economic assumptions relating
to unemployment, GDP growth, interest rates, and
inflation are also evaluated and incorporated, as
appropriate.
• Medical cost trends. For further discussion of medical
cost trends, see the “Medical Cost Trend” section of
Executive Overview-Business Trends above and the
discussion in the “Medical Costs Payable” critical
accounting estimate above. Similar factors, including
historical and expected medical cost trend levels, are
considered in estimating our long-term medical trends
at the reporting unit level.
• Operating pr oductivity. We forecast expected
operating cost levels based on historical levels and
expectations of future operating cost levels.
• Capital levels. The operating and long-term capital
requirements for each business are considered.
Although we believe that the financial projections used
are reasonable and appropriate for all of our reporting
units, due to the long-term nature of the forecasts there
is significant uncertainty inherent in those projections.
That uncertainty is increased by the impact of health care
reforms as discussed in Item 1, “Business - Government
Regulation.” For additional discussions regarding how the
enactment or implementation of health care reforms and
other factors could affect our business and the related
long-term forecasts, see Item 1A, “Risk Factors” in Part I
and “Regulatory Trends and Uncertainties” above.
Discount rates are determined for each reporting unit
and include consideration of the implied risk inherent in
their forecasts. This risk is evaluated using comparisons
to market information such as peer company weighted
average costs of capital and peer company stock prices
in the form of revenue and earnings multiples. Beyond
our selection of the most appropriate risk-free rates and
equity risk premiums, our most significant estimates in the
discount rate determinations involve our adjustments to the
peer company weighted average costs of capital that reflect
reporting unit-specific factors. Such adjustments include
the addition of size premiums and company-specific risk
premiums intended to compensate for apparent forecast
risk. We have not made any adjustments to decrease a
discount rate below the calculated peer company weighted
average cost of capital for any reporting unit. Company-
specific adjustments to discount rates are subjective and
thus are difficult to measure with certainty.
The passage of time and the availability of additional
information regarding areas of uncertainty with respect
to the reporting units’ operations could cause these
assumptions to change in the future.
We elected to bypass the optional qualitative reporting
unit fair value assessment and completed our annual
quantitative tests for goodwill impairment as of January 1,
2014. All of our reporting units had fair values substantially
in excess of their carrying values.
Intangible assets. Our recorded separately-identifiable
intangible assets were acquired in business combinations
and represent future expected benefits but they lack
physical substance (e.g., membership lists, customer
contracts, trademarks and technology). These intangible
assets are initially recorded at their fair values. Finite-lived
intangible assets are amortized over their expected useful
lives, while indefinite-lived intangible assets are evaluated
for impairment on at least an annual basis. Both finite-
lived and indefinite-lived intangible assets are evaluated
for impairment between annual periods if an event occurs
or circumstances change that may indicate impairment.
Our most significant intangible assets are customer-related
intangibles, which represent 73% of our total intangible
asset balance of $3.8 billion as of December 31, 2013.
Customer-related intangible assets acquired in
business combinations are typically valued using an
income approach based on discounted future cash flows
attributable to customers that exist as of the date of
acquisition. The most significant assumptions used in the
valuation of customer-related assets include: projected
revenue and earnings growth, retention rates, perpetuity
growth rates and discount rates. These initial valuations
and the embedded assumptions contain uncertainty to the
extent that those assumptions and estimates may ultimately
differ from actual results (e.g., customer turnover may
be higher or lower than the assumed retention rate
suggested).
Our finite-lived intangible assets are subject to
impairment tests when events or circumstances indicate
that an asset’s (or asset group’s) carrying value may
exceed its estimated fair value. Consideration is given on
a quarterly basis to a number of potential impairment
indicators including: changes in the use of the assets,
changes in legal or other business factors that could
affect value, experienced or expected operating cash-
flow deterioration or losses, adverse changes in customer
populations, adverse competitive or technological advances
that could impact value, and other factors. Following the
identification of any potential impairment indicators, we
would calculate the estimated fair value of a finite-lived
intangible asset (or asset group) using the undiscounted
cash flows that are expected to result from the use of the
asset or related group of assets. If it is determined that an
impairment exists, the amount by which the carrying value
exceeds its estimated fair value would be recorded as an
impairment.
Our indefinite-lived intangible assets are tested for
impairment on an annual basis, or more frequently if
impairment indicators exist. To determine if an indefinite-
lived intangible asset is impaired, we assess qualitative
factors to determine whether the existence of events and
circumstances indicates that it is more-likely-than-not that
the indefinite-lived intangible asset’s carrying value exceeds
its fair value. If, after assessing the totality of events and
circumstances, we conclude that it is not more likely than
not that the indefinite-lived intangible asset’s carrying
value exceeds its fair value, no impairment exists and no
further testing is performed. If we conclude otherwise,
we would perform a quantitative analysis by comparing
its estimated fair value to its carrying value. If the carrying
value exceeds its estimated fair value, an impairment would
be recorded for the amount by which the carrying value
exceeds its estimated fair value. Intangible assets were not
materially impaired in 2013.
INVESTMENTS
As of December 31, 2013, we had investments with a
carrying value of $21.5 billion, primarily held in marketable
debt securities. Our investments are principally classified
as available-for-sale and are recorded at fair value. We
exclude gross unrealized gains and losses on available-
for-sale investments from net earnings and report net
unrealized gains or losses, net of income tax effects,
as other comprehensive income and as a separate
component in shareholders’ equity. We continually monitor
the difference between the cost and fair value of our
investments. As of December 31, 2013, our available-for-
sale investments had gross unrealized gains of $326 million
and gross unrealized losses of $234 million.
For debt securities, if we intend to either sell or determine
that we will be more likely than not be required to sell
the security before recovery of the entire amortized cost
basis or maturity of the security, we recognize the entire
impairment in earnings. If we do not intend to sell the debt
security and we determine that we will not be more likely
than not be required to sell the debt security but we do
not expect to recover the entire amortized cost basis, the
impairment is bifurcated into the amount attributed to the
credit loss, and recognized in net earnings, and all other
causes, and recognized in other comprehensive income.
For equity securities, we recognize impairments in other
comprehensive income if we expect to hold the equity
security until fair value increases to at least the equity
security’s cost basis and we expect that increase in fair value
to occur in a reasonably forecasted period. If we intend to
2013 FORM 10-K
43
sell the equity security or if we believe that recovery of fair
value to cost will not occur in the near term, we recognize
the impairment in net earnings.
The most significant judgments and estimates related
to investments are related to determination of their
fair values and the other-than-temporary impairment
assessment.
Fair values. Fair values of available-for-sale debt and
equity securities are based on quoted market prices,
where available. We obtain one price for each security
primarily from a third-party pricing service (pricing service),
which generally uses quoted or other observable inputs
for the determination of fair value. The pricing service
normally derives the security prices through recently
reported trades for identical or similar securities, making
adjustments through the reporting date based upon
available observable market information. For securities not
actively traded, the pricing service may use quoted market
prices of comparable instruments or discounted cash flow
analyses, incorporating inputs that are currently observable
in the markets for similar securities. Inputs that are often
used in the valuation methodologies include, but are not
limited to, benchmark yields, credit spreads, default rates
and prepayment speeds, and non-binding broker quotes.
As we are responsible for the determination of fair value,
we perform quarterly analyses of the prices received from
the pricing service to determine whether the prices are
reasonable estimates of fair value. Specifically, we compare:
• prices received from the pricing service to prices
reported by a secondary pricing service, our custodian,
our investment consultant and/or third-party
investment advisors; and
• changes in the reported market values and returns to
relevant market indices and our expectations to test
the reasonableness of the reported prices.
Based on our internal price verification procedures and
our review of the fair value methodology documentation
provided by independent pricing service, we have not
historically adjusted the prices obtained from the pricing
service.
Other-than-temporary impairment assessment. Individual
securities with fair values lower than costs are reviewed for
impairment considering the following factors: our intent to
sell the security or the likelihood that we will be required
to sell the security before recovery of the entire amortized
cost, the length of time and extent of impairment and
the financial condition and near-term prospects of the
issuer as well as specific events or circumstances that
may influence the operations of the issuer. Other factors
included in the assessment include the type and nature of
the securities and their liquidity. Given the nature of our
portfolio, primarily investment grade securities, historical
impairments were largely market related (e.g., interest rate
fluctuations) as opposed to credit related. We do not expect
that trend to change in the near term. Our large cash
holdings reduce the risk that we will be required to sell a
security. However, our intent to sell a security may change
from period to period if facts and circumstances change.
44
UNITEDHEALTH GROUP
The unrealized losses of $234 million and $9 million at
December 31, 2013 and 2012, respectively, were primarily
caused by market interest rate increases and not by
unfavorable changes in the credit standing. We believe
we will collect the principal and interest due on our debt
securities with an amortized cost in excess of fair value.
We manage our investment portfolio to limit our exposure
to any one issuer or market sector, and largely limit our
investments to U.S. government and agency securities;
state and municipal securities; mortgage-backed securities;
and corporate debt obligations, substantially all of which
are of investment-grade quality. Securities downgraded
below policy minimums after purchase will be disposed
of in accordance with our investment policy. Total other-
than-temporary impairments during the years ended
December 31, 2013, 2012 and 2011 were $8 million, $6
million and $12 million, respectively. Our available-for-sale
debt portfolio had a weighted-average credit rating of
“AA” as of December 31, 2013. We have minimal securities
collateralized by sub-prime or Alt-A securities, and a
minimal amount of commercial mortgage loans in default.
The judgments and estimates related to fair value
and other-than-temporary impairment may ultimately
prove to be inaccurate due to many factors including:
circumstances may change over time, industry sector and
market factors may differ from expectations and estimates
or we may ultimately sell a security we previously intended
to hold. Our assessment of the financial condition and
near-term prospects of the issuer may ultimately prove
to be inaccurate as time passes and new information
becomes available, including changes to current facts and
circumstances, or as unknown or estimated unlikely trends
develop.
As discussed further in Item 7A “Quantitative and
Qualitative Disclosures About Market Risk” a 1% increase in
market interest rates would have the effect of decreasing
the fair value of our investment portfolio by $756 million.
INCOME TAXES
Our provision for income taxes, deferred tax assets and
liabilities, and uncertain tax positions reflect our assessment
of estimated future taxes to be paid on items in the
consolidated financial statements.
Deferred income taxes arise from temporary differences
between financial reporting and tax reporting bases of
assets and liabilities, as well as net operating loss and tax
credit carryforwards for tax purposes. We have established
a valuation allowance against certain deferred tax assets
for which it is more-likely-than-not that some portion, or
all, of the deferred tax asset will not be realized.
An uncertain tax position is recognized when it is more
likely than not that the position will be sustained upon
examination, including resolutions of any related appeals
or litigation processes, based on the technical merits. We
prepare and file tax returns based on our interpretation
of tax laws and regulations and record estimates based on
these judgments and interpretations. In the normal course
of business, our tax returns are subject to examination by
various taxing authorities. Such examinations may result
in future tax and interest assessments by these taxing
authorities. Inherent uncertainties exist in estimates of
tax positions due to changes in tax law resulting from
legislation, regulation and/or as concluded through the
various jurisdictions’ tax court systems.
The significant assumptions and estimates described
above are important contributors to our ultimate effective
tax rate in each year. A hypothetical increase or decrease in
our effective tax rate by 1% on our 2013 earnings before
income taxes would have caused the provision for income
taxes and net earnings to change by $89 million.
CONTINGENT LIABILITIES
Because of the nature of our businesses, we are routinely
involved in various disputes, legal proceedings and
governmental audits and investigations. We record
liabilities for our estimates of the probable costs resulting
from these matters where appropriate. Our estimates
are developed in consultation with legal counsel, if
appropriate, and are based upon an analysis of potential
results, assuming a combination of litigation and settlement
strategies and considering our insurance coverage, if any,
for such matters.
Estimates of costs resulting from legal and regulatory
matters are inherently difficult to predict, particularly
where the matters: involve indeterminate claims for
monetary damages or may involve fines, penalties or
punitive damages; present novel legal theories or represent
a shift in regulatory policy; involve a large number of
claimants or regulatory bodies; are in the early stages of
the proceedings; or could result in a change in business
practices. Accordingly, in many cases, we are unable to
estimate the losses or ranges of losses for those matters
where there is a reasonable possibility or it is probable
that a loss may be incurred. Similarly, the assessment of
the likelihood of assertion of unasserted claims involves
significant judgment.
Given this inherent uncertainty, it is possible that
future results of operations for any particular quarterly
or annual period could be materially affected by changes
in our estimates or assumptions. We evaluate our related
disclosures in each reporting period. See Note 12 of Notes
to the Consolidated Financial Statements included in
Item 8, “Financial Statements” for a discussion of specific
legal proceedings including an assessment of whether a
reasonable estimate of the losses or range of loss could be
determined.
LEGAL MATTERS
A description of our legal proceedings is presented in
Note 12 of Notes to the Consolidated Financial Statements
included in Item 8, “Financial Statements.”
CONCENTRATIONS OF CREDIT RISK
Investments in financial instruments such as marketable
securities and accounts receivable may subject us to
concentrations of credit risk. Our investments in marketable
securities are managed under an investment policy
2013 FORM 10-K
45
authorized by our Board of Directors. This policy limits
the amounts that may be invested in any one issuer and
generally limits our investments to U.S. government
and agency securities, state and municipal securities and
corporate debt obligations that are investment grade.
Concentrations of credit risk with respect to accounts
receivable are limited due to the large number of employer
groups and other customers that constitute our client
base. As of December 31, 2013, we had an aggregate $1.8
billion reinsurance receivable resulting from the sale of our
Golden Rule Financial Corporation life and annuity business
in 2005. We regularly evaluate the financial condition of
the reinsurer and record the reinsurance receivable only
to the extent that the amounts are deemed probable of
recovery. Currently, the reinsurer is rated by A.M. Best
as “A+.” As of December 31, 2013, there were no other
significant concentrations of credit risk.
ITEM 7A.
Quantitative And Qualitative
Disclosures About Market Risk
Our primary market risks are exposures to (a) changes
in interest rates that impact our investment income and
interest expense and the fair value of certain of our fixed-
rate investments and debt, (b) foreign currency exchange
rate risk of the U.S. dollar primarily to the Brazilian real and
(c) changes in equity prices that impact the value of our
equity investments.
As of December 31, 2013, we had $8.7 billion of cash,
cash equivalents and investments on which the interest
rates received vary with market interest rates, which may
materially impact our investment income. Also, $9.6 billion
of our commercial paper, debt and deposit liabilities as of
December 31, 2013 were at interest rates that vary with
market rates, either directly or through the use of related
interest rate swap contracts.
The fair value of certain of our fixed-rate investments
and debt also varies with market interest rates. As of
December 31, 2013, $18.5 billion of our investments were
fixed-rate debt securities and $10.2 billion of our debt was
non-swapped fixed-rate term debt. An increase in market
interest rates decreases the market value of fixed-rate
investments and fixed-rate debt. Conversely, a decrease in
market interest rates increases the market value of fixed-
rate investments and fixed-rate debt.
We manage exposure to market interest rates by
diversifying investments across different fixed income
market sectors and debt across maturities, as well as by
endeavoring to match our floating-rate assets and liabilities
over time, either directly or periodically through the use of
interest rate swap contracts.
46
UNITEDHEALTH GROUP
The following table summarizes the impact of hypothetical changes in market interest rates across the entire yield curve
by 1% or 2% as of December 31, 2013 on our investment income and interest expense per annum, and the fair value of our
investments and debt (in millions, except percentages):
Increase (Decrease) in Market Interest Rate
2 %
1
(1)
(2)
Increase (Decrease) in Market Interest Rate
2%
1
(1)
(2)
nm = not meaningful
$
Investment
Income Per
Annum (a)
175
87
(52)
nm
$
Investment
Income Per
Annum (a)
189
94
(18)
nm
December 31, 2013
Interest
Expense Per
Annum (a)
189
$
95
(17)
nm
Fair Value of
Investments (b)
Fair Value of
Debt
$
(1,474)
(756)
704
1,224
$
(1,786)
(974)
1,167
2,505
December 31, 2012
Interest
Expense Per
Annum (a)
134
$
67
(14)
nm
Fair Value of
Investments (b)
Fair Value of
Debt
$
(1,303)
(656)
518
686
$
(2,200)
(1,194)
1,366
2,747
(a) Given the low absolute level of short-term market rates on our floating-rate assets and liabilities as of December 31, 2013
and 2012, the assumed hypothetical change in interest rates does not reflect the full 100 basis point reduction in interest
income or interest expense as the rate cannot fall below zero and thus the 200 basis point reduction is not meaningful.
(b) As of December 31, 2013 and 2012, some of our investments had interest rates below 2% so the assumed hypothetical
change in the fair value of investments does not reflect the full 200 basis point reduction.
We have an exposure to changes in the value of the
Brazilian real to the U.S. dollar in translation of Amil’s
operating results at the average exchange rate over the
accounting period, and Amil’s assets and liabilities at the
spot rate at the end of the accounting period. The gains or
losses resulting from translating foreign currency financial
statements into U.S. dollars are included in shareholders’
equity and comprehensive income.
An appreciation of the U.S. dollar against the Brazilian real
reduces the carrying value of the net assets denominated
in Brazilian real. For example, as of December 31, 2013,
a hypothetical 10% increase in the value of the U.S.
dollar against the Brazilian real would have caused a
reduction in net assets of approximately $490 million. We
manage exposure to foreign currency risk by conducting
our international business operations primarily in their
functional currencies.
As of December 31, 2013, we had $1.6 billion of
investments in equity securities, consisting of investments
in non-U.S. dollar fixed-income funds, employee savings
plan related investments, private equity funds, and dividend
paying stocks. Valuations in non-US dollar funds are subject
to foreign exchange rates. Valuations in private equity are
subject to conditions affecting health care and technology
stocks, and dividend paying equities are subject to more
general market conditions.
2013 FORM 10-K
47
ITEM 8.
Financial Statements
TABLE OF CONTENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
1.
2.
3.
4.
5.
6.
Description of Business
Basis of Presentation, Use of Estimates and
Significant Accounting Policies
Investments
Fair Value
Property, Equipment and Capitalized Software
Goodwill and Other Intangible Assets
7. Medical Costs and Medical Costs Payable
8.
9.
10.
11.
12.
13.
Commercial Paper and Long-Term Debt
Income Taxes
Shareholders’ Equity
Share-Based Compensation
Commitments and Contingencies
Segment Financial Information
14. Quarterly Financial Data (Unaudited)
48
49
50
51
52
53
54
54
54
60
62
67
67
69
70
72
74
75
76
78
81
48
UNITEDHEALTH GROUP
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors and Shareholders of UnitedHealth
Group Incorporated and Subsidiaries:
We have audited the accompanying consolidated balance
sheets of UnitedHealth Group Incorporated and subsidiaries
(the “Company”) as of December 31, 2013 and 2012,
and the related consolidated statements of operations,
comprehensive income, changes in shareholders’ equity and
cash flows for each of the three years in the period ended
December 31, 2013. These consolidated financial statements
are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are
free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such consolidated financial statements
present fairly, in all material respects, the financial position
of UnitedHealth Group Incorporated and Subsidiaries as
of December 31, 2013 and 2012, and the results of their
operations and their cash flows for each of the three years
in the period ended December 31, 2013, in conformity with
accounting principles generally accepted in the United
States of America.
We have also audited, in accordance with the standards
of the Public Company Accounting Oversight Board
(United States), the Company’s internal control over
financial reporting as of December 31, 2013, based on
the criteria established in Internal Control-Integrated
Framework (1992) issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report
dated February 12, 2014, expressed an unqualified opinion
on the Company’s internal control over financial reporting.
/S/ DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
February 12, 2014
UNITEDHEALTH GROUP
CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, net of allowances of $196 and $189
Other current receivables, net of allowances of $169 and $206
Assets under management
Deferred income taxes
Prepaid expenses and other current assets
Total current assets
Long-term investments
Property, equipment and capitalized software, net of accumulated
depreciation and amortization of $2,675 and $2,564
Goodwill
Other intangible assets, net of accumulated amortization
of $2,283 and $1,824
Other assets
Total assets
Liabilities and shareholders’ equity
Current liabilities:
2013 FORM 10-K
49
December 31, 2013
December 31, 2012
$
7,276
1,937
3,052
3,998
2,757
430
930
20,380
19,605
4,010
31,604
3,844
2,439
$
8,406
3,031
2,709
2,889
2,773
463
781
21,052
17,711
3,939
31,286
4,682
2,215
$
81,882
$
80,885
Medical costs payable
Accounts payable and accrued liabilities
Other policy liabilities
Commercial paper and current maturities of long-term debt
Unearned revenues
$
Total current liabilities
Long-term debt, less current maturities
Future policy benefits
Deferred income taxes
Other liabilities
Total liabilities
Commitments and contingencies (Note 12)
Redeemable noncontrolling interests
Shareholders’ equity:
Preferred stock, $0.001 par value - 10 shares authorized;
no shares issued or outstanding
Common stock, $0.01 par value - 3,000 shares authorized;
988 and 1,019 issued and outstanding
Additional paid-in capital
Retained earnings
Accumulated other comprehensive (loss) income
Total shareholders’ equity
Total liabilities and shareholders’ equity
See Notes to the Consolidated Financial Statements
11,575
7,458
5,279
1,969
1,600
27,881
14,891
2,465
1,796
1,525
48,558
1,175
—
10
—
33,047
(908)
32,149
81,882
$
$
$
11,004
6,984
4,910
2,713
1,505
27,116
14,041
2,444
2,450
1,535
47,586
2,121
—
10
66
30,664
438
31,178
80,885
50
UNITEDHEALTH GROUP
UNITEDHEALTH GROUP
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
Revenues:
Premiums
Services
Products
Investment and other income
Total revenues
Operating costs:
Medical costs
Operating costs
Cost of products sold
Depreciation and amortization
Total operating costs
Earnings from operations
Interest expense
Earnings before income taxes
Provision for income taxes
Net earnings
Earnings attributable to noncontrolling interests
Net earning attributable to UnitedHealth Group common
shareholders
Earnings per share attributable to UnitedHealth Group
common shareholders:
Basic
Diluted
Basic weighted-average number of common
shares outstanding
Dilutive effect of common share equivalents
Diluted weighted-average number of common
shares outstanding
Anti-dilutive shares excluded from the calculation of
dilutive effect of common share equivalents
Cash dividends declared per common share
See Notes to the Consolidated Financial Statements
For the Years Ended December 31,
2012
2013
2011
$
109,557
8,997
3,190
745
122,489
89,290
19,362
2,839
1,375
112,866
9,623
(708)
8,915
(3,242)
$
5,673
(48)
$
$
99,728
7,437
2,773
680
110,618
80,226
17,306
2,523
1,309
101,364
9,254
(632)
8,622
(3,096)
5,526
—
$
$
$
5,625
$
5,526
5.59
5.50
1,006
17
1,023
$
$
5.38
5.28
1,027
19
1,046
$
91,983
6,613
2,612
654
101,862
74,332
15,557
2,385
1,124
93,398
8,464
(505)
7,959
(2,817)
5,142
—
5,142
4.81
4.73
1,070
17
1,087
$
$
$
$
8
1.0525
$
17
0.8000
$
47
0.6125
$
2013 FORM 10-K
51
UNITEDHEALTH GROUP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
Net earnings
For the Years Ended December 31,
2012
2013
2011
$
5,673
$
5,526
$
5,142
Other comprehensive (loss) income:
Gross unrealized holding (losses) gains on investment
securities during the period
(543)
Income tax effect 196
Total unrealized (losses) gains, net of tax
(347)
Gross reclassification adjustment for
net realized gains included in net earnings
Income tax effect
Total reclassification adjustment, net of tax
(181)
66
(115)
217
(78)
139
(156)
57
(99)
422
(154)
268
(113)
41
(72)
Total foreign currency translation (losses) gains
(884)
(63) 13
Other comprehensive (loss) income
(1,346)
(23) 209
5,351
Comprehensive income
Comprehensive income attributable to noncontrolling interests (48) — —
Comprehensive income attributable to UniteHealth Group
common shareholders
5,503
5,503
4,327
4,279
5,351
$
$
$
See Notes to the Consolidated Financial Statements
52
UNITEDHEALTH GROUP
UNITEDHEALTH GROUP
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Accumulated Other
Comprehensive
Income (Loss)
Net
Foreign
Currency
(in millions)
Balance at January 1, 2011
Net earnings
Other comprehensive income
Issuances of common shares,
and related tax effects
Share-based compensation,
and related tax benefits
Common share repurchases
Cash dividends paid on
common shares
Balance at December 31, 2011
Net earnings
Other comprehensive income (loss)
Issuances of common shares,
and related tax effects
Share-based compensation,
and related tax benefits
Common share repurchases
Acquisitions of noncontrolling
interests
Cash dividends paid on
common shares
Balance at December 31, 2012
Net earnings attributable
to UnitedHealth Group
common shareholders
Other comprehensive loss
Issuances of common shares,
and related tax effects
Share-based compensation,
and related tax benefits
Common share repurchases
Acquisition of noncontrolling
interests, and related
tax effects
Cash dividends paid on
common shares
Balance at December 31, 2013
308
453
(2,994)
(651)
28,292
5,526
(23)
704
594
(3,084)
(11)
Common Stock
Shares
1,086
Amount
11
$
Additional
Paid-In
Capital
$ —
18
—
308
(65)
(1)
453
(761)
1,039
10
—
Total
Unrealized Translation
Retained Gains (Losses) (Losses) Shareholders’
Earnings on Investments Gains
$ (28)
$ 25,562
5,142
Equity
$ 25,825
5,142
196 13 209
$ 280
(2,232)
(651)
27,821
5,526
476
(15)
40
(63)
37
—
704
(57) —
594
(1,221)
(11)
(1,863)
1,019
10
66
(820)
30,664
516
(78)
(820)
31,178
5,625
(462)
(884)
17
—
431
(48)
—
406
(984)
(2,186)
5,625
(1,346)
431
406
(3,170)
81
81
988
$
10
$ —
(1,056)
$ 33,047
$
54
$ (962)
(1,056)
$ 32,149
See Notes to the Consolidated Financial Statements
UNITEDHEALTH GROUP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Operating activities
Net earnings
Non-cash items:
Depreciation and amortization
Deferred income taxes
Share-based compensation
Other, net
Net change in other operating items, net of effects
from acquisitions and changes in AARP balances:
Accounts receivable
Other assets
Medical costs payable
Accounts payable and other liabilities
Other policy liabilities
Unearned revenues
2013 FORM 10-K
53
For the Years Ended December 31,
2012
2013
2011
$
5,673
$
5,526
$ 5,142
1,375
1
331
(83)
1,309
308
421
(231)
1,124
59
401
(67)
(317)
(838)
509
459
(221)
102 28
(267)
(130)
(295)
(121)
101 377
199 146
(81) 482
(308)
Cash flows from operating activities
6,991
7,155
6,968
Investing activities
Purchases of investments
Sales of investments
Maturities of investments
Cash paid for acquisitions, net of cash assumed
Cash received from dispositions
Purchases of property, equipment and capitalized software
Proceeds from disposal of property and equipment
Cash flows used for investing activities
(12,176)
5,706
4,859
(362)
(9,903)
3,794
4,810
(6,280)
45 —
(1,070)
146 —
(8,649)
(3,089)
(1,307)
(9,895)
3,949
4,251
(1,844)
385
(1,067)
49
(4,172)
Financing activities
(319) —
Acquisition of noncontrolling interest shares
Common stock repurchases
(2,994)
Proceeds from issuance of long-term debt 2,235 3,966 2,234
(986)
(955)
Repayments of long-term debt (1,609)
(933)
(474) 1,587
(Repayments of) proceeds from commercial paper, net
(651)
(820)
Cash dividends paid
(1,056)
37
(324)
Customer funds administered 31
381
1,078
Proceeds from common stock issuances 598
Interest rate swap termination — —
132
(627) 259
Other, net (27)
(1,474)
(3,170)
(3,084)
Cash flows (used for) financing activities (4,946) 471
(2,490)
Effect of exchange rate changes on cash and
cash equivalents
(Decrease) increase in cash and cash equivalents
(86) — —
(1,130) (1,023) 306
Cash and cash equivalents, beginning of period 8,406 9,429
9,123
Cash and cash equivalents, end of period
$ 7,276
$ 8,406
$ 9,429
Supplemental cash flow disclosures
Cash paid for interest
Cash paid for income taxes
See Notes to the Consolidated Financial Statements
$
724
$ 600
2,785 2,666
$
472
2,739
54
UNITEDHEALTH GROUP
UNITEDHEALTH GROUP
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
UnitedHealth Group Incorporated (individually and
together with its subsidiaries, “UnitedHealth Group” and
“the Company”) is a diversified health and well-being
company dedicated to helping people live healthier lives
and making the health system work better for everyone.
Through the Company’s diversified family of businesses,
it leverages core competencies in advanced, enabling
technology; health care data, information and intelligence;
and clinical care management and coordination to help
meet the demands of the health system.
2. BASIS OF PRESENTATION, USE OF ESTIMATES AND
SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company has prepared the Consolidated Financial
Statements according to U.S. Generally Accepted
Accounting Principles (GAAP) and has included the accounts
of UnitedHealth Group and its subsidiaries.
Use of Estimates
These Consolidated Financial Statements include certain
amounts based on the Company’s best estimates and
judgments. The Company’s most significant estimates
relate to medical costs payable, revenues, valuation and
impairment analysis of goodwill and other intangible
assets, estimates of other policy liabilities and other
current receivables, valuations of certain investments,
and estimates and judgments related to income taxes and
contingent liabilities. Certain of these estimates require the
application of complex assumptions and judgments, often
because they involve matters that are inherently uncertain
and will likely change in subsequent periods. The impact
of any changes in estimates is included in earnings in the
period in which the estimate is adjusted.
Revenues
Premium revenues are primarily derived from risk-based
health insurance arrangements in which the premium is
typically at a fixed rate per individual served for a one-
year period, and the Company assumes the economic
risk of funding its customers’ health care and related
administrative costs.
Premium revenues are recognized in the period in
which eligible individuals are entitled to receive health
care benefits. Health care premium payments received
from its customers in advance of the service period are
recorded as unearned revenues. Fully insured commercial
products of U.S. health plans, and beginning in 2014,
Medicare Advantage and Medicare Prescription Drug
Benefit (Medicare Part D) plans with medical loss ratios as
calculated under the definitions in the Patient Protection
and Affordable Care Act and a reconciliation measure,
the Health Care and Education Reconciliation Act of 2010
(together, Health Reform Legislation) and implementing
regulations, that fall below certain targets are required
to rebate ratable portions of their premiums annually.
Premium revenues are recognized based on the estimated
premiums earned net of projected rebates because the
Company is able to reasonably estimate the ultimate
premiums of these contracts. The Company also records
premium revenues from capitation arrangements at its
OptumHealth businesses.
The Company’s Medicare Advantage and Medicare Part
D premium revenues are subject to periodic adjustment
under the Centers for Medicare and Medicaid Services’
(CMS) risk adjustment payment methodology. CMS deploys
a risk adjustment model that apportions premiums paid
to all health plans according to health severity and certain
demographic factors. The CMS risk adjustment model
provides higher per member payments for enrollees
diagnosed with certain conditions and lower payments
for enrollees who are healthier. Under this risk adjustment
methodology, CMS calculates the risk adjusted premium
payment using diagnosis data from hospital inpatient,
hospital outpatient and physician treatment settings.
The Company and health care providers collect, capture,
and submit the necessary and available diagnosis data to
CMS within prescribed deadlines. The Company estimates
risk adjustment revenues based upon the diagnosis data
submitted and expected to be submitted to CMS. Risk
adjustment data for certain of the Company’s plans is
subject to review by the government, including audit
by regulators. See Note 12 for additional information
regarding these audits.
Service revenues consist primarily of fees derived from
services performed for customers that self-insure the health
care costs of their employees and employees’ dependants.
Under service fee contracts, the Company recognizes
revenue in the period the related services are performed.
The customers retain the risk of financing health care
costs for their employees and employees’ dependants,
and the Company administers the payment of customer
funds to physicians and other health care professionals
from customer-funded bank accounts. As the Company has
neither the obligation for funding the health care costs,
nor the primary responsibility for providing the medical
care, the Company does not recognize premium revenue
and medical costs for these contracts in its Consolidated
Financial Statements.
For both risk-based and fee-based customer
arrangements, the Company provides coordination and
facilitation of medical services; transaction processing;
customer, consumer and care professional services; and
access to contracted networks of physicians, hospitals
and other health care professionals. These services are
performed throughout the contract period.
For the Company’s OptumRx pharmacy benefits
management (PBM) business, revenues are derived from
products sold through a contracted network of retail
pharmacies or mail services, and from administrative
services, including claims processing and formulary design
and management. Product revenues include ingredient
costs (net of rebates), a negotiated dispensing fee and
customer co-payments for drugs dispensed through the
Company’s mail-service pharmacy. In retail pharmacy
transactions, revenues recognized exclude the member’s
applicable co-payment. Product revenues are recognized
when the prescriptions are dispensed through the retail
network or received by consumers through the Company’s
mail-service pharmacy. Service revenues are recognized
when the prescription claim is adjudicated. The Company
has entered into retail service contracts in which it is
primarily obligated to pay its network pharmacy providers
for benefits provided to their customers regardless if
the Company is paid. The Company is also involved in
establishing the prices charged by retail pharmacies,
determining which drugs will be included in formulary
listings and selecting which retail pharmacies will be
included in the network offered to plan sponsors’ members.
As a result, revenues are reported on a gross basis.
Medical Costs and Medical Costs Payable
Medical costs and medical costs payable include estimates
of the Company’s obligations for medical care services
that have been rendered on behalf of insured consumers,
but for which claims have either not yet been received
or processed, and for liabilities for physician, hospital
and other medical cost disputes. The Company develops
estimates for medical costs incurred but not reported using
an actuarial process that is consistently applied, centrally
controlled and automated. The actuarial models consider
factors such as time from date of service to claim receipt,
claim processing backlogs, care provider contract rate
changes, medical care utilization and other medical cost
trends. The Company estimates liabilities for physician,
hospital and other medical cost disputes based upon an
analysis of potential outcomes, assuming a combination
of litigation and settlement strategies. Each period, the
Company re-examines previously established medical costs
payable estimates based on actual claim submissions and
other changes in facts and circumstances. As the medical
costs payable estimates recorded in prior periods develop,
the Company adjusts the amount of the estimates and
includes the changes in estimates in medical costs in the
period in which the change is identified. Medical costs also
include the direct cost of patient care rendered through
OptumHealth.
Cash, Cash Equivalents and Investments
Cash and cash equivalents are highly liquid investments
that have an original maturity of three months or less.
The fair value of cash and cash equivalents approximates
their carrying value because of the short maturity of the
instruments.
The Company had checks outstanding of $1.3 billion
as of both December 31, 2013 and 2012, which were
classified as Accounts Payable and Accrued Liabilities in the
Consolidated Balance Sheets and the change in this balance
has been reflected within other financing activities in the
Consolidated Statements of Cash Flows. The outstanding
checks are primarily related to zero balance accounts; the
Company does not net checks outstanding with deposits in
2013 FORM 10-K
55
other accounts.
Investments with maturities of less than one year
are classified as short-term. Because of regulatory
requirements, certain investments are included in long-term
investments regardless of their maturity date. The Company
classifies these investments as held-to-maturity and reports
them at amortized cost. Substantially all other investments
are classified as available-for-sale and reported at fair value
based on quoted market prices, where available.
The Company excludes unrealized gains and losses
on investments in available-for-sale securities from net
earnings and reports them as comprehensive income
and, net of income tax effects, as a separate component
of shareholders’ equity. To calculate realized gains and
losses on the sale of investments, the Company specifically
identifies the cost of each investment sold.
The Company evaluates an investment for impairment
by considering the length of time and extent to which
market value has been less than cost or amortized cost, the
financial condition and near-term prospects of the issuer as
well as specific events or circumstances that may influence
the operations of the issuer and the Company’s intent to
sell the security or the likelihood that it will be required
to sell the security before recovery of the entire amortized
cost.
• For debt securities, if the Company intends to either
sell or determines that it will be more likely than not
be required to sell a security before recovery of the
entire amortized cost basis or maturity of the security,
the Company recognizes the entire impairment in
Investment and Other Income. If the Company does not
intend to sell the debt security and it determines that
it will not be more likely than not be required to sell
the security but it does not expect to recover the entire
amortized cost basis, the impairment is bifurcated
into the amount attributed to the credit loss, which is
recognized in earnings, and all other causes, which are
recognized in other comprehensive income.
• For equity securities, the Company recognizes
impairments in other comprehensive income if it
expects to hold the security until fair value increases
to at least the security’s cost basis and it expects
that increase in fair value to occur in a reasonably
forecasted period. If the Company intends to sell the
equity security or if it believes that recovery of fair
value to cost will not occur in a reasonably forecasted
period, the Company recognizes the impairment in
Investment and Other Income.
New information and the passage of time can change
these judgments. The Company manages its investment
portfolio to limit its exposure to any one issuer or
market sector, and largely limits its investments to U.S.
government and agency securities; state and municipal
securities; mortgage-backed securities; and corporate debt
obligations, substantially all of which are investment grade
quality. Securities downgraded below policy minimums
after purchase will be disposed of in accordance with the
investment policy.
56
UNITEDHEALTH GROUP
Assets Under Management
The Company provides health insurance products and
services to members of AARP under a Supplemental
Health Insurance Program (the AARP Program), and
to AARP members and non-members under separate
Medicare Advantage and Medicare Part D arrangements.
The products and services under the AARP Program
include supplemental Medicare benefits (AARP Medicare
Supplement Insurance), hospital indemnity insurance,
including insurance for individuals between 50 to 64 years
of age, and other related products.
The Company’s arrangements with AARP extend to
December 31, 2020 for the AARP Program and give the
Company an exclusive right to use the AARP brand on
the Company’s Medicare Advantage and Medicare Part D
offerings until December 31, 2020, subject to certain limited
exclusions.
Pursuant to the Company’s agreement, AARP Program
assets are managed separately from its general investment
portfolio and are used to pay costs associated with the
AARP Program. These assets are invested at the Company’s
discretion, within investment guidelines approved by AARP.
The Company does not guarantee any rates of return on
these investments and, upon transfer of the AARP Program
contract to another entity, the Company would transfer
cash equal in amount to the fair value of these investments
at the date of transfer to that entity. Because the purpose
of these assets is to fund the medical costs payable, the
rate stabilization fund (RSF) liabilities and other related
liabilities associated with this AARP contract, assets under
management are classified as current assets, consistent
with the classification of these liabilities. Interest earnings
and realized investment gains and losses on these assets
accrue to the overall benefit of the AARP policyholders
through the RSF. Accordingly, they are not included in the
Company’s earnings. Interest income and realized gains and
losses related to assets under management are recorded as
an increase to the RSF and were $101 million, $109 million
and $99 million in the years ended December 31, 2013,
2012 and 2011, respectively.
The effects of changes in other balance sheet amounts
associated with the AARP Program also accrue to the
overall benefit of the AARP policyholders through the RSF
balance. Accordingly, the Company excludes the effect of
such changes in its Consolidated Statements of Cash Flows.
For more detail on the RSF, see “Other Policy Liabilities”
below.
Other Current Receivables
Other current receivables include amounts due from
pharmaceutical manufacturers for rebates and Medicare
Part D drug discounts, reinsurance and other miscellaneous
amounts due to the Company.
The Company’s PBM businesses contract with
pharmaceutical manufacturers, some of whom provide
rebates based on use of the manufacturers’ products by its
PBM businesses’ affiliated and non-affiliated clients. The
Company accrues rebates as they are earned by its clients
on a monthly basis based on the terms of the applicable
contracts, historical data and current estimates. The PBM
businesses bill these rebates to the manufacturers on a
monthly or quarterly basis depending on the contractual
terms. The PBM businesses record rebates attributable to
affiliated clients as a reduction to medical costs. Rebates
attributable to non-affiliated clients are accrued as rebates
receivable and a reduction of cost of products sold with
a corresponding payable for the amounts of the rebates
to be remitted to non-affiliated clients in accordance
with their contracts and recorded in the Consolidated
Statements of Operations as a reduction of Product
Revenue. The Company generally receives rebates from two
to five months after billing.
For details on the Company’s Medicare Part D receivables
see “Medicare Part D Pharmacy Benefits” below.
For details on the Company’s reinsurance receivable see
“Future Policy Benefits and Reinsurance Receivable” below.
Medicare Part D Pharmacy Benefits
The Company serves as a plan sponsor offering Medicare
Part D prescription drug insurance coverage under contracts
with CMS. Under the Medicare Part D program, there
are seven separate elements of payment received by the
Company during the plan year. These payment elements
are as follows:
• CMS Premium. CMS pays a fixed monthly premium per
member to the Company for the entire plan year.
• Member Premium. Additionally, certain members pay a
fixed monthly premium to the Company for the entire
plan year.
• Low-Income Premium Subsidy. For qualifying low-
income members, CMS pays some or all of the
member’s monthly premiums to the Company on the
member’s behalf.
• Catastrophic Reinsurance Subsidy. CMS pays the
Company a cost reimbursement estimate monthly to
fund the CMS obligation to pay approximately 80%
of the costs incurred by individual members in excess
of the individual annual out-of-pocket maximum. A
settlement is made with CMS based on actual cost
experience, after the end of the plan year.
• Low-Income Member Cost Sharing Subsidy. For
qualifying low-income members, CMS pays on the
member’s behalf some or all of a member’s cost sharing
amounts, such as deductibles and coinsurance. The cost
sharing subsidy is funded by CMS through monthly
payments to the Company. The Company administers
and pays the subsidized portion of the claims on behalf
of CMS, and a settlement payment is made between
CMS and the Company based on actual claims and
premium experience, after the end of the plan year.
• CMS Risk-Share. Premiums from CMS are subject to
risk corridor provisions that compare costs targeted in
the Company’s annual bids by product and region to
actual prescription drug costs, limited to actual costs
that would have been incurred under the standard
coverage as defined by CMS. Variances of more than
5% above or below the original bid submitted by
the Company may result in CMS making additional
payments to the Company or require the Company to
refund to CMS a portion of the premiums it received.
The Company estimates and recognizes an adjustment
to premium revenues related to the risk corridor
payment settlement based upon pharmacy claims
experience to date. The estimate of the settlement
associated with these risk corridor provisions requires
the Company to consider factors that may not be
certain, including estimates of eligible pharmacy
costs and member eligibility status differences with
CMS. The Company records risk-share adjustments to
Premium Revenues in the Consolidated Statements of
Operations and Other Policy Liabilities or Other Current
Receivables in the Consolidated Balance Sheets.
• Drug Discount. Health Reform Legislation mandated
a consumer discount on brand name prescription
drugs for Medicare Part D plan participants in the
coverage gap. This discount is funded by CMS and
pharmaceutical manufacturers while the Company
administers the application of these funds. Accordingly,
amounts received are not reflected as premium
revenues, but rather are accounted for as deposits. The
Company records a liability when amounts are received
from CMS and a receivable when the Company bills
the pharmaceutical manufacturers. Related cash flows
are presented as Customer Funds Administered within
financing activities in the Consolidated Statements of
Cash Flows.
2013 FORM 10-K
57
The CMS Premium, the Member Premium, and the
Low-Income Premium Subsidy represent payments for the
Company’s insurance risk coverage under the Medicare
Part D program and, therefore, are recorded as Premium
Revenues in the Consolidated Statements of Operations.
Premium revenues are recognized ratably over the
period in which eligible individuals are entitled to receive
prescription drug benefits. The Company records premium
payments received in advance of the applicable service
period in Unearned Revenues in the Consolidated Balance
Sheets.
The Catastrophic Reinsurance Subsidy and the Low-
Income Member Cost Sharing Subsidy (Subsidies)
represent cost reimbursements under the Medicare Part
D program. Amounts received for these Subsidies are not
reflected as premium revenues, but rather are accounted
for as receivables and/or deposits. Related cash flows
are presented as Customer Funds Administered within
financing activities in the Consolidated Statements of Cash
Flows.
Pharmacy benefit costs and administrative costs under
the contract are expensed as incurred and are recognized
in Medical Costs and Operating Costs, respectively, in the
Consolidated Statements of Operations.
The final 2013 risk-share amount is expected to be
settled during the second half of 2014, and is subject to the
reconciliation process with CMS.
The Consolidated Balance Sheets include the following amounts associated with the Medicare Part D program:
(in millions)
Subsidies
Drug Discount Risk-Share
Subsidies
Drug Discount
Risk-Share
Other current receivables
881
Other policy liabilities —
$
$
425
152
$
—
214
$
461
—
$
314
319
$
—
438
December 31, 2013
December 31, 2012
As of January 1, 2014, certain changes were made to
the Medicare Part D individual coverage levels by CMS,
including:
• The init ial coverage limit decreased to $2,850 from
$2,970 in 2013.
• The c atastrophic coverage begins at $6,455 as
compared to $6,734 in 2013.
• The annual out -of-pocket maximum decreased to
$4,550 from $4,750 in 2013.
• The dis count on prescription drugs within the coverage
gap of 52.5% is consistent with 2013 for brand name
drugs and increased to 28% from 21% in 2013 for
generic drugs.
payroll costs of employees devoted to specific software
development.
The Company calculates depreciation and amortization
using the straight-line method over the estimated useful
lives of the assets. The useful lives for property, equipment
and capitalized software are:
Furniture, fixtures and equipment
Buildings
Leasehold improvements
Capitalized software
3 to 7 years
35 to 40 years
7 years or length
of lease term,
whichever is shorter
3 to 5 years
Property, Equipment and Capitalized Software
Property, equipment and capitalized software are stated
at cost, net of accumulated depreciation and amortization.
Capitalized software consists of certain costs incurred in the
development of internal-use software, including external
direct costs of materials and services and applicable
Goodwill
To determine whether goodwill is impaired, annually
or more frequently if needed, the Company performs a
multi-step impairment test. First, the Company estimates
the fair values of its reporting units using discounted cash
flows. To determine fair values, the Company must make
58
UNITEDHEALTH GROUP
assumptions about a wide variety of internal and external
factors. Significant assumptions used in the impairment
analysis include financial projections of free cash flow
(including significant assumptions about operations,
capital requirements and income taxes), long-term growth
rates for determining terminal value, and discount rates.
Comparative market multiples are used to corroborate the
results of the discounted cash flow test. If the fair value
is less than the carrying value of the reporting unit, then
the implied value of goodwill would be calculated and
compared to the carrying amount of goodwill to determine
whether goodwill is impaired.
As of December 31, 2013, no reporting unit had a
fair value less than its carrying value and the Company
concluded that there was no need for any impairment of
goodwill.
Intangible assets
The Company’s intangible assets are subject to impairment
tests when events or circumstances indicate that an
intangible asset (or asset group) may be impaired. The
Company’s indefinite lived intangible assets are also
tested for impairment annually. There were no material
impairments of intangible assets during the year ended
December 31, 2013.
Other Policy Liabilities
Other policy liabilities include the RSF associated with the
AARP Program (described below), health savings account
deposits, deposits under the Medicare Part D program
(see “Medicare Part D Pharmacy Benefits” above), accruals
for premium rebate payments under Health Reform
Legislation, the current portion of future policy benefits
and customer balances. Customer balances represent excess
customer payments and deposit accounts under experience-
rated contracts. At the customer’s option, these balances
may be refunded or used to pay future premiums or claims
under eligible contracts.
Underwriting gains or losses related to the AARP
Program are directly recorded as an increase or decrease
to the RSF and accrue to the overall benefit of the AARP
policyholders, unless cumulative net losses were to exceed
the balance in the RSF. The primary components of the
underwriting results are premium revenue, medical costs,
investment income, administrative expenses, member
service expenses, marketing expenses and premium taxes.
To the extent underwriting losses exceed the balance in the
RSF; losses would be borne by the Company. Deficits may
be recovered by underwriting gains in future periods of
the contract. To date, the Company has not been required
to fund any underwriting deficits. Changes in the RSF are
reported in Medical Costs in the Consolidated Statement of
Operations. As of December 31, 2013 and 2012, the balance
in the RSF was $1.3 billion.
Future Policy Benefits and Reinsurance Receivable
Future policy benefits represent account balances that
accrue to the benefit of the policyholders, excluding
surrender charges, for universal life and investment annuity
products and for long-duration health policies sold to
individuals for which some of the premium received in
the earlier years is intended to pay benefits to be incurred
in future years. As a result of the 2005 sale of the life
and annuity business within the Company’s Golden Rule
Financial Corporation subsidiary under an indemnity
reinsurance arrangement, the Company has maintained
a liability associated with the reinsured contracts, as it
remains primarily liable to the policyholders, and has
recorded a corresponding reinsurance receivable due from
the purchaser. As of December 31, 2013, the Company had
an aggregate $1.8 billion reinsurance receivable, of which
$136 million was recorded in Other Current Receivables
and $1.7 billion was recorded in Other Assets in the
Consolidated Balance Sheets. As of December 31, 2012,
the Company had an aggregate $1.9 billion reinsurance
receivable, of which $135 million was recorded in Other
Current Receivables and $1.8 billion was recorded in Other
Assets in the Consolidated Balance Sheets. The Company
evaluates the financial condition of the reinsurer and
only records the reinsurance receivable to the extent of
probable recovery. As of December 31, 2013, the reinsurer
was rated by A.M. Best as “A+.”
Policy Acquisition Costs
The Company’s short duration health insurance contracts
typically have a one-year term and may be canceled by
the customer with at least 30 days notice. Costs related to
the acquisition and renewal of short duration customer
contracts are charged to expense as incurred.
Noncontrolling Interests
Noncontrolling interests in the Company’s subsidiaries
whose redemption is outside the control of the Company
are classified as temporary equity. The redeemable
noncontrolling interests are primarily related to non-public
shareholders of Amil. During 2013, the Company increased
its ownership of Amil to 90%. For the year ended December
31, 2013, redeemable noncontrolling interests were
reduced by $946 million primarily due to the acquisition of
all of Amil’s remaining public shares for $1.4 billion, with an
additional $57 million recorded as a reduction to Additional
Paid in Capital, partially offset by 2013 acquisitions that
included redeemable noncontrolling interests of $471
million. At Amil’s acquisition date in 2012, the Company
purchased approximately 60% of the outstanding shares
of Amil for $3.2 billion, and recorded a noncontrolling
interest of $2.2 billion. Subsequently in 2012, the Company
purchased an additional 5% of the outstanding shares of
Amil for $319 million.
Share-Based Compensation
The Company recognizes compensation expense for
share-based awards, including stock options, stock-settled
stock appreciation rights (SARs) and restricted stock and
restricted stock units (collectively, restricted shares), on a
straight-line basis over the related service period (generally
the vesting period) of the award, or to an employee’s
eligible retirement date under the award agreement,
if earlier. Restricted shares vest ratably; primarily over
three to four years and compensation expense related to
2013 FORM 10-K
59
ASU No. 2011-06, “Other Expenses (Topic 720): Fees Paid
to the Federal Government by Health Insurers a consensus
of the FASB Emerging Issues Task Force” (ASU 2011-06)
addresses the recognition and classification of an entity’s
share of the annual health insurance industry assessment
(the industry fee) mandated by Health Reform Legislation.
The industry fee is levied on health insurers for each
calendar year beginning on or after January 1, 2014 and
is not deductible for income tax purposes. The amount of
the industry fee for each health insurer is based on a ratio
of the insurer’s net health insurance premiums written for
the previous calendar year compared to the U.S. health
insurance industry total net premiums. In accordance
with the amendments in ASU 2011-06 on January 1, 2014,
the liability for the industry fee payable in 2014 will be
estimated and recorded in full within the Company’s 2014
financial statements, with a corresponding deferred cost
that will be amortized to expense using a straight-line
method of allocation over the calendar year that it is
payable.
The Company has determined that there have been no
other recently adopted or issued accounting standards that
had, or will have, a material impact on its Consolidated
Financial Statements.
restricted shares is based on the share price on date of
grant. Stock options and SARs vest ratably over four to six
years and may be exercised up to 10 years from the date
of grant. Compensation expense related to stock options
and SARs is based on the fair value at date of grant, which
is estimated on the date of grant using a binomial option-
pricing model. Under the Company’s Employee Stock
Purchase Plan (ESPP) eligible employees are allowed to
purchase the Company’s stock at a discounted price, which
is 85% of the lower market price of the Company’s common
stock at the beginning or at the end of the six-month
purchase period. Share-based compensation expense for all
programs is recognized in Operating Costs in the Company’s
Consolidated Statements of Operations.
Net Earnings Per Common Share
The Company computes basic net earnings per common
share by dividing net earnings by the weighted-average
number of common shares outstanding during the
period. The Company determines diluted net earnings per
common share using the weighted-average number of
common shares outstanding during the period, adjusted
for potentially dilutive shares associated with stock options,
SARs, restricted shares and the ESPP, (collectively, common
stock equivalents) using the treasury stock method. The
treasury stock method assumes a hypothetical issuance of
shares to settle the share-based awards, with the assumed
proceeds used to purchase common stock at the average
market price for the period. Assumed proceeds include
the amount the employee must pay upon exercise, any
unrecognized compensation cost and any related excess
tax benefit. The difference between the number of shares
assumed issued and number of shares assumed purchased
represents the dilutive shares.
Recently Adopted Accounting Standards
In February 2013, the Financial Accounting Standards
Board (FASB) issued Accounting Standards Updated
(ASU) No. 2013-02, “Comprehensive Income (Topic 220):
Reporting of Amounts Reclassified Out of Accumulated
Other Comprehensive Income” (ASU 2013-02). ASU 2013-
02 requires companies to report the effect of significant
reclassifications out of accumulated other comprehensive
income, by component, either on the face of the financial
statements or in the notes to the financial statements and
is intended to help entities improve the transparency of
changes in other comprehensive income. ASU 2013-02 does
not amend any existing requirements for reporting net
income or other comprehensive income in the financial
statements. ASU 2013-02 became effective for the
Company’s fiscal year 2013 and the new disclosures have
been included with the Company’s investment disclosures in
Note 3.
60
UNITEDHEALTH GROUP
3. INVESTMENTS
A summary of short-term and long-term investments by major security type is as follows:
(in millions)
December 31, 2013
Debt securities - available-for-sale:
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
U.S. government and agency obligations
State and municipal obligations
Corporate obligations
U.S. agency mortgage-backed securities
Non-U.S. agency mortgage-backed securities
$
Total debt securities - available-for-sale
Equity securities - available-for-sale
Debt securities - held-to-maturity:
U.S. government and agency obligations
State and municipal obligations
Corporate obligations
Total debt securities - held-to-maturity
2,211
6,902
7,265
2,256
697
19,331
1,576
181
28
334
543
$
5
147
130
23
12
317
9
$
(21)
(72)
(60)
(61)
(7)
(221)
(13)
1 —
— —
— —
1 —
$
2,195
6,977
7,335
2,218
702
19,427
1,572
182
28
334
544
Total investments
$
21,450
$
327
$
(234)
$
21,543
December 31, 2012
Debt securities - available-for-sale:
U.S. government and agency obligations
State and municipal obligations
Corporate obligations
U.S. agency mortgage-backed securities
Non-U.S. agency mortgage-backed securities
$
Total debt securities - available-for-sale
Equity securities - available-for-sale
Debt securities - held-to-maturity:
U.S. government and agency obligations
State and municipal obligations
Corporate obligations
Total debt securities - held-to-maturity
2,501
6,282
6,930
2,168
538
18,419
668
168
30
641
839
$
38
388
283
$ (1)
(3)
(4)
70 —
36 —
815
10
(8)
(1)
6 —
— —
2 —
8 —
$
2,538
6,667
7,209
2,238
574
19,226
677
174
30
643
847
Total investments
$
19,926
$
833
$
(9)
$
20,750
The fair values of the Company’s mortgage-backed securities by credit rating (when multiple credit ratings are available for
an individual security, the average of the available ratings is used) and origination date as of December 31, 2013 were as
follows:
(in millions)
AAA
AA Grade Value
Non-Investment Total Fair
2013 $ 130 $ — $ —
—
2012
—
2011
—
2010
—
2009
2
2007
10
Pre - 2007
—
U.S. agency mortgage-backed securities
—
—
—
—
—
3
—
106
20
26
2
63
340
2,218
$ 130
106
20
26
2
65
353
2,218
Total $ 2,905 $ 3 $ 12
$ 2,920
The Company includes any securities backed by Alt-A or sub-prime mortgages and any commercial mortgage loans in
default in the non-investment grade column in the table above.
The amortized cost and fair value of available-for-sale debt securities as of December 31, 2013, by contractual maturity,
were as follows:
2013 FORM 10-K
61
(in millions)
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
U.S. agency mortgage-backed securities
Non-U.S. agency mortgage-backed securities
Total debt securities - available-for-sale
Amortized
Cost
$ 2,042
7,121
5,164
2,051
2,256
697
$ 19,331
Fair
Value
$ 2,054
7,235
5,182
2,036
2,218
702
$ 19,427
The amortized cost and fair value of held-to-maturity debt securities as of December 31, 2013, by contractual maturity, were
as follows:
(in millions)
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Total debt securities - held-to-maturity
Amortized
Cost
$
$
78
231
154
80
543
Fair
Value
$
78
230
156
80
$ 544
The fair value of available-for-sale investments with gross unrealized losses by major security type and length of time that
individual securities have been in a continuous unrealized loss position were as follows:
(in millions)
December 31, 2013
Debt securities - available-for-sale:
Less Than 12 Months
Gross
Unrealized
Losses
Fair
Value
12 Months or Greater
Gross
Unrealized
Losses
Fair
Value
Total
Fair
Value
Gross
Unrealized
Losses
U.S. government and agency obligations $ 1,055
2,491
State and municipal obligations
2,573
Corporate obligations
1,393
289
$ 7,801
U.S. agency mortgage-backed securities
Non-U.S. agency mortgage-backed securities
Total debt securities - available-for-sale
$
(19)
(62)
(51)
(51)
(6)
$ (189)
$
$
17
128
103
105
26
379
$
$
(2)
(10)
(9)
(10)
(1)
(32)
$ 1,072
2,619
2,676
1,498
315
$ 8,180
Equity securities - available-for-sale
$
180
$
(13)
$ —
$ —
$
180
December 31, 2012
Debt securities - available-for-sale:
U.S. government and agency obligations $
State and municipal obligations
Corporate obligations
183
362
695
Total debt securities - available-for-sale
$ 1,240
Equity securities - available-for-sale
$
13
$
$
$
(1)
(3)
(4)
(8)
(1)
$ —
$ —
— —
— —
$
183
362
695
$ —
$ —
$ 1,240
$ —
$ —
$
13
$
$
$
$
$
$
(21)
(72)
(60)
(61)
(7)
(221)
(13)
(1)
(3)
(4)
(8)
(1)
The unrealized losses from all securities as of December 31, 2013 were generated from approximately 6,400 positions
out of a total of 19,700 positions. The Company believes that it will collect the principal and interest due on its debt
securities that have an amortized cost in excess of fair value. The unrealized losses were primarily caused by interest rate
increases and not by unfavorable changes in the credit ratings associated with these securities. At each reporting period,
the Company evaluates securities for impairment when the fair value of the investment is less than its amortized cost. The
Company evaluated the underlying credit quality and credit ratings of the issuers, noting neither a significant deterioration
since purchase nor other factors leading to an other-than-temporary impairment (OTTI). Therefore, the Company believes
these losses to be temporary. As of December 31, 2013, the Company did not have the intent to sell any of the securities in
an unrealized loss position.
62
UNITEDHEALTH GROUP
The Company’s investments in equity securities consist of investments in Brazilian real denominated fixed-income funds,
employee savings plan related investments, private equity funds, and dividend paying stocks. The Company evaluated its
investments in equity securities for severity and duration of unrealized loss, overall market volatility and other market
factors.
Net realized gains reclassified out of accumulated other comprehensive income were from the following sources:
(in millions)
For the Years Ended December 31,
2012
2013
2011
Total OTTI $
Portion of loss recognized in other comprehensive income
Net OTTI recognized in earnings
Gross realized losses from sales
Gross realized gains from sales
Net realized gains (included in Investment and
Other Income on the Consolidated Statements
of Operations)
Income tax effect (included in Provision for Income
Taxes on the Consolidated Statements of Operations)
(8)
—
(8)
(9)
198
$
(6)
$ (12)
— —
(6) (12)
(13) (11)
175 136
181
156 113
(66)
(57) (41)
Realized gains, net of taxes $
115
$
99
$ 72
4. FAIR VALUE
Certain assets and liabilities are measured at fair value
in the Consolidated Financial Statements or have fair
values disclosed in the Notes to the Consolidated Financial
Statements. These assets and liabilities are classified into
one of three levels of a hierarchy defined by GAAP. In
instances in which the inputs used to measure fair value
fall into different levels of the fair value hierarchy, the fair
value measurement is categorized in its entirety based on
the lowest level input that is significant to the fair value
measurement in its entirety. The Company’s assessment
of the significance of a particular item to the fair value
measurement in its entirety requires judgment, including
the consideration of inputs specific to the asset or liability.
The fair value hierarchy is summarized as follows:
Level 1 — Quoted prices (unadjusted) for identical assets
liabilities in active markets.
Level 2 — Other observable inputs, either directly or
indirectly, including:
• Quoted prices for similar assets/liabilities in active
markets;
• Quoted prices for identical or similar assets/liabilities
in non-active markets (e.g., few transactions, limited
information, non-current prices, high variability over
time);
• Input s other than quoted prices that are observable for
the asset/liability (e.g., interest rates, yield curves,
implied volatilities, credit spreads); and
• Inputs that are corroborated by other observable
market data.
Level 3 — Unobservable inputs that cannot be
corroborated by observable market data.
Transfers between levels, if any, are recorded as of the
beginning of the reporting period in which the transfer
occurs; there were no transfers between Levels 1, 2 or 3
of any financial assets or liabilities during the years ended
December 31, 2013 or 2012.
Non-financial assets and liabilities or financial assets
and liabilities that are measured at fair value on a
nonrecurring basis are subject to fair value adjustments
only in certain circumstances, such as when the Company
records an impairment. There were no significant fair value
adjustments for these assets and liabilities recorded during
the years ended December 31, 2013, 2012, or 2011.
The following methods and assumptions were used
to estimate the fair value and determine the fair value
hierarchy classification of each class of financial instrument
included in the tables below:
Cash and Cash Equivalents. The carrying value of cash
and cash equivalents approximates fair value as maturities
are less than three months. Fair values of cash equivalent
instruments that do not trade on a regular basis in active
markets are classified as Level 2.
Debt and Equity Securities. Fair values of debt and equity
securities are based on quoted market prices, where
available. The Company obtains one price for each security
primarily from a third-party pricing service (pricing service),
which generally uses quoted or other observable inputs for
the determination of fair value. The pricing service normally
derives the security prices through recently reported trades
for identical or similar securities, and, if necessary, makes
adjustments through the reporting date based upon
available observable market information. For securities not
actively traded, the pricing service may use quoted market
prices of comparable instruments or discounted cash flow
analyses, incorporating inputs that are currently observable
in the markets for similar securities. Inputs that are often
used in the valuation methodologies include, but are not
limited to, benchmark yields, credit spreads, default rates,
prepayment speeds and non-binding broker quotes. As the
Company is responsible for the determination of fair value,
it performs quarterly analyses on the prices received
from the pricing service to determine whether the
prices are reasonable estimates of fair value. Specifically,
the Company compares the prices received from the
pricing service to prices reported by a secondary pricing
source, such as its custodian, its investment consultant
and third-party investment advisors. Additionally, the
Company compares changes in the reported market
values and returns to relevant market indices to test the
reasonableness of the reported prices. The Company’s
internal price verification procedures and reviews of
fair value methodology documentation provided by
independent pricing services have not historically resulted
in adjustment in the prices obtained from the pricing
service.
Fair values of debt securities that do not trade on a
regular basis in active markets but are priced using other
observable inputs are classified as Level 2.
Fair value estimates for Level 1 and Level 2 equity
securities are based on quoted market prices for actively
traded equity securities and/or other market data for
the same or comparable instruments and transactions in
establishing the prices.
The fair values of Level 3 investments in venture
capital portfolios are estimated using a market valuation
technique that relies heavily on management assumptions
and qualitative observations. Under the market approach,
the fair values of the Company’s various venture capital
investments are computed using limited quantitative and
qualitative observations of activity for similar companies
in the current market. The Company’s market modeling
utilizes, as applicable, transactions for comparable
companies in similar industries and having similar revenue
and growth characteristics; and similar preferences in their
capital structure. Key significant unobservable inputs in
the market technique include implied earnings before
interest, taxes, depreciation and amortization (EBITDA)
2013 FORM 10-K
63
multiples and revenue multiples. Additionally, the fair
values of certain of the Company’s venture capital securities
are based off of recent transactions in inactive markets for
identical or similar securities. Significant changes in any of
these inputs could result in significantly lower or higher fair
value measurements.
Throughout the procedures discussed above in relation to
the Company’s processes for validating third-party pricing
information, the Company validates the understanding
of assumptions and inputs used in security pricing and
determines the proper classification in the hierarchy based
on that understanding.
AARP Program-related Investments. AARP Program-related
investments consist of debt and equity securities held to
fund costs associated with the AARP Program and are
priced and classified using the same methodologies as the
Company’s debt and equity securities.
Interest Rate and Currency Swaps. Fair values of the
Company’s swaps are estimated using the terms of the
swaps and publicly available information including market
yield curves. Because the swaps are unique and not actively
traded but are valued using other observable inputs, the
fair values are classified as Level 2.
Long-term Debt. The fair value of the Company’s long-
term debt is estimated and classified using the same
methodologies as the Company’s investments in debt
securities.
AARP Program-related Other Liabilities. AARP Program-
related other liabilities consist of liabilities that represent
the amount of net investment gains and losses related
to AARP Program-related investments that accrue to the
benefit of the AARP policyholders.
64
UNITEDHEALTH GROUP
The following table presents a summary of fair value measurements by level and carrying values for items measured at fair
value on a recurring basis in the Consolidated Balance Sheets excluding AARP Program-related assets and liabilities, which
are presented in a separate table below:
Total assets at fair value
$
10,071
$
17,893 $
(in millions)
December 31, 2013
Cash and cash equivalents
Debt securities - available-for-sale:
U.S. government and agency obligations
State and municipal obligations
Corporate obligations
U.S. agency mortgage-backed securities
Non-U.S. agency mortgage-backed securities
Total debt securities - available-for-sale
Equity securities - available-for-sale
Percentage of total assets at fair value
Interest rate swap liabilities
December 31, 2012
Cash and cash equivalents
Debt securities - available-for-sale:
U.S. government and agency obligations
State and municipal obligations
Corporate obligations
U.S. agency mortgage-backed securities
Non-U.S. agency mortgage-backed securities
Total debt securities - available-for-sale
Equity securities - available-for-sale
Interest rate swap assets
Total assets at fair value
Quoted Prices
in Active
Markets
(Level 1)
Other
Observable
Inputs
(Level 2)
Unobservable
Inputs
(Level 3)
$
7,005
$
271
$
1,750
—
25
—
—
1,775
1,291
445
6,977
7,274
2,218
696
17,610
12
$
$
36%
—
7,615
1,752
—
13
—
—
1,765
450
—
$
$
$
$
63%
163
791
786
6,667
7,185
2,238
568
17,444
3
—
—
—
36
—
6
42
269
311
1%
—
—
—
—
11
—
6
17
224
Total
Fair and
Carrying
Value
$
7,276
2,195
6,977
7,335
2,218
702
19,427
1,572
$
28,275
$
$
100%
163
8,406
2,538
6,667
7,209
2,238
574
19,226
677
$
9,830
$
18,252
$
241
$
28,323
14 — 14
Percentage of total assets at fair value
35%
64%
1%
100%
Interest rate and currency swap liabilities $ — $ 14
$ — $ 14
The following table presents a summary of fair value measurements by level and carrying values for certain financial
instruments not measured at fair value on a recurring basis in the Consolidated Balance Sheets:
2013 FORM 10-K
65
Quoted Prices
in Active
Markets
(Level 1)
Other
Observable Unobservable
Inputs
(Level 2)
Inputs
(Level 3)
Total
Fair
Value
Total
Carrying
Value
(in millions)
December 31, 2013
Debt securities - held-to-maturity:
U.S. government and agency obligations
State and municipal obligations
Corporate obligations
Total debt securities - held-to-maturity
$
$
Long-term debt and other financing obligations $
December 31, 2012
Debt securities - held-to-maturity:
U.S. government and agency obligations
State and municipal obligations
Corporate obligations
Total debt securities - held-to-maturity
Long-term debt
$
$
$
182
—
47
229
—
174
—
10
184
—
$
$
—
—
9
9
$ 16,602
$
$
—
1
346
347
$ 17,034
$ —
28
278
$
306
$ —
$ —
29
287
$
316
$ —
$
$
182
28
334
544
$
$
181
28
334
543
$ 16,602
$ 15,745
$
$
174
30
643
847
$
$
168
30
641
839
$ 17,034
$ 15,167
The carrying amounts reported in the Consolidated Balance Sheets for other current financial assets and liabilities
approximate fair value because of their short-term nature. These assets and liabilities are not listed in the table above.
A reconciliation of the beginning and ending balances of assets measured at fair value on a recurring basis using Level 3
inputs is as follows:
(in millions)
Securities Securities
Total
Securities Securities
Total
Securities Securities
Total
December 31, 2013
Equity
Debt
December 31, 2012
Equity
Debt
December 31, 2011
Equity
Debt
$
at beginning of period
17 $ 224
71
38
(25)
(10)
Balance
Purchases
Sales
Settlements — — —
Net unrealized losses
in accumulated other
comprehensive income (2)
Net realized (losses) gains
(7)
$ 208
$ 241
109
11
(35) —
$
$ 141
209 $ 417
71
92
82
(34) (34) —
(25)
(1)
$ 349
$ 208
35
127
(17) (17)
(7) (32)
(1) —
(9) —
(14)
(14) —
(4)
(4)
in investment and other income (1)
6
Transfers to held-to-maturity
— — —
5 — 13 13 — (6)
—
(21) (222) —
(201)
(6)
—
Balance
at
end of
period
$
42 $ 269
$ 311
$
17
$
224 $ 241
$ 208
$ 209
$ 417
66
UNITEDHEALTH GROUP
The following table presents quantitative information regarding unobservable inputs that were significant to the valuation
of assets measured at fair value on a recurring basis using Level 3 inputs:
Fair
(in millions) Value Valuation Technique Unobservable Input Low High
Range
December 31, 2013
Equity securities - available-for-sale
Venture capital portfolios
$233
Market approach - comparable companies
Revenue multiple 1.0 6.0
36
Market approach - recent transactions
Inactive market transactions N/A N/A
EBITDA multiple 8.0 9.0
Total equity securities
available-for-sale
$269
Also included in the Company’s assets measured at fair value on a recurring basis using Level 3 inputs were $42 million of
available-for-sale debt securities at December 31, 2013, which were not significant.
The Company elected to measure the entirety of the AARP Assets Under Management at fair value pursuant to the fair
value option. See Note 2 for further information on the AARP Program. The following table presents fair value information
about the AARP Program-related financial assets and liabilities:
(in millions)
December 31, 2013
Cash and cash equivalents
Debt securities:
U.S. government and agency obligations
State and municipal obligations
Corporate obligations
U.S. agency mortgage-backed securities
Non-U.S. agency mortgage-backed securities
Total debt securities
Equity securities - available-for-sale
Total assets at fair value
Other liabilities
December 31, 2012
Cash and cash equivalents
Debt securities:
U.S. government and agency obligations
State and municipal obligations
Corporate obligations
U.S. agency mortgage-backed securities
Non-U.S. agency mortgage-backed securities
Total debt securities
Equity securities - available-for-sale
Total assets at fair value
Other liabilities
Quoted Prices
in Active
Markets
(Level 1)
Other
Observable
Inputs
(Level 2)
Total
Fair and
Carrying
Value
$
$
$
$
$
$
265
426
—
—
—
—
426
—
691
3
230
545
—
—
—
—
545
—
775
23
$
—
$
265
301
63
1,145
414
139
2,062
4
2,066
11
—
244
51
1,118
427
155
1,995
3
1,998
58
$
$
$
$
$
727
63
1,145
414
139
2,488
4
2,757
14
230
789
51
1,118
427
155
2,540
3
2,773
81
$
$
$
$
$
5. PROPERTY, EQUIPMENT AND CAPITALIZED SOFTWARE
A summary of property, equipment and capitalized software is as follows:
(in millions)
Land and improvements
Buildings and improvements
Computer equipment
Furniture and fixtures
Less accumulated depreciation
Property and equipment, net
Capitalized software
Less accumulated amortization
Capitalized software, net
Total property, equipment and capitalized software, net
2013 FORM 10-K
67
December 31, 2013
December 31, 2012
$
$
318
2,051
1,519
564
(1,760)
2,692
2,233
(915)
1,318
4,010
$
$
358
1,910
1,447
488
(1,542)
2,661
2,300
(1,022)
1,278
3,939
Depreciation expense for property and equipment for the years ended December 31, 2013, 2012 and 2011 was $445 million,
$449 million and $386 million, respectively. Amortization expense for capitalized software for the years ended December 31,
2013, 2012 and 2011 was $411 million, $412 million and $377 million, respectively.
6. GOODWILL AND OTHER INTANGIBLE ASSETS
Changes in the carrying amount of goodwill, by reportable segment, were as follows:
(in millions)
UnitedHealthcare OptumHealth
OptumInsight
OptumRx
Consolidated
Balance at January 1, 2012
Acquisitions
Foreign currency effects and
adjustments, net
Balance at December 31, 2012
Acquisitions
Dispositions
Foreign currency effects and
adjustments, net
$
17,932
6,557
$
(30)
24,459
408
(5)
2,113
705
—
2,818
48
—
$
3,090
98
$
(19)
3,169
483
—
(611)
(6) 1
Balance at December 31, 2013
$
24,251
$
2,860
$
3,653
$
840
—
—
840
—
—
—
840
$
23,975
7,360
(49)
31,286
939
(5)
(616)
$
31,604
In the fourth quarter of 2012, the Company purchased Amil, a health care company located in Brazil, providing health
and dental benefits, hospital and clinical services, and advanced care management resources to nearly 7 million people.
During 2013, the Company acquired all of Amil’s remaining public shares for $1.5 billion, bringing the Company’s ownership
of Amil to 90%. The remaining stake in Amil is held by shareholders, including Amil’s CEO, who has been a member of the
Company’s Board of Directors since October 2012, who have committed to retain the shares for at least five years, through
October 2017. These shareholders have the right to put the shares to the Company and the Company has the right to call
these shares upon expiration of the five year term, unless accelerated upon certain events, at fair market value. Related to
this acquisition, Amil’s CEO invested approximately $470 million in unregistered UnitedHealth Group common shares in the
fourth quarter of 2012 and has committed to hold those shares for the same five year term, subject to certain exceptions.
The total consideration paid and fair value of the noncontrolling interest exceeded the estimated fair value of the net
tangible assets acquired by $6.0 billion, of which $0.7 billion has been allocated to finite-lived intangible assets, $0.7 billion
to indefinite-lived intangible assets and $4.6 billion to goodwill. In conjunction with the Amil share purchases, the Company
generated Brazilian tax deductible goodwill of approximately R$8.9 billion ($3.8 billion in U.S. dollars at December 31,
2013).
For the years ended December 31, 2013, 2012 and 2011, aggregate consideration paid, net of cash assumed, for
acquisitions other than Amil was $0.4 billion, $3.3 billion and $1.8 billion, respectively. These acquisitions were not material
to the Company’s Consolidated Financial Statements.
68
UNITEDHEALTH GROUP
The gross carrying value, accumulated amortization and net carrying value of other intangible assets were as follows:
December 31, 2013
December 31, 2012
Gross
Net
Gross
Net
(in millions)
Customer-related
Trademarks and technology
Trademarks - indefinite-lived
Other
Carrying Accumulated Carrying
Amortization
Value
Value
Carrying Accumulated Carrying
Value Amortization
Value
$ (2,028)
$ 4,821
433
(191)
589 —
(64)
284
$ 2,793
242
589
220
$ 3,600
$ (1,629)
$ 5,229
445
299
(146)
611 — 611
172
(49)
221
Total
$ 6,127
$ (2,283)
$ 3,844
$ 6,506
$ (1,824)
$ 4,682
The acquisition date fair values and weighted-average useful lives assigned to finite-lived intangible assets acquired in
business combinations consisted of the following by year of acquisition:
2013
2012
(in millions, except years)
Customer-related
Trademarks and technology
Other
Weighted-
Average
Weighted-
Average
Fair Value Useful Life Fair Value Useful Life
$
12 years
12 years
$ 1,530
79
111
8 years
4 years
15 years
55
27
—
Total acquired finite-lived intangible assets
$
82
12 years
$ 1,720
9 years
Estimated full year amortization expense relating to intangible assets for each of the next five years ending December 31 is
as follows:
(in millions)
2014
2015
2016
2017
2018
$
500
478
449
411
332
Amortization expense relating to intangible assets for 2013, 2012 and 2011 was $519 million, $448 million and $361 million,
respectively.
2013 FORM 10-K
69
7. MEDICAL COSTS AND MEDICAL COSTS PAYABLE
The following table provides details of the Company’s net favorable medical cost development:
(in millions)
Related to Prior Years
For the Years Ended December 31,
2012
2013
2011
$
680
$
860
$
720
The net favorable development for the years ended December 31, 2013, 2012, and 2011 was primarily driven by lower than
expected health system utilization levels. The years ended December 31, 2012 and 2011 were also impacted by increased
efficiency in claims processing and handling.
The following table shows the components of the change in medical costs payable for the years ended December 31:
(in millions)
Medical costs payable, beginning of period
Acquisitions
Reported medical costs:
Current year
Prior years
Total reported medical costs
Claim payments:
Payments for current year
Payments for prior year
Total claim payments
Medical costs payable, end of period
2013
$
11,004
—
89,970
(680)
89,290
(78,989)
(9,730)
(88,719)
11,575
$
2012
$
9,799
1,029
81,086
(860)
80,226
(71,832)
(8,218)
(80,050)
$ 11,004
$
2011
9,220
155
75,052
(720)
74,332
(65,763)
(8,145)
(73,908)
9,799
$
70
UNITEDHEALTH GROUP
8. COMMERCIAL PAPER AND LONG-TERM DEBT
Commercial paper and senior unsecured long-term debt consisted of the following:
(in millions)
Commercial Paper
4.875% notes due February 2013
4.875% notes due April 2013
4.750% notes due February 2014
5.000% notes due August 2014
Floating-rate notes due August 2014
4.875% notes due March 2015 (a)
0.850% notes due October 2015 (a)
5.375% notes due March 2016 (a)
1.875% notes due November 2016
5.360% notes due November 2016
6.000% notes due June 2017
1.400% notes due October 2017 (a)
6.000% notes due November 2017
6.000% notes due February 2018
1.625% notes due March 2019 (a)
3.875% notes due October 2020 (a)
4.700% notes due February 2021
3.375% notes due November 2021 (a)
2.875% notes due March 2022 (a)
0.000% notes due November 2022
2.750% notes due February 2023 (a)
2.875% notes due March 2023 (a)
5.800% notes due March 2036
6.500% notes due June 2037
6.625% notes due November 2037
6.875% notes due February 2038
5.700% notes due October 2040
5.950% notes due February 2041
4.625% notes due November 2041
4.375% notes due March 2042
3.950% notes due October 2042
4.250% notes due March 2043
December 31, 2013
Carrying
Value
Par
Value
Fair
Value
December 31, 2012
Carrying
Value
Fair
Value
Par
Value
$ 1,115
—
—
172
389
250
416
625
601
400
95
441
625
156
1,100
500
450
400
500
1,100
15
625
750
850
500
650
1,100
300
350
600
502
625
750
$ 1,115
—
—
173
397
250
431
624
641
398
95
479
613
168
1,116
489
435
416
472
981
9
563
729
845
495
645
1,084
298
348
593
486
611
740
$ 1,115
—
—
173
400
250
436
628
657
408
107
506
617
178
1,271
481
474
436
494
1,046
10
572
698
935
593
786
1,370
329
397
567
459
530
673
$ 1,587
534
409
172
389
—
416
625
601
400
95
441
625
156
1,100
—
450
400
500
1,100
15
625
—
850
500
650
1,100
300
350
600
502
625
—
$ 1,587
534
411
178
411
—
444
623
660
397
95
489
622
170
1,120
—
442
417
512
998
9
619
—
845
495
645
1,084
298
348
593
486
611
—
$ 1,587
536
413
180
414
—
453
627
682
412
110
528
626
191
1,339
—
499
466
533
1,128
11
631
—
1,025
659
860
1,510
364
440
641
521
622
—
Total U.S. dollar denominated debt
16,952
16,739
17,596
16,117
16,143
18,008
Cetip Interbank Deposit Rate (CDI) +
1.3% Subsidiary floating debt due October 2013
CDI + 1.45% Subsidiary floating debt due October 2014
110% CDI Subsidiary floating debt due December 2014
CDI + 1.6% Subsidiary floating debt due October 2015
Brazilian Extended National Consumer Price Index (IPCA)
+ 7.61% Subsidiary floating debt due October 2015
Total Brazilian real denominated debt (in U.S. dollars)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
147
147
147
74
73
588
148
149
151
76
87
611
150
150
147
76
90
613
Total commercial paper and long-term debt
$ 16,952
$ 16,739
$ 17,596
$ 16,705
$ 16,754
$ 18,621
(a) Fixed-rate debt instruments hedged with interest rate swap contracts. See below for more information on the
Company’s interest rate swaps.
As of December 31, 2013, the Company’s long-term debt obligations also included $121 million of other financing
obligations, of which $34 million were current.
Maturities of commercial paper and long-term debt for the years ending December 31 are as follows:
(in millions)
2014
2015
2016
2017
2018
Thereafter
2013 FORM 10-K
71
$ 1,969
1,086
1,140
1,266
1,116
10,283
Commercial Paper and Bank Credit Facilities
Commercial paper consists of short-duration, senior unsecured debt privately placed on a discount basis through broker-
dealers. As of December 31, 2013, the Company’s outstanding commercial paper had a weighted-average annual interest
rate of 0.2%.
The Company has $3.0 billion five-year and $1.0 billion 364-day revolving bank credit facilities with 23 banks, which
mature in November 2018 and November 2014, respectively. These facilities provide liquidity support for the Company’s
$4.0 billion commercial paper program and are available for general corporate purposes. There were no amounts
outstanding under these facilities as of December 31, 2013. The interest rates on borrowings are variable based on term
and are calculated based on the London Interbank Offered Rate (LIBOR) plus a credit spread based on the Company’s senior
unsecured credit ratings. As of December 31, 2013, the annual interest rates on both bank credit facilities, had they been
drawn, would have ranged from 1.0% to 1.2%.
Debt Covenants
The Company’s bank credit facilities contain various covenants including requiring the Company to maintain a debt to debt-
plus-equity ratio of not more than 50%. The Company was in compliance with its debt covenants as of December 31, 2013.
Interest Rate Swap Contracts
The Company uses interest rate swap contracts to convert a portion of its interest rate exposure from fixed rates to
floating rates to more closely align interest expense with interest income received on its cash equivalent and variable rate
investment balances. The floating rates are benchmarked to LIBOR. The swaps are designated as fair value hedges on the
Company’s fixed-rate debt. Since the critical terms of the swaps match those of the debt being hedged, they are assumed to
be highly effective hedges and all changes in fair value of the swaps are recorded as an adjustment to the carrying value of
the related debt with no net impact recorded in the Consolidated Statements of Operations.
The following table summarizes the location and fair value of the interest rate swap fair value hedges on the Company’s
Consolidated Balance Sheet:
Type of Fair Value Hedge
Notional Amount
Fair Value
Balance Sheet Location
(in billions)
(in millions)
December 31, 2013
Interest rate swap contracts
December 31, 2012
Interest rate swap contracts
$
$
6.2
2.8
$ 163
Other liabilities
$ 14
11
Other assets
Other liabilities
The following table provides a summary of the effect of changes in fair value of fair value hedges on the Company’s
Consolidated Statements of Operations:
(in millions)
For the Years Ended December 31,
2013 2012 2011
Hedge - interest rate swap (loss) gain recognized in interest expense
Hedged item - long-term debt gain (loss) recognized in interest expense
Net impact on the Company’s Consolidated Statements of Operations
$ (166)
166
$ —
$ 3 $
(3)
$ —
190
(190)
$
—
72
UNITEDHEALTH GROUP
9. INCOME TAXES
The current income tax provision reflects the tax consequences of revenues and expenses currently taxable or deductible
on various income tax returns for the year reported. The deferred income tax provision or benefit generally reflects the net
change in deferred income tax assets and liabilities during the year, excluding any deferred income tax assets and liabilities
of acquired businesses. The components of the provision for income taxes for the years ended December 31 are as follows:
(in millions)
Current Provision:
Federal
State and local
Total current provision
Deferred provision
Total provision for income taxes
2013
2012
2011
$
$
3,004
237
3,241
1
3,242
$
2,638
150
2,788
308
$
3,096
$
$
2,608
150
2,758
59
2,817
The reconciliation of the tax provision at the U.S. federal statutory rate to the provision for income taxes and the effective
tax rate for the years ended December 31 is as follows:
(in millions, except percentages)
2013
2012
2011
Tax provision at the U.S. federal statutory rate
State income taxes, net of federal benefit
Settlement of state exams, net of federal benefit
Tax-exempt investment income
(0.6)
0.5
Non-deductible compensation
Other, net 9 0.1
$ 3,120
126
1
(53)
39
35.0%
1.4
1.7
— 2 —
(0.7)
0.2
(0.3)
(59)
22
(30)
$ 3,018 35.0%
143
$ 2,785
136
35.0%
1.7
(29) (0.4)
(0.8)
0.1
(0.2)
(63)
10
(22)
Provision for income taxes
$ 3,242 36.4%
$ 3,096
35.9%
$ 2,817
35.4%
The higher effective income tax rate for 2013 as compared to 2012 primarily resulted from the favorable resolution of
various one-time tax matters in 2012.
Deferred income tax assets and liabilities are recognized for the differences between the financial and income tax reporting
bases of assets and liabilities based on enacted tax rates and laws. The components of deferred income tax assets and
liabilities as of December 31 are as follows:
2013 FORM 10-K
73
(in millions)
Deferred income tax assets:
Accrued expenses and allowances
U.S. federal and state net operating loss carryforwards
Share-based compensation
Long-term liabilities
Medical costs payable and other policy liabilities
Non-U.S. tax loss carryforwards
Unearned revenues
Unrecognized tax benefits
Other - domestic
Other - non-U.S.
Subtotal
Less: valuation allowances
Total deferred income tax assets
Deferred income tax liabilities:
U.S. federal and state intangible assets
Non-U.S. goodwill and intangible assets
Capitalized software
Net unrealized gains on investments
Depreciation and amortization
Prepaid expenses
Other-non-U.S.
Total deferred income tax liabilities
Net deferred income tax liabilities
2013
2012
$
$
284
257
200
170
155
110
65
38
57
89
1,425
(207)
1,218
(1,207)
(453)
(481)
(31)
(268)
(137)
(7)
(2,584)
(1,366)
$
306
276
238
160
149
126
64
25
93
142
1,579
(271)
1,308
(1,335)
(640)
(482)
(296)
(249)
(113)
(179)
(3,294)
(1,986)
$
Valuation allowances are provided when it is considered more likely than not that deferred tax assets will not be
realized. The valuation allowances primarily relate to future tax benefits on certain federal, state and non-U.S. net
operating loss carryforwards. Federal net operating loss carryforwards of $111 million expire beginning in 2021 through
2033, state net operating loss carryforwards expire beginning in 2014 through 2033. Substantially all of the non-U.S. tax loss
carryforwards have indefinite carryforward periods.
As of December 31, 2013, the Company had $359 million of undistributed earnings from non-U.S. subsidiaries that are
intended to be reinvested in non-U.S. operations. Because these earnings are considered permanently reinvested, no U.S.
tax provision has been accrued related to the repatriation of these earnings. It is not practicable to estimate the amount of
U.S. tax that might be payable on the eventual remittance of such earnings.
A reconciliation of the beginning and ending amount of unrecognized tax benefits as of December 31 is as follows:
(in millions)
Gross unrecognized tax benefits, beginning of period
Gross increases:
Current year tax positions
Prior year tax positions
Gross decreases:
Prior year tax positions —
Settlements —
(5)
Statute of limitations lapses
Gross unrecognized tax benefits, end of period
$
89
$
81
$
129
2013
2012
2011
$
81
$
129
$
220
8
5
6
18
(48)
(10)
(14)
11
10
(34)
(25)
(53)
considered an “extraordinary dividend” and must receive
prior regulatory approval.
In 2013, based on the 2012 statutory net income and
statutory capital and surplus levels, the maximum amount
of ordinary dividends that could have been paid by the
Company’s U.S. regulated subsidiaries to their parent
companies was $4.3 billion. For the year ended December
31, 2013, the Company’s regulated subsidiaries paid their
parent companies dividends of $3.2 billion, including $430
million of extraordinary dividends. For the year ended
December 31, 2012, the Company’s regulated subsidiaries
paid their parent companies dividends of $4.9 billion,
including $1.2 billion of extraordinary dividends. As of
December 31, 2013, $1.0 billion of the Company’s $7.3
billion of cash and cash equivalents was available for
general corporate use.
The Company’s regulated subsidiaries had estimated
aggregate statutory capital and surplus of approximately
$14.8 billion as of December 31, 2013. The estimated
statutory capital and surplus necessary to satisfy regulatory
requirements of the Company’s regulated subsidiaries was
approximately $5.5 billion as of December 31, 2013.
Optum Bank must meet minimum requirements for Tier
1 leverage capital, Tier 1 risk-based capital, and Total risk-
based capital of the Federal Deposit Insurance Corporation
(FDIC) to be considered “Well Capitalized” under the
capital adequacy rules to which it is subject. At December
31, 2013, the Company believes that Optum Bank met the
FDIC requirements to be considered “Well Capitalized.”
Share Repurchase Program
Under its Board of Directors’ authorization, the Company
maintains a share repurchase program. Repurchases may be
made from time to time in open market purchases or other
types of transactions (including structured share repurchase
programs), subject to certain Board restrictions. In June
2013, the Board renewed and expanded the Company’s
share repurchase program with an authorization to
repurchase up to 110 million shares of its common stock.
During the year ended December 31, 2013, the Company
repurchased 48 million shares at an average price of $65.52
per share and an aggregate cost of $3.2 billion. As of
December 31, 2013, the Company had Board authorization
to purchase up to an additional 83 million shares of its
common stock.
74
UNITEDHEALTH GROUP
The Company classifies interest and penalties associated
with uncertain income tax positions as income taxes within
its Consolidated Financial Statements. During 2013, the
Company recognized $4 million of interest expense. The
Company recognized tax benefits from the net reduction
of interest and penalties accrued of $20 million and $12
million during the years ended December 31, 2012 and
2011, respectively. The Company had $27 million and $23
million of accrued interest and penalties for uncertain tax
positions as of December 31, 2013 and 2012, respectively.
These amounts are not included in the reconciliation
above. As of December 31, 2013, the total amount of
unrecognized tax benefits that, if recognized, would affect
the effective tax rate, was $89 million.
The Company currently files income tax returns in the
United States, various states and non-U.S. jurisdictions. The
U.S. Internal Revenue Service (IRS) has completed exams on
the consolidated income tax returns for fiscal years 2012
and prior. The Company’s 2013 tax year is under advance
review by the IRS under its Compliance Assurance Program.
With the exception of a few states, the Company is no
longer subject to income tax examinations prior to 2008.
The Brazilian federal revenue service - Secretaria da Receita
Federal (SRF) may audit the Company’s Brazilian subsidiaries
for a period of five years from the date on which corporate
income taxes should have been paid and/or the date when
the tax return was filed. Estimated taxes are paid monthly
in Brazil with an annual return due on June 30 following
the end of the taxable year.
The Company believes it is reasonably possible that its
liability for unrecognized tax benefits will decrease in the
next twelve months by $33 million as a result of audit
settlements and the expiration of statutes of limitations in
certain major jurisdictions.
10. SHAREHOLDERS’ EQUITY
Regulatory Capital and Dividend Restrictions
The Company’s regulated subsidiaries are subject to
regulations and standards in their respective jurisdictions.
These standards, among other things, require these
subsidiaries to maintain specified levels of statutory capital,
as defined by each jurisdiction, and restrict the timing and
amount of dividends and other distributions that may be
paid to their parent companies. In the United States, most
of these regulations and standards are generally consistent
with model regulations established by the National
Association of Insurance Commissioners. Except in the
case of extraordinary dividends, these standards generally
permit dividends to be paid from statutory unassigned
surplus of the regulated subsidiary and are limited based
on the regulated subsidiary’s level of statutory net income
and statutory capital and surplus. These dividends are
referred to as “ordinary dividends” and generally can be
paid without prior regulatory approval. If the dividend,
together with other dividends paid within the preceding
twelve months, exceeds a specified statutory limit or is
paid from sources other than earned surplus, it is generally
Dividends
In June 2013, the Company’s Board of Directors increased
the Company’s cash dividend to shareholders to an annual
dividend rate of $1.12 per share, paid quarterly. Since June
2012, the Company had paid an annual cash dividend of
$0.85 per share, paid quarterly. Declaration and payment
of future quarterly dividends is at the discretion of the
Board and may be adjusted as business needs or market
conditions change.
The following table provides details of the Company’s
dividend payments:
Payment Date
Amount
per Share
Total Amount Paid
(in millions)
2013
2012
2011
$
1.0525
0.8000
0.6125
$
1,056
820
651
2013 FORM 10-K
75
11. SHARE-BASED COMPENSATION
The Company’s outstanding share-based awards consist mainly of non-qualified stock options, SARs and restricted stock and
restricted stock units (collectively, restricted shares). As of December 31, 2013, the Company had 35 million shares available
for future grants of share-based awards under its share-based compensation plan, including, but not limited to, incentive or
non-qualified stock options, SARs and 14 million of awards in restricted shares. As of December 31, 2013, there were also 17
million shares of common stock available for issuance under the ESPP.
Stock Options and SARs
Stock option and SAR activity for the year ended December 31, 2013 is summarized in the table below:
Outstanding at beginning of period
Granted
Exercised
Forfeited
Outstanding at end of period
Exercisable at end of period
Vested and expected to vest, end of period
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual Life
Aggregate
Intrinsic Value
(in years)
(in millions)
$
45
58
44
55
48
46
48
4.5
3.1
4.5
$ 1,121
879
1,110
Shares
(in millions)
63
8
(28)
(2)
41
30
40
Restricted Shares
Restricted share activity for the year ended December 31, 2013 is summarized in the table below:
(shares in millions)
Nonvested at beginning of period
Granted
Vested
Forfeited
Nonvested at end of period
Shares
9
4
(1)
(1)
11
Weighted-Average
Grant Date
Fair Value per Share
$
46
58
38
51
50
76
UNITEDHEALTH GROUP
Other Share-Based Compensation Data
(in millions, except per share amounts)
Stock Options and SARs
Weighted-average grant date fair value
of shares granted, per share
Total intrinsic value of stock options and SARs exercised
Restricted Shares
Weighted-average grant date fair value
of shares granted, per share
Total fair value of restricted shares vested
Employee Stock Purchase Plan
Number of shares purchased
Share-Based Compensation Items
Share-based compensation expense, before tax
Share-based compensation expense, net of tax effects
Income tax benefit realized from share-based award exercises
(in millions, except years)
Unrecognized compensation expense related to share awards
Weighted-average years to recognize compensation expense
For the Years Ended December 31,
2013
2012
2011
$
19
592
$
18
559
$
15
327
$
$
58
31
3
331
239
206
$
$
52
716
3
421
299
461
$
$
42
113
3
401
260
170
December 31, 2013
$
310
1.3
Share-Based Compensation Recognition and Estimates
The principal assumptions the Company used in calculating grant-date fair value for stock options and SARs were as follows:
Risk-free interest rate
Expected volatility
Expected dividend yield
Forfeiture rate
Expected life in years
Risk-free interest rates are based on U.S. Treasury yields in
effect at the time of grant. Expected volatilities are based
on the historical volatility of the Company’s common stock
and the implied volatility from exchange-traded options on
the Company’s common stock. Expected dividend yields are
based on the per share cash dividend paid by the Company.
The Company uses historical data to estimate option and
SAR exercises and forfeitures within the valuation model.
The expected lives of options and SARs granted represents
the period of time that the awards granted are expected to
be outstanding based on historical exercise patterns.
Other Employee Benefit Plans
The Company also offers a 401(k) plan for its employees.
Compensation expense related to this plan was not
material for the years ended December 31, 2013, 2012 and
2011.
In addition, the Company maintains non-qualified,
unfunded deferred compensation plans, which allow
certain members of senior management and executives to
defer portions of their salary or bonus and receive certain
Company contributions on such deferrals, subject to plan
limitations. The deferrals are recorded within Long-Term
Investments with an approximately equal amount in Other
Liabilities in the Consolidated Balance Sheets. The total
2013
2012
2011
1.0% - 1.6%
41.0% - 43.0%
1.4% - 1.6%
5.0%
5.3
0.7% - 0.9%
43.2% - 44.0%
1.2% - 1.7%
5.0%
5.3 - 5.6
0.9% - 2.3%
44.3% - 45.1%
1.0% - 1.4%
5.0%
4.9 - 5.0
deferrals are distributable based upon termination of
employment or other periods, as elected under each plan
and were $441 million and $348 million as of December 31,
2013 and 2012, respectively.
12. COMMITMENTS AND CONTINGENCIES
The Company leases facilities and equipment under long-
term operating leases that are non-cancelable and expire
on various dates through 2028. Rent expense under all
operating leases for 2013, 2012 and 2011 was $438 million,
$334 million and $295 million, respectively.
As of December 31, 2013, future minimum annual lease
payments, net of sublease income, under all non-cancelable
operating leases were as follows:
(in millions)
2014
2015
2016
2017
2018
Thereafter
Future Minimum
Lease Payments
$ 487
452
348
299
273
544
The Company provides guarantees related to its service
level under certain contracts. If minimum standards are not
met, the Company may be financially at risk up to a stated
percentage of the contracted fee or a stated dollar amount.
None of the amounts accrued, paid or charged to income
for service level guarantees were material as of or for the
years ended December 31, 2013, 2012 and 2011.
As of December 31, 2013, the Company had outstanding,
undrawn letters of credit with financial institutions of
$39 million and surety bonds outstanding with insurance
companies of $499 million, primarily to bond contractual
performance.
Legal Matters
Because of the nature of its businesses, the Company is
frequently made party to a variety of legal actions and
regulatory inquiries, including class actions and suits
brought by members, care providers, consumer advocacy
organizations, customers and regulators, relating to
the Company’s businesses, including management and
administration of health benefit plans and other services.
These matters include medical malpractice, employment,
intellectual property, antitrust, privacy and contract claims,
and claims related to health care benefits coverage and
other business practices.
The Company records liabilities for its estimates of
probable costs resulting from these matters where
appropriate. Estimates of costs resulting from legal and
regulatory matters involving the Company are inherently
difficult to predict, particularly where the matters: involve
indeterminate claims for monetary damages or may involve
fines, penalties or punitive damages; present novel legal
theories or represent a shift in regulatory policy; involve
a large number of claimants or regulatory bodies; are in
the early stages of the proceedings; or could result in a
change in business practices. Accordingly, the Company is
often unable to estimate the losses or ranges of losses for
those matters where there is a reasonable possibility or it is
probable that a loss may be incurred.
Litigation Matters
California Claims Processing Matter. On January 25,
2008, the California Department of Insurance (CDI) issued
an Order to Show Cause to PacifiCare Life and Health
Insurance Company, a subsidiary of the Company, alleging
violations of certain insurance statutes and regulations
related to an alleged failure to include certain language in
standard claims correspondence, timeliness and accuracy of
claims processing, interest payments, care provider contract
implementation, care provider dispute resolution and other
related matters. Although the Company believes that CDI
has never issued a penalty in excess of $8 million, CDI has
advocated a penalty of approximately $325 million in this
matter. The matter was the subject of an administrative
hearing before a California administrative law judge
beginning in December 2009, and in August 2013, the
administrative law judge issued a non-binding proposed
decision recommending a penalty in an amount that is
not material to the Company’s results of operations, cash
2013 FORM 10-K
77
flows or financial condition. The matter is now before the
California Insurance Commissioner, who has indicated that
he will not adopt the administrative law judge’s proposed
decision and will issue his own decision. The Commissioner’s
decision is subject to challenge in court. The Company
cannot reasonably estimate the range of loss, if any, that
may result from this matter given the procedural status
of the dispute, the legal issues presented (including the
legal basis for the majority of the alleged violations),
the inherent difficulty in predicting regulatory fines and
penalties, and the various remedies and levels of judicial
review available to the Company in the event a fine or
penalty is assessed.
Endoscopy Center of Southern Nevada Litigation.
In April 2013, a Las Vegas jury awarded $24 million in
compensatory damages and $500 million in punitive
damages against a Company health plan and its parent
corporation on the theory that they were negligent in their
credentialing and monitoring of an in-network endoscopy
center owned and operated by independent physicians who
were subsequently linked by regulators to an outbreak of
hepatitis C. In September 2013, the trial court reduced the
overall award to $366 million following post-trial motions,
and in December 2013, the Company filed a notice of
appeal. Company plans are party to 41 additional individual
lawsuits and two class actions relating to the outbreak. The
Company cannot reasonably estimate the range of loss, if
any, that may result from these matters given the likelihood
of reversal on appeal, the availability of statutory and other
limits on damages, the novel legal theories being advanced
by the plaintiffs, the various postures of the remaining
cases, the availability in many cases of federal defenses
under Medicare law and the Employee Retirement Income
Security Act, and the pendency of certain relevant legal
questions before the Nevada Supreme Court. The Company
is vigorously defending these lawsuits.
Government Investigations, Audits and Reviews
The Company has been, or is currently involved in various
governmental investigations, audits and reviews. These
include routine, regular and special investigations, audits
and reviews by CMS, state insurance and health and
welfare departments, the Brazilian national regulatory
agency for private health insurance and plans, the Agência
Nacional de Saúde Suplementar, state attorneys general,
the Office of the Inspector General, the Office of Personnel
Management, the Office of Civil Rights, the Government
Accountability Office, the Federal Trade Commission, U.S.
Congressional committees, the U.S. Department of Justice,
U.S. Attorneys, the Securities and Exchange Commission
(SEC), the IRS, the SRF, the U.S. Department of Labor,
the FDIC and other governmental authorities. Certain
of the Company’s businesses have been reviewed or are
currently under review, including for, among other things,
compliance with coding and other requirements under the
Medicare risk-adjustment model.
In February 2012, CMS announced a final Risk Adjustment
Data Validation (RADV) audit and payment adjustment
78
UNITEDHEALTH GROUP
methodology and that it will conduct RADV audits
beginning with the 2011 payment year. These audits involve
a review of medical records maintained by care providers
and may result in retrospective adjustments to payments
made to health plans. CMS has not communicated how the
final payment adjustment under its methodology will be
implemented.
The Company cannot reasonably estimate the range of
loss, if any, that may result from any material government
investigations, audits and reviews in which it is currently
involved given the inherent difficulty in predicting
regulatory action, fines and penalties, if any, and the
various remedies and levels of judicial review available to
the Company in the event of an adverse finding.
13. SEGMENT FINANCIAL INFORMATION
Factors used to determine the Company’s reportable
segments include the nature of operating activities,
economic characteristics, existence of separate senior
management teams and the type of information presented
to the Company’s chief operating decision maker to
evaluate its results of operations. Reportable segments with
similar economic characteristics are combined.
The following is a description of the types of products
and services from which each of the Company’s four
reportable segments derives its revenues:
• UnitedHealthcare includes the combined results
of operations of UnitedHealthcare Employer &
Individual, UnitedHealthcare Medicare & Retirement,
UnitedHealthcare Community & State and
UnitedHealthcare International because they have
similar economic characteristics, products and services,
customers, distribution methods and operational
processes and operate in a similar regulatory
environment. The U.S. businesses also share significant
common assets, including a contracted network of
physicians, health care professionals, hospitals and
other facilities, information technology infrastructure
and other resources. UnitedHealthcare Employer &
Individual offers an array of consumer-oriented health
benefit plans and services for large national employers,
public sector employers, mid-sized employers, small
businesses and individuals nationwide and active and
retired military and their families through the TRICARE
program (West Region). UnitedHealthcare Medicare &
Retirement provides health care coverage and health
and well-being services to individuals age 50 and older,
addressing their unique needs for preventive and
acute health care services as well as services dealing
with chronic disease and other specialized issues for
older individuals. UnitedHealthcare Community &
State’s primary customers oversee Medicaid plans,
the Children’s Health Insurance Program, and other
federal, state and community health care programs.
UnitedHealthcare International is a diversified global
health services business with a variety of offerings,
including international commercial health and dental
benefits.
• OptumHealth serves the physical, emotional and
financial needs of individuals, enabling consumer
health management and integrated care delivery
through programs offered by employers, payers,
government entities and directly with the care delivery
system. OptumHealth offers access to networks
of care provider specialists, health management
services, integrated care delivery services, consumer
engagement and relationship management and sales
distribution platform services and financial services.
• OptumInsight is a health care information, technology,
operational services and consulting company
providing software and information products, advisory
consulting services, and business process outsourcing
services and support to participants in the health care
industry. Hospitals, physicians, commercial health
plans, government agencies, life sciences companies
and other organizations that comprise the health
care system use OptumInsight to reduce costs, meet
compliance mandates, improve clinical performance
and adapt to the changing health system landscape.
• OptumRx offers pharmacy benefit management
services and programs including retail pharmacy
network management services, mail order and
specialty pharmacy services, manufacturer rebate
contracting and administration, benefit plan design
and consultation, claims processing, and a variety of
clinical programs such as formulary management and
compliance, drug utilization review and disease and
drug therapy management services.
The Company’s accounting policies for reportable
segment operations are consistent with those described
in the Summary of Significant Accounting Policies (see
Note 2). Transactions between reportable segments
principally consist of sales of pharmacy benefit products
and services to UnitedHealthcare customers by OptumRx,
certain product offerings and care management and
integrated care delivery services sold to UnitedHealthcare
by OptumHealth, and health information and technology
solutions, consulting and other services sold to
UnitedHealthcare by OptumInsight. These transactions
are recorded at management’s estimate of fair value.
Intersegment transactions are eliminated in consolidation.
Assets and liabilities that are jointly used are assigned
to each reportable segment using estimates of pro-rata
usage. Cash and investments are assigned such that each
reportable segment has working capital and/or at least
minimum specified levels of regulatory capital.
As a percentage of the Company’s total consolidated
revenues, premium revenues from CMS were 29%, 29%,
and 28% for the years ended December 31, 2013, 2012
and 2011, respectively, most of which were generated by
UnitedHealthcare Medicare & Retirement and included
in the UnitedHealthcare segment. U.S. customer revenue
represented approximately 95% and 99% of consolidated
total revenues during the years ended December 31, 2013
and 2012, respectively. Substantially all revenue was U.S.
generated revenue for the year ended December 31,
2011. Long-lived fixed assets located in the United States
2013 FORM 10-K
79
represented approximately 72% and 70% of the total
long-lived fixed assets as of December 31, 2013 and 2012,
respectively. The non-US revenues and fixed assets are
primarily related to UnitedHealthcare International.
2014 BUSINESS REALIGNMENT
On January 1, 2014, the Company realigned certain of its
businesses to respond to changes in the markets it serves
and the opportunities that are emerging as the health
system evolves. The Company’s Optum business platform
took responsibility for certain technology operations
and business processing activities with the intention of
pursuing additional third-party commercial opportunities
in addition to continuing to serve UnitedHealthcare. These
activities, which were historically a corporate function, will
be included in OptumInsight’s results of operations. The
Company’s periodic filings with the SEC beginning with the
first quarter 2014 Form 10-Q will include historical segment
results restated to reflect the effect of this realignment and
will continue to present the same four reportable segments
(UnitedHealthcare, OptumHealth, OptumInsight and
OptumRx).
80
UNITEDHEALTH GROUP
Corporate and intersegment elimination amounts are presented to reconcile the reportable segment results to the
consolidated results. The following table presents the reportable segment financial information:
(in millions)
2013
Revenues - external customers:
Premiums
Services
Products
Total revenues - external customers
Total revenues - intersegment
Investment and other income
UnitedHealthcare OptumHealth OptumInsight
OptumRx
Total Optum
Optum
Corporate and
Intersegment
Eliminations Consolidated
$ 107,024
6,180
8
113,212
—
617
$ 2,533
819
19
3,371
6,357
127
$
—
1,902
92
1,994
1,179
1
$
—
96
3,071
3,167
20,839
—
$ 2,533
2,817
3,182
8,532
28,375
128
$
$ 109,557
—
8,997
—
—
3,190
— 121,744
(28,375) —
— 745
Total revenues
$ 113,829
$ 9,855
$ 3,174
$ 24,006
$ 37,035
$ (28,375) $ 122,489
Earnings from operations
Interest expense
$ 7,309
—
$
Earnings before income taxes
$ 7,309
$
976
—
976
$
$
603
—
603
$
$
735
—
735
$ 2,314
—
$ 2,314
$ 62,545
$ 9,329
$ 5,971
$ 4,525
$ 19,825
$ — $ 9,623
(708)
(708)
$
$
(708) $ 8,915
(488) $ 81,882
Total assets
Purchases of property, equipment
and capitalized software
Depreciation and amortization
2012
Revenues - external customers:
Premiums
Services
Products
Total revenues - external customers
Total revenues - intersegment
Investment and other income
Total revenues
Earnings from operations
Interest expense
824
869
234
178
171
221
78
107
483
506
—
—
1,307
1,375
$ 97,985
4,867
—
102,852
—
567
$ 103,419
$ 7,815
—
$
$ 1,743
767
21
2,531
5,503
113
—
1,720
87
1,807
1,075
—
$ 8,147
561
$
—
$ 2,882
485
$
—
$
—
83
2,665
2,748
15,611
—
$ 18,359
393
$
—
$ 1,743
2,570
2,773
7,086
22,189
113
$ 29,388
$ 1,439
—
$
—
—
—
$ 99,728
7,437
2,773
—
—
109,938
(22,189) —
680
$ (22,189) $ 110,618
— $ 9,254
$
(632)
(632)
Earnings before income taxes
$ 7,815
$
561
$
485
$
393
$ 1,439
$
(632) $ 8,622
Total assets
$ 63,591
$ 8,274
$ 5,463
$ 3,466
$ 17,203
$ 91 $ 80,885
Purchases of property, equipment
and capitalized software
Depreciation and amortization
2011
Revenues - external customers:
585
794
184
193
165
210
136
112
485
515
—
—
1,070
1,309
Premiums
Services
Products
$ 90,487
4,291
—
$ 1,496
628
24
$
Total revenues - external customers
94,778
Total revenues - intersegment
Investment and other income
—
558
2,148
4,461
95
—
1,616
96
1,712
$
—
78
2,492
2,570
$ 1,496
2,322
2,612
6,430
$
—
$ 91,983
— 6,613
2,612
—
—
101,208
958
1
16,708
—
22,127
96
(22,127)
—
—
654
Total revenues
$ 95,336
$ 6,704
$ 2,671
$ 19,278
$ 28,653
$ (22,127) $ 101,862
Earnings from operations
Interest expense
$ 7,203
—
$
Earnings before income taxes
$ 7,203
$
423
—
423
$
$
381
—
381
$
$
457
—
457
$ 1,261
—
$
—
(505)
$ 8,464
(505)
$ 1,261
$ (505) $ 7,959
Total assets
Purchases of property, equipment
and capitalized software
Depreciation and amortization
$ 52,618
$ 6,756
$ 5,308
$ 3,503
$ 15,567
$ (296) $ 67,889
635
680
168
154
175
195
89
95
432
444
—
—
1,067
1,124
2013 FORM 10-K
81
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial information for all quarters of 2013 and 2012 is as follows:
(in millions, except per share data)
March 31
June 30
September 30
December 31
For the Quarter Ended
2013
Revenues
Operating costs
Earnings from operations
Net earnings
Net earnings attributable to
UnitedHealth Group common shareholders
Net earnings per share attributable to
UnitedHealth Group common shareholders:
Basic
Diluted
2012
Revenues
Operating costs
Earnings from operations
Net earnings
Net earnings per share attributable to
UnitedHealth Group common shareholders:
Basic
Diluted
$
30,340
28,201
2,139
1,240
$
30,408
28,007
2,401
1,436
$
30,624
27,993
2,631
1,570
$ 31,117
28,665
2,452
1,427
1,192
1,436
1,570
1,427
$
1.17
1.16
27,282
24,965
2,317
1,388
1.34
1.31
$
1.42
1.40
27,265
25,039
2,226
1,337
1.30
1.27
$
1.56
1.53
27,302
24,692
2,610
1,557
1.52
1.50
$
1.43
1.41
28,769
26,668
2,101
1,244
1.22
1.20
ITEM 9.
None.
Changes In And Disagreements
With Accountants On Accounting
And Financial Disclosure
ITEM 9A.
Controls And Procedures
EVALUATION OF DISCLOSURE CONTROLS
AND PROCEDURES
We maintain disclosure controls and procedures as defined
in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934 (Exchange Act) that are designed to
provide reasonable assurance that information required to
be disclosed by us in reports that we file or submit under
the Exchange Act is (i) recorded, processed, summarized
and reported within the time periods specified in SEC rules
and forms; and (ii) accumulated and communicated to our
management, including our principal executive officer and
principal financial officer, as appropriate to allow timely
decisions regarding required disclosure.
In connection with the filing of this Annual Report on
Form 10-K, management evaluated, under the supervision
and with the participation of our Chief Executive Officer
and Chief Financial Officer, the effectiveness of the design
and operation of our disclosure controls and procedures
as of December 31, 2013. Based upon that evaluation,
our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures were
effective at the reasonable assurance level as of December
31, 2013.
CHANGES IN INTERNAL CONTROL
OVER FINANCIAL REPORTING
There have been no changes in our internal control over
financial reporting during the quarter ended December
31, 2013 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
82
UNITEDHEALTH GROUP
REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING AS OF DECEMBER 31, 2013
UnitedHealth Group Incorporated and Subsidiaries’ (the
“Company”) management is responsible for establishing
and maintaining adequate internal control over financial
reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Securities Exchange Act of 1934. The Company’s
internal control system is designed to provide reasonable
assurance to our management and board of directors
regarding the reliability of financial reporting and the
preparation of consolidated financial statements for
external purposes in accordance with generally accepted
accounting principles. The 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 consolidated
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 consolidated financial statements.
Because of its inherent limitations, internal control
over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in
conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s
internal control over financial reporting as of December
31, 2013. 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 (1992). Based on our assessment
and the COSO criteria, we believe that, as of December 31,
2013, the Company maintained effective internal control
over financial reporting.
The Company’s independent registered public accounting
firm has audited the Company’s internal control over
financial reporting as of December 31, 2013, as stated in
the Report of Independent Registered Public Accounting
Firm, appearing under Item 9A, which expresses an
unqualified opinion on the effectiveness of the Company’s
internal control over financial reporting as of December 31,
2013.
2013 FORM 10-K
83
material misstatements due to error or fraud may not be
prevented or detected on a timely basis. Also, projections of
any evaluation of the effectiveness of the internal control
over financial reporting to future periods are subject to
the risk that the controls may become inadequate because
of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting
as of December 31, 2013, based on the criteria established
in Internal Control-Integrated Framework (1992) issued
by the Committee of Sponsoring Organizations of the
Treadway Commission.
We have also audited, in accordance with the standards
of the Public Company Accounting Oversight Board (United
States), the consolidated financial statements as of and for
the year ended December 31, 2013 of the Company and our
report dated February 12, 2014 expressed an unqualified
opinion on those consolidated financial statements.
/s/ DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
February 12, 2014
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of UnitedHealth
Group Incorporated and Subsidiaries:
We have audited the internal control over financial
reporting of UnitedHealth Group Incorporated and
Subsidiaries (the “Company”) as of December 31, 2013,
based on criteria established in Internal Control-Integrated
Framework (1992) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. The Company’s
management is responsible for maintaining effective
internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting, included in the accompanying Report of
Management on Internal Control Over Financial Reporting
as of December 31, 2013. Our responsibility is to express an
opinion on the Company’s internal control over financial
reporting based on our audit.
We conducted our audit in accordance with the standards
of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance
about whether effective internal control over financial
reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting
is a process designed by, or under the supervision of, the
company’s principal executive and principal financial
officers, or persons performing similar functions, and
effected by the company’s board of directors, management,
and other personnel to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes
in accordance with generally accepted accounting
principles. A company’s internal control over financial
reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) 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 (3) 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.
Because of the inherent limitations of internal control
over financial reporting, including the possibility of
collusion or improper management override of controls,
84
UNITEDHEALTH GROUP
ITEM 9B.
Other Information
None.
PART III
ITEM 10.
Directors, Executive Officers And
Corporate Governance
Pursuant to General Instruction G(3) to Form 10-K and
Instruction 3 to Item 401(b) of Regulation S-K, information
regarding our executive officers is provided in Item 1 of
Part I of this Annual Report on Form 10-K under the caption
“Executive Officers of the Registrant.”
We have adopted a code of ethics applicable to our
principal executive officer and other senior financial
officers, who include our principal financial officer, principal
accounting officer, controller, and persons performing
similar functions. The code of ethics, entitled The Code of
Conduct: Our Principles of Ethics and Integrity, is posted on
our website at www.unitedhealthgroup.com.
The remaining information required by Items 401, 405,
406 and 407(c)(3), (d)(4) and (d)(5) of Regulation S-K will
be included under the headings “Corporate Governance,”
“Election of Directors” and “Section 16(a) Beneficial
Ownership Reporting Compliance” in our definitive proxy
statement for our 2014 Annual Meeting of Shareholders,
and such required information is incorporated herein by
reference.
ITEM 11.
Executive Compensation
The information required by Items 402, 407(e)(4)
and (e)(5) of Regulation S-K will be included under
the headings “Executive Compensation,” “Director
Compensation,” “Corporate Governance - Risk Oversight”
and “Compensation Committee Interlocks and Insider
Participation” in our definitive proxy statement for our
2014 Annual Meeting of Shareholders, and such required
information is incorporated herein by reference.
ITEM 12.
Security Ownership Of Certain Beneficial Owners And Management And
Related Stockholder Matters
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth certain information, as of December 31, 2013, concerning shares of common stock authorized
for issuance under all of our equity compensation plans:
Plan Category
(a)
(b)
Number of securities Weighted-average
to be issued upon
exercise of
outstanding
options, warrants
and rights
(in millions)
excercise
price of
outstanding
options, warrants
and rights
(c)
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected
in column (a))
(in millions)
Equity compensation plans approved by shareholders (1)
Equity compensation plans not approved by shareholders (2)
Total (2)
41
—
41
$
$
48
—
48
52 (3)
—
52
(1) Consists of the UnitedHealth Group Incorporated 2011 Stock Incentive Plan, as amended, and the UnitedHealth Group
1993 ESPP, as amended.
(2) Excludes 48,000 shares underlying stock options assumed by us in connection with our acquisition of the companies
under whose plans the options originally were granted. These options have a weighted-average exercise price of $38
and an average remaining term of approximately 1.1 years. The options are administered pursuant to the terms of the
plan under which the options originally were granted. No future awards will be granted under these acquired plans.
(3) Includes 17 million shares of common stock available for future issuance under the Employee Stock Purchase Plan as of
December 31, 2013, and 35 million shares available under the 2011 Stock Incentive Plan as of December 31, 2013. Shares
available under the 2011 Stock Incentive Plan may become the subject of future awards in the form of stock options,
SARs, restricted stock, restricted stock units, performance awards and other stock-based awards, except that only
14 million of these shares are available for future grants of awards other than stock options or SARs.
The information required by Item 403 of Regulation S-K will be included under the heading “Security Ownership of Certain
Beneficial Owners and Management” in our definitive proxy statement for our 2014 Annual Meeting of Shareholders, and
such required information is incorporated herein by reference.
EXHIBIT INDEX**
2013 FORM 10-K
85
ITEM 13.
Certain Relationships And Related
Transactions, And Director
Independence
The information required by Items 404 and 407(a) of
Regulation S-K will be included under the headings
“Certain Relationships and Transactions” and “Corporate
Governance” in our definitive proxy statement for our
2014 Annual Meeting of Shareholders, and such required
information is incorporated herein by reference.
ITEM 14.
Principal Accountant Fees
And Services
The information required by Item 9(e) of Schedule 14A will
be included under the heading “Independent Registered
Public Accounting Firm” in our definitive proxy statement
for our 2014 Annual Meeting of Shareholders, and such
required information is incorporated herein by reference.
PART IV
ITEM 15.
Exhibits And Financial
Statement Schedules
1. Financial Statements
(a)
The financial statements are included under Item 8 of
this report:
• Repor ts of Independent Registered Accounting Firm.
• Consolidated Balance Sheets as of December 31, 2013
and 2012.
• Consolidated Statement of Operations for the years
ended December 31, 2013, 2012, and 2011.
• Consolidated Statement of Comprehensive Income for
the years ended December 31, 2013, 2012, and 2011.
• Consolidated Statement of Changes in Shareholders’
Equity for the years ended December 31, 2013, 2012,
and 2011.
• Consolidated Statement of Cash Flows for the years
ended December 31, 2013, 2012, and 2011.
• Notes to the Consolidated Financial Statements.
3.1
3.2
4.1
4.2
4.3
4.4
*10.1
2. Financial Statement Schedules
The following financial statement schedule of the Company
is included in Item 15(c):
*10.2
• Schedule I - Condensed Financial Information of
Registrant (Parent Company Only).
All other schedules for which provision is made in
the applicable accounting regulations of the SEC
are not required under the related instructions, are
inapplicable, or the required information is included in
the consolidated financial statements, and therefore
have been omitted.
*10.3
*10.4
(b)
The following exhibits are filed in response to Item
601 of Regulation S-K.
Third Restated Articles of Incorporation of
UnitedHealth Group Incorporated (incorporated
by reference to Exhibit 3.1 to UnitedHealth Group
Incorporated’s Current Report on Form 8-K filed on
May 30, 2007)
Fourth Amended and Restated Bylaws of
UnitedHealth Group Incorporated (incorporated
by reference to Exhibit 3.1 to UnitedHealth Group
Incorporated’s Current Report on Form 8-K filed on
October 26, 2009)
Senior Indenture, dated as of November 15, 1998,
between United HealthCare Corporation and The
Bank of New York (incorporated by reference to
Exhibit 4.1 to UnitedHealth Group Incorporated’s
Registration Statement on Form S-3/A, SEC File
Number 333-66013, filed on January 11, 1999)
Amendment, dated as of November 6, 2000, to
Senior Indenture, dated as of November 15, 1998,
between the UnitedHealth Group Incorporated
and The Bank of New York (incorporated by
reference to Exhibit 4.1 to UnitedHealth Group
Incorporated’s Quarterly Report on Form 10-Q for
the quarter ended September 30, 2001)
Instrument of Resignation, Appointment and
Acceptance of Trustee, dated January 8, 2007,
pursuant to the Senior Indenture, dated November
15, 1988, amended November 6, 2000, among
UnitedHealth Group Incorporated, The Bank
of New York and Wilmington Trust Company
(incorporated by reference to Exhibit 4.3 to the
Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2007)
Indenture, dated as of February 4, 2008, between
UnitedHealth Group Incorporated and U.S. Bank
National Association (incorporated by reference to
Exhibit 4.1 to UnitedHealth Group Incorporated’s
Registration Statement on Form S-3, SEC File
Number 333-149031, filed on February 4, 2008)
UnitedHealth Group Incorporated 2011
Stock Incentive Plan, effective May 23, 2011
(incorporated by reference to Exhibit A to
UnitedHealth Group Incorporated’s Definitive
Proxy Statement dated April 13, 2011)
Form of Agreement for Non-Qualified Stock
Option Award to Executives under UnitedHealth
Group Incorporated’s 2011 Stock Incentive Plan
Form of Agreement for Non-Qualified Stock
Option Award for International Participants under
UnitedHealth Group Incorporated’s 2011 Stock
Incentive Plan
Form of Addendum for Non-Qualified Stock Option
Award Agreement for International Participants
under UnitedHealth Group Incorporated’s 2011
Stock Incentive Plan (incorporated by reference to
Exhibit 10.37 to UnitedHealth Group Incorporated’s
Annual Report on Form 10-K for the year ended
December 31, 2012)
86
UNITEDHEALTH GROUP
*10.5
*10.6
*10.7
*10.8
*10.9
*10.10
*10.11
*10.12
*10.13
*10.14
Form of Agreement for Restricted Stock Unit
Award to Executives under UnitedHealth
Group Incorporated’s 2011 Stock Incentive Plan
(incorporated by reference to Exhibit 10.1 to
UnitedHealth Group Incorporated’s Current Report
on Form 8-K filed on May 27, 2011)
Form of Agreement for Restricted Stock Award
to Executives under UnitedHealth Group
Incorporated’s 2011 Stock Incentive Plan
(incorporated by reference to Exhibit 10.5 to
UnitedHealth Group Incorporated’s Current Report
on Form 8-K filed on May 27, 2011)
Form of Agreement for Stock Appreciation
Rights Award to Executives under UnitedHealth
Group Incorporated’s 2011 Stock Incentive Plan
(incorporated by reference to Exhibit 10.4 to
UnitedHealth Group Incorporated’s Current Report
on Form 8-K filed on May 27, 2011)
Form of Agreement for Performance-based
Restricted Stock Unit Award to Executives under
UnitedHealth Group Incorporated’s 2011 Stock
Incentive Plan (incorporated by reference to
Exhibit 10.3 to UnitedHealth Group Incorporated’s
Current Report on Form 8-K filed on May 27, 2011)
Form of Agreement for Initial Deferred Stock
Unit Award to Non-Employee Directors under
UnitedHealth Group Incorporated’s 2011 Stock
Incentive Plan (incorporated by reference to
Exhibit 10.7 to UnitedHealth Group Incorporated’s
Current Report on Form 8-K filed on May 27, 2011)
Form of Agreement for Deferred Stock Unit Award
to Non-Employee Directors under UnitedHealth
Group Incorporated’s 2011 Stock Incentive Plan
(incorporated by reference to Exhibit 10.6 to
UnitedHealth Group Incorporated’s Current Report
on Form 8-K filed on May 27, 2011)
Amended and Restated UnitedHealth Group
Incorporated Executive Incentive Plan (2009
Statement), effective as of December 31, 2008
(incorporated by reference to Exhibit 10.12 to
UnitedHealth Group Incorporated’s Annual Report
on Form 10-K for the year ended December 31,
2008)
Amended and Restated UnitedHealth Group
Incorporated 2008 Executive Incentive Plan,
effective as of December 31, 2008 (incorporated by
reference to Exhibit 10.13 to UnitedHealth Group
Incorporated’s Annual Report on Form 10-K for the
year ended December 31, 2008)
Amendment, dated as of December 21, 2012,
of Amended and Restated UnitedHealth Group
Incorporated 2008 Executive Incentive Plan
(incorporated by reference to Exhibit 10.11 to
UnitedHealth Group Incorporated’s Annual Report
on Form 10-K for the year ended December 31,
2012)
UnitedHealth Group Executive Savings Plan (2004
Statement) (incorporated by reference to Exhibit
*10.15
*10.16
*10.17
*10.18
*10.19
*10.20
*10.21
*10.22
*10.23
*10.24
10(e) of UnitedHealth Group Incorporated’s Annual
Report on Form 10-K for the year ended December
31, 2003)
First Amendment to UnitedHealth Group Executive
Savings Plan (2004 Statement) (incorporated by
reference to Exhibit 10.3 to UnitedHealth Group
Incorporated’s Current Report on Form 8-K filed on
November 3, 2006)
Second Amendment to UnitedHealth Group
Executive Savings Plan (2004 Statement)
(incorporated by reference to Exhibit 10.13 to
UnitedHealth Group Incorporated’s Annual Report
on Form 10-K for the year ended December 31,
2007)
Third Amendment to UnitedHealth Group
Executive Savings Plan (2004 Statement)
(incorporated by reference to Exhibit 10.17 to
UnitedHealth Group Incorporated’s Annual Report
on Form 10-K for the year ended December 31,
2008)
Fourth Amendment to UnitedHealth Group
Executive Savings Plan (2004 Statement)
(incorporated by reference to Exhibit 10.1 of
UnitedHealth Group Incorporated’s Quarterly
Report on Form 10-Q for the quarter ended
September 30, 2010)
Summary of Non-Management Director
Compensation, effective as of October 1, 2013
(incorporated by reference to Exhibit 10.1 to
UnitedHealth Group Incorporated’s Quarterly
Report on Form 10-Q for the quarter ended
September 30, 2013)
UnitedHealth Group Directors’ Compensation
Deferral Plan (2009 Statement) (incorporated by
reference to Exhibit 10.18 to UnitedHealth Group
Incorporated’s Annual Report on Form 10-K for the
year ended December 31, 2008)
Amendment to the UnitedHealth Group Directors’
Compensation Deferral Plan, effective as of
January 1, 2010 (incorporated by reference to
Exhibit 10.20 to UnitedHealth Group Incorporated’s
Annual Report on Form 10K for the year ended
December 31, 2009)
First Amendment to UnitedHealth Group Directors’
Compensation Deferral Plan (incorporated by
reference to Exhibit 10.2 to UnitedHealth Group
Incorporated’s Quarterly Report on Form 10-Q for
the quarter ended September 30, 2010)
Employment Agreement, dated as of November 7,
2006, between UnitedHealth Group Incorporated
and Stephen J. Hemsley (incorporated by
reference to Exhibit 10.1 to UnitedHealth Group
Incorporated’s Current Report on Form 8-K filed on
November 8, 2006)
Agreement for Supplemental Executive Retirement
Pay, effective April 1, 2004, between UnitedHealth
Group Incorporated and Stephen J. Hemsley
(incorporated by reference to Exhibit 10(b) to
*10.34
11.1
12.1
21.1
23.1
24.1
31.1
32.1
101
2013 FORM 10-K
87
Bueno (incorporated by reference to Exhibit 10.32
to UnitedHealth Group Incorporated’s Annual
Report on Form 10-K for the year ended December
31, 2012)
Employment Agreement, effective as of January 1,
2013, between United HealthCare Services, Inc. and
Marianne D. Short
Statement regarding computation of per share
earnings (incorporated by reference to the
information contained under the heading “Net
Earnings Per Common Share” in Note 2 of Notes to
the Consolidated Financial Statements included in
Item 8, “Financial Statements”)
Computation of Ratio of Earnings to Fixed Charges
Subsidiaries of UnitedHealth Group Incorporated
Consent of Independent Registered Public
Accounting Firm
Power of Attorney
Certifications pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
The following materials from UnitedHealth Group
Incorporated’s Annual Report on Form 10-K for the
year ended December 31, 2013, filed on February
12, 2014, formatted in XBRL (eXtensible Business
Reporting Language): (i) Consolidated Balance
Sheets, (ii) Consolidated Statements of Operations,
(iii) Consolidated Statements of Comprehensive
Income, (iv) Consolidated Statements of Changes in
Shareholders’ Equity, (v) Consolidated Statements
of Cash Flows, and (vi) Notes to the Consolidated
Financial Statements.
*
Denotes management contracts and compensation plans
in which certain directors and named executive officers
participate and which are being filed pursuant to Item
601(b)(10)(iii)(A) of Regulation S-K.
** Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies
of instruments defining the rights of certain holders of
long-term debt are not filed. The Company will furnish
copies thereof to the SEC upon request.
Financial Statement Schedule
(c)
Schedule I - Condensed Financial Information of Registrant
(Parent Company Only).
*10.25
*10.26
*10.27
*10.28
*10.29
*10.30
*10.31
*10.32
*10.33
UnitedHealth Group Incorporated’s Quarterly
Report on Form 10-Q for the quarter ended March
31, 2004)
Amendment to Agreement for Supplemental
Executive Retirement Pay, dated as of November 7,
2006, between UnitedHealth Group Incorporated
and Stephen J. Hemsley (incorporated by reference
to Exhibit A to Exhibit 10.1 to UnitedHealth Group
Incorporated’s Current Report on Form 8-K filed on
November 8, 2006)
Amendment to Employment Agreement and
Agreement for Supplemental Executive Retirement
Pay, effective as of December 31, 2008, between
United HealthCare Services, Inc. and Stephen J.
Hemsley (incorporated by reference to Exhibit
10.22 to UnitedHealth Group Incorporated’s
Annual Report on Form 10-K for the year ended
December 31, 2008)
Letter Agreement, effective as of February 19,
2008, by and between UnitedHealth Group
Incorporated and Stephen J. Hemsley (incorporated
by reference to Exhibit 10.22 to UnitedHealth
Group Incorporated’s Annual Report on Form 10-K
for the year ended December 31, 2007)
Amendment to Employment Agreement, dated
as of December 14, 2010, between UnitedHealth
Group Incorporated and Stephen J. Hemsley
(incorporated by reference to Exhibit 10.1 to
UnitedHealth Group Incorporated’s Current Report
on Form 8-K filed on December 15, 2010)
Amended and Restated Employment Agreement,
dated as of August 8, 2011, between United
HealthCare Services, Inc. and Gail K. Boudreaux
(incorporated by reference to Exhibit 10.1 to
UnitedHealth Group Incorporated’s Quarterly
Report on Form 10-Q for the quarter ended
September 30, 2011)
Employment Agreement, effective as of December 1,
2006, between United HealthCare Services, Inc. and
David S. Wichmann (incorporated by reference to
Exhibit 10.2 to UnitedHealth Group Incorporated’s
Quarterly Report on Form 10-Q for the quarter
ended March 31, 2008)
Amendment to Employment Agreement, effective as
of December 31, 2008, between United HealthCare
Services, Inc. and David S. Wichmann (incorporated
by reference to Exhibit 10.37 to UnitedHealth Group
Incorporated’s Annual Report on Form 10-K for the
year ended December 31, 2008)
Amended and Restated Employment Agreement,
dated as of March 26, 2012, between United
HealthCare Services, Inc. and Larry C. Renfro
(incorporated by reference to Exhibit 10.1 to
UnitedHealth Group Incorporated’s Quarterly Report
on Form 10-Q for the quarter ended March 31, 2012)
Amended Employment Agreement, effective as
of November 1, 2012, between Amil Assistência
Médica Internacional S.A. and Dr. Edson de Godoy
88
UNITEDHEALTH GROUP
SCHEDULE I
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors and Shareholders of UnitedHealth
Group Incorporated and Subsidiaries:
We have audited the consolidated financial statements
of UnitedHealth Group Incorporated and subsidiaries (the
“Company”) as of December 31, 2013 and 2012, and for
each of the three years in the period ended December 31,
2013, and the Company’s internal control over financial
reporting as of December 31, 2013, and have issued our
reports thereon dated February 12, 2014; such consolidated
financial statements and reports are included elsewhere
in this Form 10-K. Our audits also included the financial
statement schedule of the Company listed in Item 15. This
financial statement schedule is the responsibility of the
Company’s management. Our responsibility is to express an
opinion based on our audits. In our opinion, the financial
statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set
forth therein.
/s/ DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
February 12, 2014
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(PARENT COMPANY ONLY)
UNITEDHEALTH GROUP
CONDENSED BALANCE SHEETS
(in millions, except per share data)
December 31, 2013
December 31, 2012
2013 FORM 10-K
89
Assets
Current assets:
Cash and cash equivalents
Short-term notes receivable from subsidiaries
Deferred income taxes and other current assets
Total current assets
Equity in net assets of subsidiaries
Long-term notes receivable from subsidiaries
Other assets
$
$
822
11
214
1,047
44,301
1,025
2,889
225
4,139
43,724
4,215 —
106
144
Total assets
$
49,707
$
47,969
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable and accrued liabilities
Note payable to subsidiary
Commercial paper and current maturities of long-term debt
$
Total current liabilities
Long-term debt, less current maturities
Deferred income taxes and other liabilities
Total liabilities
Commitments and contingencies (Note 4)
Shareholders’ equity:
Preferred stock, $0.001 par value -10 shares authorized;
no shares issued or outstanding
Common stock, $0.01 par value - 3,000 shares authorized;
988 and 1,019 issued and outstanding
Additional paid-in capital
Retained earnings
Accumulated other comprehensive (loss) income
Total UnitedHealth Group shareholders’ equity
Total liabilities and shareholders’ equity
See Notes to the Condensed Financial Statements of Registrant
335
215
1,935
2,485
14,804
269
17,558
—
10
—
33,047
(908)
32,149
49,707
$
$
$
356
175
2,541
3,072
13,602
117
16,791
—
10
66
30,664
438
31,178
47,969
90
UNITEDHEALTH GROUP
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(PARENT COMPANY ONLY)
UNITEDHEALTH GROUP
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
Revenues:
Investment and other income
$
Total revenues
Operating costs:
Operating costs
Interest expense
Total operating costs
Loss before income taxes
Benefit for income taxes
Loss of parent company
Equity in undistributed income of subsidiaries
Net earnings
Other comprehensive (loss) income
Comprehensive income
See Notes to the Condensed Financial Statements of Registrant
For the Years Ended December 31,
2012
2013
2011
252
252
(9)
618
609
(357)
130
(227)
5,852
5,625
(1,346)
$
28
28
(2)
566
564
(536)
192
(344)
5,870
$
3
3
25
451
476
(473)
167
(306)
5,448
5,526
5,142
(23) 209
$
4,279
$
5,503
$
5,351
2013 FORM 10-K
91
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(PARENT COMPANY ONLY)
UNITEDHEALTH GROUP
CONDENSED STATEMENTS OF CASH FLOWS
(in millions)
Operating activities
Cash flows from operating activities
For the Years Ended December 31,
2012
2013
2011
$
5,099
$
6,116
$ 5,560
Investing activities
Issuance of notes to subsidiaries
(4,149) —
Repayments of notes receivable from subsidiaries 275 — —
(2,081)
Cash paid for acquisitions
(171)
Capital contributions to subsidiaries
(2,252)
Cash flows used for investing activities
(3,737)
(99)
(7,985)
(274)
(942)
(2,458)
(1,517)
Financing activities
(3,170)
Common stock repurchases
598
Proceeds from common stock issuance
(1,056)
Cash dividends paid
(Repayments of) proceeds from commercial paper, net
(474)
Proceeds from issuance of long-term debt 2,235
Repayments of long-term debt
Interest rate swap termination — —
Proceeds of note from subsidiary 40
30
(383)
(74)
Other
(2,844) 1,388
Cash flows used for financing activities
(3,084)
1,078
(820)
1,587
3,966
(943) (986)
(2,994)
381
(651)
(933)
2,234
(955)
132
15
53
(2,718)
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Supplemental cash flow disclosures
Cash paid for interest
Cash paid for income taxes
$
$
See Notes to the Condensed Financial Statements of Registrant
(203)
1,025
822
(481) 590
916
1,506
$
1,025
$ 1,506
618
2,765
$
547
2,666
$ 418
2,739
92
UNITEDHEALTH GROUP
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(PARENT COMPANY ONLY)
UNITEDHEALTH GROUP
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
UnitedHealth Group’s parent company financial
information has been derived from its consolidated
financial statements and should be read in conjunction
with the consolidated financial statements included in
this Form 10-K. The accounting policies for the registrant
are the same as those described in Note 2 of Notes to the
Consolidated Financial Statements.
2. SUBSIDIARY TRANSACTIONS
Investment in Subsidiaries. UnitedHealth Group’s
investment in subsidiaries is stated at cost plus equity in
undistributed earnings of subsidiaries.
Transactions with Subsidiaries. During 2013, the parent
company issued intercompany notes of $1.5 billion that
were used primarily to fund the purchase of Amil’s
remaining public shares. Additionally in 2013, the $2.6
billion term note issued in 2012 was reclassified to long-
term. During 2012, the parent company completed a
non-cash exchange of a $3.9 billion intercompany note to a
subsidiary for a new term note of $2.6 billion and an equity
interest of $1.3 billion.
Dividends. Cash dividends received from subsidiaries and
included in Cash Flows from Operating Activities in the
Condensed Statements of Cash Flows were $5.3 billion, $7.8
billion and $5.6 billion in 2013, 2012 and 2011, respectively.
3. COMMERCIAL PAPER AND LONG-TERM DEBT
Discussion of commercial paper and long-term debt can
be found in Note 8 of Notes to the Consolidated Financial
Statements. Long-term debt obligations of the parent
company do not include the other financing obligations
at a subsidiary that totaled $121 million at December 31,
2013 or the Brazilian real denominated debt of a subsidiary
with a total par value of $588 million at December 31, 2012
disclosed therein.
Maturities of commercial paper and long-term debt for the
years ending December 31 are as follows:
(in millions)
2014
2015
2016
2017
2018
Thereafter
$ 1,935
1,055
1,134
1,260
1,116
10,239
4. COMMITMENTS AND CONTINGENCIES
For a summary of commitments and contingencies, see
Note 12 of Notes to the Consolidated Financial Statements
included in Item 8, “Financial Statements.”
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
2013 FORM 10-K
93
Dated: February 12, 2014
UNITEDHEALTH GROUP INCORPORATED
By
/s/ STEPHEN J. HEMSLEY
Stephen J. Hemsley
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Director, President and Chief Executive Officer
(principal executive officer)
Executive Vice President and Chief Financial Officer of
UnitedHealth Group and President of UnitedHealth Group
Operations (principal financial officer)
Senior Vice President and Chief Accounting Officer
(principal accounting officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
/s/ STEPHEN J. HEMSLEY
Stephen J. Hemsley
/s/ DAVID S. WICHMANN
David S. Wichmann
/s/ ERIC S. RANGEN
Eric S. Rangen
William C. Ballard, Jr.*
Edson Bueno*
Richard T. Burke*
Robert J. Darretta*
Michele J. Hooper*
Rodger A. Lawson*
Douglas W. Leatherdale*
Glenn M. Renwick*
Kenneth I. Shine*
Gail R. Wilensky*
*By
/s/ MARIANNE D. SHORT
Marianne D. Short,
As Attorney-in-Fact
Date
February 12, 2014
February 12, 2014
February 12, 2014
February 12, 2014
February 12, 2014
February 12, 2014
February 12, 2014
February 12, 2014
February 12, 2014
February 12, 2014
February 12, 2014
February 12, 2014
February 12, 2014
94
UNITEDHEALTH GROUP
EXHIBIT INDEX**
3.1
3.2
4.1
4.2
4.3
4.4
*10.1
*10.2
*10.3
*10.4
Third Restated Articles of Incorporation of
UnitedHealth Group Incorporated (incorporated
by reference to Exhibit 3.1 to UnitedHealth Group
Incorporated’s Current Report on Form 8-K filed on
May 30, 2007)
Fourth Amended and Restated Bylaws of
UnitedHealth Group Incorporated (incorporated
by reference to Exhibit 3.1 to UnitedHealth Group
Incorporated’s Current Report on Form 8-K filed on
October 26, 2009)
Senior Indenture, dated as of November 15, 1998,
between United HealthCare Corporation and The
Bank of New York (incorporated by reference to
Exhibit 4.1 to UnitedHealth Group Incorporated’s
Registration Statement on Form S-3/A, SEC File
Number 333-66013, filed on January 11, 1999)
Amendment, dated as of November 6, 2000, to
Senior Indenture, dated as of November 15, 1998,
between the UnitedHealth Group Incorporated
and The Bank of New York (incorporated by
reference to Exhibit 4.1 to UnitedHealth Group
Incorporated’s Quarterly Report on Form 10-Q for
the quarter ended September 30, 2001)
Instrument of Resignation, Appointment and
Acceptance of Trustee, dated January 8, 2007,
pursuant to the Senior Indenture, dated November
15, 1988, amended November 6, 2000, among
UnitedHealth Group Incorporated, The Bank
of New York and Wilmington Trust Company
(incorporated by reference to Exhibit 4.3 to the
Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2007)
Indenture, dated as of February 4, 2008, between
UnitedHealth Group Incorporated and U.S. Bank
National Association (incorporated by reference to
Exhibit 4.1 to UnitedHealth Group Incorporated’s
Registration Statement on Form S-3, SEC File
Number 333-149031, filed on February 4, 2008)
UnitedHealth Group Incorporated 2011
Stock Incentive Plan, effective May 23, 2011
(incorporated by reference to Exhibit A to
UnitedHealth Group Incorporated’s Definitive
Proxy Statement dated April 13, 2011)
Form of Agreement for Non-Qualified Stock
Option Award to Executives under UnitedHealth
Group Incorporated’s 2011 Stock Incentive Plan
Form of Agreement for Non-Qualified Stock
Option Award for International Participants under
UnitedHealth Group Incorporated’s 2011 Stock
Incentive Plan
Form of Addendum for Non-Qualified Stock Option
Award Agreement for International Participants
under UnitedHealth Group Incorporated’s 2011
Stock Incentive Plan (incorporated by reference to
Exhibit 10.37 to UnitedHealth Group Incorporated’s
Annual Report on Form 10-K for the year ended
December 31, 2012)
*10.5
*10.6
*10.7
*10.8
*10.9
*10.10
*10.11
*10.12
*10.13
*10.14
Form of Agreement for Restricted Stock Unit
Award to Executives under UnitedHealth
Group Incorporated’s 2011 Stock Incentive Plan
(incorporated by reference to Exhibit 10.1 to
UnitedHealth Group Incorporated’s Current Report
on Form 8-K filed on May 27, 2011)
Form of Agreement for Restricted Stock Award
to Executives under UnitedHealth Group
Incorporated’s 2011 Stock Incentive Plan
(incorporated by reference to Exhibit 10.5 to
UnitedHealth Group Incorporated’s Current Report
on Form 8-K filed on May 27, 2011)
Form of Agreement for Stock Appreciation
Rights Award to Executives under UnitedHealth
Group Incorporated’s 2011 Stock Incentive Plan
(incorporated by reference to Exhibit 10.4 to
UnitedHealth Group Incorporated’s Current Report
on Form 8-K filed on May 27, 2011)
Form of Agreement for Performance-based
Restricted Stock Unit Award to Executives under
UnitedHealth Group Incorporated’s 2011 Stock
Incentive Plan (incorporated by reference to
Exhibit 10.3 to UnitedHealth Group Incorporated’s
Current Report on Form 8-K filed on May 27, 2011)
Form of Agreement for Initial Deferred Stock
Unit Award to Non-Employee Directors under
UnitedHealth Group Incorporated’s 2011 Stock
Incentive Plan (incorporated by reference to
Exhibit 10.7 to UnitedHealth Group Incorporated’s
Current Report on Form 8-K filed on May 27, 2011)
Form of Agreement for Deferred Stock Unit Award
to Non-Employee Directors under UnitedHealth
Group Incorporated’s 2011 Stock Incentive Plan
(incorporated by reference to Exhibit 10.6 to
UnitedHealth Group Incorporated’s Current Report
on Form 8-K filed on May 27, 2011)
Amended and Restated UnitedHealth Group
Incorporated Executive Incentive Plan (2009
Statement), effective as of December 31, 2008
(incorporated by reference to Exhibit 10.12 to
UnitedHealth Group Incorporated’s Annual Report
on Form 10-K for the year ended December 31,
2008)
Amended and Restated UnitedHealth Group
Incorporated 2008 Executive Incentive Plan,
effective as of December 31, 2008 (incorporated by
reference to Exhibit 10.13 to UnitedHealth Group
Incorporated’s Annual Report on Form 10-K for the
year ended December 31, 2008)
Amendment, dated as of December 21, 2012,
of Amended and Restated UnitedHealth Group
Incorporated 2008 Executive Incentive Plan
(incorporated by reference to Exhibit 10.11 to
UnitedHealth Group Incorporated’s Annual Report
on Form 10-K for the year ended December 31,
2012)
UnitedHealth Group Executive Savings Plan (2004
Statement) (incorporated by reference to Exhibit
*10.15
*10.16
*10.17
*10.18
*10.19
*10.20
*10.21
*10.22
*10.23
*10.24
10(e) of UnitedHealth Group Incorporated’s Annual
Report on Form 10-K for the year ended December
31, 2003)
First Amendment to UnitedHealth Group Executive
Savings Plan (2004 Statement) (incorporated by
reference to Exhibit 10.3 to UnitedHealth Group
Incorporated’s Current Report on Form 8-K filed on
November 3, 2006)
Second Amendment to UnitedHealth Group
Executive Savings Plan (2004 Statement)
(incorporated by reference to Exhibit 10.13 to
UnitedHealth Group Incorporated’s Annual Report
on Form 10-K for the year ended December 31,
2007)
Third Amendment to UnitedHealth Group
Executive Savings Plan (2004 Statement)
(incorporated by reference to Exhibit 10.17 to
UnitedHealth Group Incorporated’s Annual Report
on Form 10-K for the year ended December 31,
2008)
Fourth Amendment to UnitedHealth Group
Executive Savings Plan (2004 Statement)
(incorporated by reference to Exhibit 10.1 of
UnitedHealth Group Incorporated’s Quarterly
Report on Form 10-Q for the quarter ended
September 30, 2010)
Summary of Non-Management Director
Compensation, effective as of October 1, 2013
(incorporated by reference to Exhibit 10.1 to
UnitedHealth Group Incorporated’s Quarterly
Report on Form 10-Q for the quarter ended
September 30, 2013)
UnitedHealth Group Directors’ Compensation
Deferral Plan (2009 Statement) (incorporated by
reference to Exhibit 10.18 to UnitedHealth Group
Incorporated’s Annual Report on Form 10-K for the
year ended December 31, 2008)
Amendment to the UnitedHealth Group Directors’
Compensation Deferral Plan, effective as of
January 1, 2010 (incorporated by reference to
Exhibit 10.20 to UnitedHealth Group Incorporated’s
Annual Report on Form 10K for the year ended
December 31, 2009)
First Amendment to UnitedHealth Group Directors’
Compensation Deferral Plan (incorporated by
reference to Exhibit 10.2 to UnitedHealth Group
Incorporated’s Quarterly Report on Form 10-Q for
the quarter ended September 30, 2010)
Employment Agreement, dated as of November 7,
2006, between UnitedHealth Group Incorporated
and Stephen J. Hemsley (incorporated by
reference to Exhibit 10.1 to UnitedHealth Group
Incorporated’s Current Report on Form 8-K filed on
November 8, 2006)
Agreement for Supplemental Executive Retirement
Pay, effective April 1, 2004, between UnitedHealth
Group Incorporated and Stephen J. Hemsley
(incorporated by reference to Exhibit 10(b) to
2013 FORM 10-K
95
UnitedHealth Group Incorporated’s Quarterly
Report on Form 10-Q for the quarter ended March
31, 2004)
Amendment to Agreement for Supplemental
Executive Retirement Pay, dated as of November 7,
2006, between UnitedHealth Group Incorporated
and Stephen J. Hemsley (incorporated by reference
to Exhibit A to Exhibit 10.1 to UnitedHealth Group
Incorporated’s Current Report on Form 8-K filed on
November 8, 2006)
Amendment to Employment Agreement and
Agreement for Supplemental Executive Retirement
Pay, effective as of December 31, 2008, between
United HealthCare Services, Inc. and Stephen J.
Hemsley (incorporated by reference to Exhibit
10.22 to UnitedHealth Group Incorporated’s
Annual Report on Form 10-K for the year ended
December 31, 2008)
Letter Agreement, effective as of February 19,
2008, by and between UnitedHealth Group
Incorporated and Stephen J. Hemsley (incorporated
by reference to Exhibit 10.22 to UnitedHealth
Group Incorporated’s Annual Report on Form 10-K
for the year ended December 31, 2007)
Amendment to Employment Agreement, dated
as of December 14, 2010, between UnitedHealth
Group Incorporated and Stephen J. Hemsley
(incorporated by reference to Exhibit 10.1 to
UnitedHealth Group Incorporated’s Current Report
on Form 8-K filed on December 15, 2010)
Amended and Restated Employment Agreement,
dated as of August 8, 2011, between United
HealthCare Services, Inc. and Gail K. Boudreaux
(incorporated by reference to Exhibit 10.1 to
UnitedHealth Group Incorporated’s Quarterly
Report on Form 10-Q for the quarter ended
September 30, 2011)
Employment Agreement, effective as of December
1, 2006, between United HealthCare Services,
Inc. and David S. Wichmann (incorporated by
reference to Exhibit 10.2 to UnitedHealth Group
Incorporated’s Quarterly Report on Form 10-Q for
the quarter ended March 31, 2008)
Amendment to Employment Agreement, effective
as of December 31, 2008, between United
HealthCare Services, Inc. and David S. Wichmann
(incorporated by reference to Exhibit 10.37 to
UnitedHealth Group Incorporated’s Annual Report
on Form 10-K for the year ended December 31,
2008)
Amended and Restated Employment Agreement,
dated as of March 26, 2012, between United
HealthCare Services, Inc. and Larry C. Renfro
(incorporated by reference to Exhibit 10.1 to
UnitedHealth Group Incorporated’s Quarterly
Report on Form 10-Q for the quarter ended March
31, 2012)
Amended Employment Agreement, effective as
*10.25
*10.26
*10.27
*10.28
*10.29
*10.30
*10.31
*10.32
*10.33
96
UNITEDHEALTH GROUP
*10.34
11.1
12.1
21.1
23.1
24.1
31.1
32.1
101
of November 1, 2012, between Amil Assistência
Médica Internacional S.A. and Dr. Edson de Godoy
Bueno (incorporated by reference to Exhibit 10.32
to UnitedHealth Group Incorporated’s Annual
Report on Form 10-K for the year ended December
31, 2012)
Employment Agreement, effective as of January 1,
2013, between United HealthCare Services, Inc. and
Marianne D. Short
Statement regarding computation of per share
earnings (incorporated by reference to the
information contained under the heading “Net
Earnings Per Common Share” in Note 2 of Notes to
the Consolidated Financial Statements included in
Item 8, “Financial Statements”)
Computation of Ratio of Earnings to Fixed Charges
Subsidiaries of UnitedHealth Group Incorporated
Consent of Independent Registered Public
Accounting Firm
Power of Attorney
Certifications pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
The following materials from UnitedHealth Group
Incorporated’s Annual Report on Form 10-K for the
year ended December 31, 2013, filed on February
12, 2014, formatted in XBRL (eXtensible Business
Reporting Language): (i) Consolidated Balance
Sheets, (ii) Consolidated Statements of Operations,
(iii) Consolidated Statements of Comprehensive
Income, (iv) Consolidated Statements of Changes in
Shareholders’ Equity, (v) Consolidated Statements
of Cash Flows, and (vi) Notes to the Consolidated
Financial Statements.
*
Denotes management contracts and compensation plans
in which certain directors and named executive officers
participate and which are being filed pursuant to Item
601(b)(10)(iii)(A) of Regulation S-K.
** Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies
of instruments defining the rights of certain holders of
long-term debt are not filed. The Company will furnish
copies thereof to the SEC upon request.
Investor Information
Market price of common stock
The following table shows the range of high and low sales
Investor relations
You can contact UnitedHealth Group Investor Relations
prices for our common stock as reported by the New York
to order, without charge, financial documents such as
Stock Exchange, where it trades under the symbol UNH.
the Annual Report on Form 10-K and the Annual Report
These prices do not include commissions or fees associated
to Shareholders.
with purchasing or selling this security.
2014
First Quarter
2013
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2012
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
high
low
$83.32
$69.57
$58.26
$66.19
$75.88
$75.54
$59.43
$60.75
$59.31
$58.29
$51.36
$57.01
$64.65
$66.72
$49.82
$53.78
$50.32
$51.09
As of January 31, 2014, we had 14,575 shareholders of record.
Shareholder account questions
Our transfer agent, Wells Fargo Shareowner Services,
can help you with a variety of shareholder-related
services, including:
• Change of address
• Lost stock certificates
• Transfer of stock to another person
• Additional administrative services
You can write to them at:
Wells Fargo Shareowner Services
P.O. Box 64854
St. Paul, Minnesota 55164-0854
Or you can call our transfer agent toll free at
(800) 468-9716 or locally at (651) 450-4064.
You can email our transfer agent at:
stocktransfer@wellsfargo.com
You can write to us at:
Investor Relations, MN008-T930
UnitedHealth Group
P.O. Box 1459
Minneapolis, Minnesota 55440-1459
You can also obtain information about UnitedHealth Group
and its businesses, including financial documents, online at
www.unitedhealthgroup.com.
Annual meeting
We invite UnitedHealth Group shareholders to attend our
annual meeting on Monday, June 2, 2014. For information
regarding the time and location of the meeting, please
see the Investors section of our corporate website,
www.unitedhealthgroup.com. You will need to bring
appropriate proof of UnitedHealth Group share ownership
and a photo ID with you to the annual meeting in order to
be admitted.
Common stock dividends
In June 2013, our Board of Directors increased our cash
dividend to shareholders to an annual dividend rate of
$1.12 per share, paid quarterly. Since June 2012, we had
paid an annual cash dividend of $0.85 per share, paid
quarterly. Declaration and payment of future quarterly
dividends is at the discretion of the Board and may be
adjusted as business needs or market conditions change.
10%
10%
This annual report is printed on recycled papers certified by Bureau Veritas per FSC® (Forest Stewardship Council™)
standards for Chain of Custody ensuring environmentally responsible, socially beneficial and economically viable
forest management, and also uses reduced VOC (Volatile Organic Compounds) vegetable-based inks.
www.unitedhealthgroup.com
UnitedHealth Group Center
9900 Bren Road East, Minnetonka, Minnesota 55343
100-13219 4/14
©2014 UnitedHealth Group. All Rights Reserved. UnitedHealth Group is a registered trademark with the U.S. Patent and Trademark Offi ce.
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