United Healthcare 2004 Annual Report Download - page 40

38 UNITEDHEALTH GROUP
The American Medical Association et al. v. Metropolitan Life Insurance Company, United HealthCare
Services, Inc. and UnitedHealth Group. On March 15, 2000, the American Medical Association filed a
lawsuit against the company in the Supreme Court of the State of New York, County of New York. On
April 13, 2000, we removed this case to the United States District Court for the Southern District of
New York. The suit alleges causes of action based on ERISA, as well as breach of contract and the implied
covenant of good faith and fair dealing, deceptive acts and practices, and trade libel in connection with
the calculation of reasonable and customary reimbursement rates for non-network providers. The suit
seeks declaratory, injunctive and compensatory relief as well as costs, fees and interest payments. An
amended complaint was filed on August 25, 2000, which alleged two classes of plaintiffs, an ERISA class
and a non-ERISA class. After the Court dismissed certain ERISA claims and the claims brought by the
American Medical Association, a third amended complaint was filed. On October 25, 2002, the court
granted in part and denied in part our motion to dismiss the third amended complaint. On May 21, 2003,
we filed a counterclaim complaint in this matter alleging antitrust violations against the American Medical
Association and asserting claims based on improper billing practices against an individual provider
plaintiff. On May 26, 2004, we filed a motion for partial summary judgment seeking the dismissal of
certain claims and parties based, in part, due to lack of standing. On July 16, 2004, plaintiffs filed a motion
for leave to file an amended complaint, seeking to assert RICO violations.
Although the results of pending litigation are always uncertain, we do not believe the results of any
such actions currently threatened or pending, including those described above, will, individually or in
aggregate, have a material adverse effect on our consolidated financial position or results of operations.
Quantitative and Qualitative Disclosures about Market Risks
Market risk represents the risk of changes in the fair value of a financial instrument caused by changes in
interest rates or equity prices. The company’s primary market risk is exposure to changes in interest rates
that could impact the fair value of our investments and long-term debt.
Approximately $12.0 billion of our cash equivalents and investments at December 31, 2004 were debt
securities. Assuming a hypothetical and immediate 1% increase or decrease in interest rates applicable
to our fixed-income investment portfolio at December 31, 2004, the fair value of our fixed-income
investments would decrease or increase by approximately $355 million. We manage our investment
portfolio to limit our exposure to any one issuer or industry and largely limit our investments to
U.S. Government and Agency securities, state and municipal securities, and corporate debt obligations
that are investment grade.
To mitigate the financial impact of changes in interest rates, we have entered into interest rate
swap agreements to more closely match the interest rates of our long-term debt with those of our cash
equivalents and short-term investments. Including the impact of our interest rate swap agreements,
approximately $3.2 billion of our commercial paper and debt had variable rates of interest and $825 million
had fixed rates as of December 31, 2004. A hypothetical 1% increase or decrease in interest rates would
not be material to the fair value of our commercial paper and debt.
At December 31, 2004, we had $207 million of equity investments, primarily held by our
UnitedHealth Capital business in various public and non-public companies concentrated in the areas
of health care delivery and related information technologies. Market conditions that affect the value
of health care or technology stocks will likewise impact the value of our equity portfolio.