United Healthcare 2009 Annual Report Download - page 24

practices. Privacy and security requirements regarding personally identifiable information are also imposed on us
through controls with our customers. In addition, despite the security measures we have in place to ensure
compliance with applicable laws and rules, our facilities and systems and those of our third party service
providers may be vulnerable to security breaches, acts of vandalism or theft, computer viruses, misplaced or lost
data, programming and/or human errors or other similar events. Compliance with new privacy and security laws,
requirements, and new regulations, such as ARRA, will result in cost increases due to necessary systems changes
(including further implementation of encryption and other data protection standards), new limitations or
constraints on our business models, the development of new administrative processes, the effects of potential
noncompliance by our business associates, and increased enforcement actions and fines and penalties. They also
may impose further restrictions on our collection, disclosure and use of patient identifiable data that is housed in
one or more of our administrative databases.
Noncompliance with any privacy or security laws and regulations or any security breach involving the
misappropriation, loss or other unauthorized disclosure of sensitive or confidential member information, whether
by us or by one of our business associates, could have a material adverse effect on our business, reputation and
results of operations, including mandatory disclosure to the media, significant increase in the number and cost of
managing and remediating data security incidents, increased enforcement actions, material fines and penalties,
compensatory, special, punitive, and statutory damages, litigation, consent orders regarding our privacy and
security practices, adverse actions against our licenses to do business, and injunctive relief.
Our relationship with AARP is important and the loss of such relationship could have an adverse effect on
our business and results of operations.
Under our agreements with AARP, we provide AARP-branded Medicare Supplement insurance, hospital
indemnity insurance and other products to AARP members and Medicare Part D prescription drug plans to
AARP members and non-members. One of our agreements with AARP expands the relationship to include
AARP-branded Medicare Advantage plans for AARP members and non-members. Our agreements with AARP
contain commitments regarding corporate governance, corporate social responsibility, diversity and measures
intended to improve and simplify the health care experience for consumers. The AARP agreements may be
terminated early under certain circumstances, including, depending on the agreement, a material breach by either
party, insolvency of either party, a material adverse change in the financial condition of the Company, material
changes in the Medicare programs, material harm to AARP caused by the Company, and by mutual agreement.
The success of our AARP arrangements depends, in part, on our ability to service AARP and its members,
develop additional products and services, price the products and services competitively, meet our corporate
governance, corporate social responsibility, and diversity commitments, and respond effectively to federal and
state regulatory changes. The loss of our AARP relationship could have an adverse effect on our business and
results of operations.
Because of the nature of our business, we are routinely subject to various litigation actions, which, if
resolved unfavorably, could result in substantial penalties and/or monetary damages and adversely affect
our financial position, results of operations and cash flows.
Periodically, we become a party to the types of legal actions that can affect any business, such as employment
and employment discrimination-related suits, employee benefit claims, breach of contract actions, tort claims,
shareholder suits, and intellectual property-related litigation. In addition, because of the nature of our business,
we are routinely made party to a variety of legal actions related to the design and management of our service
offerings. These matters include, among others, 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, contract disputes and claims related to disclosure of certain business practices.
We are also party to certain class action lawsuits brought by health care professional groups.
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
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