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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ÈANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Commission file number: 1-10864
UNITEDHEALTH GROUP INCORPORATED
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1321939
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
UNITEDHEALTH GROUP CENTER
9900 BREN ROAD EAST
MINNETONKA, MINNESOTA 55343
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (952) 936-1300
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE, INC.
(Title of each class) (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 ÈNo
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No È
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 ÈNo
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 ÈNo
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. È
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 ÈAccelerated filer
Non-accelerated filer Smaller reporting company
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes No È
The aggregate market value of voting stock held by non-affiliates of the registrant as of June 30, 2010 was $31,467,360,829 (based on the
last reported sale price of $28.40 per share on June 30, 2010, on the New York Stock Exchange).*
As of January 31, 2011, there were 1,093,694,629 shares of the registrant’s Common Stock, $.01 par value per share, issued and
outstanding.
Note that in Part III of this report on Form 10-K, we incorporate by reference certain information from our Definitive Proxy Statement for
the 2011 Annual Meeting of Shareholders. This document will be filed with the Securities and Exchange Commission (SEC) within the
time period permitted by the SEC. The SEC allows us to disclose important information by referring to it in that manner. Please refer to
such information.
* Only shares of voting stock held beneficially by directors, executive officers and subsidiaries of the Company have been excluded in
determining this number.

Table of contents

  • Page 1
    ...Act) Yes ' No È The aggregate market value of voting stock held by non-affiliates of the registrant as of June 30, 2010 was $31,467,360,829 (based on the last reported sale price of $28.40 per share on June 30, 2010, on the New York Stock Exchange).* As of January 31, 2011, there were 1,093,694,629...

  • Page 2
    ... Item 9B. 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 ...Financial Statements and Supplementary Data ...Changes in and...

  • Page 3
    ... Medicare & Retirement (formerly Ovations), and UnitedHealthcare Community & State (formerly AmeriChoice) businesses. Health services are provided to the participants in the health system itself, ranging from consumers, employers and health plans to physicians and life sciences companies...

  • Page 4
    ...products and services, types of customers, distribution methods, operational processes and regulatory environment. These businesses also share significant common assets, including our contracted networks of physicians, health care professionals, hospitals and other facilities, information technology...

  • Page 5
    ... essential needs to comprehensive benefit plans, all of which offer access to our broad-based proprietary network of contracted physicians, hospitals and other health care professionals with economic benefits reflective of the aggregate purchasing capacity of our organization; Innovative clinical...

  • Page 6
    ...dedicated to the needs of people age 50 and over, state and U.S. government agencies and employer groups. UnitedHealthcare Medicare & Retirement also has distinct pricing, underwriting, clinical program management and marketing capabilities dedicated to risk-based health products and services in the...

  • Page 7
    ... organization (PPO) plans, Special Needs Plans, Point-of-Service (POS) plans and Private-Fee-for-Service plans. Under the Medicare Advantage programs, UnitedHealthcare Medicare & Retirement provides health insurance coverage to eligible Medicare beneficiaries in exchange for a fixed monthly premium...

  • Page 8
    ..., modular service designs can be easily integrated to meet varying employer, payer, public sector and consumer needs at a wide range of price points. OptumHealth offers its products on an administrative fee basis where it manages and administers benefit claims for self-insured customers in exchange...

  • Page 9
    ...pharmaceutical products on a nationwide and international basis. As of December 31, 2010, Ingenix's customer base included 6,200 hospital facilities, 246,000 health care professionals or groups, 2,000 payers and intermediaries, 205 Fortune 500 companies, 2,200 life sciences companies, 270 government...

  • Page 10
    ..., clinical data warehousing, analysis and management responses for medical cost trend management, physician practice revenue cycle management, including integrated electronic medical record systems, revenue and payment cycle management for payer and health care professional organizations, payment...

  • Page 11
    ... members' homes. Prescription Solutions provides PBM services to customers in our Health Benefits segment, as well as external employer groups, union trusts, managed care organizations, Medicare-contracted plans, Medicaid plans and TPAs, including mail service only, rebate services only and pharmacy...

  • Page 12
    ... and self-funded plans; requiring urgent care coverage determinations to be made and communicated within 24 hours; and improving the clarity of and expanding the types of information in adverse benefit determination notices. Effective 2011: Beginning in 2011, commercial fully insured health plans in...

  • Page 13
    ...premium income from health business is derived from health insurance plans that meet the minimum creditable coverage requirements. Effective 2013/2014: The Health Reform Legislation provides for an increase in Medicaid fee-for-service and managed care program reimbursements for primary care services...

  • Page 14
    .... 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. HIPAA requires guaranteed health care coverage for...

  • Page 15
    ..., contracting, product and rate, and financial and reporting requirements. There are laws and regulations that set specific standards for delivery of services, payment of claims, adequacy of health care professional networks, fraud prevention, protection of consumer health information, pricing and...

  • Page 16
    ... and performance of state government contracts. Guaranty Fund Assessments. Under state guaranty fund laws, certain insurance companies (and HMOs in some states), including those issuing health (which includes long-term care), life and accident insurance policies, doing business in those states can...

  • Page 17
    ... companies, insurance companies, HMOs, TPAs and business services outsourcing companies, health care professionals that have formed networks to directly contract with employers or with CMS, specialty benefit providers, government entities, disease management companies, and various health information...

  • Page 18
    ... to January 2011. Prior to joining UnitedHealth Group, Ms. Boudreaux served as Executive Vice President of Health Care Services Corporation (HCSC) from January 2006 to May 2008. Mr. Mikan is Executive Vice President of UnitedHealth Group and Chief Executive Officer of Health Services and has served...

  • Page 19
    ... Markets Group from October 2009 to January 2011. From January 2009 to October 2009, Mr. Renfro served as Executive Vice President of UnitedHealth Group and Chief Executive Officer of Ovations. Prior to joining UnitedHealth Group, Mr. Renfro served as President of Fidelity Developing Businesses...

  • Page 20
    ... criteria, product design, negotiation of favorable provider contracts and care management programs. Total medical costs are affected by the number of individual services rendered and the cost of each service. Our premium revenue on commercial policies is typically at a fixed rate per individual...

  • Page 21
    ...approvals could reduce our revenue or increase our costs. Under state guaranty fund laws, certain insurance companies (and HMOs in some states), including those issuing health (which includes long-term care), life and accident insurance policies, doing business in those states can be assessed (up to...

  • Page 22
    ...revenues, financial position and results of operations. In the first quarter of 2010, the Health Reform Legislation was signed into law. The Health Reform Legislation expands access to coverage and modifies aspects of the commercial insurance market, as well as the Medicaid and Medicare programs and...

  • Page 23
    ... our medical and operating costs. These premium increases are oftentimes subject to state regulatory approval, and, as required under the Health Reform Legislation, HHS recently issued proposed rules that, if implemented, would establish a federal premium rate review process for annual premium rate...

  • Page 24
    ...cost management in response to these rate reductions, there can be no assurance that we will be able to execute successfully on these or other strategies to address changes in the Medicare Advantage program. As part of the Health Reform Legislation, CMS has developed a system whereby plans that meet...

  • Page 25
    ...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...

  • Page 26
    ...Solutions is subject to the Payment Card Industry Data Security Standards, which is a multifaceted security standard that includes requirements for security management, policies, procedures, network architecture, software design and other critical protective measures to protect customer account data...

  • Page 27
    ... our ability to process and dispense prescriptions and provide products and services to customers. 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 could be...

  • Page 28
    ...or out-of-network, could adversely affect our business and results of operations. 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...

  • Page 29
    ... 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...

  • Page 30
    ...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...

  • Page 31
    ...medical costs and increased use of health care services. Any such disaster or similar event could have a material adverse effect on our business, financial condition and results of operations. If we fail to properly maintain the integrity or availability of our data or to strategically implement new...

  • Page 32
    ... 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...

  • Page 33
    ...agency's opinion of our financial strength, operating performance and ability to meet our debt obligations or obligations to policyholders. Downgrades in our credit ratings, should they occur, may adversely affect our business, financial condition and results of operations. ITEM 1B. UNRESOLVED STAFF...

  • Page 34
    ... the Board and may be adjusted as business needs or market conditions change. Prior to May 2010, our policy had been to pay an annual dividend of $0.030 per share. ISSUER PURCHASES OF EQUITY SECURITIES Issuer Purchases of Equity Securities (a) Fourth Quarter 2010 Total Number of Shares Purchased as...

  • Page 35
    ...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, 2010. 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...

  • Page 36
    ... Health, Inc., Citigroup Inc., General Electric Company, International Business Machines Corporation and Johnson & Johnson. Although there are differences in terms of size and industry, like UnitedHealth Group, all of these companies are large multi-segment companies using a well-defined operating...

  • Page 37
    ...companies included in our peer group are Aetna Inc., Cigna Corporation, Coventry Health Care, Inc., Humana Inc. and WellPoint, Inc. We believe that this peer group reflects publicly traded peers to our Health Benefits businesses. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN Among UnitedHealth Group...

  • Page 38
    ITEM 6. SELECTED FINANCIAL DATA FINANCIAL HIGHLIGHTS (in millions, except percentages and per share data) 2010 For the Year Ended December 31, 2009 2008 2007 2006 Consolidated operating results Revenues ...Earnings from operations ...Net earnings ...Return on shareholders' equity (a) ...Basic net...

  • Page 39
    ... costs of their employees and employees' dependants. For both risk-based and fee-based health care benefit arrangements, we provide coordination and facilitation of medical services; transaction processing; health care professional services; and access to contracted networks of physicians, hospitals...

  • Page 40
    contracts and care coordination programs. Controlling medical costs requires a comprehensive and integrated approach to organize and advance the full range of interrelationships among patients/consumers, health professionals, hospitals, pharmaceutical/technology manufacturers and other key ...

  • Page 41
    ...such as consulting services, data management, information technology and related infrastructure construction, disease management, and population-based health and wellness programs will continue to grow. Beginning in 2011, health plans with medical loss ratios on fully insured products, as calculated...

  • Page 42
    ... name and generic drug usage by seniors. We have incorporated the anticipated impact of these changes in our 2011 product pricing and pharmacy benefit management business plan. As part of the Health Reform Legislation, Medicare Advantage payment rates for 2011 were frozen at 2010 levels. Separately...

  • Page 43
    ...and/or impose new or higher levels of taxes or assessments. Government funding pressure, coupled with adverse economic conditions, will impact the financial positions of hospitals, physicians and other care providers and could therefore increase medical cost trends experienced by our businesses. Our...

  • Page 44
    ... rate increases reflecting underlying medical cost trends. Growth in customers served by our health services businesses, particularly through pharmaceutical benefit management programs, increased revenues from public sector behavioral health programs and increased sales of health care technology...

  • Page 45
    ... to Health Benefits customers by Prescription Solutions, certain product offerings sold to Health Benefits customers by OptumHealth, and medical benefits cost, quality and utilization data and predictive modeling sold to Health Benefits by Ingenix. These transactions are recorded at management...

  • Page 46
    ... medical costs. OptumHealth Increased revenues in OptumHealth for 2010 were driven by new business development in large scale public sector programs and increased sales of benefits and services to external employer markets, partially offset by a loss of some smaller specialty benefits customers...

  • Page 47
    ...states in which we operate, which increased operating costs and decreased income taxes. Reporting Segments Health Benefits Revenue growth in Health Benefits for 2009 was primarily due to growth in the number of individuals served by our public and senior markets businesses and premium rate increases...

  • Page 48
    ...for 2009 were primarily driven by new business development in large-scale public sector care and behavioral health programs for state clients, which were partially offset by a decline in individuals served through commercial products. Earnings from operations and operating margins for 2009 decreased...

  • Page 49
    ... provided by operating activities ...$ 6,273 $ 5,625 $ 4,238 Sales of investments ...2,593 4,040 5,568 Maturities of investments ...3,105 2,675 3,030 Proceeds from customer funds administered ...974 204 0 Proceeds from issuance of commercial paper, net ...930 0 0 Proceeds from issuance of long-term...

  • Page 50
    ...of $573 million, net of taxes, for the settlement of two class action lawsuits related to our historical stock option practices, the 2009 increase in medical costs payable driven by membership growth in risk-based products in the public and senior markets businesses, and the effect of changes to our...

  • Page 51
    .... Under our Board of Directors' authorization, we maintain a common share repurchase program. Repurchases may be made from time to time at prevailing prices in the open market, subject to certain preset parameters. In February 2010, the Board renewed and increased our share repurchase program, and...

  • Page 52
    ...payment of future quarterly dividends are at the discretion of the Board and may be adjusted as business needs or market conditions change. Prior to May 2010, our policy had been to pay an annual dividend. The following table provides details of our dividend payments: Year Aggregate Amount per Share...

  • Page 53
    ..., health care professional contract rate changes, medical care utilization and other medical cost trends, membership volume and demographics, benefit plan changes, and business mix changes related to products, customers and geography. Depending on the health care professional and type of service...

  • Page 54
    ...near-term completion factors. Medical cost trend factors are developed through a comprehensive analysis of claims incurred in prior months and by reviewing a broad set of health care utilization indicators including, but not limited to, pharmacy utilization trends, inpatient hospital census data and...

  • Page 55
    ...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, as recorded in our records. Employer groups generally provide us with changes to their eligible population one month in...

  • Page 56
    ... 31, 2010. Although we believe that the financial projections used are reasonable and appropriate for all of our reporting units, there is uncertainty inherent in those projections. That uncertainty is increased by the impact of health care reforms as discussed in Item 1, "Business - Government...

  • Page 57
    .... If we intend to 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. New information and the passage of time can change these judgments. We manage our investment portfolio to limit our exposure...

  • Page 58
    ...the large number of employer groups that constitute our customer base. As of December 31, 2010, we had an aggregate $2.0 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...

  • Page 59
    ...venture capital funds, a portion of which were invested 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...

  • Page 60
    ... Board (United States), the Company's internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 10, 2011...

  • Page 61
    UnitedHealth Group Consolidated Balance Sheets (in millions, except per share data) December 31, 2010 December 31, 2009 Assets Current assets: Cash and cash equivalents ...Short-term investments ...Accounts receivable, net of allowances of $241 and $220 ...Assets under management ...Deferred income...

  • Page 62
    UnitedHealth Group Consolidated Statements of Operations (in millions, except per share data) For the Year Ended December 31, 2010 2009 2008 Revenues: Premiums ...Services ...Products ...Investment and other income ...Total revenues ...Operating costs: Medical costs ...Operating costs ...Cost of ...

  • Page 63
    ... of common stock, and related tax benefits ...Common stock repurchases ...Share-based compensation, and related tax benefits ...Common stock dividend ...Balance at December 31, 2009 ...Net earnings ...Unrealized holding gains on investment securities during the period, net of tax expense of $26...

  • Page 64
    ... of long-term debt ...Payments for retirement of long-term debt ...Proceeds from interest rate swap termination ...Common stock repurchases ...Proceeds from common stock issuances ...Share-based compensation excess tax benefit ...Customer funds administered ...Dividends paid ...Checks outstanding...

  • Page 65
    ... evidence-based medicine as the standard for care, and providing relevant, actionable data that physicians, health care professionals, consumers, employers and other participants in health care can use to make better, more informed decisions. Through its diversified family of businesses, the Company...

  • Page 66
    ... 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. Through the Company's Prescription Solutions pharmacy benefits...

  • Page 67
    ... 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...

  • Page 68
    ... D prescription drug insurance coverage under contracts with CMS. Under the Medicare Part D program, there are six 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...

  • Page 69
    ... 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...

  • Page 70
    ... projections. That uncertainty is increased by potential health care reforms, as any passed legislation may significantly change the forecasts and long-term growth rate assumptions for some or all of its reporting units. Intangible assets Finite lived intangible assets are acquired in a business...

  • Page 71
    ... 31, 2010. Other Policy Liabilities Other policy liabilities include the RSF associated with the AARP program (see Note 12 of Notes to the Consolidated Financial Statements), health savings account deposits, deposits under the Medicare Part D program (see "Medicare Part D Pharmacy Benefits Contract...

  • Page 72
    ... and number of shares assumed purchased represents the dilutive shares. Recent Accounting Standards Recently Adopted Accounting Standards. In January 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2010-06, "Improving Disclosures about Fair Value...

  • Page 73
    ... of short-term and long-term investments is as follows: Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (in millions) December 31, 2010 Debt securities - available-for-sale: U.S. government and agency obligations ...State and municipal obligations ...Corporate obligations...

  • Page 74
    ... Value 2010 ...2007 ...2006 ...2005 ...Pre-2005 ...U.S. agency mortgage-backed securities ...Total ... $ 8 73 123 140 98 1,903 $0 0 0 0 1 0 $1 $0 0 0 0 1 0 $1 $ 0 3 14 3 1 0 $21 $ 8 76 137 143 101 1,903 $2,345 $2,368 The amortized cost and fair value of available-for-sale debt securities...

  • Page 75
    ... obligations and corporate obligations as of December 31, 2010 were primarily caused by interest rate increases and not by unfavorable changes in the credit ratings associated with these securities. The Company evaluates impairment at each reporting period for securities where the fair value of the...

  • Page 76
    ... the areas of health care services and related information technologies. Market conditions that affect the value of health care and related technology stocks will likewise impact the value of the Company's equity portfolio. The equity securities and venture capital funds were evaluated for severity...

  • Page 77
    ... information, non-current prices, high variability over time); Inputs other than quoted prices that are observable for the asset/liability (e.g., interest rates, yield curves, volatilities, default rates); and Inputs that are derived principally from or corroborated by other observable market data...

  • Page 78
    ... Financial Statements for further detail on AARP. Quoted Prices in Active Markets (Level 1) Other Observable Inputs (Level 2) Unobservable Inputs (Level 3) (in millions) Total Fair Value December 31, 2010 Cash and cash equivalents ...Debt securities - available-for-sale: U.S. government...

  • Page 79
    ... as of December 31, 2010 and 2009, respectively, consist of preferred stock and other items for which there are no active markets. Interest Rate Swaps. Fair values of the Company's interest rate swaps are estimated using the terms of the swaps and publicly available market yield curves. Because the...

  • Page 80
    ... AARP Program-related investments consist of debt and equity securities held to fund costs associated with the AARP Program (see Note 12 of Notes to the Consolidated Financial Statements). The Company elected to measure the AARP assets under management at fair value pursuant to the fair value option...

  • Page 81
    ... 2010, as part of the annual goodwill impairment analysis, the Company considered the aforementioned market conditions and operating results as well as indications of interest the Company began to receive on the clinical trial support businesses as the fair value of the reporting unit was evaluated...

  • Page 82
    ... 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 backlogs, care provider contract rate changes...

  • Page 83
    ... in current maturities of long-term debt in the Consolidated Balance Sheets as of December 31, 2010 and 2009 due to a current note holder option to "put" the note to the Company which began on November 15, 2010, and recurs each November 15 thereafter until 2022 (except 2014), at accreted value. 81

  • Page 84
    ... 23 banks, which matures in May 2012. This facility supports the Company's commercial paper program and is available for general corporate purposes. There were no amounts outstanding under this facility as of December 31, 2010. The interest rate is variable based on term and amount and is calculated...

  • Page 85
    ... provides a summary of the effect of changes in fair value of fair value hedges on the Company's Consolidated Statement of Operations: (in millions) Year Ended December 31, 2010 Hedge loss recognized in interest expense ...Hedged item gain recognized in interest expense ...Net impact on the Company...

  • Page 86
    ... of December 31 are as follows: (in millions) 2010 2009 Deferred income tax assets: Share-based compensation ...Net operating loss carryforwards ...Accrued expenses and allowances ...Long term liabilities ...Medical costs payable and other policy liabilities ...Unearned revenues ...Unrecognized tax...

  • Page 87
    ... and moved the Company to a quarterly dividend payment cycle. 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. Prior to May 2010, the Company's policy had been to pay an annual dividend. 85

  • Page 88
    ... an average price of approximately $33 per share and an aggregate cost of $2.5 billion. As of December 31, 2010, the Company had Board authorization to purchase up to an additional 48 million shares of its common stock. 11. Share-Based Compensation The Company's 2002 Stock Incentive Plan (Plan), as...

  • Page 89
    ...using an option-pricing model. For purposes of estimating the fair value of the Company's employee stock option and SAR grants, the Company uses a binomial model. The principal assumptions the Company used in applying the option-pricing models were as follows: 2010 2009 2008 Risk free interest rate...

  • Page 90
    ...award program includes a retirement provision that treats all employees who are age 55 or older with at least ten years of recognized employment with the Company as retirement-eligible. For 2010, 2009 and 2008, the Company recognized compensation expense related to its share-based compensation plans...

  • Page 91
    ...AARP The Company provides health insurance products and services to members of AARP under a Supplemental Health Insurance Program (the Program), and separate Medicare Advantage and Medicare Part D arrangements. The products and services under the Program include supplemental Medicare benefits (AARP...

  • Page 92
    ... to the fair value option. The following AARP Program-related assets and liabilities were included in the Company's Consolidated Balance Sheets: (in millions) December 31, 2010 December 31, 2009 Accounts receivable ...Assets under management ...Medical costs payable ...Accounts payable and accrued...

  • Page 93
    ... claims. The Company charges these customers administrative fees based on the expected cost of administering their self-funded programs. In some cases, the Company provides performance guarantees related to its administrative function. If these standards are not met, the Company may be financially...

  • Page 94
    ... customary reimbursement rates for non-network health care providers by the Company's affiliates. On January 14, 2009, the parties announced an agreement to settle the lawsuit, along with a similar case filed in 2008 in federal court in New Jersey. Under the terms of the settlement, the Company and...

  • Page 95
    Historical Stock Option Practices. In 2006, a consolidated shareholder derivative action, captioned In re UnitedHealth Group Incorporated Shareholder Derivative Litigation was filed against certain of the Company's current and former officers and directors in the United States District Court for the...

  • Page 96
    ... methodology does not take into account the "error rate" in the original Medicare fee-for-service data that was used to develop the risk adjustment system. Additionally, payments received from CMS, as well as benefits offered and premiums charged to members, are based on actuarially certified bids...

  • Page 97
    ... similar products and services, types of customers, distribution methods and operational processes, and operate in a similar regulatory environment. These businesses also share significant common assets, including the Company's contracted networks of physicians, health care professionals, hospitals...

  • Page 98
    ... following table presents reporting segment financial information as of and for the years ended December 31: Health Benefits Prescription Solutions Corporate and Intersegment Eliminations (in millions) 2010 Revenues - external customers: Premiums ...Services ...Products ...Total revenues - external...

  • Page 99
    .... Quarterly Financial Data (Unaudited) Selected quarterly financial information for all quarters of 2010 and 2009 is as follows: (in millions, except per share data) March 31 For the Quarter Ended June 30 September 30 December 31 2010 Revenues ...Operating costs ...Earnings from operations ...Net...

  • Page 100
    ...31, 2010. Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2010. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING There...

  • Page 101
    ...Company's internal controls over financial reporting as of December 31, 2010. STEPHEN J. HEMSLEY Stephen J. Hemsley President and Chief Executive Officer DAVID S. WICHMANN David S. Wichmann Executive Vice President and Chief Financial Officer of UnitedHealth Group and President of UnitedHealth Group...

  • Page 102
    ... 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...

  • Page 103
    ...headings "Corporate Governance," "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in our definitive proxy statement for our 2011 Annual Meeting of Shareholders, and such required information is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The...

  • Page 104
    ... the Company's Current Report on Form 8-K dated October 23, 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 the Company's Registration Statement on Form S-3/A, SEC File Number 333-66013...

  • Page 105
    ... as of February 9, 2011 Form of Agreement for Deferred Stock Unit Award to Non-Employee Directors under the Company's 2002 Stock Incentive Plan, effective as of February 9, 2011 Amended and Restated UnitedHealth Group Incorporated Executive Incentive Plan (2009 Statement), effective as of December...

  • Page 106
    ... Amendment to UnitedHealth Group Executive Savings Plan (2004 Statement) (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2010) Summary of Non-Management Director Compensation, effective as of July 1, 2009 (incorporated by...

  • Page 107
    ...January 29, 2009, between United HealthCare Services, Inc. and Larry C. Renfro (incorporated by reference to Exhibit 10.40 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008) Employment Agreement, effective as of December 1, 2006, between United HealthCare Services, Inc...

  • Page 108
    ... 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, 2010 and 2009, and...

  • Page 109
    Schedule I Condensed Financial Information of Registrant (Parent Company Only) UnitedHealth Group Condensed Balance Sheets (in millions, except per share data) December 31, 2010 2009 Assets Current assets: Cash and cash equivalents ...Deferred income taxes ...Prepaid expenses and other current ...

  • Page 110
    ... Financial Information of Registrant (Parent Company Only) UnitedHealth Group Condensed Statements of Operations (in millions) For the Year Ended December 31, 2010 2009 2008 Revenues: Investment and other income ...Total revenues ...Operating costs: Operating costs ...Interest expense ...Total...

  • Page 111
    Schedule I Condensed Financial Information of Registrant (Parent Company Only) UnitedHealth Group Condensed Statements of Cash Flows (in millions) For the Year Ended December 31, 2010 2009 2008 Operating activities Cash flows from operating activities ...Investing activities Capital contributions ...

  • Page 112
    ...31, 2010, 2009 and 2008 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...

  • Page 113
    ... duly authorized. Dated: February 10, 2011 UNITEDHEALTH GROUP INCORPORATED By STEPHEN J. HEMSLEY Stephen J. Hemsley President and Chief Executive Officer /s/ Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of...

  • Page 114
    ... the Company's Current Report on Form 8-K dated October 23, 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 the Company's Registration Statement on Form S-3/A, SEC File Number 333-66013...

  • Page 115
    ... Amendment to UnitedHealth Group Executive Savings Plan (2004 Statement) (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2010) Summary of Non-Management Director Compensation, effective as of July 1, 2009 (incorporated by...

  • Page 116
    ...Exhibit A to Exhibit 10.1 to the Company's Current Report on Form 8-K dated November 7, 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...

  • Page 117
    ... materials from UnitedHealth Group Incorporated's Annual Report on Form 10-K for the year ended December 31, 2010, filed on February 10, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated...

  • Page 118
    ...above in the box labeled "Number of Units," each Deferred Stock Unit representing the right to receive one share of UnitedHealth Group Incorporated Common Stock, $.01 par value per share (the "Common Stock"), subject to certain restrictions and on the terms and conditions contained in this Award and...

  • Page 119
    ... Units. In no event shall settlement occur later than ninety (90) days following Participant's Departure Date, unless such payment is deferred in accordance with the terms and conditions of the Company's non-qualified deferred compensation plans and in compliance with Section 409A of the Internal...

  • Page 120
    ... receive upon the terms and conditions specified in this certificate and in lieu of the shares of Common Stock of the Company immediately theretofore receivable upon the settlement of the Deferred Stock Units, with appropriate adjustments to prevent diminution or enlargement of benefits or potential...

  • Page 121
    ...Compliance with Securities Laws. The Company shall not be required to deliver any shares of Common Stock underlying any Deferred Stock Units until the requirements of any federal or state securities laws, rules or regulations or other laws or rules (including the rules of any securities exchange) as...

  • Page 122
    ... stock units (the "Deferred Stock Units") indicated above in the box labeled "Number of Units," each Deferred Stock Unit representing the right to receive one share of UnitedHealth Group Incorporated Common Stock, $.01 par value per share (the "Common Stock"), subject to the terms and conditions...

  • Page 123
    ... later than ninety (90) days following Participant's Departure Date, unless such payment is deferred in accordance with the terms and conditions of the Company's non-qualified deferred compensation plans and in compliance with Section 409A of the Internal Revenue Code of 1986 and its accompanying...

  • Page 124
    ... of any unsecured creditor of the Company or any Affiliate. (c) Compliance with Securities Laws. The Company shall not be required to deliver any shares of Common Stock underlying any Deferred Stock Units until the requirements of any federal or state securities laws, rules or regulations or other...

  • Page 125
    ... Participant is a "specified employee" (within the meaning of Code Section 409A and determined pursuant to procedures adopted by the Company) as of the Departure Date, payment shall be made on the first day following the six (6) month anniversary of Participant's Departure Date (or, if earlier than...

  • Page 126
    ..., customer relationships, and confidential information. Unless the context otherwise requires, "UnitedHealth Group" includes all its affiliated entities. This Agreement amends and restates the Employment Agreement between Executive and UnitedHealth Group previously executed by the parties in...

  • Page 127
    ... UnitedHealth Group's policies. UnitedHealth Group reserves the right to amend or discontinue any plan or policy at any time in its sole discretion. To supplement standard Company-paid life and disability coverages, the Company also will provide Executive with additional group term life insurance...

  • Page 128
    ... through the date on which Executive becomes eligible for Medicare. To exercise the option to secure the Post-COBRA Policy coverage, Executive agrees to take all required actions and provide any requested personal medical history and information, in accordance with UnitedHealth One's then current...

  • Page 129
    ... September 1, 2011. Term. This Agreement's term is from the Effective Date until this Agreement is terminated under Section 3.B. Termination. i. ii. By Mutual Agreement. The parties may terminate Executive's employment and this Agreement at any time by mutual agreement. By UnitedHealth Group without...

  • Page 130
    ... reduction affecting every member of the group of employees who are Executive Vice Presidents of UnitedHealth Group Incorporated; (b) moves Executive's primary work location more than 50 miles; (c) makes changes that substantially diminish Executive's duties or responsibilities; provided that, "Good...

  • Page 131
    ...under any long-term or similar benefit plan, or any other special or one-time bonus or incentive compensation payments); provided, however, that if termination occurs within two years following the Effective Date, the amount payable under this paragraph will be two times the greater of (i) Executive...

  • Page 132
    ... a "separation from service" and will be referred to as a "Termination." C. Separation Agreement and Release Required. In order to receive any Severance Benefits under this Agreement, Executive must sign a separation agreement and release of claims in a form determined by UnitedHealth Group in its...

  • Page 133
    ...Executive's employment. Examples of Confidential Information include: inventions; new product or marketing plans; business strategies and plans; merger and acquisition targets; financial and pricing information; computer programs, source codes, models and databases; analytical models; customer lists...

  • Page 134
    ..., employee, officer, director, consultant, owner, principal, partner or shareholder, or in any other individual or representative capacity: i. Customer Solicitation: Executive will not engage in, or attempt to engage in, any business competitive with any UnitedHealth Group business with any person...

  • Page 135
    ...requested, UnitedHealth Group will pay Executive an hourly rate of $300 to compensate Executive for any time spent in response to a request made hereunder. UnitedHealth Group will indemnify Executive, in accordance with the Minnesota Business Corporation Act, for all claims and other covered matters...

  • Page 136
    ... and memoranda) between Executive and UnitedHealth Group or its predecessors. This Agreement does not supersede any stock option, restricted stock, or stock appreciation rights plan or award certificate. Choice of Law. Minnesota law governs this Agreement. Waivers. No party's failure to exercise...

  • Page 137
    ... to the amendment of) the terms of any plan or program under which the Payments are to be made, including this Agreement, to avoid the imposition of a Section 409A tax, in each case, without any material diminution in the value of the payments or benefits to Executive. [signature page immediately...

  • Page 138
    United HealthCare Services, Inc. By Its /s/ Lori Sweere Executive Vice President of Human Capital Executive /s/ Gail K. Boudreaux Date June 2, 2010 - 13 - Date May 21, 2010

  • Page 139
    ... 31, 2010 December 31, 2009 December 31, 2008 December 31, 2007 December 31, 2006 Earnings: Earnings before income taxes ...Add back: Fixed charges ...Total earnings available for fixed charges ...Fixed charges: Interest, capitalized and expensed ...Interest component of rental payments ...Total...

  • Page 140
    ... (Shanghai) Co. CII Financial, Inc. Citipsych Pty. Ltd. ClinPharm International Limited Commonwealth Administrators, LLC Corporate Support Ltd. DBP Services of New York IPA, Inc. DCG Resource Options, LLC Definity Health Corporation Dental Benefit Providers of California, Inc. Ireland Canada DE...

  • Page 141
    ... Network Systems, Inc. Evercare Collaborative Solutions, Inc. IL DE ME DE SC DE DE Dental Benefit Providers, Inc. United HealthCare Services, Inc. National Benefit Resources, Inc. OptumHealth Holdings, LLC UnitedHealthcare Insurance Company Ingenix, Inc. Ovations, Inc. 1 DBP Services DBP Services...

  • Page 142
    ... Insurance Company Ovations, Inc. Ingenix, Inc. Sierra Health Services, Inc. Sierra Health Services, Inc. Personal Performance Consultants UK Limited Oxford Health Plans LLC UnitedHealth Group Incorporated Golden Rule Financial Corporation UnitedHealth Group Incorporated United HealthCare Services...

  • Page 143
    .... UnitedHealth International, Inc. Hygeia Corporation Ingenix International (Netherlands) B.V. Ingenix Pharmaceutical Services, Inc. Ingenix International (Netherlands) B.V. Ingenix Pharmaceutical Services, Inc. OptumHealth Allies UnitedHealth Allies i3 Drug Safety i3 Innovus i3 Pharma Resourcing...

  • Page 144
    Subsidiaries of the Company State of Jurisdiction or Domicile Name of Entity Subsidiary of Entity Doing Business As i3 Research India Private Limited i3 Research Limited i3 Sweden AB i3 Switzerland SARL Information Network Corporation Ingenix Holdings, LLC Ingenix Innovus (Netherlands) B.V. ...

  • Page 145
    ... Inc. Lynx Medical Systems Holding Corp. OneNet PPO, LLC Mid Atlantic Medical Services, LLC MAMSI Life and Health MLH OptumHealth Care Solutions, Inc. Mid Atlantic Medical Services, LLC M.D. IPA M.D. IPA HEALTH M.D. IPA PREFERRED M.D. IPA, The Quality Care Health Plan UnitedHealth Group Incorporated...

  • Page 146
    ...Business As Mohave Valley Hospital, Inc. National Benefit Resources, Inc. National Pacific Dental, Inc. Neighborhood Health Partnership, Inc. Netwerkes, LLC Nevada Pacific Dental Northern Nevada Health Network, Inc. OneNet PPO, LLC Optimum Choice, Inc. AZ MN TX FL TN NV NV MD MD Southwest Medical...

  • Page 147
    ... Plan Administrators, Inc. PacifiCare Health Plan Administrators, Inc. PacifiCare Health Plan Administrators, Inc. PacifiCare Health Plan Administrators, Inc. OptumHealth, LLC United HealthCare Services, Inc. OptumHealth International B.V. PPC International, L.L.C. Mid Atlantic Medical Services...

  • Page 148
    ... United Optical Med One Works i3 QualityMetric Internlock Employee and Family Assistance Prescription Solutions PRESCRIPTION SOLUTIONS FirstLine Medical THC of Nevada THC of Nevada Pharmacy Southwest Hospitalist Services Group SMA Lifestyle Center The Lewin Group, Inc. NC Ingenix Public...

  • Page 149
    ... Behavioral Health Plan, California UHC International Services, Inc. UHIC Holdings, Inc. UMR Care Management, LLLP DE DE CA DE DE DE CareMedic Systems, Inc. AmeriChoice Corporation United Behavioral Health UnitedHealth Group Incorporated United HealthCare Services, Inc. United HealthCare Services...

  • Page 150
    ... AmeriChoice Center for Health Care Policy and Evaluation Charter HealthCare, Inc. Employee Performance Design Evercare Healthmarc HealthPro Health Professionals Review Optum UHC Management UHC Management Company UHC Management Company, Inc. Unimerica Workplace Benefits United HealthCare Corporation...

  • Page 151
    ... Services Company of the River Valley, Inc. UnitedHealth Group Incorporated UnitedHealthcare, Inc. UnitedHealthcare, Inc. UnitedHealthcare, Inc. UnitedHealthcare, Inc. UnitedHealthcare, Inc. Complete Health MetraHealth Care Plan AMERICHOICE EVERCARE AT HOME OPTUMHEALTH OVATIONS United HealthCare...

  • Page 152
    ... Services Company of the River Valley, Inc. UnitedHealthcare Insurance Company UnitedHealthcare, Inc. United HealthCare Services, Inc. Golden Rule Financial Corporation OptumHealth Care Solutions, Inc. Ingenix, Inc. 7 UNITEDHEALTHCARE OF WISCONSIN-PERSONAL CARE PLUS UnitedOne Insurance...

  • Page 153
    ... our reports dated February 10, 2011, relating to the consolidated financial statements and financial statement schedule of UnitedHealth Group Incorporated and the effectiveness of UnitedHealth Group Incorporated's internal control over financial reporting, appearing in this Annual Report on Form 10...

  • Page 154
    ... capacities, to sign an Annual Report on Form 10-K for the year ended December 31, 2010 for UnitedHealth Group Incorporated, and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission...

  • Page 155
    ... information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ STEPHEN J. HEMSLEY b) February 10, 2011 Stephen J. Hemsley President and Chief Executive Officer

  • Page 156
    ... information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. DAVID S. WICHMANN David S. Wichmann Executive Vice President and Chief Financial Officer of UnitedHealth Group...

  • Page 157
    ... (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. February 10, 2011 DAVID S. WICHMANN David S. Wichmann Executive Vice President and Chief Financial Officer of UnitedHealth Group and President of...