United Healthcare 2012 Annual Report Download

Download and view the complete annual report

Please find the complete 2012 United Healthcare annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 128

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ÈANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2012
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)
(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 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.
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
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, 2012 was $59,444,144,483 (based on the last
reported sale price of $58.50 per share on June 30, 2012, on the New York Stock Exchange).*
As of January 31, 2013, there were 1,024,925,324 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
2013 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
    ... 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, 2012 was $59,444,144,483 (based on the last reported sale price of $58.50 per share on June 30, 2012, on the New York Stock Exchange...

  • Page 2
    ... and Results of Operations ...Financial Statements ...Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ...Other Information ...Part III Item 10. Item 11. Item 12. Item 13. Item 14. Directors, Executive Officers and Corporate Governance ...Executive Compensation...

  • Page 3
    ... business markets: integrated care delivery, care management, consumer engagement and support, distribution of benefits and services, health financial services, operational services and support, health care information technology and pharmacy. Through UnitedHealthcare and Optum, in 2012, we managed...

  • Page 4
    ... consumer-oriented health benefit plans and services for large national employers, public sector employers, mid-sized employers, small businesses and individuals nationwide, providing nearly 27 million Americans access to health care as of December 31, 2012. Through its risk-based product offerings...

  • Page 5
    ...2012, nearly 42,000 employersponsored benefit plans, including more than 200 employers in the large group self-funded market, purchased an HRA or HSA product. The consumer engagement tools provide members with online and/or mobile access to benefit, cost and quality information. Value-Based Products...

  • Page 6
    ..., Public Sector, and National Accounts), and clinical need. The spectrum of clinical programs offered to all consumers, regardless of their health goals - staying healthy, getting healthy, living with a chronic condition includes: wellness, decision support, utilization management, case and disease...

  • Page 7
    ... 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...

  • Page 8
    ..., the medically underserved and those without the benefit of employer-funded health care coverage in exchange for a monthly premium per member from the applicable state. UnitedHealthcare Community & State's primary customers oversee Medicaid plans, the Children's Health Insurance Program (CHIP...

  • Page 9
    ..., benefit designs, price points and values, including indemnity products. Amil's products include various administrative services such as network access and administration, care management and personal health services and claims processing. Other Operations. UnitedHealthcare International also...

  • Page 10
    ...evolve, care providers are emerging as a fourth market for the health management, financial services and integrated care delivery businesses. OptumHealth is organized into three major operating groups: Care Management, Integrated Care Delivery and Consumer Solutions. Care Management. Care Management...

  • Page 11
    ..., 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...

  • Page 12
    Care Providers. The Provider Solutions businesses combine a comprehensive range of technology and information products, advisory consulting, and outsourcing services focused on hospitals, integrated delivery networks, and physician practices. These solutions help drive financial performance, meet ...

  • Page 13
    ... services, to provide insights into patient reported outcomes and to optimize and manage risk to Life Sciences' clients. Products include Market Access and Reimbursement: Utilizes real-world evidence to drive increased drug revenues and pricing and reimbursements strategies; Health Economics...

  • Page 14
    ... of a plan's network; and included a requirement to provide coverage for preventive services without cost to members (for non-grandfathered plans). Commercial fully insured health plans in the large employer group, small employer group and individual markets with medical loss ratios below certain...

  • Page 15
    ... or health status rating adjustments; all individual and small group plans must provide certain essential health benefits, with member cost-sharing limitations and no annual limits on essential benefits coverage; establishment of state-based exchanges for individuals and small employers as well as...

  • Page 16
    ... 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 small employers and certain eligible individuals...

  • Page 17
    ...may do business with employers who sponsor employee benefit health plans, particularly those that maintain self-funded plans. Regulations established by the DOL provide additional rules for claims payment and member appeals under health care plans governed by ERISA. Additionally, some states require...

  • Page 18
    ... 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...

  • Page 19
    ... 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 directly contract with employers or with CMS, specialty benefit providers...

  • Page 20
    ... competitive factors that can impact our businesses relate to 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...

  • Page 21
    ...of AARP Services Inc., Chief Operating Officer of AARP Services Inc., President and Chief Executive Officer of AARP Financial and President of the AARP Funds. Ms. Short is Executive Vice President and Chief Legal Officer of UnitedHealth Group and has served in that capacity since January 2013. Prior...

  • Page 22
    ... in large part on our ability to predict, price for, and effectively manage medical costs. In this regard, the Health Reform Legislation established minimum medical loss ratios for certain health plans and authorized HHS to maintain an annual price increase review process for commercial health plans...

  • Page 23
    ...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 our financial results. For example, if our 2012 medical...

  • Page 24
    ... conduct business and our results of operations, financial position and cash flows. The 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...

  • Page 25
    ... health care markets, and our market share, results of operations, financial position and cash flows could be materially and adversely affected. In addition, the Health Reform Legislation requires the establishment of state-based health insurance exchanges for individuals and small employers by 2014...

  • Page 26
    ... require commercial health plans in the individual and small group markets to provide to the states and HHS extensive information supporting rate increases. If we are not able to secure approval for adequate premium increases to offset increases in our cost structure or if consumers forego coverage...

  • Page 27
    ... 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 are dependent upon periodic funding from the federal government or applicable state governments and...

  • Page 28
    ... 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...

  • Page 29
    ... control could affect our ability to timely process and dispense prescriptions 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...

  • Page 30
    ... affect our business, results of operations, financial position and cash flows. 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 31
    ... payers, our results of operations, financial position and cash flows could be materially and adversely affected. In addition, physicians, hospitals, pharmaceutical benefit service providers, pharmaceutical manufacturers, and certain health care providers are customers of our Optum businesses. Given...

  • Page 32
    ...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...

  • Page 33
    ... 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...

  • Page 34
    ... taxes or assessments for our commercial programs, such as premium taxes on insurance companies and health maintenance organizations and surcharges or fees on select fee-for-service and capitated medical claims, and could materially and adversely affect our results of operations, financial position...

  • Page 35
    ... to adequately price our products and services, to provide effective service to our customers in an efficient and uninterrupted fashion, and to accurately report our results of operations depends on the integrity of the data in our information systems. As a result of technology initiatives and...

  • Page 36
    ... 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 37
    ..., our Board of Directors adopted a share repurchase program, which the Board evaluates periodically. In June 2012, 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...

  • Page 38
    ...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, 2012. The...

  • Page 39
    ...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...

  • Page 40
    ... 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 UnitedHealthcare businesses. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN Among UnitedHealth Group, the S&P 500 Index, and a Peer...

  • Page 41
    ... and per share data) 2012 For the Year Ended December 31, 2011 2010 2009 2008 Consolidated operating results Revenues ...Earnings from operations ...Net earnings ...Return on shareholders' equity (a) ...Basic earnings per share attributable to UnitedHealth Group common shareholders ...Diluted...

  • Page 42
    ...'s businesses, we expect the medical care ratio to rise over time as we continue to grow in the senior and public markets and participate in the health benefit exchange market in 2014. In the commercial market segment, we expect pricing to continue to be highly competitive in 2013. We plan to...

  • Page 43
    ... for claims and/or benefits of our risk-based insurance arrangements. Our operating results depend in large part on our ability to effectively estimate, price for and manage our medical costs through underwriting criteria, product design, negotiation of favorable care provider contracts and care...

  • Page 44
    ... seen increased participation in incentive-based payment models such as pay for performance, shared savings, bundled/episode payment and Patient-Centered Medical Home models (PCMHs). We also have seen continued development and deployment of risk-based accountable care models designed to modernize...

  • Page 45
    ... 10% in a number of markets due to the combination of medical cost trends and the incremental costs of health care reform. We have begun to experience greater regulatory challenges to appropriate premium rate increases in several states, including California and New York. Depending on the level of...

  • Page 46
    ... taxes and fees on to customers through increases in rates and/or decreases in benefits, subject to regulatory approval. State-Based Exchanges and Coverage Expansion. Effective in 2014, state-based exchanges are required to be established for individuals and small employers with enrollment processes...

  • Page 47
    ... costs ...Earnings from operations ...Interest expense ...Earnings before income taxes ...Provision for income taxes ...Net earnings ...Diluted earnings per share attributable to UnitedHealth Group common shareholders . . Medical care ratio (a) ...Operating cost ratio ...Operating margin ...Tax rate...

  • Page 48
    ...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...

  • Page 49
    The following table presents reportable segment financial information: For the Years Ended December 31, 2012 2011 2010 Increase/ (Decrease) 2012 vs. 2011 Increase/ (Decrease) 2011 vs. 2010 (in millions, except percentages) Revenues UnitedHealthcare ...OptumHealth ...OptumInsight ...OptumRx ......

  • Page 50
    ... for 2012 was driven by lower than expected health system utilization levels and increased efficiency in claims handling and processing. In March 2012, UnitedHealthcare Military & Veterans was awarded the TRICARE West Region Managed Care Support Contract. The contract, for health care operations...

  • Page 51
    ... RESULTS OF OPERATIONS COMPARED TO 2010 RESULTS Consolidated Financial Results Revenues The increases in revenues for 2011 were driven by strong organic growth in the number of individuals served in our UnitedHealthcare businesses, commercial premium rate increases reflecting underlying medical cost...

  • Page 52
    ... overall operating cost management and the increase in 2010 operating costs due to the goodwill impairment and charges for a business line disposition of certain i3-branded clinical trial service businesses. Income Tax Rate The effective income tax rate for 2011 decreased compared to the prior year...

  • Page 53
    ... certain i3-branded clinical trial service businesses. OptumRx The increase in OptumRx revenues for 2011 was due to increased prescription volumes, primarily due to growth in customers served through Medicare Part D prescription drug plans by our UnitedHealthcare Medicare & Retirement business, and...

  • Page 54
    ... 2012 Cash Flows Compared to 2011 Cash Flows Cash flows from operating activities for 2012 increased $187 million, or 3% from 2011 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...

  • Page 55
    ... provide liquidity support for our $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, 2012. The interest rates on borrowings are variable depending on term and are calculated based...

  • Page 56
    ... to the Consolidated Financial Statements included in Item 8, "Financial Statements." Dividends. In June 2012, our Board of Directors increased our cash dividend to shareholders to an annual dividend rate of $0.85 per share, paid quarterly. Since May 2011, we had paid an annual dividend of $0.65...

  • Page 57
    ... as of December 31, 2012, under our various contractual obligations and commitments: (in millions) 2013 2014 to 2015 2016 to 2017 Thereafter Total Debt (a) ...Operating leases ...Purchase obligations (b) ...Future policy benefits (c) ...Unrecognized tax benefits (d) ...Other liabilities recorded on...

  • Page 58
    ... the date of service. As of December 31, 2012, our days outstanding in medical payables was 49 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...

  • Page 59
    ... 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...

  • Page 60
    ... 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...

  • Page 61
    ... 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...

  • Page 62
    ... on available-for-sale investments from earnings and report net unrealized gains or losses, net of income tax effects, 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, 2012, our investments...

  • Page 63
    ...our debt securities with an amortized cost in excess of fair value. The unrealized losses of $9 million and $32 million at December 31, 2012 and 2011, respectively, were primarily caused by market interest rate increases and not by unfavorable changes in the credit standing. We manage our investment...

  • Page 64
    ... 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...

  • Page 65
    ... limited due to the large number of employer groups and other customers that constitute our client base. As of December 31, 2012, we had an aggregate $1.9 billion reinsurance receivable resulting from the sale of our Golden Rule Financial Corporation life and annuity business in 2005. We regularly...

  • Page 66
    ... employee savings plan related investments of $348 million and 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...

  • Page 67
    ... Assets ...7. Medical Costs and Medical Costs Payable ...8. Commercial Paper and Long-Term Debt ...9. Income Taxes ...10. Shareholders' Equity ...11. Share-Based Compensation ...12. Commitments and Contingencies ...13. Segment Financial Information ...14. Quarterly Financial Data (Unaudited...

  • Page 68
    ...'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...

  • Page 69
    ...: 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...

  • Page 70
    ...operations ...Interest expense ...Earnings before income taxes ...Provision for income taxes ...Net earnings ...Earnings per share attributable to UnitedHealth Group common shareholders: Basic ...Diluted ...Basic weighted-average number of common shares outstanding ...Dilutive effect of common stock...

  • Page 71
    UnitedHealth Group Consolidated Statements of Comprehensive Income (in millions) For the Years Ended December 31, 2012 2011 2010 Net earnings ...Other comprehensive (loss) income: Gross unrealized holding gains on investment securities during the period ...Income tax expense ...Total unrealized ...

  • Page 72
    ... stock, and related tax effects ...Share-based compensation, and related tax benefits ...Common stock repurchases ...Cash dividends paid on common stock ...Balance at December 31, 2010 . . Net earnings ...Other comprehensive income ...Issuances of common stock, and related tax effects ...Share-based...

  • Page 73
    UnitedHealth Group Consolidated Statements of Cash Flows For the Years Ended December 31, 2012 2011 2010 (in millions) Operating activities Net earnings ...Non-cash items: Depreciation and amortization ...Deferred income taxes ...Share-based compensation ...Other, net ...Net change in other ...

  • Page 74
    ...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. Effective in 2011, U.S. commercial health plans with medical loss ratios on fully insured products, as...

  • Page 75
    ... 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...

  • Page 76
    ... 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...

  • Page 77
    ... 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...

  • Page 78
    ... 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...

  • Page 79
    ...As of January 1, 2013, certain changes were made to the Medicare Part D coverage by CMS, including: The initial coverage limit increased to $2,970 from $2,930 in 2012. The catastrophic coverage begins at $6,734 as compared to $6,658 in 2012. The annual out-of-pocket maximum increased to $4,750 from...

  • Page 80
    ... 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...

  • Page 81
    ... 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...

  • Page 82
    ... 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...

  • Page 83
    ... A summary of short-term and long-term investments by major security type is as follows: Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (in millions) December 31, 2012 Debt securities - available-for-sale: U.S. government and agency obligations ...State and municipal...

  • Page 84
    ..., the average of the available ratings is used) and origination as of December 31, 2012 were as follows: (in millions) AAA AA A Non-Investment Grade Total Fair Value 2012 ...2011 ...2010 ...2007 ...2006 ...Pre-2006 ...U.S. agency mortgage-backed securities ...Total ... $ 123 27 - 88 137 167 2,238...

  • Page 85
    ... various public and nonpublic companies concentrated in 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...

  • Page 86
    ..., 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...

  • Page 87
    ... 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...

  • Page 88
    ...: Quoted Prices in Active Markets (Level 1) Other Observable Inputs (Level 2) Unobservable Inputs (Level 3) Total Fair and Carrying Value (in millions) December 31, 2012 Cash and cash equivalents ...Debt securities - available-for-sale: U.S. government and agency obligations ...State and municipal...

  • Page 89
    ...Quoted Prices in Active Markets (Level 1) Other Observable Inputs (Level 2) Unobservable Inputs (Level 3) Total Fair Value Total Carrying Value (in millions) December 31, 2012 Debt securities - held-to-maturity: U.S. government and agency obligations ...State and municipal obligations ...Corporate...

  • Page 90
    ... fair value information about the AARP Program-related financial assets and liabilities: Quoted Prices in Active Markets (Level 1) Other Observable Inputs (Level 2) Total Fair and Carrying Value (in millions) December 31, 2012 Cash and cash equivalents ...Debt securities: U.S. government and...

  • Page 91
    ..., bringing the stake in Amil attributable to the Company to approximately 65% of Amil's outstanding shares. Amil is a health care company located in Brazil, providing health and dental benefits, hospital and clinical services, and advanced care management resources to more than 5 million people. The...

  • Page 92
    ... shareholders to the date of payment to the tendering minority shareholders. The remaining 10% 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...

  • Page 93
    ... development for 2012, 2011 and 2010 was driven by lower than expected health system utilization levels and increased efficiency in claims handling and processing. The favorable development for 2010 was also impacted by a reduction in reserves needed for disputed claims from care providers; and...

  • Page 94
    ... commercial paper and long-term debt ...$16,705 $16,754 $18,621 $11,860 $11,638 $13,149 (a) In 2012, the Company entered into interest rate swap contracts with a notional amount of $2.8 billion hedging these fixed-rate debt instruments. See below for more information on the Company's interest rate...

  • Page 95
    ... of short-duration, senior unsecured debt privately placed on a discount basis through broker-dealers. As of December 31, 2012, the Company's outstanding commercial paper had a weighted-average annual interest rate of 0.3%. The Company has $3.0 billion five-year and $1.0 billion 364-day revolving...

  • Page 96
    ... $2,749 37.2% The higher effective income tax rate for 2012 as compared to 2011 resulted from the favorable resolution of various tax matters in 2011. The 2010 effective income tax rates were at higher levels due to the cumulative implementation of changes under the Health Reform Legislation. 94

  • Page 97
    ...: (in millions) 2012 2011 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...

  • Page 98
    ... 31, 2012, the total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate, was $77 million. The Company currently files income tax returns in the U.S., various states and foreign jurisdictions. The U.S. Internal Revenue Service (IRS) has completed exams on...

  • Page 99
    ... 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) 2010 ...2011 ...2012 ...11. Share-Based Compensation $0.4050 0.6125 0.8000 $449 651 820 The Company's outstanding...

  • Page 100
    ...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...

  • Page 101
    ...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 all employees. Compensation expense related to this plan was not material for the years 2012, 2011 and 2010. In addition...

  • Page 102
    ... by members, care providers, 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...

  • Page 103
    ... consumer-oriented health benefit plans and services for large national employers, public sector employers, mid-sized employers, small businesses and individuals nationwide and will serve TRICARE West Region members beginning April 1, 2013. UnitedHealthcare Medicare & Retirement provides health care...

  • Page 104
    ..., 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...

  • Page 105
    ... results. The following table presents the reportable segment financial information: Optum Corporate and Intersegment UnitedHealthcare OptumHealth OptumInsight OptumRx Total Optum Eliminations Consolidated (in millions) 2012 Revenues - external customers: Premiums ...Services ...Products...

  • Page 106
    ...information for all quarters of 2012 and 2011 is as follows: (in millions, except per share data) March 31 For the Quarter Ended June 30 September 30 December 31 2012 Revenues ...Operating costs ...Earnings from operations ...Net earnings ...Net earnings per share attributable to UnitedHealth Group...

  • Page 107
    ...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...

  • Page 108
    ...-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...

  • Page 109
    ... 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, 2012, based on...

  • Page 110
    ...headings "Corporate Governance," "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in our definitive proxy statement for our 2013 Annual Meeting of Shareholders, and such required information is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The...

  • Page 111
    ... Relationships and Transactions" and "Corporate Governance" in our definitive proxy statement for our 2013 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...

  • Page 112
    ... 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 UnitedHealth Group Incorporated's Registration Statement on Form S-3/A, SEC File Number 333...

  • Page 113
    ... 10.4 to UnitedHealth Group Incorporated's Current Report on Form 8-K dated May 23, 2011) Form of Agreement for Performance-based Restricted Stock Unit Award to Executives under UnitedHealth Group Incorporated's 2011 Stock Incentive Plan, effective as of May 24, 2011 (incorporated by reference...

  • Page 114
    ... 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...

  • Page 115
    ... 31, 2008, between United HealthCare Services, Inc. and Lori Sweere Employment Agreement, effective as of April 12, 2007, between United HealthCare Services, Inc. and Anthony Welters (incorporated by reference to Exhibit 10.28 to UnitedHealth Group Incorporated's Annual Report on Form 10-K for the...

  • Page 116
    ... 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...

  • Page 117
    ... 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, 2012 and 2011, and...

  • Page 118
    ... Financial Information of Registrant (Parent Company Only) UnitedHealth Group Condensed Balance Sheets (in millions, except per share data) December 31, 2012 December 31, 2011 Assets Current assets: Cash and cash equivalents ...Notes receivable from subsidiaries ...Deferred income taxes, prepaid...

  • Page 119
    ... Condensed Financial Information of Registrant (Parent Company Only) UnitedHealth Group Condensed Statements of Comprehensive Income For the Years Ended December 31, 2012 2011 2010 (in millions) Revenues: Investment and other income ...Total revenues ...Operating costs: Operating costs ...Interest...

  • Page 120
    Schedule I Condensed Financial Information of Registrant (Parent Company Only) UnitedHealth Group Condensed Statements of Cash Flows For the Years Ended December 31, (in millions) 2012 2011 2010 Operating activities Cash flows from operating activities ...Investing activities Cash paid for ...

  • Page 121
    .... UnitedHealth Group's investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries. Notes Receivable from Subsidiaries. Notes issued to subsidiaries were used primarily to fund acquisitions. During 2012, the parent company completed a non-cash exchange of...

  • Page 122
    ... duly authorized. Dated: February 6, 2013 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...

  • Page 123
    ... 10.4 to UnitedHealth Group Incorporated's Current Report on Form 8-K dated May 23, 2011) Form of Agreement for Performance-based Restricted Stock Unit Award to Executives under UnitedHealth Group Incorporated's 2011 Stock Incentive Plan, effective as of May 24, 2011 (incorporated by reference...

  • Page 124
    ...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...

  • Page 125
    ... 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...

  • Page 126
    ... Statements of Changes in Shareholders' Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to the Consolidated Financial Statements. 12.1 21.1 23.1 24.1 31.1 32.1 101 * ** Denotes management contracts and compensation plans in which certain directors and named executive officers...

  • Page 127

  • Page 128