United Healthcare 2012 Annual Report Download - page 42

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read together with the accompanying Consolidated Financial Statements and
Notes to the Consolidated Financial Statements thereto. Readers are cautioned that the statements, estimates,
projections or outlook contained in this report, including discussions regarding financial prospects, economic
conditions, trends and uncertainties contained in this Item 7, may constitute forward-looking statements within
the meaning of the PSLRA. These forward-looking statements involve risks and uncertainties that may cause our
actual results to differ materially from the results discussed in the forward-looking statements. A description of
some of the risks and uncertainties can be found further below in this Item 7 and in Item 1A, “Risk Factors.”
EXECUTIVE OVERVIEW
General
UnitedHealth Group is a diversified health and well-being company dedicated to helping people live healthier
lives and making health care work better. We offer a broad spectrum of products and services through two
distinct platforms: UnitedHealthcare, which provides health care coverage and benefits services; and Optum,
which provides information and technology-enabled health services. Further information on our business is
included in Item 1, “Business” and additional information on the our segments can be found in this Item 7 and in
Note 13 to the Consolidated Financial Statements in Item 8, “Financial Statements.”
Revenues
Our revenues are primarily comprised of premiums derived from risk-based health insurance arrangements in
which the premium is typically at a fixed rate per individual served for a one-year period, and we assume the
economic risk of funding our customers’ health care benefits and related administrative costs. We also generate
revenues from fee-based services performed for customers that self-insure the health care 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 and other health care professionals. We also
generate service revenues from our Optum businesses relating to care management, consumer engagement and
support, distribution of benefits and services, health financial services, operational services and support, health
care information technology and pharmacy services. Product revenues are mainly comprised of products sold by
our pharmacy benefit management business. We derive investment income primarily from interest earned on our
investments in debt securities; investment income also includes gains or losses when investment securities are
sold, or other-than-temporarily impaired.
Pricing Trends. We seek to price our products consistent with anticipated underlying medical trends, while
balancing growth, margins, competitive dynamics, cost increases for the industry fees and tax provisions of
Health Reform Legislation and premium rebates at the local market level. We endeavor to sustain a commercial
medical care ratio in a stable range for an equivalent mix of business. Changes in business mix and Health
Reform Legislation may impact our premiums, medical costs and medical care ratio. Further, we continue to
expect premium rates to be under pressure through continued market competition in commercial products and
government payment rates. Aggregating UnitedHealthcare’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
hold to our pricing disciplines and, considering the competitive environment and persistently weak employment
and new business formation rates, we expect continued pressure on our commercial risk-based product
membership in 2013. Additionally, self-insured membership as a percent of total commercial membership is
expected to continue to increase at a modest pace in 2013 and beyond, due in part to the emerging popularity of
midsize employers moving to self-funded arrangements.
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