United Healthcare 2004 Annual Report Download - page 27

UNITEDHEALTH GROUP 25
Health Care Services earnings from operations in 2004 were $2.8 billion, representing an increase of
$945 million, or 51%, over 2003. This increase primarily resulted from Ovations’ and UnitedHealthcare’s
revenue growth, improved gross margins on UnitedHealthcare’s commercial risk-based products and the
impact of the acquisitions of Oxford, MAMSI and Golden Rule. UnitedHealthcare’s commercial medical
care ratio improved to 79.0% in 2004 from 80.0% in 2003. The decrease in the commercial medical care
ratio was primarily driven by net premium rate increases that slightly exceeded overall medical benefit cost
increases and changes in business and customer mix. Health Care Services’ 2004 operating margin was
8.6%, an increase of 110 basis points over 2003. This increase was principally driven by a combination of
the improved commercial medical care ratio and changes in business and customer mix.
The following table summarizes the number of individuals served by Health Care Services, by major
market segment and funding arrangement, as of December 311:
(in thousands) 2004 2003
Commercial
Risk-Based 7,655 5,400
Fee-Based 3,305 2,895
Total Commercial 10,960 8,295
Medicare
330 230
Medicaid 1,260 1,105
Total Health Care Services 12,550 9,630
1Excludes individuals served by Ovations’ Medicare supplement products provided to AARP members.
The number of individuals served by UnitedHealthcare’s commercial business as of December 31, 2004,
increased by nearly 2.7 million, or 32%, over the prior year. Excluding the 2004 acquisitions of Oxford,
MAMSI and a smaller regional health plan, the number of individuals served by UnitedHealthcare’s
commercial business increased by 245,000. This included an increase of 285,000 in the number of
individuals served with fee-based products, driven by new customer relationships and existing customers
converting from risk-based products to fee-based products, partially offset by a decrease of 40,000 in the
number of individuals served with risk-based products resulting primarily from customers converting to
self-funded, fee-based arrangements and a competitive commercial risk-based pricing environment.
Excluding the impact of the Oxford acquisition, the number of individuals served by Ovations’
Medicare Advantage products increased by 30,000, or 13%, from 2003. AmeriChoice’s Medicaid
enrollment increased by 155,000, or 14%, due to organic growth in the number of individuals served
and the acquisition of a Medicaid health plan in Michigan in February 2004, resulting in the addition
of approximately 95,000 individuals served.
Uniprise
Uniprise provides network-based health and well-being services, business-to-business transaction
processing services, consumer connectivity and technology support services to large employers and health
plans, and provides health-related consumer and financial transaction products and services. Uniprise
revenues in 2004 were $3.4 billion, representing an increase of 8% over 2003. This increase was driven
primarily by growth of 4% in the number of individuals served by Uniprise, excluding the impact of the
acquisition of Definity Health Corporation (Definity) in December 2004, and annual service fee rate
increases for self-insured customers. Uniprise served 9.9 million individuals and 9.1 million individuals as
of December 31, 2004 and 2003, respectively.