United Healthcare 2004 Annual Report Download - page 60

58 UNITEDHEALTH GROUP
12 Commitments and Contingencies
LEASES
We lease facilities, computer hardware and other equipment under long-term operating leases that are
noncancelable and expire on various dates through 2025. Rent expense under all operating leases was
$137 million in 2004, $133 million in 2003 and $132 million in 2002.
At December 31, 2004, future minimum annual lease payments, net of sublease income, under all
noncancelable operating leases were as follows: $126 million in 2005, $116 million in 2006, $106 million
in 2007, $78 million in 2008, $62 million in 2009, and $149 million thereafter.
SERVICE AGREEMENTS
We have noncancelable contracts for certain data center operations and support, network and voice
communication services, and other services, which expire on various dates through 2009. Expenses incurred
in connection with these agreements were $265 million in 2004, $256 million in 2003 and $264 million in
2002. At December 31, 2004, future minimum obligations under our noncancelable contracts were as follows:
$103 million in 2005, $55 million in 2006, $14 million in 2007, $9 million in 2008, and $3million in 2009.
LEGAL MATTERS
Because of the nature of our businesses, we are routinely made party to a variety of legal actions related to
the design, management and offerings of our services. We record liabilities for our estimates of probable
costs resulting from these matters. These matters include, but are not limited to, claims relating to health
care benefits coverage, medical malpractice actions, contract disputes and claims related to disclosure of
certain business practices. Following the events of September 11, 2001, the cost of business insurance
coverage increased significantly. As a result, we have increased the amount of risk that we self-insure,
particularly with respect to matters incidental to our business.
Beginning in 1999, a series of class action lawsuits were filed against us and virtually all major entities
in the health benefits business. In December 2000, a multidistrict litigation panel consolidated several
litigation cases involving UnitedHealth Group and our affiliates in the Southern District Court of Florida,
Miami division. Generally, the health care provider plaintiffs allege violations of ERISA and RICO in
connection with alleged undisclosed policies intended to maximize profits. Other allegations include
breach of state prompt payment laws and breach of contract claims for failure to timely reimburse
providers for medical services rendered. The consolidated suits seek injunctive, compensatory and
equitable relief as well as restitution, costs, fees and interest payments. The trial court granted the health
care providers’ motion for class certification and that order was reviewed by the Eleventh Circuit Court
of Appeals. The Eleventh Circuit affirmed the class action status of the RICO claims, but reversed as to
the breach of contract, unjust enrichment and prompt payment claims. Through a series of motions and
appeals, all direct claims against UnitedHealthcare have been compelled to arbitration. The trial court
has denied UnitedHealthcare’s further motion to compel the secondary RICO claims to arbitration and
the Eleventh Circuit affirmed that order. A trial date has been set for September 2005. The trial court
has ordered that the trial be bifurcated into separate liability and damage proceedings.