United Healthcare 2007 Annual Report Download - page 64

As of January 1, 2008, certain changes were made to the Medicare Part D coverage by CMS, including:
• The initial coverage limit increased to $2,510.
• The catastrophic coverage begins at $5,726.
• The annual out-of-pocket maximum increased to $4,050.
• The risk-share provisions take effect if actual costs are more than 5% above or below expected costs.
• CMS retains 50% to 80% of the losses or profits outside this risk corridor.
These changes result in an increase in the amount of losses or profits that we may realize from this contract in
2008 as the amount of risk retained by CMS has diminished.
4. Acquisitions
On March 12, 2007, we announced that we had signed a definitive merger agreement under which the Company
will acquire all of the outstanding shares of Sierra Health Services, Inc. (Sierra), a diversified health care services
company based in Las Vegas, Nevada, for approximately $2.6 billion in cash, representing a price of $43.50 per
share of Sierra common stock. The transaction has been approved by the Boards of Directors of both companies,
Sierra’s shareholders and all required state regulatory agencies, and is expected to close in early 2008, subject to
federal regulatory approvals and other customary conditions. This acquisition is intended to strengthen our
position in the rapidly growing southwest region.
On January 10, 2008, we acquired all of the outstanding shares of Fiserv Health, Inc. (Fiserv Health), a
subsidiary of Fiserv, Inc., for $730 million in cash. Fiserv Health is a leading administrator of medical benefits
and also provides care facilitation services, specialty health solutions and PBM services. The acquired businesses
will each align with our Health Care Services, OptumHealth, Ingenix and Prescription Solutions segments. We
expect that this transaction will allow us to expand the capacity of our existing benefits administration businesses
and enable existing and new Fiserv Health customers to leverage our full range of assets, including ancillary
services, our national network and technology tools. The pro forma effects of this acquisition on our
Consolidated Financial Statements were not material.
On January 8, 2008, we announced that AmeriChoice had signed a definitive agreement to acquire Unison Health
Plans (Unison). Unison provides government-sponsored health plan coverage to approximately 370,000 people in
Pennsylvania, Ohio, Tennessee, Delaware and South Carolina through a network of independent health care
professionals. This all-cash transaction is expected to close by mid-2008, subject to required regulatory approvals
and other customary conditions. The pro forma effects of this acquisition on our Consolidated Financial
Statements are not expected to be material.
On December 1, 2006, our Health Care Services business segment acquired the Student Insurance Division
(Student Resources) of The MEGA Life and Health Insurance Company through an asset purchase agreement.
Student Resources primarily serves college and university students. This acquisition strengthened our position in
this market and provided expanded distribution opportunities for our other UnitedHealth Group businesses. In
exchange and under the terms of the asset purchase agreement, we issued a 10-year, $95 million promissory note
bearing a 5.4% fixed interest rate and paid approximately $1 million in cash. The results of operations and
financial condition of Student Resources have been included in our Consolidated Financial Statements since the
acquisition date. The pro forma effects of the Student Resources acquisition on our Consolidated Financial
Statements were not material.
On February 24, 2006, we acquired John Deere Health Care, Inc. (JDHC). JDHC serves employers primarily in
Iowa, central and western Illinois, eastern Tennessee and southwestern Virginia. This acquisition strengthened
our resources and capabilities in these areas. The operations of JDHC reside primarily within our Health Care
Services segment. We paid approximately $515 million in cash, including transaction costs, in exchange for all
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