United Healthcare 2009 Annual Report Download - page 21

comprehensiveness of coverage offered, reputation for quality care, financial stability and diversity of product
offerings. For our Health Benefits reporting segment, competitors include Aetna Inc., Cigna Corporation,
Coventry Health Care, Inc., Health Net, Inc., Humana Inc., Kaiser Permanente, WellPoint, Inc., numerous
for-profit and not-for-profit organizations operating under licenses from the Blue Cross Blue Shield Association
and other enterprises that serve more limited geographic areas or market segments such as Medicare specialty
services. For our Prescription Solutions business, competitors include Medco Health Solutions, Inc., CVS/
Caremark Corporation and Express Scripts, Inc. Our OptumHealth and Ingenix reporting segments also compete
with a broad and diverse set of other businesses.
We believe that barriers to entry in many markets are not substantial, so the addition of new competitors can
occur relatively easily, and customers enjoy significant flexibility in moving between competitors. In particular
markets, competitors may have capabilities or resources that give them a competitive advantage. Greater market
share, established reputation, superior supplier or health care professional arrangements, existing business
relationships, and other factors all can provide a competitive advantage to our businesses or to their competitors.
In addition, significant merger and acquisition activity has occurred in the industries in which we operate, both as
to our competitors and suppliers (including hospitals, physician groups and other care professionals) in these
industries. Consolidation may make it more difficult for us to retain or increase customers, to improve the terms
on which we do business with our suppliers, or to maintain or advance profitability. If we do not compete
effectively in our markets, if we set rates too high or too low in highly competitive markets, if we do not design
and price our products properly and competitively, if we are unable to innovate and deliver products and services
that demonstrate value to our customers, if we do not provide a satisfactory level of services, if membership or
demand for other services does not increase as we expect, if membership or demand for other services declines,
or if we lose accounts with more profitable products while retaining or increasing membership in accounts with
less profitable products, our business and results of operations could be materially adversely affected.
As a payer in various government health care programs, we are exposed to additional risks associated with
program funding, enrollments, payment adjustments and audits that could adversely affect our revenues,
cash flows and results of operations.
We participate in various federal, state and local government health care coverage programs, including as a payer
in Medicare Advantage, Medicare Part D, various Medicaid programs and SCHIP, and receive revenues from
these programs. These programs generally are subject to frequent changes, including changes that may reduce the
number of persons enrolled or eligible, reduce the amount of reimbursement or payment levels, or increase our
administrative or medical costs under such programs. For example, CMS recently implemented a reduction in
Medicare Advantage reimbursements of approximately 5% for 2010. Such changes have adversely affected our
results of operations and willingness to participate in such programs in certain geographic areas in the past, and
may do so in the future.
Our participation in the Medicare Advantage, Medicare Part D, and various Medicaid programs and SCHIP
occurs through bids that are submitted periodically. Revenues for these programs are dependent upon periodic
funding from the federal government or applicable state governments and allocation of the funding through
various payment mechanisms. Funding for these government programs is dependent upon many factors outside
of our control, including general economic conditions and budgetary constraints at the federal or applicable state
level, and general political issues and priorities. A reduction or less than expected increase in government
funding for these programs or change in allocation methodologies may adversely affect our revenues and results
of operations.
CMS uses various payment mechanisms to allocate funding for Medicare programs, including determining
payments by considering the risk status of our Medicare members as supported by provider medical record
documentation. Federal regulators audit the supporting documents and can revise payments based on the audit
findings. CMS announced in 2008 that it will perform audits of selected Medicare health plans each year to
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