United Healthcare 2010 Annual Report Download - page 44

2010 RESULTS OF OPERATIONS COMPARED TO 2009 RESULTS
Consolidated Financial Results
Revenues
The increases in revenues for 2010 were primarily due to strong organic growth in risk-based benefit offerings in
our public and senior markets businesses and commercial premium rate increases reflecting underlying medical
cost trends. Growth in customers served by our health services businesses, particularly through pharmaceutical
benefit management programs, increased revenues from public sector behavioral health programs and increased
sales of health care technology software and services also contributed to our revenue growth.
Medical Costs and Medical Care Ratio
Medical costs for 2010 increased primarily due to growth in our public and senior markets risk-based businesses
and medical cost inflation, which were partially offset by net favorable development of prior period medical
costs.
For 2010 and 2009, there was $800 million and $310 million, respectively, of net favorable medical cost
development related to prior fiscal years. The favorable development in 2010 was primarily driven by lower than
expected health system utilization levels; more efficient claims handling and processing, which results in higher
completion factors; a reduction in reserves needed for disputed claims from care providers; and favorable
resolution of certain state-based assessments.
The medical care ratio decreased due to a moderation in overall demand for medical services, successful clinical
engagement and management and the increase in prior period favorable development discussed previously.
Operating Costs
Operating costs for 2010 increased due to acquired and organic growth in health services businesses, which are
generally more operating cost intensive than our benefits businesses, goodwill impairment and charges for a
business line disposition at Ingenix, which is discussed in more detail below, an increase in staffing and selling
expenses primarily due to the change in the Medicare Advantage annual enrollment period, costs related to
increased employee headcount and compensation, increased advertising costs, and the absorption of new business
development and start-up costs.
Income Tax Rate
The increase in our effective income tax rate for 2010 as compared to 2009 resulted from a benefit in the 2009
tax rate from the resolution of various historical state income tax matters and an increase in the 2010 rate related
to limitations on the future deductibility of certain compensation related to the Health Reform Legislation.
Reporting Segments
We have four reporting segments:
• Health Benefits, which includes UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare &
Retirement, and UnitedHealthcare Community & State;
• OptumHealth;
• Ingenix; and
• Prescription Solutions.
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