SEC Info - Unitedhealth Group Inc - ‘10-K’ for 12/31/10

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Unitedhealth Group Inc – ‘10-K’ for 12/31/10 – ‘XML.R9’

On: Thursday, 2/10/11, at 4:04pm ET · For: 12/31/10 · Accession #: 1193125-11-30615 · File #: 1-10864

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 2/10/11  Unitedhealth Group Inc            10-K       12/31/10  114:19M                                    Donnelley … Solutions/FA

Annual Report — Form 10-K — Sect. 13 / 15(d) – SEA’34
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                       HTML   1.46M 
 2: EX-10.12    Form of Agreement for Deferred Stock Unit Award     HTML     49K 
 3: EX-10.13    Form of Agreement for Deferred Stock Unit Award     HTML     47K 
 4: EX-10.33    Amendment to Employment Agreement                   HTML     83K 
 6: EX-21.1     Subsidiaries of the Company                         HTML    164K 
 7: EX-23.1     Consent of Independent Registered Public            HTML     35K 
                Accounting Firm                                                  
 8: EX-24.1     Power of Attorney                                   HTML     42K 
 5: EX-12.1     Computation of Ratio of Earnings to Fixed Charges   HTML     49K 
 9: EX-31.1     Certification Pursuant to Section 302 of the        HTML     49K 
                Sarbanes-Oxley Act of 2002                                       
10: EX-32.1     Certification Pursuant to Section 906 of the        HTML     38K 
                Sarbanes-Oxley Act of 2002                                       
87: XML         IDEA XML File -- Definitions and References          XML    314K 
103: XML         IDEA XML File -- Filing Summary                      XML    384K  
98: XML.R1      Document and Entity Information                      XML    226K 
99: XML.R2      Consolidated Balance Sheets                          XML    396K 
53: XML.R3      Consolidated Balance Sheets (Parenthetical)          XML    175K 
62: XML.R4      Consolidated Statements of Operations                XML    342K 
85: XML.R5      Consolidated Statements of Changes in                XML    754K 
                Shareholders' Equity                                             
80: XML.R6      Consolidated Statements of Changes in                XML     98K 
                Shareholders' Equity (Parenthetical)                             
109: XML.R7      Consolidated Statements of Cash Flows                XML    564K  
28: XML.R8      Description of Business                              XML     60K 
79: XML.R9      Basis of Presentation, Use of Estimates and          XML    114K 
                Significant Accounting Policies                                  
24: XML.R10     Investments                                          XML    262K 
23: XML.R11     Fair Value                                           XML    195K 
52: XML.R12     Property, Equipment and Capitalized Software         XML     75K 
92: XML.R13     Goodwill and Other Intangible Assets                 XML    127K 
54: XML.R14     Medical Costs and Medical Costs Payable              XML     82K 
58: XML.R15     Commercial Paper and Long-Term Debt                  XML    159K 
74: XML.R16     Income Taxes                                         XML    140K 
114: XML.R17     Shareholders' Equity                                 XML     73K  
45: XML.R18     Share-Based Compensation                             XML    110K 
17: XML.R19     Aarp                                                 XML    136K 
61: XML.R20     Commitments and Contingencies                        XML     86K 
90: XML.R21     Segment Financial Information                        XML    218K 
35: XML.R22     Quarterly Financial Data                             XML     89K 
86: XML.R23     Schedule I                                           XML    172K 
59: XML.R24     Basis of Presentation, Use of Estimates and          XML    243K 
                Significant Accounting Policies (Policy)                         
108: XML.R25     Fair Value (Policy)                                  XML     65K  
94: XML.R26     Commercial Paper and Long-Term Debt (Policy)         XML     59K 
65: XML.R27     Aarp (Policy)                                        XML     63K 
75: XML.R28     Basis of Presentation, Use of Estimates and          XML     76K 
                Significant Accounting Policies (Tables)                         
22: XML.R29     Investments (Tables)                                 XML    297K 
26: XML.R30     Fair Value (Tables)                                  XML    194K 
38: XML.R31     Property, Equipment and Capitalized Software         XML     73K 
                (Tables)                                                         
48: XML.R32     Goodwill and Other Intangible Assets (Tables)        XML    144K 
73: XML.R33     Medical Costs and Medical Costs Payable (Tables)     XML     79K 
93: XML.R34     Commercial Paper and Long-Term Debt (Tables)         XML    171K 
20: XML.R35     Income Taxes (Tables)                                XML    155K 
29: XML.R36     Shareholders' Equity (Tables)                        XML     57K 
100: XML.R37     Share-Based Compensation (Tables)                    XML    111K  
107: XML.R38     Aarp (Tables)                                        XML    137K  
66: XML.R39     Commitments and Contingencies (Tables)               XML     64K 
111: XML.R40     Segment Financial Information (Tables)               XML    213K  
30: XML.R41     Quarterly Financial Data (Tables)                    XML     87K 
113: XML.R42     Schedule I (Tables)                                  XML    170K  
40: XML.R43     Basis of Presentation, Use of Estimates and          XML    230K 
                Significant Accounting Policies (Narrative)                      
                (Details)                                                        
18: XML.R44     Basis of Presentation, Use of Estimates and          XML    157K 
                Significant Accounting Policies (Consolidated                    
                Balance Sheet) (Details)                                         
39: XML.R45     Basis of Presentation, Use of Estimates and          XML    146K 
                Significant Accounting Policies (Useful Lives for                
                Property, Equipment and Capitalized Software)                    
                (Details)                                                        
89: XML.R46     Investments (Narrative) (Details)                    XML    185K 
106: XML.R47     Investments (Short-term and Long-term Investments)   XML    881K  
                (Details)                                                        
56: XML.R48     Investments (Fair Value of the Company's             XML    840K 
                Mortgage-backed Securities by Credit Rating and                  
                Non-U.S. Agency Mortgage-backed Securities by                    
                Origination) (Details)                                           
42: XML.R49     Investments (Amortized Cost and Fair Value of        XML    176K 
                Available-for-sale Debt Securities by Contractual                
                Maturity) (Details)                                              
71: XML.R50     Investments (Amortized Cost and Fair Value of        XML    124K 
                Held-to-maturity Debt Securities by Contractual                  
                Maturity) (Details)                                              
21: XML.R51     Investments (Fair Value of Available-for-sale        XML    620K 
                Investments with Gross Unrealized Losses by                      
                Investment Type and Length of Time that Individual               
                Securities Have Been in a Continuous Unrealized                  
                Loss Position) (Details)                                         
77: XML.R52     Investments (Mortgage Backed Securities in an        XML    306K 
                Unrealized Loss Position by Credit Rating)                       
                (Details)                                                        
43: XML.R53     Investments (Net Realized Gains (Losses), Before     XML    143K 
                Taxes) (Details)                                                 
27: XML.R54     Fair Value (Narrative) (Details)                     XML     91K 
105: XML.R55     Fair Value (Financial Assets and Liabilities,        XML   1.45M  
                Excluding AARP, Measured at Fair Value on a                      
                Recurring Basis) (Details)                                       
102: XML.R56     Fair Value (Reconciliation of Assets Measured at     XML    339K  
                Fair Value on a Recurring Basis Using Level 3                    
                Inputs) (Details)                                                
51: XML.R57     Fair Value (Summary of Fair Value and Carrying       XML    233K 
                Value for Certain Financial Instruments for Which                
                it is Practicable to Estimate Fair Value)                        
                (Details)                                                        
34: XML.R58     Property, Equipment and Capitalized Software         XML     97K 
                (Narrative) (Details)                                            
96: XML.R59     Property, Equipment and Capitalized Software         XML    155K 
                (Summary of Property, Equipment and Capitalized                  
                Software) (Details)                                              
25: XML.R60     Goodwill and Other Intangible Assets (Narrative)     XML     98K 
                (Details)                                                        
81: XML.R61     Goodwill and Other Intangible Assets (Changes in     XML    385K 
                Carrying Amount of Goodwill by Reporting Segment)                
                (Details)                                                        
78: XML.R62     Goodwill and Other Intangible Assets (Gross          XML    239K 
                Carrying Value, Accumulated Amortization and Net                 
                Carrying Value of Other Intangible Assets)                       
                (Details)                                                        
101: XML.R63     Goodwill and Other Intangible Assets (Finite-Lived   XML    207K  
                Intangible Assets Acquired in Business                           
                Combinations) (Details)                                          
97: XML.R64     Goodwill and Other Intangible Assets (Amortization   XML     87K 
                Expense Relating to Intangible Assets) (Details)                 
110: XML.R65     Medical Costs and Medical Costs Payable              XML     58K  
                (Narrative) (Details)                                            
32: XML.R66     Medical Costs and Medical Costs Payable (The         XML    179K 
                Components of the Change in Medical Costs Payable)               
                (Details)                                                        
50: XML.R67     Commercial Paper and Long-Term Debt (Narrative)      XML    820K 
                (Details)                                                        
69: XML.R68     Commercial Paper and Long-Term Debt (Commercial      XML   1.27M 
                Paper and Long-Term Debt) (Details)                              
60: XML.R69     Commercial Paper and Long-Term Debt (Maturities of   XML    110K 
                long-term debt) (Details)                                        
70: XML.R70     Commercial Paper and Long-Term Debt (Summary of      XML     97K 
                Location and Fair Value of Fair Value Hedges)                    
                (Details)                                                        
112: XML.R71     Commercial Paper and Long-Term Debt (Effect of       XML     73K  
                Changes in Fair Value of Fair Value Hedges)                      
                (Details)                                                        
33: XML.R72     Income Taxes (Narrative) (Details)                   XML    168K 
41: XML.R73     Income Taxes (Components of the provision for        XML    134K 
                income taxes) (Details)                                          
37: XML.R74     Income Taxes (Reconciliation of the tax provision    XML    237K 
                at the U.S. Federal Statutory Rate) (Details)                    
67: XML.R75     Income Taxes (Components of deferred income tax      XML    236K 
                assets and liabilities) (Details)                                
76: XML.R76     Income Taxes (Reconciliation of unrecognized tax     XML    128K 
                benefits) (Details)                                              
64: XML.R77     Shareholders' Equity (Narrative) (Details)           XML    282K 
57: XML.R78     Shareholders' Equity (Schedule of Company's          XML     86K 
                dividend payments) (Details)                                     
31: XML.R79     Share-Based Compensation (Narrative) (Details)       XML    513K 
19: XML.R80     Share-Based Compensation (Stock Option and SAR       XML    196K 
                Activity) (Details)                                              
68: XML.R81     Share-Based Compensation (Share-Based Compensation   XML    213K 
                Principal Fair Value Assumptions) (Details)                      
49: XML.R82     Share-Based Compensation (Restricted Share           XML    126K 
                Activity) (Details)                                              
63: XML.R83     Aarp (Narrative) (Details)                           XML    130K 
88: XML.R84     Aarp (AARP Program-related Assets and Liabilities)   XML    271K 
                (Details)                                                        
84: XML.R85     Aarp (AARP Program Financial Assets and              XML   1.80M 
                Liabilities Measured at Fair Value on a Recurring                
                Basis) (Details)                                                 
46: XML.R86     Commitments and Contingencies (Narrative)            XML    230K 
91: XML.R87     Commitments and Contingencies (Future Minimum        XML     95K 
                Annual Lease Payments, Net of Sublease Income,                   
                Under all Noncancelable Operating Leases)                        
                (Details)                                                        
82: XML.R88     Segment Financial Information (Narrative)            XML     85K 
                (Details)                                                        
36: XML.R89     Segment Financial Information (Details)              XML   2.99M 
55: XML.R90     Quarterly Financial Data (Quarterly Financial        XML    323K 
                Information) (Details)                                           
83: XML.R91     Schedule I (Condensed Balance Sheets) (Details)      XML    908K 
44: XML.R92     Schedule I (Condensed Statements of Operations)      XML    695K 
                (Details)                                                        
95: XML.R93     Schedule I (Condensed Statements of Cash Flows)      XML    560K 
                (Details)                                                        
47: XML.R94     Schedule I (Narrative) (Details)                     XML    123K 
104: EXCEL       IDEA Workbook of Financial Reports (.xls)            XLS   2.46M  
11: EX-101.INS  XBRL Instance -- unh-20101231                        XML   3.87M 
13: EX-101.CAL  XBRL Calculations -- unh-20101231_cal                XML    297K 
14: EX-101.DEF  XBRL Definitions -- unh-20101231_def                 XML    758K 
15: EX-101.LAB  XBRL Labels -- unh-20101231_lab                      XML   1.52M 
16: EX-101.PRE  XBRL Presentations -- unh-20101231_pre               XML   1.30M 
12: EX-101.SCH  XBRL Schema -- unh-20101231                          XSD    282K 
72: ZIP         XBRL Zipped Folder -- 0001193125-11-030615-xbrl      Zip    248K

‘XML.R9’ — Basis of Presentation, Use of Estimates and Significant Accounting Policies

This Financial Report is an XBRL XML File.

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<div> <div> 2. Basis of Presentation, Use of Estimates and Significant Accounting Policies <div> Basis of Presentation The Company has prepared the Consolidated Financial Statements according to U.S. Generally Accepted Accounting Principles (GAAP) and has included the accounts of UnitedHealth Group and its subsidiaries. The Company has eliminated intercompany balances and transactions.</div> <div> Use of Estimates These Consolidated Financial Statements include certain amounts based on the Company's best estimates and judgments. The Company's most significant estimates relate to medical costs, medical costs payable, revenues, goodwill, other intangible assets, investments, income taxes and contingent liabilities. These estimates require the application of complex assumptions and judgments, often because they involve matters that are inherently uncertain and will likely change in subsequent periods. The impact of any changes in estimates is included in earnings in the period in which the estimate is adjusted.</div> <div> Revenues Premium revenues are primarily derived from risk-based health insurance arrangements in which the premium is typically at a fixed rate per individual served for a one-year period, and the Company assumes the economic risk of funding its customers' health care and related administrative costs. The Company recognizes premium revenues in the period in which eligible individuals are entitled to receive health care benefits. The Company records health care premium payments received from its customers in advance of the service period as unearned revenues. Centers for Medicare and Medicaid Services (CMS) deploys a risk adjustment model that apportions premiums paid to all health plans according to health severity and certain demographic factors. The CMS risk adjustment model pays more for members whose medical history indicates they have certain medical conditions. Under this risk adjustment methodology, CMS calculates the risk adjusted premium payment using diagnosis data from hospital inpatient, hospital outpatient and physician treatment settings. The Company and health care providers collect, capture, and submit the necessary and available diagnosis data to CMS within prescribed deadlines. The Company estimates risk adjustment revenues based upon the diagnosis data submitted and expected to be submitted to CMS. Risk adjustment data for certain of the Company's plans is subject to audit by regulators. See Note 13 of Notes to the Consolidated Financial Statements for additional information regarding these audits. Service revenues consist primarily of fees derived from services performed for customers that self-insure the health care costs of their employees and employees' dependants. Under service fee contracts, the Company recognizes revenue in the period the related services are performed based upon the fee charged to the customer. The customers retain the risk of financing health care costs for their employees and employees' dependants, and the Company administers the payment of customer funds to physicians and other health care professionals from customer-funded bank accounts. Since the Company has neither the obligation for funding the health care costs, nor the primary responsibility for providing the medical care, the Company does not recognize premium revenue and medical costs for these contracts in its Consolidated Financial Statements. For both risk-based and fee-based customer arrangements, the Company provides coordination and facilitation of medical services; transaction processing; customer, consumer and care professional services; and access to contracted networks of physicians, hospitals and other health care professionals. Through the Company's Prescription Solutions pharmacy benefits management (PBM) business, revenues are derived from products sold through a contracted network of retail pharmacies, and from administrative services, including claims processing and formulary design and management. Product revenues include ingredient costs (net of rebates), a negotiated dispensing fee and customer co-payments for drugs dispensed through the Company's mail-service pharmacy. In retail pharmacy transactions, revenues recognized always exclude the member's applicable co-payment. Product revenues are recognized upon sale or shipment based on contract terms. Service revenues are recognized when the prescription claim is adjudicated. The Company has entered into retail service contracts in which it is primarily obligated to pay its network pharmacy providers for benefits provided to their customers regardless if the Company is paid. The Company is also involved in establishing the prices charged by retail pharmacies, determining which drugs will be included in formulary listings and selecting which retail pharmacies will be included in the network offered to plan sponsors' members. As a result, revenues are reported on a gross basis. Product revenues also include sales of Ingenix publishing and software products that are recognized as revenue upon estimated delivery date.</div> <div> Medical Costs and Medical Costs Payable Medical costs and medical costs payable include estimates of the Company's obligations for medical care services that have been rendered on behalf of insured consumers but for which the Company has either not yet received or processed claims, and for liabilities for physician, hospital and other medical cost disputes. The Company develops estimates for medical costs incurred but not reported using an actuarial process that is consistently applied, centrally controlled and automated. The actuarial models consider factors such as time from date of service to claim receipt, claim backlogs, care professional contract rate changes, medical care consumption and other medical cost trends. The Company estimates liabilities for physician, hospital and other medical cost disputes based upon an analysis of potential outcomes, assuming a combination of litigation and settlement strategies. Each period, the Company re-examines previously established medical costs payable estimates based on actual claim submissions and other changes in facts and circumstances. As the liability estimates recorded in prior periods become more exact, the Company adjusts the amount of the estimates, and includes the changes in estimates in medical costs in the period in which the change is identified. In every reporting period, the Company's operating results include the effects of more completely developed medical costs payable estimates associated with previously reported periods.</div> <div> Cash, Cash Equivalents and Investments Cash and cash equivalents are highly liquid investments that have an original maturity of three months or less. The fair value of cash and cash equivalents approximates their carrying value because of the short maturity of the instruments. The Company had checks outstanding in excess of bank deposits of $1.3 billion as of December 31, 2010 and $1.2 billion as of December 31, 2009, which were classified as Accounts Payable and Accrued Liabilities in the Consolidated Balance Sheets and the changes have been reflected as Checks Outstanding within financing activities in the Consolidated Statements of Cash Flows. Investments with maturities of less than one year are classified as short-term. Because of regulatory requirements, certain investments are included in long-term investments regardless of their maturity date. The Company classifies these investments as held-to-maturity and reports them at amortized cost. Substantially all other investments are classified as available-for-sale and reported at fair value based on quoted market prices, where available. The Company excludes unrealized gains and losses on investments in available-for-sale securities from earnings and reports them, net of income tax effects, as a separate component of shareholders' equity. The Company evaluates investments for impairment by considering the length of time and extent to which market value has been less than cost, the financial condition and near-term prospects of the issuer as well as specific events or circumstances that may influence the operations of the issuer and the Company's intent to sell the security or the likelihood that it will be required to sell the security before recovery of the entire amortized cost. For debt securities, if the Company intends to either sell or determines that it will be more likely than not be required to sell a security before recovery of the entire amortized cost basis or maturity of the security, the Company recognizes the entire impairment in earnings. If the Company does not intend to sell the debt security and it determines that it will not be more likely than not be required to sell the security but it does not expect to recover the entire amortized cost basis, the impairment is bifurcated into the amount attributed to the credit loss, which is recognized in earnings, and all other causes, which are recognized in other comprehensive income. For equity securities, the Company recognizes impairments in other comprehensive income if it expects to hold the security until fair value increases to at least the security's cost basis and it expects that increase in fair value to occur in a reasonably forecasted period. If the Company intends to sell the equity security or if it believes that recovery of fair value to cost will not occur in a reasonably forecasted period, the Company recognizes the impairment in net earnings. New information and the passage of time can change these judgments. The Company manages its investment portfolio to limit its exposure to any one issuer or market sector, and largely limits its investments to U.S. government and agency securities; state and municipal securities; mortgage-backed securities; and corporate debt obligations, substantially all of investment grade quality. Securities downgraded below policy minimums after purchase will be disposed of in accordance with the investment policy. To calculate realized gains and losses on the sale of investments, the Company uses the specific cost or amortized cost of each investment sold.</div> <div> Assets Under Management The Company administers certain aspects of AARP's insurance program (see Note 12 of Notes to the Consolidated Financial Statements). Pursuant to the Company's agreement, AARP assets are managed separately from its general investment portfolio and are used to pay costs associated with the AARP program. These assets are invested at the Company's discretion, within investment guidelines approved by AARP. The Company does not guarantee any rates of return on these investments and, upon transfer of the AARP contract to another entity, the Company would transfer cash equal in amount to the fair value of these investments at the date of transfer to that entity. Because the purpose of these assets is to fund the medical costs payable, the rate stabilization fund (RSF) liabilities and other related liabilities associated with the AARP contract, assets under management are classified as current assets, consistent with the classification of these liabilities. Interest earnings and realized investment gains and losses on these assets accrue to the overall benefit of the AARP policyholders through the RSF. Accordingly, they are not included in the Company's earnings.</div> <div> Other Current Receivables Other current receivables include amounts due from pharmacy rebates, CMS for Medicare Part D, reinsurance and other miscellaneous amounts due to the Company. The Company's PBM businesses contract with pharmaceutical manufacturers, some of whom provide rebates based on use of the manufacturers' products by its PBM businesses' affiliated and non-affiliated clients. The Company accrues rebates as they are earned by its clients on a monthly basis based on the terms of the applicable contracts, historical data and current estimates. The PBM businesses bill these rebates to the manufacturers on a monthly or quarterly basis depending on the contractual terms. The PBM businesses record rebates attributable to affiliated clients as a reduction to medical costs. Rebates attributable to non-affiliated clients are accrued as rebates receivable and a reduction of cost of products sold with a corresponding payable for the amounts of the rebates to be remitted to non-affiliated clients in accordance with their contracts and recorded in the Consolidated Statements of Operations as a reduction of Product Revenue. The Company generally receives rebates between two to five months after billing. For details on the Company's Medicare Part D receivables see "Medicare Part D Pharmacy Benefits Contract" below. For details on the Company's reinsurance receivable see "Future Policy Benefits and Reinsurance Receivables" below.</div> <div> Medicare Part D Pharmacy Benefits Contract The Company serves as a plan sponsor offering Medicare Part D prescription drug insurance coverage under contracts with CMS. Under the Medicare Part D program, there are six separate elements of payment received by the Company during the plan year. These payment elements are as follows: <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="3%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> CMS Premium. CMS pays a fixed monthly premium per member to the Company for the entire plan year. </td></tr></table> <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="3%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> Member Premium. Additionally, certain members pay a fixed monthly premium to the Company for the entire plan year. </td></tr></table> <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="3%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> Low-Income Premium Subsidy. For qualifying low-income members, CMS pays some or all of the member's monthly premiums to the Company on the member's behalf. </td></tr></table> <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="3%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> Catastrophic Reinsurance Subsidy. CMS pays the Company a cost reimbursement estimate monthly to fund the CMS obligation to pay approximately 80% of the costs incurred by individual members in excess of the individual annual out-of-pocket maximum. A settlement is made with CMS based on actual cost experience, after the end of the plan year. </td></tr></table> <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="3%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> Low-Income Member Cost Sharing Subsidy. For qualifying low-income members, CMS pays on the member's behalf some or all of a member's cost sharing amounts, such as deductibles and coinsurance. The cost sharing subsidy is funded by CMS through monthly payments to the Company. The Company administers and pays the subsidized portion of the claims on behalf of CMS, and a settlement payment is made between CMS and the Company based on actual claims and premium experience, after the end of the plan year. </td></tr></table> <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="3%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> CMS Risk-Share. Premiums from CMS are subject to risk corridor provisions that compare costs targeted in the Company's annual bids to actual prescription drug costs, limited to actual costs that would have been incurred under the standard coverage as defined by CMS. Variances of more than 5% above or below the original bid submitted by the Company may result in CMS making additional payments to the Company or require the Company to refund to CMS a portion of the premiums it received. The Company estimates and recognizes an adjustment to premium revenues related to the risk corridor payment settlement based upon pharmacy claims experience. The estimate of the settlement associated with these risk corridor provisions requires the Company to consider factors that may not be certain, including member eligibility status differences with CMS. The Company records risk-share adjustments to Premium Revenues in the Consolidated Statements of Operations and Other Policy Liabilities or Other Current Receivables in the Consolidated Balance Sheets. </td></tr></table> The CMS Premium, the Member Premium, and the Low-Income Premium Subsidy represent payments for the Company's insurance risk coverage under the Medicare Part D program and therefore are recorded as Premium Revenues in the Consolidated Statements of Operations. Premium revenues are recognized ratably over the period in which eligible individuals are entitled to receive prescription drug benefits. The Company records premium payments received in advance of the applicable service period in Unearned Revenues in the Consolidated Balance Sheets. The Catastrophic Reinsurance Subsidy and the Low-Income Member Cost Sharing Subsidy represent cost reimbursements under the Medicare Part D program. The Company is fully reimbursed by CMS for costs incurred for these contract elements and, accordingly, there is no insurance risk to the Company. Amounts received for these subsidies are not reflected as premium revenues, but rather are accounted for as deposits. However, as of December 31, 2009, the amounts received for these subsidies were insufficient to cover the costs incurred for these contract elements; therefore, the Company recorded a receivable in Other Current Receivables in the Consolidated Balance Sheets. Related cash flows are presented as Customer Funds Administered within financing activities in the Consolidated Statements of Cash Flows. Pharmacy benefit costs and administrative costs under the contract are expensed as incurred and are recognized in Medical Costs and Operating Costs, respectively, in the Consolidated Statements of Operations. The final 2010 risk-share amount is expected to be settled during the second half of 2011, and is subject to the reconciliation process with CMS. The Consolidated Balance Sheets include the following amounts associated with the Medicare Part D program: <div class="MetaData"> <table border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr><td width="50%"> </td> <td valign="bottom" width="11%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="11%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="11%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="11%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">December 31, 2010</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">December 31, 2009</td> <td valign="bottom"> </td></tr> <tr><td style="border-bottom: #000000 1px solid;" valign="bottom" nowrap="nowrap"> (in millions)</td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">CMS Subsidies (a)</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" nowrap="nowrap" align="center">Risk-Share</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">CMS Subsidies (a)</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" nowrap="nowrap" align="center">Risk-Share</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Other current receivables</td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">0</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">0</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">271</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">0</td> <td valign="bottom" nowrap="nowrap"> </td></tr> <tr><td valign="top"> Other policy liabilities</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">475</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">265</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">268</td> <td valign="bottom" nowrap="nowrap"> </td></tr></table> <table style="border-collapse: collapse;" class="MetaData" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="4%" align="left">(a)</td> <td class="MetaData" valign="top" align="left">Includes the Catastrophic Reinsurance Subsidy and the Low-Income Member Cost Sharing Subsidy. </td></tr></table></div> As of January 1, 2011, certain changes were made to the Medicare Part D coverage by CMS, including: <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="3%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> The initial coverage limit increased to $2,840 from $2,830 in 2010. </td></tr></table> <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="3%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> The catastrophic coverage begins at $6,448 as compared to $6,440 in 2010. </td></tr></table> <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="3%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> The annual out-of-pocket maximum remained at $4,550 for 2011. </td></tr></table></div></div> <div> Property, Equipment and Capitalized Software Property, equipment and capitalized software are stated at cost, net of accumulated depreciation and amortization. Capitalized software consists of certain costs incurred in the development of internal-use software, including external direct costs of materials and services and payroll costs of employees devoted to specific software development. The Company reviews property, equipment and capitalized software for events or changes in circumstances that would indicate that it might not recover their carrying value. If the Company determines that an asset may not be recoverable, an impairment charge is recorded. The Company calculates depreciation and amortization using the straight-line method over the estimated useful lives of the assets. The useful lives for property, equipment and capitalized software are: <table border="0" cellspacing="0" cellpadding="0" width="92%" align="center"> <tr><td width="47%"> </td> <td valign="bottom" width="4%"> </td> <td width="49%"> </td></tr> <tr><td valign="top"> Furniture, fixtures and equipment</td> <td valign="bottom"> </td> <td valign="bottom" align="right">3 to 7 years</td></tr> <tr><td valign="top"> Buildings</td> <td valign="bottom"> </td> <td valign="bottom" align="right">35 to 40 years</td></tr> <tr><td valign="top"> Leasehold improvements</td> <td valign="bottom"> </td> <td valign="bottom" align="right">7 years or length of lease term, whichever is shorter</td></tr> <tr><td valign="top"> Capitalized software</td> <td valign="bottom"> </td> <td valign="bottom" align="right">3 to 5 years</td></tr></table></div> <div> Goodwill <div> Goodwill represents the amount of the purchase price in excess of the fair values assigned to the underlying identifiable net assets of acquired businesses. Goodwill is not amortized, but is subject to an annual impairment test. Tests are performed more frequently if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. To determine whether goodwill is impaired, the Company performs a two-step impairment test. In the first step of the test, the fair values of the reporting units are compared to their aggregate carrying values, including goodwill. If the fair value of the reporting unit is greater than its carrying amount, goodwill is not impaired and no further testing is required. If the fair value of the reporting unit is less than its carrying amount, the Company would proceed to step two of the test. In step two of the test, the implied fair value of the goodwill of the reporting unit is determined by a hypothetical allocation of the fair value calculated in step one to all of the assets and liabilities of that reporting unit (including any recognized and unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value was reflective of the price paid to acquire the reporting unit. The implied fair value of goodwill is the excess, if any, of the calculated fair value after hypothetical allocation to the reporting unit's assets and liabilities. If the implied fair value of the goodwill is greater than the carrying amount of the goodwill at the analysis date, goodwill is not impaired and the analysis is complete. If the implied fair value of the goodwill is less than the carrying value of goodwill at the analysis date, goodwill is deemed impaired by the amount of that variance. The Company calculates the estimated fair value of our reporting units using discounted cash flows. To determine fair values the Company must make assumptions about a wide variety of internal and external factors. Significant assumptions used in the impairment analysis include financial projections of free cash flow (includes significant assumptions about operations, capital requirements and income taxes), long-term growth rates for determining terminal value, and discount rates. Where available and appropriate, comparative market multiples are used to corroborate the results of our discounted cash flow test. The Company completed its annual assessment of goodwill as of January 1, 2011 and determined that other than the $172 million impairment related to the Ingenix business discussed in Note 6 of Notes to Consolidated Financial Statements, no impairment existed as of December 31, 2010. Although the Company believes that the financial projections used are reasonable and appropriate for all of its reporting units, there is uncertainty inherent in those projections. That uncertainty is increased by potential health care reforms, as any passed legislation may significantly change the forecasts and long-term growth rate assumptions for some or all of its reporting units</div></div> Intangible assets <div> Finite lived intangible assets are acquired in a business combination and are assets that represent future expected benefits but lack physical substance (e.g., membership lists, customer contracts, and trademarks). The Company does not have material holdings of indefinite lived intangible assets. Intangible assets are amortized over their expected useful lives and are subject to impairment tests when events or circumstances indicate that a finite lived intangible asset's (or asset group's) carrying value may exceed its estimated fair value. If the carrying value exceeds its estimated fair value, an impairment would be recorded. The Company calculates the estimated fair value of finite lived intangible assets using undiscounted cash flows that are expected to result from the use of the intangible asset or group of assets. The Company considers many factors, including estimated future utility to estimate cash flows. There were no material impairments of finite lived intangible assets during the year ended December 31, 2010. <div> Other Policy Liabilities Other policy liabilities include the RSF associated with the AARP program (see Note 12 of Notes to the Consolidated Financial Statements), health savings account deposits, deposits under the Medicare Part D program (see "Medicare Part D Pharmacy Benefits Contract" above), and the current portion of future policy benefits. Customer balances represent excess customer payments and deposit accounts under experience-rated contracts. At the customer's option, these balances may be refunded or used to pay future premiums or claims under eligible contracts.</div></div> <div> Income Taxes Deferred income tax assets and liabilities are recognized for the differences between the financial and income tax reporting bases of assets and liabilities based on enacted tax rates and laws. The deferred income tax provision or benefit generally reflects the net change in deferred income tax assets and liabilities during the year, excluding any deferred income tax assets and liabilities of acquired businesses. The current income tax provision reflects the tax consequences of revenues and expenses currently taxable or deductible on various income tax returns for the year reported.</div> <div> Future Policy Benefits and Reinsurance Receivables Future policy benefits represent account balances that accrue to the benefit of the policyholders, excluding surrender charges, for universal life and investment annuity products and for long-duration health policies sold to individuals for which some of the premium received in the earlier years is intended to pay benefits to be incurred in future years. As a result of the 2005 sale of the life and annuity business within the Company's Golden Rule Financial Corporation (Golden Rule) subsidiary under an indemnity reinsurance arrangement, the Company has maintained a liability associated with the reinsured contracts, as it remains primarily liable to the policyholders, and has recorded a corresponding reinsurance receivable due from the purchaser. As of December 31, 2010, the Company had an aggregate $2.0 billion reinsurance receivable, of which $126 million was recorded in Other Current Receivables and $1.9 billion was recorded in Other Assets in the Consolidated Balance Sheets. As of December 31, 2009, the Company had an aggregate $2.0 billion reinsurance receivable, of which $139 million was recorded in Other Current Receivables and $1.9 billion was recorded in Other Assets in the Consolidated Balance Sheets. The Company evaluates the financial condition of the reinsurer and only records the reinsurance receivable to the extent of probable recovery. Currently, the reinsurer is rated by A.M. Best as "A." As of December 31, 2010, there were no other significant concentrations of credit risk <div> Policy Acquisition Costs The Company's short duration health insurance contracts typically have a one-year term and may be cancelled by the customer with at least 30 days notice. Costs related to the acquisition and renewal of short duration customer contracts are charged to expense as incurred.</div></div> <div> Share-Based Compensation Share-based compensation expense is measured at the grant date fair values of the awards and is recognized as expense over the period in which the share-based compensation vests.</div> <div> Net Earnings Per Common Share The Company computes basic net earnings per common share by dividing net earnings by the weighted-average number of common shares outstanding during the period. The Company determines diluted net earnings per common share using the weighted-average number of common shares outstanding during the period, adjusted for potentially dilutive shares associated with stock options, restricted stock and restricted stock units (collectively, restricted shares), using the treasury stock method. The treasury stock method assumes exercise of stock options and vesting of restricted shares, with the assumed proceeds used to purchase common stock at the average market price for the period. The difference between the number of shares assumed issued and number of shares assumed purchased represents the dilutive shares.</div> <div> Recent Accounting Standards Recently Adopted Accounting Standards. In January 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2010-06, "Improving Disclosures about Fair Value Measurements" (ASU 2010-06). This update amends the fair value guidance of the FASB Accounting Standards Codification (ASC) to require additional disclosures regarding (i) transfers in and out of Level 1 and Level 2 fair value measurements and (ii) activity in Level 3 fair value measurements. ASU 2010-06 also clarifies existing disclosure requirements regarding (i) the level of asset and liability disaggregation and (ii) fair value measurement inputs and valuation techniques. The new disclosures and clarifications of existing disclosures were effective for the Company's fiscal year 2010, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements, which will be effective for the Company's fiscal year 2011. The Company's fair value disclosures, including the new disclosures effective in 2010, have been included in Note 4 of Notes to the Consolidated Financial Statements. The Company has determined that there have been no recently issued accounting standards that will have a material impact on its Consolidated Financial Statements, or materially apply to its operations. </div> </div>

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2 Subsequent Filings that Reference this Filing

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 6/05/11  SEC                               UPLOAD¶    10/06/17    1:46K  Unitedhealth Group Inc.
 4/27/11  SEC                               UPLOAD¶    10/06/17    1:67K  Unitedhealth Group Inc.

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Filing Submission 0001193125-11-030615 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Unitedhealth Group Inc – ‘10-K’ for 12/31/10 – ‘XML.R9’

On: Thursday, 2/10/11, at 4:04pm ET · For: 12/31/10 · Accession #: 1193125-11-30615 · File #: 1-10864

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Annual Report — Form 10-K — Sect. 13 / 15(d) – SEA’34Filing Table of Contents

‘XML.R9’ — Basis of Presentation, Use of Estimates and Significant Accounting Policies

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Annual Report — Form 10-K — Sect. 13 / 15(d) – SEA’34
Filing Table of Contents