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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
Commission file number: 0-13253
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UNITED HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1321939
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
300 OPUS CENTER
9900 BREN ROAD EAST
MINNETONKA, MINNESOTA 55343
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 936-1300
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Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE, INC.
(Title of each class) (Name of each exchange on which
registered)
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES _X_ NO __
Indicate by checkmark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of March 1, 1997, was approximately $7,957,874,400* (based on the
last reported sale price of $50 per share on March 1, 1997, on the New York
Stock Exchange).
As of March 17, 1997, 185,600,404 shares of the registrant's Common Stock,
$.01 par value per share, were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Shareholders of Registrant for the fiscal year ended
December 31, 1996. Certain information therein is incorporated by reference into
Part II hereof.
Proxy Statement for the Annual Meeting of Shareholders of Registrant to be
held on May 14, 1997. Certain information therein is incorporated by reference
into Part III hereof.
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*Only shares of common stock held beneficially by directors and executive
officers of the Company and persons or entities filing Schedules 13G and
received by the Company have been excluded in determining this number.
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PART I
ITEM 1. BUSINESS
United HealthCare Corporation-SM- is a national leader in offering health
care coverage and related services through a broad continuum of products and
services in all 50 states and Puerto Rico. United HealthCare's products and
services reflect a number of core capabilities, including medical information
management, health benefit administration, risk assessment and pricing, health
benefit design and provider contracting and risk sharing. With these
capabilities, United is able to provide comprehensive managed health care
services, such as health maintenance organizations ("HMOs"), insurance and self-
funded health care coverage products.The Company also offers unbundled health
care management and cost containment products such as behavioral health
services, utilization review services, specialized provider networks and
employee assistance programs.
United HealthCare Corporation is a Minnesota corporation, incorporated in
January 1977. Unless the context otherwise requires, the terms "United," "United
HealthCare" or the "Company" refer to United HealthCare Corporation and its
subsidiaries. United's executive offices are located at 300 Opus Center, 9900
Bren Road East, Minnetonka, Minnesota 55343; telephone (612) 936-1300.
HEALTH PLANS, INSURANCE AND RELATED OPERATIONS
HEALTH PLANS. As of December 31, 1996, United held a majority ownership
interest in health plans operating in 28 states and Puerto Rico. With respect to
these owned health plan operations, United assumes the risk for health care and
administrative costs in return for the premium revenue it receives. United's
owned health plans are usually licensed as HMOs or insurers and provide
comprehensive health care coverage for a fixed fee or premium that usually does
not vary with the extent of medical services received by the member. In
addition, these health plans enter into contractual arrangements with
independent providers of health care services to help manage medical and
hospital use, quality and costs. A few of United's owned health plans employ
health care providers and directly deliver health care services to members.
These plans strive to achieve cost-effective delivery of health care services by
emphasizing appropriate use of health care services, promoting preventive health
services, and encouraging the reduction of unnecessary hospitalization and other
medical services. United also provides administrative and other management
services to a few health plans in which United has no ownership interest. With
respect to these managed health plan operations, United receives an
administrative fee for providing its services and generally assumes no
responsibility for health care costs.
HEALTH PLAN POINT-OF-SERVICE PRODUCTS. United HealthCare's point-of-service
products are growing rapidly, and are one of the Company's most popular health
plan coverage options. Unlike traditional closed-panel HMO products, which cover
non-emergency services only when rendered by contracted providers, the
point-of-service products also provide coverage, usually at a lower level, for
services received from non-contracted providers. This out-of-network coverage is
sometimes offered directly by the health plan, but more often is provided by an
insurance policy "wrapped around" the health plan benefit contract. The
insurance policy is usually sold by one of United's insurance subsidiaries.
HEALTH PLAN SELF-FUNDED PRODUCTS. United has developed self-funded products
for employers who desire the cost containment aspects of an HMO product and want
to self-insure the health care cost risk. United uses the provider networks it
has developed in connection with its HMO or insurance products for these
products, many of which include a point-of-service feature. The provider
contracts for these products are with individual physicians or groups of
physicians as well as health care facilities and are generally on a standardized
fee-for-service basis. These self-funded products offer employers and other
sponsoring groups access to a provider network and the administrative and care
coordination services associated with an HMO product, but the risks of health
care use generally are borne by the sponsoring company or group.
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HEALTH PLAN MEDICARE PRODUCTS. Several of United's owned health plans
contract with the federal Health Care Financing Administration ("HCFA") to
provide coverage for Medicare-eligible individuals. In addition, several more
health plans that do not currently have such a contract are in the process of
seeking one. Under these contracts the plans receive a fixed payment each month
from HCFA for each enrolled individual, and must provide at least the benefits
which would be covered under traditional Medicare. Typically, the plans provide
a significantly higher level of coverage and may, but often do not, charge an
additional premium to the members for the additional benefits. The health plans
generally use a subset of their commercial product provider network as the
provider network for the Medicare products. Any Medicare-eligible person in a
plan's service area may enroll in the Medicare product without underwriting or
health screening.
Some of United's health plans also may offer these Medicare products to or
through employer groups as a method of providing retiree health care coverage.
In addition, certain health plans may market Medicare Select, a modifiction of a
Medicare supplement program which allows individuals to seek care through HMOs
or preferred provider organizations ("PPOs") and receive additional benefits at
a lower cost while still retaining their traditional Medigap-type coverage.
HEALTH PLAN MEDICAID PRODUCTS. Several of United's health plans offer
coverage to Medicaid-eligible individuals. These plans typically contract with a
state agency to provide such coverage and are paid a fixed monthly payment for
each enrolled individual. The level of benefits is generally set by contract and
few additional benefits are offered. Enrollment must usually be offered to all
eligible individuals, without underwriting or health screening. Generally, the
provider network for commercial products is used, but some providers may refuse
to participate in the Medicaid product and the network may otherwise have a
different number or set of providers.
PPO, INDEMNITY INSURANCE AND SELF-FUNDED PRODUCTS. United's insurance
subsidiaries are licensed to sell their respective products in all 50 states,
the District of Columbia, Puerto Rico and the Virgin Islands. Through these
insurance subsidiaries and the Company's third-party administrator subsidiaries,
United offers a variety of health insurance and self-funded plan products and
services. Many of the insurance and self-funded products are marketed as
point-of-service products or include a PPO feature, under which a higher level
of coverage is available if certain providers are used.
For smaller customers (less than 50 employees) these products are typically
sold on an insured basis for a fixed premium, with no experience adjustments
made to that premium. This type of business has often been subject to sudden and
unpredictable changes in health care costs and generally has high administrative
and marketing expenses. In addition, these products are subject to extensive
state regulations. For larger customers, these products are sold on both an
insured and self-funded basis. The insured products are often sold on an
experience-rated basis and the self-funded products are usually sold on an
administrative fee basis. In some cases United's agreement with the customer may
provide for penalties or rewards related to administrative service standards
and/or health care costs.
United's insurance subsidiaries have historically also offered several
health insurance products in conjunction with health plan products. These
products help employers replace multiple health care policies and vendors with a
single health care plan. These subsidiaries also offer reinsurance and other
insured products on a selective basis to most of United's health plans and to
employers and other sponsoring groups offering self-funded health care benefit
plans. In connection with the acquisition of The MetraHealth Companies, Inc. in
October 1995, United entered into an agreement with Metropolitan Life Insurance
Company ("MetLife") under which United offers MetLife's life, dental, accidental
death and dismemberment and short-term disability products to United customers
and MetLife offers United's health care coverage products to MetLife customers.
This agreement with MetLife also contains certain mutual exclusivity and
non-competition provisions.
The following tables provide information with respect to the enrollment in
the Company's various health plan and insurance products. The enrollment numbers
are provided as of December 31, 1996 and
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January 31, 1997 since a number of the contracts for the Company's health care
coverage products commence, expire or renew, as the case may be, as of January 1
of each year.
ENROLLMENT BY PRODUCT TYPE
DECEMBER 31, JANUARY 31,
PRODUCT 1996 1997
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HEALTH PLAN PRODUCTS(1)
Commercial......................................................................... 4,100,000 4,224,000
Medicare........................................................................... 230,000 243,000
Medicaid........................................................................... 525,000 513,000
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Total Health Plan Products........................................................... 4,855,000 4,980,000
OTHER NETWORK BASED PRODUCTS(2)
Commercial......................................................................... 5,764,000 5,577,000
INDEMNITY
Commercial......................................................................... 3,249,000 3,096,000
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TOTAL................................................................................ 13,778,000 13,653,000
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(1) Includes various HMO and HMO point-of-service products as well as
self-funded programs that use a health plan network of providers.
(2) Includes insurance-based and self-funded PPO and point-of-service products.
ENROLLMENT BY FUNDING MECHANISM AND PRODUCT TYPE
DECEMBER 1996 JANUARY 1997
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PRODUCT FUNDED SELF-FUNDED FUNDED SELF-FUNDED
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Health Plan Products.................................... 4,542,000 313,000 4,657,000 323,000
Other Network Based Products............................ 719,000 4,955,000 749,000 4,828,000
Indemnity............................................... 585,000 2,664,000 577,000 2,519,000
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TOTAL................................................... 5,846,000 7,932,000 5,983,000 7,670,000
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SPECIALTY SERVICES
Through United HealthCare's specialty services business units, United
develops and sells specialized products to facilitate the efficient delivery of
health care services. United makes these products available to or in connection
with the products of its health plans and insurance operations where feasible.
In addition, these products often are sold independently of United's health
plans and insurance operations.
With respect to its specialty services, United generally receives fees for
the services provided, which are primarily administrative in nature, and assumes
no responsibility for health care costs except in the case of certain of its
behavioral health products. United assumes some responsibility for health care
costs related to providing mental health/substance abuse services and thus
recognizes premium-like revenue and medical services expense.
United's specialty products were available to a total of approximately 48.8
million participant lives at December 31, 1996, many of whom were not enrolled
in one of United's owned health plans. One person may be covered by more than
one specialty service and therefore may account for more than one of these
participant lives. United offers the following specialty services to HMOs, PPOs,
insurers, providers, Blue Cross/Blue Shield plans, third-party administrators,
employers, labor unions and/or government agencies.
3
CARE MANAGEMENT AND BENEFIT ADMINISTRATION SERVICES. United's care
management programs offer customers unbundled cost and utilization review and
care management services. These services include prior, concurrent and
retrospective review of hospital admissions and certain ambulatory services,
second opinion programs, care management, specialist referrals and discharge
planning. These services emphasize patient and provider education as a means of
helping clients manage their health care costs.
United's care management programs offer customers who may not have
geographic access to United's health plans an alternative to bundled managed
care services. These services include utilization management, medical
information and education, claims payment, provider networks, mental
health/substance abuse services and other related services. Use of these
services can provide clients who have members outside health plan service areas
with results similar to health plans.
TRANSPLANT NETWORK. United's transplant network services programs offer
clients access to a network of health care facilities for transplant-related
services and transplant care management services. United negotiates fixed,
competitive rates for high-cost, low-frequency health care services such as
organ and tissue transplants.
WORKERS COMPENSATION AND DISABILITY MANAGEMENT SERVICES. United's workers
compensation and disability management services tailor United's broad resources
into products and services intended to apply managed care concepts, such as
utilization review and use of specialized preferred provider networks, to
workers compensation and casualty insurance cases. These products and services
include hospitalization and outpatient surgery pre-certification and care
management, access to provider networks, specialized programs such as carpal
tunnel and back injury case management, and review of imaging (CAT scans and
MRI) services.
DEMAND MANAGEMENT PROGRAMS. United's demand management programs help
consumers make informed choices about their health and well-being by focusing on
preventive care, self-care, smart lifestyle options, and consumer education.
United's Optum-Registered Trademark- NurseLine and employee assistance programs
provide customers the opportunity to improve the quality and reduce the cost of
medical care by helping them identify medical and human risks that could affect
their health and well-being and developing problem-specific solutions to change
behavior and reduce those risks. In addition, these programs issue various
publications to members as supplementary tools for managing demand for services,
with content that emphasizes health and wellness and explains how to use health
care services most effectively.
GERIATRIC CARE MANAGEMENT SERVICES. United also develops and provides
products and services that help manage health care for the elderly. United's
EverCare-Registered Trademark- program coordinates the provision of a broad
spectrum of health care services to elderly nursing home residents through
contracts with a physician-nurse practitioner team. EverCare is participating in
a demonstration project with HCFA to offer health care services to the elderly
nursing home residents in nine separate locations throughout the country.
Through its Government Operations division, United provides administrative
services for certain government health care programs. Most of this business is
Medicare Part B claims processing. One of United's insurance subsidiaries is the
sole carrier for the states of Minnesota, Virginia, Mississippi and Connecticut.
That subsidiary also serves as the fiscal intermediary for Medicare Part A in
Connecticut, Michigan and New York, and handles all Medicare durable medical
equipment claims for the 10 states in HCFA's northeast region.
BEHAVIORAL HEALTH SERVICES. The specialty operations in United's behavioral
health services business unit include mental health and substance abuse-related
services. United's behavioral health subsidiaries provide specialized provider
networks and behavioral health care case management services to some of United's
health plans and to other customers. These services are provided by Company
employed behavioral health care professionals and by a network of contracted
providers. United assumes the responsibility for health care costs related to
certain of these services.
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THIRD PARTY ADMINISTRATION SERVICES. United provides third party
administrator ("TPA") services to employers who choose to use self-funding to
control health care costs and also desire customized health care plans and
administration. United's TPA services are available to employers of all sizes in
both single and multiple locations and include a fully integrated portfolio of
products.
APPLIED HEALTHCARE INFORMATICS, INC. Applied HealthCare Informatics, Inc.
("AHI") was formed in 1996 to combine certain of the Company's existing
information-related businesses and capabilities. AHI provides products and
services for United's health plans and other businesses and to external
customers in the following areas: data collection and warehousing; data analysis
and reporting; outcomes and effectiveness research; health services delivery
evaluation and improvement; appropriateness of care programs; and the creation
of information management tools. AHI includes the Center for Health Care
Evaluation, United's longstanding health care information and research unit. AHI
will continue to expand the Center's research programs.
INTERNATIONAL BUSINESS. United has begun exploring opportunities to sell
its products and services in foreign countries and anticipates using various
arrangements such as joint ventures, and direct contracting. United currently is
engaged in a joint venture that operates a health plan in the Republic of South
Africa and provides certain managed care consulting services in Germany.
EXPANSION AND DIVESTITURE OF OPERATIONS
United continually evaluates opportunities to expand its business and
considers whether to divest or cease offering the products of certain of its
businesses. These opportunities may include acquisitions or dispositions of a
specialty services program or of insurance and health plan operations. United
also devotes significant attention to developing new products and techniques for
containing health care costs, measuring the outcomes and efficiency of health
care delivered, and managing health care delivery systems.
During 1996, the Company sold or terminated certain immaterial lines of
business or ceased offering certain products as part of its ongoing emphasis on
its strategic focus. In addition, United has engaged in an extensive acquisition
program over the last few years that may affect United's ability to integrate
and manage its overall business effectively. Integration activities relating to
acquisitions may increase costs, affect membership, revenue and earnings growth
and adversely affect United's financial results.
The Company has recently finalized an agreement with the American
Association of Retired Persons ("AARP") relating to the delivery of Medicare
supplement health insurance products effective January 1, 1998. Throughout the
remainder of 1997, the Company will be engaged in an extensive transition
process relative to implementation of this contract, including multi-state
product filings, information systems assessments, and coordination of the
transfer of the operations from AARP's existing vendor. In addition, late in
1996, AARP accepted the Company's proposal to make its managed health plan
services available to AARP members in five geographic markets.
GOVERNMENT REGULATION
United's primary business, offering health care coverage and health care
management services, is heavily regulated at both the federal and state level.
United believes that it is in compliance in all material respects with the
various federal and state regulations applicable to its current operations. To
maintain such compliance, it may be necessary for United or a subsidiary to make
changes from time to time in its services, products, organizational or capital
structure or marketing methods.
Government regulation of health care coverage products and services is a
changing area of law that varies from jurisdiction to jurisdiction. Changes in
applicable laws and regulations are continually being considered and the
interpretation of existing laws and rules also may change from time to time.
Regulatory agencies generally have broad discretion in promulgating regulations
and in interpreting and enforcing laws and rules. While United is unable to
predict what regulatory changes may occur or the impact on
5
United of any particular change, United's operations and financial results could
be negatively affected by regulatory revisions. Certain proposed changes in
Medicare and Medicaid programs may increase the opportunities for United to
enroll persons under products developed for the Medicare- and Medicaid-eligible
populations. Other proposed changes may limit the reimbursement available to
United and increase competition in those programs, which could adversely affect
United's financial results. The continued consideration and enactment of
"anti-managed care" laws and regulations, such as "any willing provider" laws
and limits on utilization management, by federal and state bodies may make it
more difficult for United to control medical costs and may adversely affect
financial results.
A number of jurisdictions have enacted small group insurance and rating
reforms, which generally limit the ability of insurer and health plans to use
risk selection as a method of controlling costs for small group business. These
laws may generally limit or eliminate use of preexisting conditions exclusions,
experience rating and industry class rating and may limit the amount of rate
increases from year to year. Under these laws, cost control through provider
contracting and managing care may become more important, and United currently
believes its experience in these areas will allow it to compete effectively.
In addition to changes in applicable laws and rules, United is potentially
subject to governmental audits, investigations and enforcement actions. These
include possible government actions relating to the federal Employee Retirement
Income Security Act ("ERISA"), which regulates insured and self-insured health
coverage plans offered by employers and United's services to such plans and
employers, the Federal Employees Health Benefit Plan ("FEHBP"), federal and
state fraud and abuse laws, and laws relating to utilization management and the
delivery of health care. Any such government action could result in assessment
of damages, civil or criminal fines or penalties, or other sanctions, including
exclusion from participation in government programs. Although United is
currently involved in various government audits, such as under FEHBP or relating
to services for ERISA plans, United does not believe the results of such current
audits will, individually or in the aggregate, have a material adverse effect on
United's financial results.
HMOS. All of the states in which United's health plans offer HMO products
have enacted statutes regulating the activities of those health plans. Most
states require periodic financial reports from HMOs licensed to operate in their
states and impose minimum capital or reserve requirements. Certain of United's
subsidiaries are required to maintain specified capital levels to support their
operations. In addition, certain of United's subsidiaries are required by state
regulatory agencies to maintain restricted cash reserves represented by
interest-bearing instruments, which are held by trustees or state regulatory
agencies to ensure that adequate financial reserves are maintained. Some state
regulations enable agencies to review all contracts entered into by HMOs,
including management contracts, for reasonableness of fees charged and other
provisions.
United's health plans that have Medicare risk contracts are subject to
regulation by HCFA. HCFA has the right to audit health plans operating under
Medicare risk contracts to determine each health plan's compliance with HCFA's
contracts and regulations and the quality of care being rendered to the health
plan's members. To enter into Medicare risk contracts, a health plan must either
be federally qualified or be considered a Competitive Medical Plan under HCFA's
requirements. Health plans that offer a Medicare risk product also must comply
with requirements established by peer review organizations ("PROs"), which are
organizations under contract with HCFA to monitor the quality of health care
received by Medicare beneficiaries. PRO requirements relate to quality assurance
and utilization review procedures. United's health plans that have Medicare cost
contracts are subject to similar regulatory requirements. In addition, these
health plans are required to file certain cost reimbursement reports with HCFA,
which are subject to audit and revision.
United's health plans that have Medicaid contracts are subject to both
federal and state regulation regarding services to be provided to Medicaid
enrollees, payment for those services, and other aspects of
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the Medicaid program. Both Medicare and Medicaid have, or have proposed,
regulations relating to fraud and abuse, physician incentive plans and provider
referrals, which may affect United's operations.
Many of United's health plans have contracts with FEHBP. These contracts are
subject to extensive regulation, including complex rules relating to the
premiums charged. FEHBP has the authority to retroactively audit the rates
charged and has the right to seek premium refunds or institute other sanctions
against health plans participating in the program depending on the outcome of
such audits.
INSURANCE REGULATION. United's insurance subsidiaries are subject to
regulation by the Department of Insurance in each state in which the entity is
licensed. Regulatory authorities exercise extensive supervisory power over
insurance companies in regard to licensing; the amount of reserves that must be
maintained; the approval of forms of insurance policies used; the nature of, and
limitation on, an insurance company's investments; periodic examination of the
operations of insurance companies; the form and content of annual statements and
other reports required to be filed on the financial condition of insurance
companies; and the establishment of capital requirements for insurance
companies. United's insurance company subsidiaries are required to file periodic
statutory financial statements in each jurisdiction in which they are licensed.
Additionally, these companies are periodically examined by the insurance
departments of the jurisdiction in which they are licensed to do business.
INSURANCE HOLDING COMPANY REGULATIONS. Certain of United's health plans and
each of United's insurance subsidiaries are subject to regulation under state
insurance holding company regulations. Such insurance holding company laws and
regulations generally require registration with the state Department of
Insurance and the filing of certain reports describing capital structure,
ownership, financial condition, certain intercompany transactions and general
business operations. Various notice and reporting requirements generally apply
to transactions between companies within an insurance holding company system,
depending on the size and nature of the transactions. Certain state insurance
holding company laws and regulations require prior regulatory approval or, in
certain circumstances, prior notice of certain material intercompany transfers
of assets as well as certain transactions between the regulated companies, their
parent holding companies and affiliates, and acquisitions.
TPAS. Certain subsidiaries of United also are licensed as third-party
administrators ("TPAs") in states where such licensing is required for their
activities. TPA regulations, although differing greatly from state to state,
generally contain certain required administrative procedures, periodic reporting
obligations and minimum financial requirements.
PPOS. Certain of United's subsidiaries' operations may be subject to PPO
regulation in a particular state. PPO regulations generally contain certain
network, contracting, financial and reporting requirements which vary from state
to state.
UTILIZATION REVIEW REGULATIONS. A number of states have enacted laws and/or
adopted regulations governing the provision of utilization review activities and
these laws may apply to certain of United's operations. Generally, these laws
and regulations require compliance with specific standards for the delivery of
services, confidentiality, staffing, and policies and procedures of private
review entities, including the credentials required of personnel.
MCOS. In recent years a number of states have enacted laws enabling
self-insured employers and/or insurance carriers to apply medical management and
other managed care techniques to the medical benefit portion of workers
compensation if such managed care is performed by a state-certified managed care
organization ("MCO"). United, by itself or with its health plans, has generally
sought MCO certification in the states where it is available and where it
markets managed care workers compensation products. MCO laws differ
significantly from state to state, but generally address network and utilization
review activities.
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ERISA. The provision of goods and services to or through certain types of
employee health benefit plans is subject to ERISA. ERISA is a complex set of
laws and regulations that is subject to periodic interpretation by the United
States Department of Labor. ERISA places controls on how United's business units
may do business with employers covered by ERISA, particularly employers that
maintain self-funded plans. The Department of Labor is engaged in an ongoing
ERISA enforcement program which may result in additional constraints on how
ERISA-governed benefit plans conduct their activities. There recently have been
legislative attempts to limit ERISA's preemptive effect on state laws. If such
limitations were to be enacted, they might increase United's liability exposure
under state law-based suits relating to employee health benefits offered by
United's health plans and specialty businesses and may permit greater state
regulation of other aspects of those businesses' operations.
MANAGEMENT INFORMATION SYSTEMS
The Company's health plans, insurance, self-funded and specialty products
use computer-based management information systems for various purposes,
including claims processing, billing, utilization management, underwriting,
marketing and sales tracking, general accounting, medical cost trending, managed
care reporting and financial planning. These systems also support member, group
and provider service functions, including on-line access to membership
verification, claims and referral status, and information regarding hospital
admissions and lengths of stay. In addition, these systems support extensive
analysis of cost and outcome data.
The Company continually evaluates, upgrades and enhances the computer
information systems that support its operations. System development efforts
relating to increased efficiency, capacity and flexibility are ongoing. The
Company's computer processing capabilities support multiple product delivery
systems with attendant tracking and processing for such systems, and an
integrated database of information for increased reporting and research
capabilities, and use automated entry and edit capabilities to speed the capture
and processing of information. Over the past several years, the Company has
upgraded its mainframe computers, enhanced its existing software functionality,
and migrated to various software database environments. This approach allows the
Company to preserve its investment in existing systems as well as exploit new
technologies to help improve either the cost effectiveness of the services
provided, or allow for the introduction of new product capabilities. Following
the MetraHealth acquisition, the Company has been engaged in an extensive review
of its information systems, including integration of multiple systems. The
Company also has outsourced the operations of a substantial portion of its
computer operations centers to a few third parties. Simplification and
integration of the many different systems now servicing the Company's business
is an important component of controlling administrative expenses and effectively
managing United's operations. To the extent that these integration efforts are
not successful, the Company's financial results may be adversely affected.
MARKETING
The Company's marketing strategy and implementation for its health plan,
insurance, self-funded and specialty managed care products are defined and
coordinated by United HealthCare's corporate marketing staff. Primary marketing
responsibility for each of the Company's health plans and specialty managed care
products resides with a marketing director and a direct sales force. In
addition, the Company's health plan, insurance, self-funded and specialty
managed care products are sold through independent insurance agents and brokers.
Marketing efforts are supported by ongoing market research that identifies and
grades prospective customers and establishes specific enrollment goals by
territory and employer. Marketing efforts also are supported by public relations
efforts and advertising programs that may employ television, radio, newspapers,
billboards, direct mail and telemarketing.
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COMPETITION
The managed health care industry evolved primarily as a result of health
care buyers' concerns regarding rising health care costs. The industry's goal is
to infuse greater cost effectiveness and accountability into the health care
system through the development of managed care products, including health plans,
PPOs, and specialized services such as mental health or pharmacy benefit
programs, while increasing the accessibility and quality of health care
services. The industry in which United operates is highly competitive and
significant consolidation has occurred within the industry, creating stronger
competitors. At the same time, there are a number of new entrants to the
industry, which also may increase competitive pressures. The current competitive
markets in certain areas may limit United's ability to price its products at
levels United believes appropriate. These competitive factors could adversely
affect United's financial results.
As managed health care penetration of the health care market and the effects
of health care reforms increase nationwide, the Company expects that obtaining
new contracts for its health plans with large
employer and government groups may increasingly become more difficult and that
competition for smaller employer groups will intensify. In addition, employers
may increasingly choose to self-insure the health care risk, while seeking
benefit administration and utilization review services from third parties to
assist them in controlling and reporting health care costs.
The Company's health plan, insurance, self-funded and specialty managed care
products compete for group and individual membership with other health insurance
plans, Blue Cross/Blue Shield plans, other health plans, HMOs, PPOs, third party
administrators and health care management companies, and employers or groups
that elect to self-insure. The Company also faces competition from hospitals,
health care facilities, and other health care providers who have combined and
formed their own networks to contract directly with employer groups and other
prospective customers for the delivery of health care services. The Company's
ability to increase the number of persons covered by its products or services or
to increase its premiums and fees can be affected by the number and strength of
the Company's competitors in any particular area. The Company believes that the
principal competitive factors affecting the Company and its products include
price, the level and quality of products and service, provider network
capabilities, market share, the offering of innovative products, product
distribution systems, financial strength, and marketplace reputation.
Further, the Company currently believes that factors that generally help it
in regard to competitors are the breadth of its product line, its geographic
scope and diversity, the strength of its underwriting and
pricing practices and staff, its significant market position in certain
geographic areas, the strength of its distribution network, its financial
strength, its generally large provider networks that provide more member choice,
its point-of-service products and experience, and its generally favorable
marketplace reputation. In a number of markets the Company may be at a
disadvantage in regard to competitors with larger market shares, broader
networks, narrower networks (which may allow greater cost control and lower
prices) or a more-established marketplace name and reputation.
EMPLOYEES
As of December 31, 1996, the Company employed approximately 27,800 people;
approximately 225 of which were represented by a union. The Company believes its
employee relations are good.
CAUTIONARY STATEMENTS
The statements contained in the Business section and elsewhere in this Form
10-K, and the statements contained in the Management's Discussion and Analysis
of Financial Condition and Results of Operations and elsewhere in those sections
of the Company's annual report to shareholders incorporated by reference into
this document, all include forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 (the "PSLRA"). When used in
this Form 10-K and in future filings by the
9
Company with the Securities and Exchange Commission, in the Company's press
releases, presentations to securities analysts or investors, and in oral
statements made by or with the approval of an authorized executive officer of
the Company, the words or phrases "believes," "anticipates," "intends," "will
likely result," "estimates," "projects" or similar expressions are intended to
identify such forward-looking statements. Any of these forward-looking
statements involve risks and uncertainties that may cause the Company's actual
results to differ materially from the results discussed in the forward-looking
statements.
The following discussion contains certain cautionary statements regarding
United's business that investors and others should consider. This discussion is
intended to take advantage of the "safe harbor" provisions of the PSLRA. In
making these cautionary statements, the Company is not undertaking to address or
update each factor in future filings or communications regarding the Company's
business or results, and is not undertaking to address how any of these factors
may have caused results to differ from discussions or information contained in
previous filings or communications. In addition, any of the matters discussed
below may have affected United's past, as well as current, foward-looking
statements about future results, so that the Company's actual results in the
future may differ materially from those expressed in prior communications.
HEALTH CARE COSTS. A large portion of the revenue received by United is
used to pay the costs of health care services or supplies delivered to its
members. The total health care costs incurred by United are affected by the
number of individual services rendered and the cost of each service. Much of the
Company's premium revenue is set in advance of the actual delivery of services
and incurrence of the related costs, usually on a prospective annual basis.
While United attempts to base the premiums it charges at least in part on its
estimate of future health care costs over the fixed premium period, competition,
regulations and other circumstances may limit United's ability to fully base
premiums on estimated costs. In addition, many factors may and often do cause
actual health care costs to exceed that estimated and reflected in premiums.
These factors may include increased utilization of services, increased cost of
individual services, catastrophes, epidemics, the introduction of new or costly
treatments, general inflation, new mandated benefits or other regulatory
changes, and insured population characteristics. In addition, the Company's
earnings reported for any particular quarter include estimates of covered
services incurred by the Company's enrollees during that period but for which a
claim has not been received or processed. These are estimates and therefore the
Company's earnings may be subject to later adjustment based on the actual costs.
INDUSTRY FACTORS. The managed care industry has recently received
significant amounts of negative publicity. This publicity, in turn, has
contributed to increased legislative activity, regulation and review of industry
practices. These factors may adversely affect the Company's ability to market
its products or services, could necessitate changes in the Company's products
and services, and may increase regulatory burdens under which the Company
operates, further increasing the costs of doing business and adversely affecting
profitability.
COMPETITION. In many of its geographic or product markets, the Company
competes with a number of other entities, some of which may have certain
characteristics or capabilities that give them an advantage in competing with
the Company. The Company believes the barriers to entry in these markets are not
substantial, so that the addition of new competitors can occur relatively
easily. Certain of the Company's customers may decide to perform for themselves
functions or services formerly provided by the Company, which would result in a
decrease in the Company's revenues. Certain of the Company's providers may
decide to market products and services to Company customers in competition with
the Company. In addition, significant merger and acquisition activity has
occurred in the industry in which the Company operates as well as in industries
that act as suppliers to the Company, such as the hospital, physician,
pharmaceutical and medical device industries. This activity may create stronger
competitors or result in higher health care costs. To the extent that there is
strong competition or that competition intensifies in any market, the Company's
ability to retain or increase customers or providers, its revenue
10
growth, its pricing flexibility, its control over medical cost trends and its
marketing expenses may all be adversely affected.
AARP CONTRACT. In early 1997, the Company finalized its contract
arrangements with the American Association of Retired Persons ("AARP") under
which the Company will provide Medicare supplement health insurance products to
AARP members, effective January 1, 1998. As a result of this agreement, the
Company will significantly expand the number of members served, the products
offered and the services it must provide. The success of the AARP arrangement
will depend, in part, on the Company's ability to service these new members,
develop additional products and services, and price the products and services
competitively.
GOVERNMENT PROGRAMS AND REGULATION. The Company's business is heavily
regulated on a federal, state and local level. The laws and rules governing the
Company's business and interpretations of those laws and rules are subject to
frequent change and broad latitude is given to the agencies administering those
regulations. Existing or future laws and rules could force United to change how
it does business, may restrict United's revenue and/or enrollment growth,
increase its health care and administrative costs, and/ or increase the
Company's liability for medical malpractice or other actions. Regulatory
approvals must be obtained and maintained to market many of United's products
and services. Delays in obtaining or failure to obtain or maintain such
approvals could adversely affect United's revenue or the number of its members,
or could increase costs. A significant portion of United's revenues relate to
federal, state and local government health care coverage programs. These types
of programs, such as the federal Medicare program and the federal and state
Medicaid programs, are generally subject to frequent change including changes
that may reduce the number of persons enrolled or eligible, reduce the revenue
received by United or increase the Company's administrative or health care costs
under such programs. Such changes have in the past and may in the future
adversely affect United's results and its willingness to participate in such
programs.
The Company is also subject to various governmental audits and
investigations. Such activities could result in the loss of licensure or the
right to participate in certain programs, or the imposition of fines, penalties
and other sanctions. In addition, disclosure of any adverse investigation or
audit results or sanctions could negatively affect the Company's reputation in
various markets and make it more difficult for the Company to sell its products
and services.
The National Association of Insurance Commissioners (the "NAIC") has an
effort underway that would impose new minimum capitalization requirements for
health care coverages provided by insurance companies, HMOs and other risk
bearing health care entities. The requirements would take the form of risk-based
capital rules similar to those which currently apply only to insurance
companies. There could be an increase in the capital required for certain of
United's subsidiaries and there may be some potential for disparate treatment
relative to competing products. Failure of the NAIC to act may result in some
form of federal solvency regulation of companies providing Medicare-related
benefit programs.
PROVIDER RELATIONS. One of the significant techniques United uses to manage
health care costs and utilization and monitor the quality of care being
delivered is contracting with physicians, hospitals and other providers. Because
of the geographic diversity of its health plans and the large number of
providers with which most of those health plans contract, United currently
believes it has a limited exposure to provider relations issues. In any
particular market, however, providers could refuse to contract with United,
demand higher payments or take other actions that could result in higher health
care costs, less desirable products for customers and members, or difficulty
meeting regulatory or accreditation requirements.
In some markets, certain providers, particularly hospitals,
physician/hospital organizations or multi-specialty physician groups, may have
significant market positions or near monopolies. In addition,
11
physician or practice management companies, which aggregate physician practices
for purposes of administrative efficiency and marketing leverage, continue to
expand. These providers may compete directly with the Company. If such providers
refuse to contract with United, use their market position to negotiate favorable
contracts, or place United at a competitive disadvantage, United's ability to
market products or to be profitable in those areas could be adversely affected.
LITIGATION AND INSURANCE. United may be a party to a variety of legal
actions to which any corporation may be subject, including employment and
employment discrimination-related suits, employee benefit claims, breach of
contract actions, tort claims, shareholder suits, including securities fraud,
and intellectual property related litigation. In addition, because of the nature
of its business, United is subject to a variety of legal actions relating to its
business operations, such as claims relating to the denial of health care
benefits, medical malpractice actions, provider disputes including disputes over
withheld compensation and termination of provider contracts, disputes related to
self-funded business including actions alleging claim administration errors and
the failure to disclose network rate discounts and other fee and rebate
arrangements, disputes over copayment calculations, and claims relating to
customer audits and contract performance. Recent court decisions and legislative
activity may have the effect of increasing the Company's exposure for any of
these types of claims. In some cases, substantial non-economic or punitive
damages may be sought. While United currently has insurance coverage for some of
these potential liabilities, others may not be covered by insurance, the
insurers may dispute coverage or the amount of insurance may not be enough to
cover the damages awarded. In addition, certain types of damages, such as
punitive damages, may not be covered by insurance and insurance coverage for all
or certain forms of liability may become unavailable or prohibitively expensive
in the future.
INFORMATION SYSTEMS. United's business is significantly dependent on
effective information systems. United has many different information systems for
its various businesses. The Company's information systems require an ongoing
commitment of resources to maintain and enhance existing systems and develop new
systems. As a result of United's acquisition activities, United is in the
process of attempting to reduce the number of systems and also upgrade and
expand its information systems capabilities. Failure to maintain effective and
efficient information systems could result in loss of existing customers,
difficulty in attracting new customers, customer and provider disputes,
regulatory problems, increases in administrative expenses or other adverse
consequences. In addition, the Company may, from time-to-time, obtain
significant portions of its systems-related or other services or facilities from
independent third parties, which may make the Company's operations vulnerable to
such third parties' failure to perform adequately.
ADMINISTRATION AND MANAGEMENT. Efficient and cost-effective administration
of the Company's operations is integral to United's profitability and
competitive positioning. While United attempts to effectively manage such
expenses, increases in staff-related and other administrative expenses may occur
from time-to-time due to business or product start-ups or expansions, growth or
changes in business, acquisitions, regulatory requirements or other reasons.
Such expense increases are not clearly predictable and increases in
administrative expenses may adversely affect results.
United believes it currently has a relatively experienced, capable
management staff. Loss of certain managers or a number of such managers could
adversely affect United's ability to administer and manage its business.
MARKETING. The Company markets its products and services through both
employed sales people and independent sales agents. Although the Company has a
number of such sales employees and agents, if certain key sales employees or
agents or a large subset of such individuals were to leave the Company, its
ability to retain existing customers and members could be impaired. In addition,
certain of the Company's customers or potential customers consider rating,
accreditation or certification of the Company by various private or governmental
bodies or rating agencies necessary or important. Certain of the Company's
health plans or other business units may not have obtained or may not desire or
be able to obtain or maintain
12
such accreditation or certification, which could adversely affect the Company's
ability to obtain or retain business with such customers.
ACQUISITIONS. The Company has made several large acquisitions in recent
years and has an active ongoing acquisition program. These acquisitions may
entail certain risks and uncertainties in addition to those present in its
ongoing business operations, unknown liabilities, unforeseen administrative
needs or increased efforts to integrate the acquired operations. Failure to
identify liabilities, anticipate additional administrative needs or effectively
integrate acquired operations could result in reduced revenues, increased
administrative and other costs, or customer confusion or dissatisfaction.
STOCK MARKET. The market prices of the securities of certain of the
publicly-held companies in the industry in which United operates have shown
volatility and sensitivity in response to many factors, including general market
trends, public communications regarding managed care, legislative or regulatory
actions, health care cost trends, pricing trends, competition, earnings or
membership reports of particular industry participants, and acquisition
activity. During 1996, the market price for United's securities experienced
similar volatility. There can be no assurance regarding the level or stability
of United's share price at any time or of the impact of these or any other
factors on the share price.
13
EXECUTIVE OFFICERS OF THE REGISTRANT
FIRST ELECTED AS
NAME AGE POSITION EXECUTIVE OFFICER
- ---------------------------------------- --- ---------------------------------------- -----------------
William W. McGuire, M.D................. 48 President, Chairman, Chief Executive 1988
Officer and Director
James G. Carlson........................ 44 Executive Vice President, Field 1995
Operations
David A.George.......................... 41 Executive Vice President, Administrative 1996
Services
David P. Koppe.......................... 40 Chief Financial Officer 1992
Sheila T. Leatherman.................... 45 Executive Vice President 1993
David J. Lubben......................... 45 General Counsel and Secretary 1996
Thomas P. McDonough..................... 48 Executive Vice President 1997
Michael A. Mooney....................... 43 Executive Vice President, Underwriting & 1996
Pricing
Jeannine M. Rivet....................... 48 Executive Vice President, Health 1992
Services
Travers H. Wills........................ 53 Executive Vice President and Chief 1992
Operating Officer
Executive officers of the Company are elected annually by the Board of
Directors and serve until their successors are duly elected and qualified.
Dr. McGuire became a director of the Company in February 1989 and the
chairman of the board in May 1991. Dr. McGuire became an executive vice
president of United in November 1988, was appointed the Company's chief
operating officer in May 1989, the Company's president in November 1989 and the
Company's chief executive officer in February 1991.
Mr. Carlson became United's executive vice president in October 1995. From
March to October 1995, Mr. Carlson was executive vice president of The
MetraHealth Companies, Inc ("MetraHealth"). Mr. Carlson was president and chief
executive officer of HealthSpring, Inc., a developer of primary care physician
practices, from July 1992 to March 1995. From April 1975 to July 1992, Mr.
Carlson was an employee of Prudential Insurance Company. Mr. Carlson's last
position with Prudential Insurance Company was vice president of Group
Insurance.
Mr. George became a vice president of United in October 1995 and an
executive vice president in October 1996. Mr. George was an executive vice
president of MetraHealth from November 1994 to October 1995. Prior to joining
MetraHealth, Mr. George was president of Southern Group Operations for the
Prudential Insurance Company of America from 1989 through November 1994.
Mr. Koppe became the Company's chief financial officer in December 1994. He
has been employed by the Company since June 1983 and served as the Company's
vice president and treasurer from May 1989 to January 1996. Mr. Koppe also
served as the Company's controller from May 1989 until October 1994.
Ms. Leatherman currently serves as an executive vice president of United.
Ms. Leatherman joined the Company in 1989 and served as its vice president of
research and development until June 1992 when she became president of United's
Center for Health Care Evaluation.
Mr. Lubben became the Company's general counsel and secretary in October
1996. Prior to joining United, he was a partner in the law firm of Dorsey &
Whitney LLP. Mr. Lubben first became associated with Dorsey & Whitney in 1977.
14
Mr. McDonough became executive vice president of the Company in February
1997. From October 1995 through February 1997, he was the Company's senior vice
president, claim services. From August 1995 to October 1995, he was employed by
MetraHealth as senior vice president, claim services. From July 1993 through
July 1995, he was the president of Harrington Services Corporation, and from
February 1988 to July 1993, he was the chief operating officer of Jardine Group
Services Corporation.
Mr. Mooney has been employed by the Company since February 1985 and became
an executive vice president of United in January 1996. Prior to January 1996,
Mr. Mooney served in various capacities in United's Underwriting Department
including, most recently, vice president, underwriting.
Ms. Rivet has been employed by United since July 1990. She became an
executive vice president of the Company in October 1994. She served as the
Company's senior vice president, health plan operations from September 1993 to
September 1994 and the Company's vice president of health service operations
from June 1990 to September 1993.
Mr. Wills has been employed by the Company since November 1992. From
November 1992 until October 1995, he served as United's senior vice president,
specialty operations. He has been the Company's chief operating officer since
October 1995. From 1968 to 1992, Mr. Wills was employed by CIGNA Corporation, a
multi-line insurance company, in various capacities, most recently as president
of MCC Companies, a mental health/substance abuse subsidiary of CIGNA.
15
ITEM 2. PROPERTIES
As of December 31, 1996, the Company leased approximately 1,140,918
aggregate square feet of space for its principal administrative offices in
Hartford, Connecticut and the greater Minneapolis/St. Paul, Minnesota area. In
connection with its operations outside of the Minneapolis/St. Paul, Minnesota
and Hartford, Connecticut areas, as of December 31, 1996, the Company leased
approximately 5,212,172 aggregate square feet for office space or space for
computer facilities and claims processing centers nationwide and 13,280
aggregate square feet outside of the U.S. Such space corresponds to areas in
which its health plans or managed care services specialty programs operate or
where it has satellite administrative offices. The Company's leases expire at
various dates through 2011. As of December 31, 1996, the Company owned
approximately 699,851 aggregate square feet of space for administrative offices
in various states and its staff model clinic operations in Florida.
ITEM 3. LEGAL PROCEEDINGS
Because of the nature of its business, United is subject to suits relating
to the failure to provide or pay for health care or other benefits, poor
outcomes for care delivered or arranged under United's programs, nonacceptance
or termination of providers, failure to return withheld amounts from provider
compensation, failure of a self-funded plan serviced by United to pay benefits,
improper copayment calculations and other forms of legal actions. Some of these
suits may include claims for substantial non-economic or punitive damages. While
United does not believe that any such actions, or any other types of actions,
currently threatened or pending will, individually or in the aggregate, have a
material adverse effect on United's financial position or results of operations,
the likelihood or outcome of such current or future suits cannot be accurately
predicted and they could adversely affect United's financial results.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information contained under the heading "Investor Information" in the
Company's Annual Report to Shareholders for the fiscal year ended December 31,
1996, is incorporated herein by reference.
ITEM. 6. SELECTED FINANCIAL DATA
The information contained under the heading "Financial Highlights" in the
Company's Annual Report to Shareholders for the fiscal year ended December 31,
1996, is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The information contained under the heading "Financial Review" in the
Company's Annual Report to Shareholders for the fiscal year ended December 31,
1996, is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's Consolidated Financial Statements together with the Report of
Independent Public Accountants thereon appearing on pages 24 through 38 of the
Company's Annual Report to Shareholders for the fiscal year ended December 31,
1996, are incorporated herein by reference.
16
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information included under the headings "Election of Directors" and
"Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's
definitive Proxy Statement for the Annual Meeting of Shareholders to be held May
14, 1997, is incorporated herein by reference.
Pursuant to General Instruction G(3) to Form 10-K and Instruction 3 to Item
401(b) of Regulation S-K, information as to executive officers of the Company is
set forth in Part I of this Form 10-K under separate caption.
ITEM 11. EXECUTIVE COMPENSATION
The information included under the heading "Executive Compensation" in the
Company's definitive Proxy Statement for the Annual Meeting of Shareholders to
be held May 14, 1997, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Information included under the heading "Security Ownership of Certain
Beneficial Owners and Management" in the Company's definitive Proxy Statement
for the Annual Meeting of Shareholders to be held May 14, 1997, is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to certain relationships and related transactions
appearing under the heading "Certain Relationships and Transactions" in the
Company's definitive Proxy Statement for the Annual Meeting of Shareholders to
be held May 14, 1997, is incorporated herein by reference.
17
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
The following consolidated financial statements of the Company are included
in the Company's Annual Report to Shareholders for the fiscal year ended
December 31, 1996 and are incorporated herein by reference:
Consolidated Statements of Operations for the Three Years Ended December
31, 1996.
Consolidated Balance Sheets at December 31, 1996 and 1995.
Consolidated Statements of Changes in Shareholders' Equity for the Three
Years Ended December 31, 1996.
Consolidated Statements of Cash Flows for the Three Years Ended December
31, 1996.
Notes to Consolidated Financial Statements.
Report of Independent Public Accountants.
(a) 2. FINANCIAL STATEMENT SCHEDULES
None
(a) 3. EXHIBITS
13(a) Copy of the Company's Second Restated Articles of Incorporation.
13(b) Copy of the Company's Restated Bylaws, as amended. (Incorporated by reference
to Exhibit 3 to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1991.)
14 Certificate of Designation for 5.75% Series A Convertible Preferred Stock
(See Exhibit 3(a).)
*10(a) Employment Agreement dated as of January 6, 1996, between United HealthCare
Corporation and William W. McGuire, M.D. (Incorporated by reference to
Exhibit 10(b) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995.)
*10(b) United HealthCare Corporation 1985 Stock Option Plan, as amended.
(Incorporated by reference to Exhibit 10(b) to the Company's Annual Report
on Form 10-K for the year ended December 31, 1993.)
*10(c) United HealthCare Corporation 1987 Supplemental Stock Option Plan.
(Incorporated by reference to Exhibit 10(d) to the Company's Annual Report
on Form 10-K for the year ended December 31, 1993.)
*10(d) United HealthCare Corporation 1988 Stock Option Plan, as amended.
(Incorporated by reference to Exhibit 10(e) to the Company's Annual Report
on Form 10-K for the year ended December 31, 1992.)
*10(e) United HealthCare Corporation 1990 Stock and Incentive Plan, as amended.
(Incorporated by reference to Exhibit 10(f) to the Company's Annual Report
on Form 10-K for the year ended December 31, 1992.)
*10(f) United HealthCare Corporation Amended and Restated 1991 Stock and Incentive
Plan, Amended and Restated Effective August 15, 1996.
18
10(g) Employment Agreement, dated as of November 1, 1994, between United HealthCare
Corporation and Jeannine Rivet. (Incorporated by reference to Exhibit 10(k)
to the Company's Annual Report on Form 10-K for the year-ended December 31,
1994.)
*10(h) Restated Employment Agreement dated as of May 27, 1994, between United
HealthCare Corporation and Travers H. Wills. (Incorporated by reference to
Exhibit 99.1 to the Company's Interim Report on Form 8-K dated May 27,
1994.)
10(i) Employment Agreement dated as of November 1, 1994, between United HealthCare
Corporation and Michael Mooney. (Incorporated by reference to Exhibit 10(m)
to the Company's Annual Report on Form 10-K for the year ended December 31,
1996.)
*10(j) Employment Agreement dated as of December 1, 1994, between United HealthCare
Corporation and David P. Koppe. (Incorporated be reference to Exhibit 10(q)
to the Company's Annual Report on Form 10-K for the year ended December 31,
1994.)
10(k) Employment Agreement dated as of November 1, 1994, between United HealthCare
Corporation and Sheila T. Leatherman. (Incorporated by reference to Exhibit
10(r) to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.)
10(l) Employment Agreement dated as of November 1, 1994, between United HealthCare
Corporation and James Conto. (Incorporated by reference to Exhibit 10(s) to
the Company's Annual Report on Form 10-K for the year ended December 31,
1994.)
*10(m) Employment Agreement effective as of October 2, 1995 between United
HealthCare Corporation and James G. Carlson. (Incorporated by reference to
Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995.)
*10(n) Employment Agreement effective as of October 2, 1995, between United
HealthCare Corporation and David A. George.
+10(o) Information Technology Services Agreement between The MetraHealth Companies,
Inc. and Integrated Systems Solutions Corporation dated as of November 1,
1995. (Incorporated by reference to Exhibit 10(t) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.)
+10(p) AARP Health Insurance Agreement by and among American Association of Retired
Persons, Trustees of the AARP Insurance Plan and United HealthCare
Insurance Company dated as of February 26, 1997.
*10(q) United HealthCare Corporation Non-employee Director Stock Option Plan.
(Incorporated by reference to Exhibit 10(x) to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994.)
*10(r) Letter Agreement between The MetraHealth Companies, Inc. and Kennett L.
Simmons dated as of October 2, 1995. (Incorporated by reference to Exhibit
10(w) to the Company's Annual Report on Form 10-K for the year ended
December 31, 1995.)
*10(s) Consulting Agreement between The MetraHealth Companies, Inc. and Kennett L.
Simmons dated as of October 2, 1995. (Incorporated by reference to Exhibit
10(x) to the Company's Annual Report on Form 10-K for the year ended
December 31, 1995.)
11 Statement regarding computation of per share earnings.
13 Information contained under the headings "Investor Information," "Financial
Highlights," "Financial Review" and the Company's Consolidated Financial
Statements together with the Report of Independent Public Accountants
thereon, for the fiscal year ended December 31, 1996, as required by Rule
601(b) (13) (ii). (E.D.G.A.R. version only)
19
21 Subsidiaries of the Registrant
23 Consent of Independent Public Accountants.
24 Powers of Attorney.
27 Financial Data Schedule. (E.D.G.A.R. version only)
- ------------------------
+ Pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended,
confidential portions of these Exhibits have been deleted and filed
separately with the Securities and Exchange Commission pursuant to a request
for confidential treatment.
* Denotes compensation plans in which certain directors and named executive
officers participate and which are being filed pursuant to Item
601(b)(10)(iii)(A) of Regulation S-K.
(b) REPORTS ON FORM 8-K
The following reports on Form 8-K were filed during the fourth quarter of
1996 or during the period thereafter ending on March 29, 1997:
The company filed a Current Report on Form 8-K dated December 18, 1996. The
only item reported on this filing was Item 5 concerning the dismissal of a
shareholder suit against the Company, RAY LEVY, ET AL. V. UNITED HEALTHCARE
CORPORATION, ET AL.
(c) See Exhibits listed in Item 14 hereof and the Exhibits attached as a
separate section of this Report.
20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: March 28, 1997
UNITED HEALTHCARE CORPORATION
By: /s/ WILLIAM W. MCGUIRE, M.D.
-----------------------------------------
William W. McGuire, M.D.
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ WILLIAM W. MCGUIRE, M.D. Director, Chief Executive
- ------------------------------ Officer (principal March 28, 1997
William W. McGuire, M.D. executive officer)
/s/ DAVID P. KOPPE Chief Financial Officer
- ------------------------------ (principal financial and March 28, 1997
David P. Koppe accounting officer)
*
- ------------------------------ Director March 28, 1997
William C. Ballard, Jr.
*
- ------------------------------ Director March 28, 1997
Richard T. Burke
*
- ------------------------------ Director March 28, 1997
James A. Johnson
*
- ------------------------------ Director March 28, 1997
Thomas H. Kean
*
- ------------------------------ Director March 28, 1997
Douglas W. Leatherdale
- ------------------------------ Director March 28, 1997
Elizabeth J. McCormack
21
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
*
- ------------------------------ Director March 28, 1997
Robert L. Ryan
*
- ------------------------------ Director March 28, 1997
William G. Spears
*
- ------------------------------ Director March 28, 1997
Kennett L. Simmons
*
- ------------------------------ Director March 28, 1997
Gail R. Wilensky
*By /s/ WILLIAM W. MCGUIRE,
M.D. March 28, 1997
--------------------------
William W. McGuire, M.D.
AS ATTORNEY-IN-FACT
22
EXHIBITS INDEX
PAGE
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13(a) Copy of the Company's Second Restated Articles of Incorporation...................................
13(b) Copy of the Company's Restated Bylaws, as amended. (Incorporated by reference to Exhibit 3 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1991.)...................
14 Certificate of Designation for 5.75% Series A Convertible Preferred Stock (See Exhibit 3(a).).....
10(a) Employment Agreement dated as of January 6, 1996, between United HealthCare Corporation and
William W. McGuire, M.D. (Incorporated by reference to Exhibit 10(b) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.)......................................
10(b) United HealthCare Corporation 1985 Stock Option Plan, as amended. (Incorporated by reference to
Exhibit 10(b) to the Company's Annual Report on Form 10-K for the year ended December 31,
1993.)..........................................................................................
10(c) United HealthCare Corporation 1987 Supplemental Stock Option Plan. (Incorporated by reference to
Exhibit 10(d) to the Company's Annual Report on Form 10-K for the year ended December 31,
1993.)..........................................................................................
10(d) United HealthCare Corporation 1988 Stock Option Plan, as amended. (Incorporated by reference to
Exhibit 10(e) to the Company's Annual Report on Form 10-K for the year ended December 31,
1992.)..........................................................................................
10(e) United HealthCare Corporation 1990 Stock and Incentive Plan, as amended. (Incorporated by
reference to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the year ended
December 31, 1992.).............................................................................
10(f) United HealthCare Corporation Amended and Restated 1991 Stock and Incentive Plan, Amended and
Restated Effective August 15, 1996..............................................................
10(g) Employment Agreement, dated as of November 1, 1994, between United HealthCare Corporation and
Jeannine Rivet. (Incorporated by reference to Exhibit 10(k) to the Company's Annual Report on
Form 10-K for the year-ended December 31, 1994.)................................................
10(h) Restated Employment Agreement dated as of May 27, 1994, between United HealthCare Corporation and
Travers H. Wills. (Incorporated by reference to Exhibit 99.1 to the Company's InterimReport on
Form 8-K dated May 27, 1994.)...................................................................
10(i) Employment Agreement dated as of November 1, 1994, between United HealthCare Corporation and
Michael Mooney. (Incorporated by reference to Exhibit 10(m) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996.)................................................
10(j) Employment Agreement dated as of December 1, 1994, between United HealthCare Corporation and David
P. Koppe. (Incorporated be reference to Exhibit 10(q) to the Company's Annual Report on Form
10-K for the year ended December 31, 1994.).....................................................
10(k) Employment Agreement dated as of November 1, 1994, between United HealthCare Corporation and
Sheila T. Leatherman. (Incorporated by reference to Exhibit 10(r) to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994.).............................................
10(l) Employment Agreement dated as of November 1, 1994, between United HealthCare Corporation and James
Conto. (Incorporated by reference to Exhibit 10(s) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1994.)..........................................................
23
PAGE
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10(m) Employment Agreement effective as of October 2, 1995 between United HealthCare Corporation and
James G. Carlson. (Incorporated by reference to Exhibit 10(a) to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995.).........................................
10(n) Employment Agreement effective as of October 2, 1995, between United HealthCare Corporation and
David A. George.................................................................................
10(o) Information Technology Services Agreement between The MetraHealth Companies, Inc. and Integrated
Systems Solutions Corporation dated as of November 1, 1995. (Incorporated by reference to
Exhibit 10(t) to the Company's Annual Report on Form 10-K for the year ended December 31,
1995.)..........................................................................................
10(p) AARP Health Insurance Agreement by and among American Association of Retired Persons, Trustees of
the AARP Insurance Plan and United HealthCare Insurance Company dated as of February 26,
1997............................................................................................
10(q) United HealthCare Corporation Non-employee Director Stock Option Plan. (Incorporated by reference
to Exhibit 10(x) to the Company's Annual Report on Form 10-K for the year ended December 31,
1994.)..........................................................................................
10(r) Letter Agreement between The MetraHealth Companies, Inc. and Kennett L. Simmons dated as of
October 2, 1995. (Incorporated by reference to Exhibit 10(w) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995.)................................................
10(s) Consulting Agreement between The MetraHealth Companies, Inc. and Kennett L. Simmons dated as of
October 2, 1995. (Incorporated by reference to Exhibit 10(x) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995.)................................................
11 Statement regarding computation of per share earnings.............................................
13 Information contained under the headings Investor Information, Financial Highlights, Financial
Review and the Company's Consolidated Financial Statements together with the Report of
Independent Public Accountants thereon, for the fiscal year ended December 31, 1996, as required
by Rule 601(b) (13) (ii). (E.D.G.A.R. version only).............................................
21 Subsidiaries of the Registrant....................................................................
23 Consent of Independent Public Accountants.........................................................
24 Powers of Attorney................................................................................
27 Financial Data Schedule. (E.D.G.A.R. version only)................................................
24