UnitedHealth Group, Inc

UnitedHealth Group

UnitedHealth Group Incorporated is a managed health care company. According to its company literature, UnitedHealth Group is a diversified health and well-being company dedicated to making health care work better. Headquartered in Minneapolis, Minn., UnitedHealth Group offers a broad spectrum of products and services through seven operating businesses: UnitedHealthcare, Ovations, AmeriChoice, Uniprise, OptumHealth, Ingenix, and Prescription Solutions. Through its family of businesses, UnitedHealth Group serves approximately 70 million individuals nationwide. In 2004 the company posted a gross profit of $10.2 billion (Lexis Nexis Online - Company Financial Reports).

United Health Group It is the parent of UnitedHealthcare, one of the largest health insurers in the U.S. It was created in 1977, as UnitedHealthCare Corporation (it renamed itself in 1998), but traces its origin to a firm it acquired in 1977, Charter Med Incorporated, which was founded in 1974. In 1979, it introduced the first network-based health plan for seniors. In 1984, it became a publicly traded company.

Acquisitions

In 1995, the company acquired The MetraHealth Companies Inc. for $1.75 billion. MetraHealth was a privately held company formed by combining the group health care operations of The Travelers Insurance Company and Metropolitan Life Insurance Company also known as MetLife. In July 2004, UnitedHealth Group acquired Oxford Health Plans and all of United Healthcare's New York-based small group contracts (2-49 lives) are now Oxford Health Plans products. In December 2005, the company received final regulatory approval for its $9.2 billion purchase of PacifiCare Health Systems. It agreed to divest parts of PacifiCare's commercial health insurance business in Tucson, Arizona and Boulder, Colorado to satisfy antitrust regulator concerns, and also agreed to end its network access agreement with Blue Shield of California.

In March 2007, United Health Group signed a definitive agreement to acquire Sierra Health Services Inc. for $2.6 billion. Sierra provided health benefits and services to 310,000 members in Nevada and another 320,000 people in senior and government programs throughout the United States.

In a recent insurance industry publication, Business Insurance, United was named Readers Choice^TM winner 2007 for "Best Managed care organization".

To contrast with that, however, in a recent non-insurance industry survey of health care executives who have dealt with the company, United received a 91% unfavorable rating - the worst ranking among all listed.

Legal issues

In 2006, the Securities and Exchange Commission began investigating the conduct of UnitedHealth's management and directors, for backdating of stock options. Investigations were also begun by the Internal Revenue Service and prosecutors in the U.S. attorney's office for the Southern District of New York, who subpoenaed documents from the company. The investigations came to light after a series of probing stories in the Wall Street Journal in May 2006, discussing apparent backdating of hundreds of millions of dollars' worth of stock options by UHC management. The backdating apparently occurred with the knowledge and approval of the directors, according to the Journal. Major shareholders have filed lawsuits accusing former New Jersey governor Thomas Kean and UHC's other directors of failing in their fiduciary duty. On October 15, 2006, CEO William W. McGuire was forced to resign, and relinquish hundreds of millions of dollars in stock options. On December 6, 2007, the SEC announced a settlement under which McGuire will repay $468 million, as a partial settlement of the backdating prosecution. Legal actions filed by the SEC against United Health Care itself are still pending.

In June 2006, the American Chiropractic Association filed a national class action lawsuit against the American Chiropractic Network (ACN), which is owned by UHC and administers chiropractic benefits, and against United Healthcare itself, for alleged practices in violation of the federal RICO act.

Ingenix

Ingenix, a subsidiary of United Health Care, is the industry leader in quantifying reasonable and customary rates for medical services. Health insurance companies pay Ingenix to gain access to these rate determinations. As most health insurance plans contain an exclusion for coverage of services that exceed the reasonable and customary rate, this valuation is a legitimate way for insurance companies to deny coverage.

In February 2008, New York State Attorney General Andrew M. Cuomo announced that he was conducting an industry-wide investigation into a scheme by health insurers to defraud consumers by manipulating reasonable and customary rates. The announcement included a statement that Cuomo intended "to file suit against Ingenix, Inc, its parent UnitedHealth Group (NYSE: UNH), and three additional subsidiaries." Cuomo's investigation found that Ingenix databases used to quantify reasonable and customary rates were remarkably lower than the actual cost of typcial medical expenses. This inappropriately provides health insurance companies with basis to deny a portion of provider claims, thereby pushing costs down to members.