Further information on our business and reportable segments is presented in Item 1, “Business” and in Note 13 to the Consolidated Financial Statements in Item 8, “Financial Statements.”
UnitedHealthcare medical enrollment grew organically by 4.5 million people, including 2.9 million military beneficiaries through the TRICARE contract. Medicare Part D stand-alone membership grew by 725,000 people.
The increase in OptumRx revenues in 2013 were due to the insourcing of UnitedHealthcare’s commercial pharmacy benefit programs and growth in both UnitedHealthcare’s Medicare Part D members and external clients. Over the course of 2013, we completed our transition of 12 million migrating and new members to the OptumRx platform from a third party.
Other significant items contributing to the overall decrease in cash year-over-year included: (a) decreased investments in acquisitions and noncontrolling interest shares (the activity in 2013 primarily related to the acquisition of the remaining publicly traded shares of Amil during the second quarter of 2013 for $1.5 billion); (b) a decrease in net proceeds from commercial paper and long-term debt, as proceeds from 2013 debt issuances were fully offset by scheduled maturities and the redemption of all of our outstanding subsidiary debt (in 2012, the increased cash flows from common stock issuances and proceeds from issuances of commercial paper and long-term debt primarily related to the Amil acquisition); and (c) increased net purchases of investments.
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. See Note 2 of Notes to the Consolidated Financial Statements included in Item 8, “Financial Statements” for more detail.
As the timing of future settlements is uncertain, they have been classified as due “Thereafter.”
Includes obligations associated with contingent consideration and other payments related to business acquisitions, certain employee benefit programs, and various other long-term liabilities. Due to uncertainty regarding payment timing, obligations for employee benefit programs, charitable contributions and other liabilities have been classified as “Thereafter.”
individuals) are required to rebate ratable portions of their premiums to their customers annually. Premium revenues are recognized based on the estimated premiums earned net of projected rebates because we are able to reasonably estimate the ultimate premiums of these contracts. Each period, we estimate premium rebates based on the expected financial performance of the applicable contracts within each defined aggregation set (e.g., by state, group size and licensed subsidiary). The most significant factors in estimating the financial performance are current and future premiums and medical claim experience, effective tax rates and expected changes in business mix. The estimated ultimate premium is revised each period to reflect current and projected experience.
Other-than-temporary impairment assessment. Individual securities with fair values lower than costs are reviewed for impairment considering the following factors: our intent to sell the security or the likelihood that we will be required to sell the security before recovery of the entire amortized cost, the length of time and extent of impairment and 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. Other factors included in the assessment include the type and nature of the securities and their liquidity. Given the nature of our portfolio, primarily investment grade securities, historical impairments were largely market related (e.g., interest rate fluctuations) as opposed to credit related. We do not expect that trend to change in the near term. Our large cash holdings reduce the risk that we will be required to sell a security. However, our intent to sell a security may change from period to period if facts and circumstances change.
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. 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. As 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.
The Company’s arrangements with AARP extend to December 31, 2020 for the AARP Program and give the Company an exclusive right to use the AARP brand on the Company’s Medicare Advantage and Medicare Part D offerings until December 31, 2020, subject to certain limited exclusions.
with at least 30 days notice. Costs related to the acquisition and renewal of short duration customer contracts are charged to
The Company also offers a 401(k) plan for its employees. Compensation expense related to this plan was not material for the years ended December 31, 2013, 2012 and 2011.
As of December 31, 2013, the Company had outstanding, undrawn letters of credit with financial institutions of $39 million and surety bonds outstanding with insurance companies of $499 million, primarily to bond contractual performance.