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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): JULY 11, 1996
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UNITED HEALTHCARE CORPORATION
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(exact name of registrant as specified in charter)
MINNESOTA
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(State or other jurisdiction of incorporation)
0-13253 41-1321939
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(Commission File Number) (IRS Employer Identification No.)
300 OPUS CENTER, 9900 BREN ROAD EAST, MINNETONKA, MN 55343
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 936-1300
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Item 5. Other Events
On July 11, 1996 the Registrant issued a press release relating to its Second
Quarter earnings.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits
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Exhibit 99.1 - United HealthCare Corporation Press Release, dated
July 11, 1996.
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SIGNATURES
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Pursuant to the requirements 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.
UNITED HEALTHCARE CORPORATION
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(Registrant)
By /s/David P. Koppe
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David P. Koppe
Chief Financial Officer
Date: July 11, 1996
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EXHIBIT INDEX
Exhibit Number Description Page No.
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99.1 United HealthCare Corporation Press
Release dated July 11, 1996. 5
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Exhibit 99.1
News Release
[LETTERHEAD OF UNITED HEALTHCARE]
CONTACTS: David Koppe
Chief Financial Officer
(612) 936-7211
Bernard McDonagh
Vice President, Investor Relations
(612) 936-7214
Susan Busch
Director, Communications
(612) 992-5132
FOR IMMEDIATE RELEASE
UNITED HEALTHCARE REPORTS SECOND QUARTER
EARNINGS EXPECTATIONS
MINNEAPOLIS (July 11, 1996) -- United HealthCare Corporation (NYSE: UNH)
indicated today that after completing an in-depth review of detailed April and
May results the company estimates earnings from operations for the three months
ending June 30 will be between $0.40 and $0.45 per share, compared with $0.51
per share for the same period last year. The $0.40 to $0.45 range is before
charges of approximately $45 million, or $0.15 per share, that it expects to
recognize as a provision for losses on two large multi-year contracts in its St.
Louis health plan, and approximately $15 million, or $0.05 per share, for the
previously disclosed charges related to the second quarter acquisition of
HealthWise of America.
The company expects its consolidated medical expense ratio to rise to
approximately 84.5 percent to 85.5 percent in the second quarter of 1996. This
is higher than the 82.8 percent reported in the first quarter of 1996.
The leading cause of this increase in the medical expense ratio is the health
plan component of the company's MetraHealth operations, which were acquired in
October 1995. While integration of this company into United HealthCare has gone
very well and its small group indemnity segment has stabilized, United
HealthCare believes that the pre-acquisition pricing decisions made by
MetraHealth overestimated the immediate savings obtainable from their health
care provider contracting. This, along with areas of higher medical expense in
the second quarter, has resulted in an increased medical expense ratio in the
former MetraHealth network and premium-based products or products in which
MetraHealth shares risk. The resultant medical expense ratio for the former
MetraHealth health plans has risen to approximately 91 percent for the five
months ended May 1996.
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Page 2 of 3
In addition, the company believes that its commercial products delivered through
a number of its established health plans were negatively impacted by increases
in some health care cost components, led by outpatient services, physician
utilization, and prescription drugs. Decreases in inpatient hospital utilization
in the company have not adequately compensated for the increases in these other
services. For 1995 and the first quarter of 1996, the company had estimated that
its medical cost trend for commercial business was around 2 percent, but the
most recent analysis of cost trends suggests that the 1996 medical trend has now
increased to 3-4 percent. While this is still a relatively low rate of medical
cost inflation, premium pricing during 1995 and for January 1996 enrollments did
not anticipate this upturn, resulting in 1996 medical expense ratio increases.
Finally, the company's St. Louis health plan operation experienced significant
negative results with two long standing customers representing 23 percent of the
plan's total commercial insured membership. The company will record a second
quarter charge of approximately $45 million to provide for the future losses
from the multi-year terms of these contracts.
The above negative results are sufficiently large to overshadow the favorable
results in several other United HealthCare health plans, as well as continued
strong commercial health plan enrollment growth, successes in new and expanding
Medicare initiatives, and ongoing control of administrative expenses and
improvements in customer service.
United HealthCare has in place a number of aggressive medical management
initiatives that should help counteract these negative trends and improve
operating performance. These programs include focused efforts at prescription
drug cost improvement (including implementing more limited drug formularies);
increases in physician profiling to identify and improve performance of cost
outliers; new reviews for selected outpatient procedures; and further decreases
in unit costs for hospital and selected physician fees via contract changes.
In addition, the company's recent premium rating actions have resulted in the
realization of 4 percent to 5 percent health plan renewal increases in February,
March, April, and May, which compare favorably to the rate increases of 0.5
percent placed for January 1996. New group pricing has been similarly increased
to reflect the new cost trends. While the February to May renewals represent a
small portion of the health plan book of business, these actions will continue
into the future, and current indications are that the strength of the company's
product designs will allow for continued positive enrollment gains in the face
of this higher pricing.
United HealthCare said it is also continuing its initiatives to lower
administrative costs; improve customer service; implement its broader access
health plan offerings in new markets; introduce managed care products to former
MetraHealth customers; and expand its Medicare programs into multiple new
markets. These efforts are currently yielding positive results and should
favorably contribute to future growth and profitability for the company.
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Page 3 of 3
Commenting on its business environment and results, United HealthCare chairman
and CEO William W. McGuire, M.D., said "1996 has proven to be a more difficult
year from an earnings growth standpoint than we previously thought. The fact
that the MetraHealth provider contracts did not achieve the savings projected by
MetraHealth management, coupled with the recent rise of selected medical cost
components at a time our pricing was based on lower trend assumptions, have
negatively impacted earnings in the quarter. While this is very disappointing
for us, our company is solid and performing well on many fronts. We remain
positive about our industry, our company, and our future. We expect the third
and fourth quarters to show sequential improvement over the results for this
second quarter."
United HealthCare Corporation is a national leader in health care management,
serving purchasers, consumers, managers and providers of health care since 1974.
The company serves over 40 million individuals through a broad continuum of
health care products and services, including HMOs, point of service, PPOs and
managed indemnity programs; as well as managed mental health and substance abuse
services; utilization management; workers' compensation and disability
management services; specialized provider networks; third-party administration
(TPA) services; employee assistance services; Medicare and managed care programs
for the aged; managed Medicaid services; health care evaluation services;
information systems; and administrative services.
This press release should be read in conjunction with the cautionary statements
contained in United HealthCare's 1995 10K filed with the SEC.
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