State of New Jersey Department of the Treasury, Division of Volume 1: Table of Contents Pensions and Benefits Section 1 Forms A. B. C. D. E. F. G. 4.4.1.1 Offer and Acceptance Page 4.4.1.3 Subcontractor Utilization Plan 4.4.2.1 Ownership Disclosure Form 4.4.2.2 Disclosure of Investment Activities in Iran 4.4.2.3 Business Registration Certificate 4.4.2.4 Disclosure of Investigations 4.4.2.5 Source Disclosure Certification Form The information provided in this proposal submission is confidential and proprietary to OptumRx and contains trade secrets that are protected under the Uniform Trade Secrets Act. This information is intended solely for use by the party to whom it is directed (as named on the first page, the “requesting part”) and its representatives. It is not to be disclosed to any other third party or used for any purpose other than evaluation of the proposal without the prior written consent of OptumRx. Unauthorized disclosure or use of this information by the requesting part or its representatives may violate the Uniform Trade Secrets Act. Although we have endeavored to ensure the accuracy of the information presented, responses are pursuant to the interpretation of the questions (without the benefit of clarification by the requesting party); therefore, the material contained in this proposal is meant solely for information purposes and is not to be considered legally binding. June 2017 optumrx.com DPP - 919 Page 1 of 1 DocuSign Envelope ID: FFD5B1E2-31DC-4516-95E3-AEDC0B98B000 OFFER AND ACCEPTANCE Bid Solicitation {RFP} #: 17DPP00144 Bid Solicitation {RFP} Title: T2679 – Employee Benefits: Pharmacy Benefit Management Blanket P.O. {Contract} Term: See Section 5.2 of the Bid Solicitation {RFP} State of New Jersey Department of the Treasury Division of Purchase and Property 33 West State Street, P.O. Box 230 Trenton, New Jersey 08625-0230 Open to Cooperative Purchasing OFFER (To be completed by the Vendor {Bidder}) TO THE STATE OF NEW JERSEY: The Undersigned hereby offers and agrees to furnish the goods, products, or services in compliance with all terms of this Master Blanket Purchase Order (Blanket P.O.) {Contract} as defined in Section 2.0 of the Bid Solicitation {Request for Proposal (RFP)}. Vendor {Bidder}: OptumRx, Inc. Title: SVP, Pricing, Proposals, Analytics & Reporting Address: 1600 McConnor Parkway E-Mail Address: pbmsales@optum.com City, State, ZIP: Schaumburg, IL 60173-6801 Phone Number: 800-282-3232 Fax Number: 949-474-4311 Authorized Signature: (Electronic Signature Acceptable) Printed Name: Tricia Fringer FEIN: By signing and submitting this Offer, the Vendor {Bidder} certifies and confirms that: 1. The Vendor {Bidder} has read, understands, and agrees to all terms, conditions, and specifications set forth in the State of New Jersey Standard Terms and Conditions and the provisions set forth in Bid Solicitation {RFP} Section 4.4.1.1.1 (MacBride Principles Certification), Section 4.4.1.1.2 (No Subcontractor Certification), Section 4.4.1.1.3 (Non-Collusion), and Section 4.4.1.1.4 (New Jersey Business Ethics Guide Certification); 2. The Vendor's {Bidder's} failure to meet any terms and conditions of the Blanket P.O. {Contract} as defined in the Bid Solicitation {RFP} shall constitute a breach and may result in suspension or debarment from further State bidding; 3. A defaulting Vendor {Contractor} may also be liable, at the option of the State, for the difference between the Blanket P.O {Contract} price and the price bid by an alternate vendor of the goods or services in addition to other remedies available; and 4. By signing and submitting this Offer, the Vendor {Bidder} consents to receipt of any and all documents related to this Bid Solicitation {RFP} and the resulting Blanket P.O. {Contract} by electronic medium or facsimile. THIS FORM MUST BE SIGNED, COMPLETED AND INCLUDED WITH THE VENDOR'S {BIDDER'S} QUOTE {PROPOSAL}. ADDITIONAL VENDOR {BIDDER} REQUIREMENTS (For State Use Only) Bid Security Amount: Performance Security Amount: Payment Security Amount: Retainage Percentage: For set-aside contracts only, a Vendor {Bidder} must be registered with the N.J. Division of Revenue and Enterprise Services, Small Business Registration and M/WBE Certification Services Unit. Please refer to N.J.A.C. 17:13-3.1 & 17:13-3.2 for additional information. ACCEPTANCE OF OFFER (For State Use Only) The Offer above is hereby accepted and now constitutes a Blanket P.O. {Contract} with the State of New Jersey. The Vendor {Contractor} is now bound to sell the goods, products, or services listed by the attached Blanket P.O. {Contract} as defined by Section 2.0 of the Bid Solicitation {RFP}. The Vendor {Contractor} shall not commence any work or provide any good, product, or service under this Blanket P.O. {Contract} until the Vendor {Contractor} complies with all requirements set forth in the Bid Solicitation {RFP} and receives written notice to proceed. Blanket P.O. {Contract} Number: Blanket P.O. {Contract} Award Date: Blanket P.O. {Contract} Effective Date: State of New Jersey Authorized Signature: DPP - 920 DocuSign Envelope ID: FFD5B1E2-31DC-4516-95E3-AEDC0B98B000 REQUIRED SUBMISSION IF BIDDER INTENDS TO SUBCONTRACT STATE OF NEW JERSEY DIVISION OF PURCHASE AND PROPERTY (DPP) SUBCONTRACTOR UTILIZATION PLAN DPP Solicitation No.: '33 DPP Solicitation Title: 7 ± (PSOR\HH %HQHILWV 3KDUPDF\ %HQHILW 0DQDJHPHQW Bidder's Name and Address: Bidder's Telephone No.:_800 282 3232_____________ _________ OptumRx ,QF 1600 McConnor Parkway Schaumburg, IL 60173-6801 0LFKDHO 0DJXLUH Bidder's Contact Person:BBBBBBBB_____________B INSTRUCTIONS: List all businesses to be used as subcontractors. This form may be duplicated for extended lists. SUBCONTRACTOR'S NAME ADDRESS, ZIP CODE TELEPHONE NUMBER AND VENDOR ID NUMBER CHECK HERE IF CONTRACT IS NOT SMALL BUSINESS TYPE(S) OF GOODS OR SERVICES TO BE PROVIDED ESTIMATED VALUE OF SUBCONTRACTS Interpreting Services International, Inc. 6180 Laurel Canyon Blvd. North Hollywood, CA 91606 818-753-9181 Translation services for written communication materials Subcontractor is utilized across our entire book of business. Language Line Services 1 Lower Ragsdale Drive, Building 2 Monterey, CA 93940 877-886-3885 Translation of languages for our customer service department Subcontractor is utilized across our entire book of business. MCMC LLC 300 Crown Colony Drive, Ste. 203 Quincy, MA 02169 617-849-9277 ,52 ZH XWLOL]H IRU SK\VLFLDQ UHYLHZV PHGLFDO QHFHVVLW\ UHYLHZ DQG DSSHDOV VXSSRUW SMALL BUSINESS I CATEGORY * II $ORULFD ± D GLYLVLRQ RI :HVW &XVWRPHU 0DQDJHPHQW *URXS //& 1974 Stone Rose Drive, Crossroads Plaza Rocky Mount, NC 27804 (800) 757-2106 Convey Health Solutions 13621 NW 12th Street, Suite 100 Sunrise, FL 33323 (954) 903-5245 III Subcontractor is utilized across our entire book of business. Pharmacy help desk and supplemental customer service for nights and weekend overflow for Medicare Part D members only Subcontractor is utilized across our entire book of business. Medicare Part D enrollment services Subcontractor is utilized across our entire book of business. * For those Bidders listing Small Business Subcontractors: Attach copies of Division of Revenue - Small Business Enterprise Unit registration for each subcontractor listed. If bidder has not achieved established subcontracting set-aside goals, also attach documentation of good faith effort to do so in the relevant category in accordance with N.J.A.C. 17:13-4 and the Notice to All Bidders. I hereby certify that this Subcontractor Utilization Plan (Plan) is being submitted in good faith. I certify that each subcontractor has been notified that it has been listed on this Plan and that each subcontractor has consented, in writing, to its name being submitted for this contract. Additionally, I certify that I shall notify each subcontractor listed on the Plan, in writing, if the award is granted to my firm, and I shall make all documentation available to the Division of Purchase and Property upon request. I further certify that all information contained in this Plan is true and correct and I acknowledge that the State will rely on the truth of the information in awarding the contract. PRINCIPAL OF FIRM: 693 3ULFLQJ 3URSRVDOV $QDO\WLFV 5HSRUWLQJ -XQH _________________________________________________ ____________________________________________ __________________________ (Signature) (Title) (Date) PB-SA-3 Revised 12/14 DPP - 921 DocuSign Envelope ID: FFD5B1E2-31DC-4516-95E3-AEDC0B98B000 REQUIRED SUBMISSION IF BIDDER INTENDS TO SUBCONTRACT STATE OF NEW JERSEY DIVISION OF PURCHASE AND PROPERTY (DPP) SUBCONTRACTOR UTILIZATION PLAN DPP Solicitation No.: '33 DPP Solicitation Title: 7 ± (PSOR\HH %HQHILWV 3KDUPDF\ %HQHILW 0DQDJHPHQW Bidder's Name and Address: 800 282 3232 Bidder's Telephone No.:_BBBBBBBB_____________ OptumRx ,QF 1600 McConnor Parkway Schaumburg, IL 60173-6801 0LFKDHO 0DJXLUH Bidder's Contact Person:BBBBBBBBB_____________ INSTRUCTIONS: List all businesses to be used as subcontractors. This form may be duplicated for extended lists. SUBCONTRACTOR'S NAME ADDRESS, ZIP CODE TELEPHONE NUMBER AND VENDOR ID NUMBER CHECK HERE IF CONTRACT IS NOT SMALL BUSINESS SMALL BUSINESS I CATEGORY * II Eliza Corporation 75 Sylvan St. Danvers, MA 01923 (800) 701-7864 TYPE(S) OF GOODS OR SERVICES TO BE PROVIDED III Automated outbound calls notifying members of mail order status, prior authorization status and requesting member satisfaction surveys. Medical Review Institute of America 2875 South Decker Lake Drive, Suite 300 Salt Lake City, UT 84119 (800) 654-2422 ,QGHSHQGHQW 0HGLFDO 5HYLHZ 6HUYLFHV 05,R$ LV DQ ,52 ZH XWLOL]H WR FRPSO\ ZLWK IHGHUDO URWDWLQJ ,52 H[WHUQDO UHYLHZ UHTXLUHPHQWV Advanced Medical Reviews, Inc. (AMR) 10780 Santa Monica Blvd. Los Angeles, CA 90050 (800) 726-1207 ,QGHSHQGHQW 0HGLFDO 5HYLHZ 6HUYLFHV $05 LV DQ ,52 ZH XWLOL]H WR FRPSO\ ZLWK IHGHUDO URWDWLQJ ,52 H[WHUQDO UHYLHZ UHTXLUHPHQWV SureScripts 2800 Crystal Drive Arlington, VA 22202 (703) 921-2104 Surescripts has certified our claims, eligibility, and medication history system/processes for e-prescribing purposes. Surescripts also serves as a network routing solution for transmitting ePrescribing communications between PBM, EMR and pharmacy. SCIO Health Analytics 433 S. Main St., Suite 203 West Hartford, CT 06110 (860) 676-8808 ESTIMATED VALUE OF SUBCONTRACTS The vendor provides an audit application to OptumRx. The application is utilized by OptumRx staff to conduct audits of prescriptions provided to individuals. Subcontractor is utilized across our entire book of business. Subcontractor is utilized across our entire book of business. Subcontractor is utilized across our entire book of business. Subcontractor is utilized across our entire book of business. Subcontractor is utilized across our entire book of business. * For those Bidders listing Small Business Subcontractors: Attach copies of Division of Revenue - Small Business Enterprise Unit registration for each subcontractor listed. If bidder has not achieved established subcontracting set-aside goals, also attach documentation of good faith effort to do so in the relevant category in accordance with N.J.A.C. 17:13-4 and the Notice to All Bidders. I hereby certify that this Subcontractor Utilization Plan (Plan) is being submitted in good faith. I certify that each subcontractor has been notified that it has been listed on this Plan and that each subcontractor has consented, in writing, to its name being submitted for this contract. Additionally, I certify that I shall notify each subcontractor listed on the Plan, in writing, if the award is granted to my firm, and I shall make all documentation available to the Division of Purchase and Property upon request. I further certify that all information contained in this Plan is true and correct and I acknowledge that the State will rely on the truth of the information in awarding the contract. PRINCIPAL OF FIRM: 693 3ULFLQJ 3URSRVDOV $QDO\WLFV 5HSRUWLQJ -XQH _________________________________________________ ____________________________________________ __________________________ (Signature) (Title) (Date) PB-SA-3 Revised 12/14 DPP - 922 DocuSign Envelope ID: FFD5B1E2-31DC-4516-95E3-AEDC0B98B000 REQUIRED SUBMISSION IF BIDDER INTENDS TO SUBCONTRACT STATE OF NEW JERSEY DIVISION OF PURCHASE AND PROPERTY (DPP) SUBCONTRACTOR UTILIZATION PLAN DPP Solicitation No.: '33 DPP Solicitation Title: 7 ± (PSOR\HH %HQHILWV 3KDUPDF\ %HQHILW 0DQDJHPHQW Bidder's Name and Address: 800 282 3232 Bidder's Telephone No.:BBBBBBBBB_____________ OptumRx ,QF 1600 McConnor Parkway Schaumburg, IL 60173-6801 0LFKDHO 0DJXLUH Bidder's Contact Person:_____________BBBBBBBBBB INSTRUCTIONS: List all businesses to be used as subcontractors. This form may be duplicated for extended lists. SUBCONTRACTOR'S NAME ADDRESS, ZIP CODE TELEPHONE NUMBER AND VENDOR ID NUMBER CHECK HERE IF CONTRACT IS NOT SMALL BUSINESS SMALL BUSINESS I CATEGORY * II Fiserv 5875 N Lindbergh Blvd Hazelwood, MO 63042 262-879-5000 Diamond Marketing Solutions 900 Kimberly Drive Carol Stream, IL 60188 630-597-9100 TYPE(S) OF GOODS OR SERVICES TO BE PROVIDED ESTIMATED VALUE OF SUBCONTRACTS 3ULQWLQJ PHPEHUVKLS FDUGV 6XEFRQWUDFWRU LV XWLOL]HG DFURVV RXU HQWLUH ERRN RI EXVLQHVV III 0HPEHU DQG SKDUPDF\ FKHFN SD\PHQWV (23V Xerox Corporation 45 Glover Avenue Norwalk, CT 06856-4505 800-ASK-XEROX 6XEFRQWUDFWRU LV XWLOL]HG DFURVV RXU HQWLUH ERRN RI EXVLQHVV 3ULQW IXOILOOPHQW 6XEFRQWUDFWRU LV XWLOL]HG DFURVV RXU HQWLUH ERRN RI EXVLQHVV Change Healthcare 3055 Lebanon Pike, Suite 1000 Nashville, TN 37214 615-932-3000 'LUHFW 0HPEHU 5HLPEXUVHPHQW SD\PHQW SURFHVVLQJ 7KH 5DZOLQJV &RPSDQ\ 2QH (GHQ 3DUNZD\ /D*UDQJH .< 5HWURVSHFWLYH FRPSOLDQFH DXGLWV 6XEFRQWUDFWRU LV XWLOL]HG DFURVV RXU HQWLUH ERRN RI EXVLQHVV 6XEFRQWUDFWRU LV XWLOL]HG DFURVV RXU HQWLUH ERRN RI EXVLQHVV * For those Bidders listing Small Business Subcontractors: Attach copies of Division of Revenue - Small Business Enterprise Unit registration for each subcontractor listed. If bidder has not achieved established subcontracting set-aside goals, also attach documentation of good faith effort to do so in the relevant category in accordance with N.J.A.C. 17:13-4 and the Notice to All Bidders. I hereby certify that this Subcontractor Utilization Plan (Plan) is being submitted in good faith. I certify that each subcontractor has been notified that it has been listed on this Plan and that each subcontractor has consented, in writing, to its name being submitted for this contract. Additionally, I certify that I shall notify each subcontractor listed on the Plan, in writing, if the award is granted to my firm, and I shall make all documentation available to the Division of Purchase and Property upon request. I further certify that all information contained in this Plan is true and correct and I acknowledge that the State will rely on the truth of the information in awarding the contract. PRINCIPAL OF FIRM: 693 3ULFLQJ 3URSRVDOV $QDO\WLFV 5HSRUWLQJ -XQH _________________________________________________ ____________________________________________ __________________________ (Signature) (Title) (Date) PB-SA-3 Revised 12/14 DPP - 923 DocuSign Envelope ID: FFD5B1E2-31DC-4516-95E3-AEDC0B98B000 REQUIRED SUBMISSION IF BIDDER INTENDS TO SUBCONTRACT STATE OF NEW JERSEY DIVISION OF PURCHASE AND PROPERTY (DPP) SUBCONTRACTOR UTILIZATION PLAN DPP Solicitation No.: '33 DPP Solicitation Title: 7 ± (PSOR\HH %HQHILWV 3KDUPDF\ %HQHILW 0DQDJHPHQW Bidder's Name and Address: 800 282 3232 Bidder's Telephone No.:BBBBBBBBB_____________ OptumRx ,QF 1600 McConnor Parkway Schaumburg, IL 60173-6801 0LFKDHO 0DJXLUH Bidder's Contact Person:_____________BBBBBBBBBB INSTRUCTIONS: List all businesses to be used as subcontractors. This form may be duplicated for extended lists. SUBCONTRACTOR'S NAME ADDRESS, ZIP CODE TELEPHONE NUMBER AND VENDOR ID NUMBER CHECK HERE IF CONTRACT IS NOT SMALL BUSINESS SMALL BUSINESS I CATEGORY * II 0HGLFDO (YDOXDWLRQ 6SHFLDOLVWV 0(6 TYPE(S) OF GOODS OR SERVICES TO BE PROVIDED III ,QGHSHQGHQW 0HGLFDO 5HYLHZ 6HUYLFHV 0(6 LV DQ ,52 ZH XWLOL]H WR FRPSO\ ZLWK IHGHUDO URWDWLQJ ,52 H[WHUQDO UHYLHZ UHTXLUHPHQWV 3ULQW YHQGRUV DUH LGHQWLILHG DW WKH WLPH RI LPSOHPHQWDWLRQ 3ULQWHU YHQGRUV DUH XVHG IRU SULQWLQJ PHPEHU DQG SKDUPDF\ FKHFN SD\PHQWV (23V PHPEHU FRPPXQLFDWLRQV (2%V VWDWHPHQWV OHWWHUV DQG PRUH :H XWLOL]H PXOWLSOH SULQW VXEFRQWUDFWRUV DQG KDYH D 0DVWHU 6HUYLFHV $JUHHPHQW 06$ LQ SODFH ZLWK HDFK VXEFRQWUDFWRU WKDW FRYHUV &RQILGHQWLDOLW\ 6HFXULW\ +,3$$ :DUUDQWLHV ,QGHPQLILFDWLRQ ,QVXUDQFH DQG JRYHUQPHQW UHTXLUHG ODQJXDJH (DFK YHQGRU LV YHWWHG WKURXJK D GXH GLOLJHQFH SURFHVV WR FRYHU FRPSOLDQFH ULVN FDSDELOLWLHV ILQDQFLDO VWDWXV DQG PRUH ESTIMATED VALUE OF SUBCONTRACTS 3ULQWHU YHQGRUV DUH XVHG IRU SULQWLQJ PHPEHU DQG SKDUPDF\ FKHFN SD\PHQWV (23V PHPEHU FRPPXQLFDWLRQV (2%V VWDWHPHQWV OHWWHUV DQG PRUH 6XEFRQWUDFWRU LV XWLOL]HG DFURVV RXU HQWLUH ERRN RI EXVLQHVV 6XEFRQWUDFWRU LV XWLOL]HG DFURVV RXU HQWLUH ERRN RI EXVLQHVV * For those Bidders listing Small Business Subcontractors: Attach copies of Division of Revenue - Small Business Enterprise Unit registration for each subcontractor listed. If bidder has not achieved established subcontracting set-aside goals, also attach documentation of good faith effort to do so in the relevant category in accordance with N.J.A.C. 17:13-4 and the Notice to All Bidders. I hereby certify that this Subcontractor Utilization Plan (Plan) is being submitted in good faith. I certify that each subcontractor has been notified that it has been listed on this Plan and that each subcontractor has consented, in writing, to its name being submitted for this contract. Additionally, I certify that I shall notify each subcontractor listed on the Plan, in writing, if the award is granted to my firm, and I shall make all documentation available to the Division of Purchase and Property upon request. I further certify that all information contained in this Plan is true and correct and I acknowledge that the State will rely on the truth of the information in awarding the contract. PRINCIPAL OF FIRM: 693 3ULFLQJ 3URSRVDOV $QDO\WLFV 5HSRUWLQJ -XQH _________________________________________________ ____________________________________________ __________________________ (Signature) (Title) (Date) PB-SA-3 Revised 12/14 DPP - 924 DocuSign Envelope ID: FFD5B1E2-31DC-4516-95E3-AEDC0B98B000 STATE OF NEW JERSEY -- DIVISION OF PURCHASE AND PROPERTY OWNERSHIP DISCLOSURE FORM Vendor Bidder: OptumRx, Inc. Bid Solicitation Number: 17DPP00144 PART 1: PLEASE COMPLETE THE QUESTIONS BELOW BY CHECKING EITHER THE "YES" OR "NO" BOX. ALL PARTIES ENTERING INTO A CONTRACT WITH THE STATE ARE REQUIRED TO COMPLETE THIS FORM PURSUANT TO N.J.S.A. 52:25-24.2 PLEASE NOTE: IF THE VENDOR BIDDER IS A NON-PROFIT, THIS FORM IS NOT REQUIRED. PLEASE COMPLETE THE SEPARATE DISCLOSURE OF INVESTIGATIONS FORM. YES 1. Are there any individuals, corporations, partnerships, or limited liability companies owning a 10% or greater interest in the Vendor Bidder? IF THE ANSWER TO QUESTION 1 IS NO, PLEASE SIGN AND DATE THE FORM. YOU DO NOT HAVE TO COMPLETE ANY MORE QUESTIONS ON THIS FORM. IF THE ANSWER TO QUESTION 1 IS YES, PLEASE ANSWER QUESTIONS 2-4 BELOW. 2. Of those parties owning a 10% or greater interest in the Vendor Bidder, are any of those parties individuals? 3. Of those parties owning a 10% or greater interest in the Vendor Bidder, are any of those parties corporations, partnerships, or limited liability companies? 4. If your answer to Question 3 is “YES”, are there any parties owning a 10% or greater interest in the corporation, partnership or limited liability company referenced in Question 3? NO ✔ ✔ ✔ ✔ IF ANY OF THE ANSWERS TO QUESTIONS 2-4 ARE YES, PLEASE PROVIDE THE REQUESTED INFORMATION IN PART 2 BELOW. PART 2: PLEASE PROVIDE FURTHER INFORMATION RELATED TO QUESTIONS 2-4 ANSWERED AS "YES". If you answered "YES" for question 2, 3 or 4, you must disclose identifying information related to the individuals,corporations, partnerships, and/or limited liability companies owning a 10% or greater interest in the Vendor Bidder. Further, if one or more of these entities is itself a corporation, partnership, or limited liability company, you must also disclose all parties that own a 10% or greater interest in that corporation, partnership, or limited liability company. This information is required by statute. TO COMPLETE PART 2, PLEASE PROVIDE THE REQUESTED INFORMATION PERTAINING TO EITHER INDIVIDUALS, CORPORATIONS, PARTNERSHIPS, OR LIMITED LIABILITY COMPANIES HAVING A 10% OR GREATER INTEREST IN THE VENDOR BIDDER. IF YOU NEED TO MAKE ADDITIONAL ENTRIES, CLICK THE “ADD AN ENTRY” BUTTON IN THE APPROPRIATE ENTITY BOX. Individuals Name: Date of Birth: Home Address: Delete Entry City State Zip Code Are there additional entities holding a 10% or greater ownership interest in the Vendor Bidder and its parent corporation, partnership or limited liability company? Yes or No Add An Additional Individual Entry DPP - 925 DocuSign Envelope ID: FFD5B1E2-31DC-4516-95E3-AEDC0B98B000 Partnerships/Corporations/Limited Liability Companies Entity Name: OptumRx Holdings, LLC Partner Name: Business Address: 11000 Optum Circle Delete Entry City Eden Prairie State MN Zip Code 55344 Are there additional entities holding a 10% or greater ownership interest in the Vendor Bidder and its parent corporation, partnership or limited liability company? ✔ Entity Name: Yes No or Optum, Inc. Partner Name: Business Address: 11000 Optum Circle Delete Entry City Eden Prairie State MN Zip Code 55344 Are there additional entities holding a 10% or greater ownership interest in the Vendor Bidder and its parent corporation, partnership or limited liability company? ✔ Entity Name: Yes No or United HealthCare Services, Inc. Partner Name: Business Address: 9900 Bren Road East Delete Entry City Minnetonka State MN Zip Code 55343 Are there additional entities holding a 10% or greater ownership interest in the Vendor Bidder and its parent corporation, partnership or limited liability company? ✔ Entity Name: Yes No or UnitedHealth Group Incorporated Partner Name: Business Address: 9900 Bren Road East Delete Entry City Minnetonka State MN Zip Code 55343 Are there additional entities holding a 10% or greater ownership interest in the Vendor Bidder and its parent corporation, partnership or limited liability company? Yes or ✔ No Add An Additional Partnership/Corporation/ Limited Liability Company Entry DPP - 926 DocuSign Envelope ID: FFD5B1E2-31DC-4516-95E3-AEDC0B98B000 In the alternative, to comply with this section, a bidder with any direct or indirect parent entity which is publicly traded may submit the name and address of each publicly traded entity and the name and address of each person that holds a 10 percent or greater beneficial interest in the publicly traded entity as of the last annual filing with the federal Securities and Exchange Commission or the foreign equivalent, and, if there is any person that holds a 10 percent or greater beneficial interest, also shall submit links to the websites containing the last annual filings with the federal Securities and Exchange Commission or the foreign equivalent and the relevant page numbers of the filings that contain the information on each person that holds a 10 percent or greater beneficial interest. N.J.S.A. 52:25-24.2 Certification: I hereby certify that the foregoing information and any attachments hereto, to the best of my knowledge are true and complete. I certify that I am authorized to execute this form on behalf of the Vendor Bidder; and acknowledge that the State of New Jersey is relying on the information contained herein and that the Vendor Bidder is under a continuing obligation from the date of this certification through the completion of any contracts with the State to notify the State in writing of any changes to the information contained herein; that I am aware that it is a criminal offense to make a false statement or misrepresentation in this certification, and if I do so, I am subject to criminal prosecution under the law and that it will constitute a material breach of my agreement(s) with the State, permitting the State to declare any contract(s) resulting from this certification void and unenforceable. Signature: Date: June 8, 2017 Do Not Enter Vendor ID as a Signature Print Name and Title: Tricia Fringer, Senior Vice President FEIN/SSN: DPP - 927 DocuSign Envelope ID: FFD5B1E2-31DC-4516-95E3-AEDC0B98B000 STATE OF NEW JERSEY -- DIVISION OF PURCHASE AND PROPERTY DISCLOSURE OF INVESTMENT ACTIVITIES IN IRAN Quote Number: 17DPP00144 Bidder/Offeror: OptumRx, Inc. PART 1: CERTIFICATION BIDDERS MUST COMPLETE PART 1 BY CHECKING EITHER BOX. FAILURE TO CHECK ONE OF THE BOXES WILL RENDER THE PROPOSAL NON-RESPONSIVE. Pursuant to Public Law 2012, c. 25, any person or entity that submits a bid or proposal or otherwise proposes to enter into or renew a contract must complete the certification below to attest, under penalty of perjury, that neither the person or entity, nor any of its parents, subsidiaries, or affiliates, is identified on the Department of Treasury’s Chapter 25 list as a person or entity engaging in investment activities in Iran. The Chapter 25 list is found on the Division’s website at http://www.state.nj.us/treasury/purchase/pdf/Chapter25List.pdf. Bidders must review this list prior to completing the below certification. Failure to complete the certification will render a bidder’s proposal non-responsive. If the Director finds a person or entity to be in violation of law, s/he shall take action as may be appropriate and provided by law, rule or contract, including but not limited to, imposing sanctions, seeking compliance, recovering damages, declaring the party in default and seeking debarment or suspension of the party PLEASE CHECK THE APPROPRIATE BOX: I certify, pursuant to Public Law 2012, c. 25, that neither the bidder listed above nor any of the bidder’s parents, subsidiaries, or affiliates is listed on the N.J. Department of the Treasury’’s list of entities determined to be engaged in prohibited activities in Iran pursuant to P.L. 2012, c. 25 (“Chapter 25 List”). I further certify that I am the person listed above, or I am an officer or representative of the entity listed above and am authorized to make this certification on its behalf. I will skip Part 2 and sign and complete the Certification below. OR I am unable to certify as above because the bidder and/or one or more of its parents, subsidiaries, or affiliates is listed on the Department’s Chapter 25 list. I will provide a detailed, accurate and precise description of the activities in Part 2 below and sign and complete the Certification below. Failure to provide such will result in the proposal being rendered as nonresponsive and appropriate penalties, fines and/or sanctions will be assessed as provided by law. PART 2: PLEASE PROVIDE FURTHER INFORMATION RELATED TO INVESTMENT ACTIVITIES IN IRAN You must provide a detailed, accurate and precise description of the activities of the bidding person/entity, or one of its parents, subsidiaries or affiliates, engaging in the investment activities in Iran outlined above by completing the boxes below. EACH BOX WILL PROMPT YOU TO PROVIDE INFORMATION RELATIVE TO THE ABOVE QUESTIONS. PLEASE PROVIDE THOROUGH ANSWERS TO EACH QUESTION. IF YOU NEED TO MAKE ADDITIONAL ENTRIES, CLICK THE “ADD AN ADDITIONAL ACTIVITIES ENTRY” BUTTON. Name Relationship to Bidder/Offeror Description of Activities Duration of Engagement Bidder/Offeror Contact Name Anticipated Cessation Date Contact Phone Number ADD AN ADDITIONAL ACTIVITIES ENTRY Certification: I, being duly sworn upon my oath, hereby represent that the foregoing information and any attachments thereto to the best of my knowledge are true and complete. I acknowledge: that I am authorized to execute this certification on behalf of the bidder; that the State of New Jersey is relying on the information contained herein and that I am under a continuing obligation from the date of this certification through the completion of any contracts with the State to notify the State in writing of any changes to the information contained herein; that I am aware that it is a criminal offense to make a false statement or misrepresentation in this certification, and if I do so, I am subject to criminal prosecution under the law and that it will constitute a material breach of my agreement(s) with the State, permitting the State to declare any contract(s) resulting from this certification void and unenforceable. Full Name (Print): Tricia Fringer Signature: Do Not Enter PIN as a Signature Title: SVP, Pricing, Proposals, Analytics & Reporting Date: June 8, 2017 DPP - 928 N.J. Department of Treasury - Division of Revenue, On-Line Inquiry Page 1 of 1 STATE OF NEW JERSEY BUSINESS REGISTRATION CERTIFICATE Taxpayer Name: OPTUMRX, INC. Trade Name: Address: 2300 MAIN ST IRVINE, CA 92614-6223 Certificate Number: 1129563 Effective Date: April 20, 2009 Date of Issuance: June 06, 2017 For Office Use Only: 20170606082548690 DPP - 929 https://www1.state.nj.us/TYTR_BRC/servlet/common/BRCLogin 6/6/2017 DocuSign Envelope ID: FFD5B1E2-31DC-4516-95E3-AEDC0B98B000 STATE OF NEW JERSEY -- DIVISION OF PURCHASE AND PROPERTY DISCLOSURE OF INVESTIGATIONS AND OTHER ACTIONS INVOLVING BIDDER FORM Solicitation Number: 17DPP00144 Bidder/Offeror: OptumRx, Inc. PART 1: PLEASE COMPLETE THE QUESTIONS BELOW BY CHECKING EITHER THE "YES" OR "NO" BOX. PLEASE REFER TO THE PERSONS AND/OR ENTITIES LISTED ON YOUR OWNERSHIP DISCLOSURE FORM WHEN ANSWERING THE QUESTIONS BELOW. NON-PROFIT ENTITIES: PLEASE LIST ALL OFFICERS/DIRECTORS IN PART 2 OF THIS FORM. YOU WILL BE REQUIRED TO ANSWER THE QUESTIONS BELOW WITH RESPECT TO THESE INDIVIDUALS. YES NO 1. Has any person or entity listed on this form or its attachments ever been arrested, charged, indicted, or convicted in a criminal or disorderly persons matter by the State of New Jersey (or political subdivision thereof), any other state or the U.S. Government? ✔ 2. Has any person or entity listed on this form or its attachments ever been suspended, debarred or otherwise declared ineligible by any government agency from bidding or contracting to provide services, labor, materials or supplies? ✔ 3. Are there currently any pending criminal matters or debarment proceedings in which the firm and/or its officers and/or managers are involved? ✔ 4. Has any person or entity listed on this form or its attachments been denied any license, permit or similar authorization required to engage in the work applied for herein, or has any such license, permit or similar authorization been revoked by any agency of federal, state or local government? ✔ IF ANY OF THE ANSWERS TO QUESTIONS 1-4 ARE YES, PLEASE PROVIDE THE REQUESTED INFORMATION IN PART 2 BELOW. IF ALL OF THE ANSWERS TO QUESTIONS 1-4 ARE NO, PLEASE READ AND SIGN THE FORM BELOW. NO FURTHER ACTION IS NEEDED. IF YOU ARE A NON-PROFIT, YOU MUST DISCLOSE ALL OFFICERS/DIRECTORS IN PART 2 BELOW. PART 2: PROVIDING ADDITIONAL INFORMATION For Questions 1-4 answered “YES”, you must provide a detailed description of any investigation or litigation, including but not limited to administrative complaints or other administrative proceedings, involving public sector clients during the past 5 years. This description must include the nature and status of the investigation, and for any litigation, the caption of the action, a brief description of the action, the date of inception, current status, and if applicable, disposition. Please provide this information in the box labeled “Additional Information” below. The box will prompt you to provide the information referenced above. Please provide thorough answers to each question. Click on the “Add Additional Information” button below the box if you need to make additional entries. Non-profit bidder/offerors must disclose the individuals serving as officers or directors for purposes of this form. Please indicate all individuals acting in either capacity by providing the information located in the “Officers/Directors” box. If additional entries are needed, click the “Add an Officer/Director Entry” button. Once all required information has been disclosed, complete the certification beneath the “Additional Information” section below. Failure to complete this form may render your proposal non-responsive. DPP - 930 DocuSign Envelope ID: FFD5B1E2-31DC-4516-95E3-AEDC0B98B000 Additional Information Person or Entity Date of Inception: Current Status Brief Description Caption of Action (if applicable) Delete Entry Disposition of Action (if applicable) Bidder/Offeror Contact Name Contact Phone Number Add Additional Information Officers/Directors Name: DOB Title Delete Entry Address City State Phone Zip Code E-Mail Add An Additional Officer/Director Entry Certification: I, being duly sworn upon my oath, hereby represent that the foregoing information and any attachments thereto to the best of my knowledge are true and complete. I acknowledge: that I am authorized to execute this certification on behalf of the bidder; that the State of New Jersey is relying on the information contained herein and that I am under a continuing obligation from the date of this certification through the completion of any contracts with the State to notify the State in writing of any changes to the information contained herein; that I am aware that it is a criminal offense to make a false statement or misrepresentation in this certification, and if I do so, I am subject to criminal prosecution under the law and that it will constitute a material breach of my agreement(s) with the State, permitting the State to declare any contract (s) resulting from this certification void and unenforceable. Full Name (Print): Tricia Fringer Signature: Do Not Enter PIN as a Signature Title: SVP, Pricing, Proposals, Analytics & Reporting Date: June 8, 2017 DPP - 931 DocuSign Envelope ID: FFD5B1E2-31DC-4516-95E3-AEDC0B98B000 STATE OF NEW JERSEY—DIVISION OF PURCHASE AND PROPERTY SOURCE DISCLOSURE FORM Solicitation Number: 17DPP00144 Bidder/Offeror: OptumRx, Inc. The Contractor submits this Certification in response to the solicitation issued by the Division of Purchase and Property, Department of the Treasury, State of New Jersey ("Division"), in accordance with the requirements of N.J.S.A. 52:34-13.2. Instructions: List every location where services will be performed by the Contractor and all Subcontractors. If any of the services cannot be performed within the United States, the Contractor shall state, with specificity, the reasons why the services cannot be performed in the United States. Contractor/ Subcontractor Name Performance Location by Country Description of Services Reason Services Cannot Be Performed in U.S. PBM Services N/A Interpreting Services International, United States Inc. Translation services for written communication materials N/A Language Line Services United States Translation of languages for our customer service Department N/A MCMC LLC United States Coordination of second level appeals and physician reviews Peer-to-peer review of prior authorization claims and appeals. N/A Alorica – a division of West Customer Management Group, LLC United States Pharmacy help desk and supplemental customer service for nights and weekend overflow for Medicare Part D members only N/A Convey Health Solutions United States Medicare Part D enrollment services N/A Eliza Corporation United States Automated outbound calls notifying members of mail order status, prior authorization status and requesting member satisfaction surveys. N/A Medical Review Institute of America United States Independent Medical Review Services. MRIoA is an IRO we utilize to comply with federal rotating IRO external review requirements. N/A Advanced Medical Reviews, Inc. (AMR) United States Independent Medical Review Services. AMR is an IRO we utilize to comply with federal rotating IRO external review requirements. N/A Medical Evaluation Specialists (MES) Peer Review Services. United States Independent Medical Review Services. MES is an IRO we utilize to comply with federal rotating IRO external review requirements. N/A SureScripts United States Surescripts has certified our claims, eligibility, and medication history system/processes for e-prescribing purposes. Surescripts also serves as a network routing solution for transmitting ePrescribing communications between PBM, EMR and pharmacy. N/A SCIO Health Analytics United States The vendor provides an audit application to OptumRx. The application is utilized by OptumRx staff to conduct audits of prescriptions provided to individuals. N/A Fiserv Output Solutions United States ID card printing N/A Diamond Marketing Solutions United States Member and pharmacy check payments, EOPs N/A Xerox Corporation United States N/A Change Healthcare United States Compose, print and mail communications that include checks, EOBs, statements and leters. Direct Member Reimbursement payment processing The Rawlings Company United States Retrospective compliance audits N/A OptumRx, Inc. United States DPP - 932 N/A DocuSign Envelope ID: FFD5B1E2-31DC-4516-95E3-AEDC0B98B000 Certification: I, being duly sworn upon my oath, hereby represent that the foregoing information and any attachments thereto to the best of my knowledge are true and complete. I acknowledge: that I am authorized to execute this certification on behalf of the bidder; that the State of New Jersey is relying on the information contained herein and that I am under a continuing obligation from the date of this certification through the completion of any contracts with the State to notify the State in writing of any changes to the information contained herein; that I am aware that it is a criminal offense to make a false statement or misrepresentation in this certification, and if I do so, I am subject to criminal prosecution under the law and that it will constitute a material breach of my agreement(s) with the State, permitting the State to declare any contract(s) resulting from this certification void and unenforceable. Full Name (Print):Tricia Fringer Signature: Title: Senior Vice President, Pricing, Proposals, Analytics & Reporting Date: June 8, 2017 DPP - 933 State of New Jersey Department of the Treasury, Division of Volume 2: Table of Contents Pensions and Benefits Section 2 4.4.3 Technical Proposal A. B. C. D. 4.4.3.1 Management Overview 4.4.3.2 Contract Management 4.4.3.3.2 Mobilization Plan 4.4.3.3.3 Technology Project Plan • UnitedHealth Group Software Development Overview E. 4.4.3.3.4 Plans Required by Bid Solicitation Section 3.12 • UnitedHealth Group Business Continuity Plan – Disaster Recovery and Enterprise Resiliency and Response Document • UnitedHealth Group Data Management and Data Storage and Tape Management Overview Section 3 4.4.4 Organizational Support and Experience A. 4.4.4.1 Location B. 4.4.4.2 Organization Charts • Contract Specific Chart • Chart for Entire Firm C. 4.4.4.3 Resumes D. 4.4.4.4 Backup Staff E. 4.4.4.5 Experience with Contracts of Similar Size and Scope F.4.4.4.6 Financial Capability • UnitedHealth Group Annual Report 10-K 2016 Section 3A Miscellaneous Documents A. Cover Letter The information provided in this proposal submission is confidential and proprietary to OptumRx and contains trade secrets that are protected under the Uniform Trade Secrets Act. This information is intended solely for use by the party to whom it is directed (as named on the first page, the “requesting part”) and its representatives. It is not to be disclosed to any other third party or used for any purpose other than evaluation of the proposal without the prior written consent of OptumRx. Unauthorized disclosure or use of this information by the requesting part or its representatives may violate the Uniform Trade Secrets Act. Although we have endeavored to ensure the accuracy of the information presented, responses are pursuant to the interpretation of the questions (without the benefit of clarification by the requesting party); therefore, the material contained in this proposal is meant solely for information purposes and is not to be considered legally binding. June 2017 DPP - 934 State of New Jersey Department of the Treasury, Division of Pensions and Benefits The State of New Jersey Department of the Treasury, Division of Pensions and Benefits (DPB) seeks a qualified and experienced Pharmacy Benefit Management (PBM) for the DBP Health Benefit Plan. The PBM selected by DBP should have a proven track record and the capacity to provide the DBP’s 835,000 active, COBRA and preMedicare members with best-in-class pharmacy services that advance healthier outcomes and deliver the best value to your members and their eligible dependents while achieving the lowest net cost to DPB. They must also have the technology, infrastructure and flexibility to administer and deliver optimal clinical outcomes and high levels of customer satisfaction through an easily accessible, robust network of retail pharmacies. Management Overview OptumRx is one of the largest PBMs in the United States: ● ● ● ● Serves 65 million members Fills one billion prescriptions annually Manages $75 billion in pharmacy spend Holds four URAC Quality Accreditations Like many large benefits sponsors, DPB continues to face the challenges of an increasing demand for medication—including expensive specialty medicines—and significant price inflation for many traditional medications. OptumRx is well-positioned to meet DPB’s requirements. OptumRx is a wholly owned subsidiary of UnitedHealth Group, the most diversified health care company in the United States. The breadth and depth of resources available through our vast organization makes us more than a PBM. We are a pharmacy care services company, with more than 28 years of industry experienced, with the talent, scale, technology resources and innovative spirit to serve complex customers with large diverse populations. As you begin reading in this Management Overview and throughout our proposal response, OptumRx, one of the three largest PBMs in the country, offers the network coverage, retail and mail-based services, clinical support and administrative expertise you require. We also are ready to deliver a seamless implementation and transition and have already developed a plan for a January 1, 2018 start date. The plan includes collaborative processes for working closely with Aetna and Horizon Blue Cross and Blue Shield of NJ (Horizon). We are prepared to comply with all contractual requirements outlined throughout the RFP. We know the DPB seeks an industry-leading PBM that has a proven track record with large, complex customers. We are ready with a differentiated approach that: ● Meets your stated objectives regarding retail pharmacy access, mail order dependability, clinical efficacy, member education and the ability to collaborate and coordinate with your other vendors. ● Controls costs while promoting health through competitive administrative fees, transparent pricing, promotion of generic medications, effective discount and rebate practices, comprehensive clinical programs, and efficient processes that include a laser focus on fraud, waste and abuse. ● Addresses the high cost of specialty drugs through a holistic (360-degree view) of the member with concentration on education, outcomes and total cost of care. ● Focuses on expertly managed, collaborative and personalized customer service—starting with implementation—from seasoned, dedicated implementation and client management teams. We foster an environment of open communication to thoroughly assess your needs, share best practices and innovative solutions, and determine how we can align ourselves most effectively with your objectives. June 2017 optumrx.com DPP - 935 Page 1 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Management Overview A Business Model Aligned with DPB Objectives OptumRx is fortunate to provide PBM services and solutions for State-sponsored health plans and large commercial customers. Our extensive public employee customer base of over six million members includes customers similar to DPB, including a state employee retiree plan with nearly one half of one million members, a state that represents the second largest plan sponsor in the country, and all active employees plus retired teachers for a high-population mid-western state. As a result, we understand the importance of responsive service—whether it is OptumRx providing exceptional service to DPB, your members and vendors or making it possible for DPB to deliver to your members the highest quality service levels available in the industry. Our experience has also given us a deep understanding of DPB’s clinical objectives, including the ability to recognize and manage drug and opioid abuse, look for new and more engaging ways to help members adhere to drug regimens or help members participate in DPB programs available to members for managing chronic conditions. A Long History Serving the People of New Jersey As a subsidiary of UnitedHealth Group, OptumRx is part of a long history of serving the people and the State of New Jersey through investment, payroll and other taxes, real property spend, contracting and philanthropic giving. In 2016 alone, we: ● Employed nearly 3,000 people across New Jersey ● Served nearly 1.8 million New Jersey citizens ● Invested nearly $530 million through financial and property spending ● Contributed $2 million through philanthropic giving to multiple state and local community initiatives We plan to continue our investment in New Jersey. We are finalizing plans for a new pharmacy location in the Newark area to meet the pharmacy needs of our New Jersey members, including specialty and infusion. We plan to begin staffing this new pharmacy operation in early 2018. A Value-Based Approach Delivers Total Cost of Care Management At OptumRx, we are the people we serve, and in our role as a service provider that touches each end of the health continuum, we are uniquely positioned to hold the system accountable to drive down health care waste. Our carrier-agnostic approach to data integration allows us to monitor health events in real time to understand how care plan outcomes compare with industry norms and: ● Hold pharmaceutical manufacturers accountable by focusing on value by leveraging fact-based drug research and outcomes to drive purchasing decisions and reimbursement strategies. ● Hold providers accountable through value-based contracting by working with providers to align reimbursement with outcomes and away from transactional methodology. ● Hold members accountable for medication adherence by using incentives or plan design to reinforce the right adherence behaviors. ● Hold the pharmaceutical manufacturers accountable for drug effectiveness by tying drug effectiveness to rebates or other accountability measures. June 2017 optumrx.com DPP - 936 Page 2 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Management Overview This level of data, oversight and action positions OptumRx to play a unique role with each part of the health system, holding each stakeholder accountable for doing the right thing An Innovative Tool that Delivers Quality at the Point of Care Many times, physicians are in the dark at the point of prescribing, as they don’t have access to the formularies or drug cost. Additionally, navigating prior authorization (PA) requirements is unclear and challenging. Implementing smarter tools at the point of care increases efficiencies, provides for a significantly improved provider and member experience, and reduces angst. In response, OptumRx offers providers an innovative, real-time e-prescribing solution, Script Connect. Besides support for standard e-prescribing tools and transactions, Script Connect combines multiple diverse, complex health care data sources into one easy-to-use platform that saves time and money. Script Connect enhances the information available to providers at the point of prescribing to support prescription decision making and free up resources for direct patient care. Script Connect provides prescription clarity up front by giving physicians patient-specific pharmacy information at the point of prescribing, using real-time data and information through electronic medical record system integration. A streamlined suite of ePA and eRx tools, Script Connect includes an intuitive dashboard for providers to submit test prescriptions and manage prior authorizations in real-time. Script Connect enables providers to see eligibility, member-specific plan information, and achieve a greater transparency into pricing and formulary. In addition, clinical alerts are sent through Script Connect to keep the prescriber informed about critical medication issues related to adherence, dosage, drug interactions and similar topics. These alerts are available in real-time while the patient is in the prescriber’s office. Implementing smarter tools, like Script Connect, right at the point of care may increase efficiencies, improve workflow and enable the prescriber to understand and more effectively leverage the member’s prescription benefit for a better member experience while driving to the lowest net cost. June 2017 optumrx.com DPP - 937 Page 3 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Management Overview Efficient Processes Deliver Accuracy With one of the most efficient and flexible claims adjudication platforms in the industry (RxClaim) and one of the most expansive, evidence-based clinical rules engines in the industry, OptumRx can accommodate virtually any benefit configuration or ad-hoc modification with speed and accuracy. Our industry leading claims processing efficiency results in consistent and accurate claims payment—helping prevent fraud, waste and abuse. Our proprietary real-time audit system prevents claims errors before they happen. Applied to 100 percent of claims, our system significantly reduces the number of incorrect claims for benefit plan coverage and components such as copayments, coinsurance, preferred drug lists, deductibles and out-of-pocket maximums. Our dedicated service team takes a proactive approach to meeting DPB’s current and future pharmacy benefit plan objectives in a collaborative, hands-on fashion to become the best selection for your current and strategic long-term goals—while offering critical support toward your goal of a healthy and productive workforce. The team continually reviews the data we collect to follow critical areas such as trends in benefit design, utilization management, including underutilization of over-the-counter medication programs, and member satisfaction. ● Clinical services that educate members with accessible tools and communications to promote the use of generic medication and special programs that work in tandem with those administered by Aetna and Horizon. We support your member communications needs, including needs for non-English communications. ● A technology platform that supports our high performance level by combining our automated dispensing technology and systems, such as radio frequency identification and barcode technologies, with hands-on verification. The pharmacist-in-charge at each facility is responsible for verifying that every prescription is correctly dispensed, and as each prescription advances through the process, a visual and physical inspection augments our automated system. OptumRx is ready to deliver high-quality, accurate and accessible pharmacy services designed to make a healthy difference while keeping costs in check. Working on DPB’s Behalf to Control Costs while Promoting Health As a consumer-focused pharmacy benefits management company, Optum Rx is meeting the demands of a rapidly changing health care landscape with a commitment to doing the basics right. We have direct access to leading consumer science, vast data warehouses and analytics expertise to verify we continue to meet the needs of the customers and individuals we serve. For example, our innovations in opioid abuse management are a direct result of our holistic and collaborative approach to serving our members and customers. We further differentiate ourselves as an active member of URAC, an independent, non-profit organization that promotes health care quality through accreditation, certification and commendation. June 2017 optumrx.com DPP - 938 OptumRx is the first PBM in the nation to earn four separate URAC quality accreditations: ● Pharmacy Benefit Management, ● Drug Therapy Management, ● Mail Service Pharmacy ● Specialty Pharmacy. Page 4 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Management Overview Our ability to capture and analyze vast amounts of member medical and pharmacy claims data helps us identify opportunities that lead to better health including the avoidance of inappropriate medication rather than simply focus on isolated pharmacy-related metrics—such as a rule set just geared for medication adherence. Our commitment to doing the basics right for DPB includes: ● A convenient national and local independent retail pharmacy network, along with dependable mail-order services. Advanced home delivery pharmacies provide convenient ordering options and cost savings. Innovative technology and Six Sigma quality measures provide smooth, timely fulfillment. ● Flexible benefit plan design features offering almost unlimited options for benefit plan coverage and components such as drug coverage, copayments, coinsurance, deductibles and out-of-pocket maximums. We are fully prepared to administer DPB’s self-insured Employer Group Waiver Plan (EGWP) and Wraparound Benefit (WRAP). . ● Tested administrative procedures that provide smooth enrollment, eligibility, file transfer, billing and disaster recovery processes, as well as safeguarding the privacy and security of all member and DPB information. ● Robust online reporting capabilities giving DPB the flexibility to access performance results at your convenience or create your own reporting, including the ability to easily create specific benchmark reports that compare your own performance and utilization data to help identify specific patterns or trends within certain categories or providers on an aggregate or individual basis. ● Knowledgeable and dedicated member service advocates, trained uniquely on the DPB culture and programs, addressing DPB member questions 24 hours a day, seven days a week, 365 days a year. Our call center won the International Customer Management Institute’s Global Call Center Award for Best Quality Assurance Program. Our Specialty Pharmacy, BriovaRx, has also been honored through our award-winning member assistance programs. ● Innovative mobile tools and features empowering DPB members to manage their prescriptions from their smartphones, including options to refill prescriptions online, check order status, view clinical criteria around utilization management programs, view prescription history and find a network pharmacy. We even offer convenient text message alerts that notify members of upcoming refills. More than a PBM: Quality and Integrity through Independence Our clinical programs help drive improved quality, better clinical outcomes and lower overall health care costs through member education, provider outreach and utilization management strategies. What’s more, we are fully prepared to work with Aetna, Horizon and your other vendors to advance the healthy outcomes you expect, while providing a seamless member experience. Our opioid management program is second to none in the identification and compassionate management of members. We use prospective, concurrent and retrospective drug utilization review, prior authorization and step therapy, quantity and dose limits, formulary and prescription drug list management, and targeted disease programs to provide clinical efficacy and reduce costs. June 2017 optumrx.com DPP - 939 Page 5 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Management Overview Medication therapy management and member adherence programs for cost containment and favorable healthcare outcomes, including the purchase and use of specialty medication and retrospective drug utilization review. In a 12 month randomized trial, OptumRx observed more than $240 in total health care cost savings per member per year driven primarily by reductions in emergency room visits and inpatient admissions. Another critical example of our independence is the OptumRx Pharmacy & Therapeutics (P&T) Committee, an independent committee established to promote clinically appropriate, safe and cost-effective drug therapy that reflects community and national standards of practice. P&T Committee members exercise professional judgment to make determinations, based on clinical and scientific evidence, national and international best practice guidelines and drug utilization analyses. The P&T Committee chairperson is an external committee member. The P&T Committee is comprised of members that are selected to provide diversity of specialty, expertise and geography. Unique to the industry, we encourage and welcome DPB participation in the P&T Committee process by attending and observing our P&T Committee meetings in person. During this observation, DPB would be given the opportunity to understand the rigorous, evidence-based process that our P&T Committee has in place. Finally, the integrity of our programs and services is enhanced by the fact that we operate independently of pharmaceutical and retail drug companies. We provide all of our core pharmacy functions in-house—owning our home delivery and specialty pharmacies, developing our formularies and contracting directly with manufacturers for rebates, contracting with our networking pharmacies, and employing around-the-clock DPB-specific customer service advocates. Specialty Management: Cost Savings and Health Improvement with a Member Focus By 2018, specialty medications—which represent approximately 2 to 3 percent of all prescriptions filled—are expected to represent more than 40 percent of an employer’s pharmacy costs and continue as a major contributor to an employer’s medical cost trend. Nearly three-quarters of those who take specialty drugs suffer not only from the primary disease—such as cancer, MS, rheumatoid arthritis, or HIV/AIDS—but also have at least one other medical comorbidity. We recognize that member engagement is critical to managing healthcare costs and that the best results are achieved during teachable moments—when information meets need. BriovaRx Customers have experienced ● $7,000 PM in Rx savings ● 7 percent adherence increase with BriovaLive support ● 6 percent increase in hepatitis C medication adherence ● Award-winning member BriovaRx, our wholly-owned specialty pharmacy, is recognized as a specialty pharmacy industry leader. In addition to BriovaRx’s award-winning customer education and support efforts, BriovaRx manages $28 billion in specialty pharmaceutical spend, supports approximately 85,000 specialty subscribers and has relationships with over 100 pharmacy companies. June 2017 optumrx.com DPP - 940 Page 6 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Management Overview With OptumRx, we treat every conversation we have with a member as an educational opportunity. Our professionals are committed to helping members engage in their overall health, reducing costs and driving better health outcomes. We start by applying our proprietary analytics to your pharmacy and medical data to analyze the impact of specialty medications within your population. Our nurses work with members who have recently been discharged from the hospital to prevent readmission, establish a care plan to close gaps and get members on the path to better health. All of our pharmacists, nurses and advocates have access to the same personalized member alerts and gaps in care information through access to the same system. On an ongoing basis, we monitor your spend, trend, adherence, and other metrics, so we can continually shape your pharmacy benefit to match your ongoing goals and objectives. We also keep you aware of impending specialty trends, including the best ways to manage compound drugs. We continually look for new ways to refine our clinical programs to engage your members, increase adherence and mitigate costs. We leverage the relationships with pharmaceutical manufacturers that give us superior access to specialty medications, including limited distribution drugs, at competitive costs Our award winning BriovaLive™, specialty pharmacy’s only live video consultation program, supports members through personal contact with our specialty pharmacists to provide education and promote adherence—bringing the pharmacy to the patient. We arrange a live video or phone consult with the member on or near the day the medication arrives. Our pharmacist or nurse walks the member through every step, helps them assemble devices for injectable and infusible medications when appropriate, teaches members to self-administer injections, and explains how and where to store the medication. We also coach your members on how to manage possible side effects and avoid drug interactions. Service Excellence: A Collaborative Approach for the DPB The DPB is looking for a partner to evolve as you evolve and advance. Our promise to DPB is a proactive approach to meeting your current and future pharmacy benefit plan objectives—beginning with implementation. In 2016 alone, OptumRx successfully on boarded 3.4 million members. Coordinated Implementation for a Smooth Transition We are fully aware that a smooth and error-free implementation is critical to DPB and to a smooth transition. We also are aware of the implementation time between the awarding of the contract and the program launch date. Our extensive experience with large commercial and public sector customers, as well as with short implementation periods, is a differentiating strength. We deploy the critical resources and install the right processes to make sure we execute a custom and seamless program launch. Before, during, and after implementation, we take the time to understand DPB’s pharmacy benefit program objectives and goals. DPB’s dedicated implementation manager and implementation team engages your organization in proactive communication throughout the entire implementation process. This process begins with an in-depth, on-site implementation kick-off meeting to establish processes and expectations. June 2017 optumrx.com DPP - 941 “We want quality and better outcomes for our members as well as cost-containment…and we appreciate the willingness of OptumRx to meet our unique needs. They have a seasoned, experienced leadership team on the client management side…willing to do what it takes to get the job done. It’s an effective working relationship with positive synergy.” Eric Estes, Senior Director Independence Blue Cross Page 7 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Management Overview Our exceptional teams of experts work closely with DPB to guide you through the initial stages of discovery, benefit plan interpretation, benefit plan design architecture, and testing. From the loading of eligibility information to our sophisticated benefit testing, our structured, technical approach results in an implementation that is executed efficiently, accurately, and in a timely manner. We are especially attuned to the need for a smooth transition from the incumbent PBM to OptumRx and have tremendous experience doing so with your incumbent. We cover every transition detail, including member communications, provider notifications and timing to make sure all members have a positive experience. During our initial meeting, we review the implementation process and applicable documentation to assess the details necessary to successfully finalize and implement the plan. Hands-on Client Management Our collaborative, hands-on style begins with our dedicated client management team—providing the foundation for a strategic and trusting long-term relationship. We are providing a dedicated account team as required by DPB, but also ready to expand on the expertise within the team’s structure based on our learnings from our experience supporting the needs of other large public sector customers, including states, federal agencies and retiree systems. This experienced, professional client management team delivers consistent and accessible services by: ● Formalizing a detailed implementation plan designed to align benefit intent, requirements, expectations and deliverables ● Meeting frequently with DPB to discuss opportunities to deliver greater efficiency, enhanced service and optimal plan performance ● Monitoring, documenting, analyzing and communicating program performance ● Working strategically across all DPB vendors to design approaches that support exceptional service, improved engagement and enhanced affordability and outcomes ● Discussing and recommending additional or new programs and services that may benefit DPB and its members ● Assisting with daily operational needs and facilitating timely resolution of issues with focus on escalated issue management and member satisfaction. ● Being available to assist and guide DPB efforts, including walking DPB step-by-step through the process for creating specialized report templates and generating secure customized reports through our online reporting tool. Our regularly scheduled communications, dedicated staff and a tight infrastructure of support reinforce our high-quality and attentive service model. DPB’s client management team has direct access to our internal executive leadership team, driving prompt review and resolution of any issues that may arise. Every day, OptumRx blends operational experience with strategic innovation. We are always improving, bringing our full portfolio of expertise and specialists to you in a professional, collaborative and flexible manner. June 2017 optumrx.com DPP - 942 Page 8 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Management Overview Nationally Recognized Member Services Pharmacy represents an important door for member engagement and improved health. What makes OptumRx different from other PBM organizations is not just that we understand the opportunity this early recognition of potential health risk represents, but that we have the resources to capitalize on that potential and a mission to do it in the right way. We provide 24-hour live support for DPB members with 156 dedicated member services representatives. These dedicated representatives address inquiries regarding prescriptions and benefits, including eligibility, copayment, formulary alternatives, prior authorization process and status and pharmacy processing assistance. In addition, our service representatives can confer with Consulting Pharmacists for clinical inquiries. The Consulting Pharmacists are primarily available to support a variety of clinical inquiries from members with a mail service pharmacy benefit, including questions about side effects, drug interaction, and pill identification. These pharmacists also perform drug utilization reviews with either members or physicians to resolve potential issues for drug-drug interactions, dosage appropriateness, drug-allergy consideration, or age appropriateness. Our pharmacists provide a valued added consultation that includes offering lower cost formulary alternatives that can help members save money through their benefit plan. OptumRx with its exceptional customer service approach is both a logical next step for maximizing your pharmacy benefit value to your members today and a hedge against the rising cost of pharmacy tomorrow. Our Commitment to the DPB and Your Members We are not just a PBM, but an integrated organization focused on keeping the cost of medications under control while delivering quality, holistic care to your members. We accomplish this through collaboration with other DPB programs and vendors to leverage all member engagement opportunities, including secure sharing of appropriate member information, to advance better health actions and outcomes. We are energized by the opportunity to deliver effective solutions that help DPB solve its pharmacy benefit challenges (including rising specialty pharmacy costs) and improve the lives of your members and their engagement with health care. Our proposal demonstrates how our full suite of pharmacy benefit administration and management services can be tailored to meet your program goals and objectives. We have configured our service offering to reflect your expectations and to allow you to supplement and enhance components as your health objectives evolve. We see our relationship with DPB as an opportunity to use flexible engagements to address the overall impact of pharmacy benefit management on your population in collaboration with your other benefits providers. We look forward to earning a highly consultative and trusting, strategic relationship that spans the duration of this contract and beyond allowing us to collectively accomplish your program goals while providing highly personalized and exceptional advocacy for your members. OptumRx accepts all terms and conditions of this bid with the following additional language: ● Section 5.18 – Agree, as it applies to changes that impact administrative fees as outlined in this provision, provided that Vendor reserves the right to modify Financial Contracted Terms based on changes by the State in formulary or any carve out of services set forth in the Agreement, including but not limited to Specialty Pharmacy services. ● Section 2.3- Agree as it relates to other comparable commercial clients which excludes buying coalitions, collectives or clients in Any Willing Provider states which would not be similar clients. June 2017 optumrx.com DPP - 943 Page 9 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Contract Management CONFIDENTIAL MATERIAL: CONTAINS HIGHLY SENSITIVE PROPRIETARY AND/OR TRADE SECRET INFORMATION; PUBLIC DISCLOSURE WILL CAUSE SIGNIFICANT COMPETITIVE INJURY AND DISRUPTION. OptumRx’s contract management solution begins with a client management team assigned from the Government and Reform Market Segment where government serves as a payer at a county, municipal and/or state level. The client management team has a wealth of experience supporting government-specific health care benefits and is prepared to leverage their experience to address the unique plans and needs of state beneficiaries. The State of New Jersey Department of the Treasury, Division of Pensions and Benefits (DPB) is assigned a team that understands the unique needs and challenges of government entities and is skilled at understanding customer-specific needs, working with you to develop strategies that meet or exceed your goals, and continuing to foster the development of your prescription drug program throughout the life of our relationship. Providing your members with safe, effective, quality healthcare begins with asking the right questions, listening to gain insight, and delivering highly tailored solutions to solve your most pressing healthcare challenges. For DPB, we have assembled a tenured and motivated account leadership team that is right for your organization and can support your leadership in delivering a clinically-safe, cost effective prescription drug benefit. We have assigned a specialized client management team to DPB, led by the following functional roles: ● Account Executive, Sara Sabin, New Jersey based ● Account Manager, Paul Eberle, New Jersey based ● Clinical Account Executive, Adrianne LaPilusa, New Jersey based ● Financial Analyst, Chase Livengood, Illinois based ● IT Analyst, Christine Levitt, Nevada based ● EGWP Subject Matter Expert (SME), Julian Nadolny, Florida based ● Executive Sponsor, John Prince, Minnesota based ● Eligibility Consultant, Edward Pawula, Illinois based These individuals are positioned strategically within their departments so that customers have ease of access to executive leaders and other subject matter experts throughout our company. The core, customer-facing responsibility of DPB’s client management team is to provide complete satisfaction through the following services: ● Provide a seamless implementation relationship with the assigned implementation manager ● Monitor and effectively address industry trends that prove relevant to DPB ● Offer proactive solutions to drive meaningful and measurable results ● Strive to respond to customer inquiries generally within two hours of receipt and work to effectively resolve concerns ● Promote ongoing educational initiatives throughout the entire continuum of care June 2017 optumrx.com DPP - 944 Page 1 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Contract Management ● Offer intelligent and thoughtful analysis of industry news and trends ● Generate reports that meet the analytical needs of your organization on a schedule that supports your need for information The client management team conducts quarterly meetings with DPB providing a consultative approach to reviewing your plan’s performance. The OptumRx team delivers expert guidance with recommendations that have been carefully modeled so that your opportunities for enhancement are clearly identified and prioritized. In addition, Sara Sabin, the Account Executive, provides a year-end performance analysis in which we present the trends recognized during the year and provide qualified recommendations that promote an efficient prescription benefit in today’s changing environment and foster educated participant choices throughout the continuum of care. Moreover, to provide exceptional availability throughout the life of our relationship with DPB, our client management team strives to return all customer phone calls and emails generally within two hours of receipt. Even if the customer inquiry cannot be fully satisfied within that time frame, a team member contacts the customer representative to report on the progress. We provide each member of the client management team with mobile devices to further allow access to email and telephone service when traveling or out of the office. Since we employ a team approach to account management, DPB would access to a team member who is familiar with your account should the key point of contact be unavailable. Additionally, the client management team is fully supported by our customer service team which is available to assist customers and members 24 hours a day, seven days a week. CLIENT M AN AGEMENT TE AM S AR A S A B I N A CCOUNT E XECUTIVE As a the account executive, based in New Jersey, Sara works with OptumRx customers as a key advisor in developing, implementing and managing innovative pharmacy benefit solutions that foster improved wellness and enhanced savings. Leading the account management team, she: ● Oversees new customer implementations. ● Works with customers’ external health care providers to create a seamless continuum of care for members. ● Supports customers’ ongoing operational and reporting needs. ● Makes cost-containment recommendations. ● Meets with customers frequently to assess ongoing projects, deliver comprehensive plan reports and discuss key performance factors. Additionally, Sara is responsible for recommending appropriate solutions and services to customers, renewing existing contracts, and retaining membership and customer satisfaction. June 2017 optumrx.com DPP - 945 Page 2 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Contract Management Sara joined OptumRx in 2015. Her previous experience includes a variety of roles, most recently including a director at a pharmaceutical company where she managed and implemented the managed markets strategy representing a $4 billion franchise portfolio. She reviewed customer’s rebate contracts including national PBMs and health plans. Sara holds a Bachelor of Arts degree from Dartmouth College, and a master of public health from Yale University. P AU L E B E R L E A CCOUNT M ANAGER As an account manager, Paul Eberle, serves as the day-to-day contact for assigned OptumRx customers and acts as a direct liaison between OptumRx’ s internal departments and the customer. Paul’s responsibilities include: ● Assisting with new customer benefits implementation and transition to assigned operational resources within the team. ● Creating data files and reports for customers as needed. ● Setting up and training customers on the web-based claims system access tool, which allows customers to view claims online in real time, perform drug overrides, update member eligibility and view member histories. ● Communicating pharmacy additions and deletions for plans with selected pharmacy networks and working with the networks to provide customers and the OptumRx Pharmacy Help Desk with updated pharmacy network listings. ● Working with customers and their outside vendors to develop and distribute member materials. Paul prioritizes each customer’s needs and supports OptumRx’s ultimate goal to deliver exceptional service and overall satisfaction. Paul joined OptumRx in 2005. Paul’s previous experience includes a variety of roles, including actively managing customer/broker/consultant relationships through an annual average of over 40 face-to-face pharmacy strategy and review meeting., while achieving average 93 percent annual retention of self-funded customer book-of-business over 11-year time period. Paul holds a Bachelor of Arts degree from Johns Hopkins University, and he obtained his MBA from Columbia University. A D R I A N N E L A P I L U S A , P HARM . D., MBA C LINIC AL A CC OUNT E XECUTIVE As a clinical account executive, Adrianne LaPilusa is the primary functional clinical resource for OptumRx customers. She works to make customer-specific clinical recommendations that help with formulary management, improved care and cost-containment goals. Adrianne’s responsibilities include: June 2017 optumrx.com DPP - 946 Page 3 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Contract Management ● Collaborates with customers to establish achievable but aggressive clinical program goals, including generic dispensing rate improvements, implementation of utilization management programs, improvement in medication adherence rates, improvements in therapy gaps for key chronic disease states, formulary compliance targets, and HEDIS and NCQA measures ● Provides superior clinical consultation and clinical account management with a focus on customer satisfaction and retention, and trend management ● Explains formulary and clinical program recommendations to customers ● Provides clinical market intelligence to customers regarding potential and future medications ● Communicates drug information to customers and responds to plan-specific clinical inquiries ● Formulates and delivers strategic clinical recommendations based on available customerspecific data Adrianne represents customers and coordinates with other OptumRx business functions to implement customer requests, complete projects, and address ongoing clinical service needs. Adrianne is a PharmD and joined OptumRx in 2017. Her previous experience includes a variety of pharmacy roles, including holding a position as a Senior Pharmacist Account Executive with a national pharmacy benefit manager in their commercial business. Prior to that, she worked as a Clinical Account Executive and Associate Director, Clinical and Account Services. Adrianne holds a Bachelor’s degree in Pharmacy from Purdue University. She also holds a Pharm D from Creighton University. C H A S E L I V E N G O O D , CP A F INANCIAL A NALYST As a financial analyst, Chase Livengood supports and analyzes financial performance to meet the needs of OptumRx customers. Chase’s responsibilities include: ● Financial and analytical support to customers for data evaluation and outcome measurement. ● Provides support for clinical and product profit and loss management. ● Overseeing financial analysis/trending and customer profitability. ● Supports operations management and facilitation. Chase joined OptumRx in 2015. His previous experience includes working within the PBM industry on the Segment Finance team. Chase is a certified public accountant, located in Illinois. CHRISTINE LEVITT IT A N A L Y S T As the assigned IT analyst, Christine Levitt brings over 19 years of experience working with some national organizations, which have secured her wealth of experience Christine has been with OptumRx for eight years. June 2017 optumrx.com DPP - 947 Page 4 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Contract Management Christine possesses superior customer service traits, and with her experience and consultative management skills and approach, Christine leads some of our most visible, largest and strategic customers with excess of over 1 million lives within OptumRx. Christine is extremely detailed oriented. She proactively reviews all aspects of our processes each morning when reviewing statuses of her customer files. Christine is neither reactive nor passive in regards to waiting for issues to materialize and form. She proactively digs deep into any anomalies that may form during the course of any given day, in addition to regularly looking for ways to improve processes and file efficiencies. Christine is located in Nevada and is available during DPB’s business hours. She is dedicated 50 percent to oversee the IT implementation and on-going operations. She manages the day to day operations to verify automation, file loads, and report requirements are executed as required. J ULIAN J. N ADOLNY , J R . D IRECTOR , E M PLOYER G ROUP W AIVER P LANS EGWP S UBJECT M ATTER E XPERT Julian Nadolny has over 16 years of experience in the health insurance field and over 10 years of experience in Medicare. He possesses unparalleled regulatory and operational knowledge and expertise in Medicare Advantage and Medicare Part D Employer Group Waiver Plans (EGWPs). In his current role, he oversees OptumRx’s Medicare Prescription Drug Plan (PDP) EGWP product, including implementation, operations, strategic development, and compliance. Previously, Julian served in the public sector at the Centers for Medicare & Medicaid Services (CMS). He was the chief architect of the Medicare Part D EGWP program that debuted in 2006, designing and implementing the EGWP program for CMS. This effort included EGWP functional design, developing the various waivers of Medicare Part C and Medicare Part D requirements, and drafting the plan sponsor applications and contracts associated with the EGWP program. He also assisted in the development of the original Medicare Prescription Drug Benefit and Medicare Advantage Code of Federal Regulations, and co- authored Chapter 9 of the Medicare Managed Care Manual and Chapter 12 of the Medicare Prescription Drug Benefit Manual titled Employer/Union Sponsored Group Health Plans. JOHN PRINCE, EXECUTIVE SPONSOR CHIEF EXECUTIVE OFFICER John Prince serves as the executive vice president and chief executive officer (CEO) of OptumRx. In this capacity, his primary responsibilities include overseeing all OptumRx Operations, including the Customer Services, Clinical Operations, Information Technology, Government Services, Quality, Business Continuity, Implementations, Work Force Planning and Benefit Administration teams. He leads several key OptumRx Operations initiatives including Net Promoter Score improvement, member experience advances and he also led the completion of the OptumRx/Catamaran integration. Prior to his current position, John has served in a variety of positions at UnitedHealth Group, including executive vice president and chief financial officer of Optum, the first chief operating officer of OptumHealth and led the formation of OptumHealth Financial Services as its chief executive officer. Prior to joining UnitedHealth Group, John served as senior vice president and head of health care business development and strategy at a major financial corporation and was a partner at a major accounting firm in its health care strategy and operations consultancy practice. June 2017 optumrx.com DPP - 948 Page 5 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Contract Management John earned an undergraduate degree in economics and mathematics from Northwestern University, as well as a Master of Business Administration degree from Northwestern’s Kellogg School of Management. He serves on the board of trustees of the Minneapolis Institute of Arts. EDWARD PAWULA ELIGIBILITY CONSULTANT As the assigned eligibility consultant, Edward manages the implementation and ongoing administration of customer and vendor data feeds, both verifying the accurate and timely setup of new exchanges as well as providing prompt and resolute attention to any inquires or questions related to the process flow and results of OptumRx’s eligibility cycle. Edward spent the early years of his career in the Healthcare IT industry with a third party vendor managing outgoing eligibility feeds for a number of large-scale customers. This, in addition to his time at OptumRx as an eligibility consultant managing incoming file feeds, has afforded him valuable experience into the implementation and ongoing administration processes, allowing him to offer insights and suggestions that are able to prevent potential issues or disruptions while always keeping in mind the unique needs of the client. While managing the day to day duties of the eligibility analyst role, Edward has also worked on a variety of projects to streamline and optimize the eligibility process at OptumRx, helping to decrease departmental turnaround time and increase efficiency with common tasks. As a former project manager and team lead, Edward understands the importance of collaboration and communication in all aspects, and is committed to working alongside a variety of teams internally and externally to always provide the best customer experience for the customer. Edward graduated with a Bachelor of Arts in Political Science from Loyola University Chicago. June 2017 optumrx.com DPP - 949 Page 6 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Mobilization and Implementation Plan CONFIDENTIAL MATERIAL: CONTAINS HIGHLY SENSITIVE PROPRIETARY AND/OR TRADE SECRET INFORMATION; PUBLIC DISCLOSURE WILL CAUSE SIGNIFICANT COMPETITIVE INJURY AND DISRUPTION. OptumRx is agile and uniquely able to leverage technology to provide the State of New Jersey Department of the Treasury, Division of Pensions and Benefits (DPB) a customized implementation that addresses your business requirements and the results you desire. Excellent implementations have been our hallmark with an overall satisfaction rating of 92 percent of customers being satisfied with the accuracy of their materials and 95 percent of customers satisfied with the level of communication provided to them during the implementation experience. We consult with DPB to understand your goals, architect the solution, and achieve a successful, streamlined implementation. This approach continues throughout our relationship. TIMETABLE Please refer to the attached detailed timetable and work plan for the mobilization and implementation period of July 1, 2017 through January 1, 2018. The timetable and work plan may be modified based on the timing of notification of award. KEY PERSONNEL For a successful implementation, OptumRx assigns a dedicated project manager to oversee the implementation process along with a host of internal functional resources, based on the needs of the project and DPB. The project manager assigned to oversee DPB’s implementation is Karen Martin, however, please note that this assignment is subject to change. K A R E N M AR T I N , S E N I O R I M P L E M E N T AT I O N P R O J E C T M A N A G E R , P R O G R AM L E A D As a senior implementation project manager, Karen Martin is accountable for overseeing and directing all requirements of a PBM customer implementation. Karen joined our organization in April Rhode Island. During Karen’s tenure at OptumRx, she has held 2012 and is based in various roles in client management and implementation services. Prior to joining our organization, Karen spent seven years at a national pharmacy benefit manager where she held various management positions within the operations and corporate benefits divisions. In her tenure with OptumRx, Karen has successfully led a number of large new customer implementation projects and is a Medicare Part D and EGWP subject matter expert. Most recently, Karen successfully led the implementation of several lines of business, including Medicare Part D business, for a large Managed Care Organization. Karen attended Johnson and Wales University and is pursuing her Certified Project Management Professional (PMP) designation. A NTHONY P IEPLOW , S E N I O R I M P L E M E N T AT I O N P R O J E C T M A N A G E R , C O M M E R C I A L Anthony Pieplow joined OptumRx organization in 2004. He has extensive experience in the PBM industry and has previously served as a member service supervisor and an account manager. While working at a national PBM, Anthony was named Implementation Manager of the Year. In addition, he also earned the Clients for Life award in 2013. June 2017 optumrx.com DPP - 950 Page 1 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Mobilization and Implementation Plan As a senior implementation project manager, he is responsible for defining deliverables, eliminating obstacles, and thoroughly communicating with customers throughout the entire implementation process. Anthony is a certified pharmacy technician. He is located in Florida. J ESSICA C UNHA , I M P L E M E N T A T I O N P R O J E C T M AN A G E R , EGWP Jessica Cunha is an Implementation project manager. Jessica joined the organization in November 2015. During Jessica’s tenure, she has worked on a variety of new customer implementations, including Commercial and EGWP lines of business. Previously, Jessica worked as a senior account manager at another PBM, where she accrued experience in Health Plans (Commercial, Med D, EGWP, etc.) Jessica is the primary contact for customer implementations and is responsible for managing project deliverables, cross-functional tasks, reducing risks, eliminating obstacles, and effectively communicating with internal partners and customers throughout the implementation process. Jessica has her Bachelor of Science Degree from Bridgewater State College. She is located in Rhode Island. In addition, your implementation project team is supported by the following individuals who are actively involved throughout the entire implementation phase. Additional individuals may be assigned to the team to support specific requirements or functions. Functions Strategic Account Executive ● ● ● ● ● ● Client Service Manager ● ● ● ● June 2017 Participate in all implementation status meetings, both internal and external Handle special projects or custom requests that are owned by the client management team or delivered post transition Coordinate training of RxTrack (post go-live) Provide open enrollment support, if applicable Serve as the customer's primary point of contact for strategic, legal, and financial items after the contract has been executed and received Review customer first invoices post go live for accuracy per contract terms Participate in all implementation status meetings, both internal and external Submit set up requests for customer user IDs/tools and assistances with training of online applications during the implementation Handle issue resolution post go-live (for example, user access, password resets, overrides, member inquiries from customer/member services/pharmacies) Serve as the customer's primary day-to-day contact after the implementation optumrx.com DPP - 951 Page 2 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Clinical Consultant ● ● ● ● ● ● ● ● ● Benefit Consultant ● ● ● Benefit Analyst ● ● ● ● ● ● ● June 2017 Mobilization and Implementation Plan Participate in all implementation status meetings where clinical issues are discussed, both internal and external Lead and document discussion for clinical, formulary, and prior authorization requirements Participate in benefit design discovery meetings Provide review of data and mapping for non-standard and Medicare Part D historical prior authorization loads Review benefit testing results for clinical and formulary items Handle set up of clinical publications, drug intelligence, and MTM programs Provide post go live support including clinical monitoring and issue resolution Conduct formulary, non-standard specialty and utilization management disruption analysis Serve as the primary clinical contact for the customer during and post implementation Participate in all implementation status meetings, both internal and external Lead and document discussion for benefit plan requirements Create and submit Benefit Design Summary (BDS) to the Benefit Administration Team for coding Participate in business structure discussion and requirements gathering Participate in internal implementation status meetings as agreed to by the benefit analyst and implementation project manager, based on project complexities. Participate in external implementation meetings as requested by the benefit consultant or implementation project manager and document discussion for benefit plan requirements (when benefit consultant is not assigned When benefit consultant is assigned, participate in plan benefit meetings meeting to ensure customer requirements can be accommodated, when requested by benefit consultant Build and test all benefit plan elements, including CAG, TCT, and account/group load files if applicable Work with QA to ensure all benefit parameters are adjudicating accurately Participate in business structure discussion and requirements gathering Participate in accumulation exchange requirements discussions optumrx.com DPP - 952 Page 3 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Eligibility Analyst ● ● ● ● ● ● ● ● ● ● Data File Analyst ● ● ● ● ● ● ● ● ● Print Fulfillment ● ● ● ● ● ● June 2017 Mobilization and Implementation Plan Participate in all implementation status meetings, both internal and external Lead and document discussion for member eligibility requirements (for example, format, frequency, submission) Participate in business structure discussion and requirements gathering Create CAG in RxClaim along with accounts and groups if batch load is not required Test all aspects of eligibility files Coordinate with DCO to establish automation of ongoing eligibility feeds Establish connectivity with RxEXPRESS to exchange eligibility data for mail order operations Collaborate with benefit analyst on TCT requirements Participate in cross functional team discussions where ID format is a key component (for example, accumulation and claims extracts exchanges, ID card creation, web portal SSO), if applicable Collaborate with data analyst so that necessary folders are set up for FTP site Participate in all implementation status meetings, both internal and external Participate in business structure discussion and requirements gathering for accumulation set up Coordinate with DCO to setup secure FTP for file exchange Lead discussions with third party vendors for accumulation file, claim extract file, and prescriber file discussions Establish, document, and confirm the format, frequency, and submission of accumulation files, claim extract files, and prescriber files Coordinate with DCO to establish the automation of ongoing inbound/outbound files Develop, prepare, and execute appropriate test plan for all aspects of data files Load historical PA files (non-Medicare Part D) into RxClaim Create customer carrier in RxClaim Provide customer logicals and customer user IDs for RxClaim Participate in implementation status meetings as required Set up all member materials as defined throughout the implementation Proof all products and makes changes as requested Establish target mail dates for all materials and communicates them to the implementation project manager (based on customer requirements) Coordinates all mailings with print vendor Adhere to all deadlines and keeps implementation project manager abreast of vendor relations and delays that may occur optumrx.com DPP - 953 Page 4 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Member Services ● ● ● ● ● ● ● Prior Authorization ● ● ● ● ● ● ● ● Quality Assurance Analyst ● ● ● ● ● Medicare Marketing Specialist ● ● EGWP Subject Matter Expert ● ● June 2017 Mobilization and Implementation Plan Participate in implementation status meetings as required Validate performance guarantees against call center standards Assign call center toll-free number Review Customer Care procedures and applicable service levels with the customer Complete the Member Services Customer Sign Off document Set up procedures for the member and pharmacy call centers Coordinate applicable training for the member services representatives on customer requirements Assist with reviewing ad hoc member materials for proper use of member services contact information Participate in post-go live issue resolution Provide call metrics to the implementation project manager post-go live, when available Participate in implementation status meetings as required Validate performance guarantees against prior authorization standards Assist clinical consultant with completion of the Implementation Guide Work with the Member Services Team on documentation that relates to prior authorization operations, including confirming correct phone number is populated in applicable extended reject messages Coordinate applicable training for prior authorization technicians on customer requirements Implement custom prior authorization criteria and communications Resolve post-go live prior authorization issues, if any Provide metrics to the implementation project manager post-go live Participate in implementation status meetings as required Create testing scenarios for all benefit plan elements, including CAG, TCT, e-prescribing profile, and account/group load files if applicable Validate results s that customers intent is met Collaborate with benefit analyst to ensure that any defects are corrected and retested prior to go-live Review benefit testing results with internal partners and the customer when necessary Provide standard OptumRx templates, as needed Provide oversight of marketing material collection for delegated functions (for example, coverage determinations, appeals, grievance, etc.) Participate in all implementation status meetings, both internal and external Create standard customer materials as required Work with print fulfillment so that materials are printed and mailed timely optumrx.com DPP - 954 Page 5 State of New Jersey Department of the Treasury, Division of Pensions and Benefits EGWP Enrollment Analyst ● ● ● ● ● ● ● ● OptumRx Home Delivery ● ● ● ● ● ● BriovaRx Specialty ● ● ● ● ● ● Sales ● ● ● ● ● ● ● June 2017 Mobilization and Implementation Plan Participate in all implementation status meetings, both internal and external Discuss EGWP enrollment requirements with customer, including disenrollment, reenrollments, etc. Receive files from Eligibility Team for new EGWP member submissions and pertinent updates and submits/receives file from CMS Establish customer actionable and exceptions report timing and delivery method and sets up report to appropriate destination Set up applicable FTP folders with DCO, if needed Provide customer training on enrollment reports Provide oversight of enrollment vendor and all processes of submitting and process timely enrollment and resulting triggers/mailing of enrollment driven member communications Troubleshoot enrollment inquiries and issues Participate in implementation status meetings as needed Provide mail service facility assignment Set up customer in RxEXPRESS Test all mail order components Provide ORT file coordination (for example, load, fallout, lag file, reporting, metrics) Participate in post-go live issue resolution Participate in implementation meetings, internal and external, where specialty items will be discussed Work with customer and implementation project manager to determine appropriate member outreach Set up customer in ScriptMed Obtain new prescriptions via physician outreach as appropriate. Coordinate specialty ORT file (load, fallout, lag file, reporting, metrics) Train patient care coordinators. as applicable Provide in depth customer education on member experience, if needed Provide specialty outreach call stats Participate in implementation status meetings, as needed Serve as the primary contact so that all commitments made during the RFP/procurement process are implemented and make it into the contract, including NDAs, BAAs, etc. Be responsible for all changes and/or follow-up issues related to the contract, NDAs, BAAs, etc., including contract revisions and getting customer signature Assist in resolving escalated issues which directly impact the success of the implementation, as needed and communicated to sales by the implementation project manager Provide documented requirements: notice of sale, contract/LOI, performance guarantees, RFP, finalist presentation and other information relevant to the success of the implementation Participate in the scope of services and products sold meeting Schedule the introductory call to introduce the customer and the implementation project manager optumrx.com DPP - 955 Page 6 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Customer ● ● ● ● Mobilization and Implementation Plan Participate in all implementation meetings Provide timely response to requests for information and document approval Provide feedback related to issues and risks throughout the Implementation phase Respond to implementation survey request post-implementation C L I E N T M A N A G E M E N T T E AM E N G A G E M E N T A key driver of our implementation success is the active involvement of your OptumRx dedicated client management team from day one. This early engagement allows the critical relationships to be developed and also provides the opportunity for the team to have a clear understanding of the benefit programs to be implemented as well as the future strategic direction of DPB as it relates to benefits. We also welcome and recommend executive level meetings to review key milestones and address any risks that may be identified during the management of the project. The client management leadership team identified for DPB begins working with their counterparts once the business is awarded to begin the planning process. Our communication process during implementation is a critical aspect of a smooth implementation, and your client management team begins working alongside DPB counterparts and the OptumRx Implementation Team to create the best communication pathways both during and after the implementation process. P L A N F O R R E C R U I T M E N T O F S T AF F We can begin a recruiting process to hire the best talent for the open positions identified. We can work with our internal talent acquisition staff to identify qualified individuals who are fully capable of executing their roles as well as working with DPB to fulfill your goals. DPB has the opportunity to meet the final qualified candidates who are dedicated client management team members and provide your input with regard to the staff assignments. Senior client management leaders are responsible for the management and development of the dedicated client management team and involved in all projects, so that DPB’s expectations are met. OptumRx has a member of our senior team present at all board meetings so that our team stays aligned with your goals and initiatives. PURCHASE AND DISTRIBUTION OF EQUIPMENT, INVENTORY, SUPPLIES AND M AT E R I A L S In the course of our normal business planning process, OptumRx reviews new customer pipeline information to confirm we are always ready and able to accommodate new business growth. This information is communicated to leaders in our operational areas to proactively develop resource plans in order to meet our customers’ needs. This planning process occurs, for example, with respect to member services, mail and specialty service capacity, and print fulfillment materials. June 2017 optumrx.com DPP - 956 Page 7 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Mobilization and Implementation Plan PLAN FOR USE OF SUBCONTRACTORS S U B C O N T R A C T O R S U T I L I Z E D I N A D M I N I S T E R I N G PBM S E R V I C E S As a full service pharmacy benefit manager, OptumRx provides all core PBM-related services for your organization and does not subcontract any core PBM services. Specifically, we manage all aspects of our pharmacy program, own state-of-the-art mail service and specialty pharmacies, and have our own direct contracts with retail pharmacies for the dispensing of prescriptions as well as with drug manufacturers and intermediaries for rebate services. OptumRx uses the following non-core subcontractors: CONFIDENTIAL, PROPRIETARY AND TRADE SECRET INFORMATION OF OPTUMRX Subcontractor Name Delegated Services SureScripts Surescripts has certified our claims, eligibility, and medication history system/processes for e-prescribing purposes. Surescripts also serves as a network routing solution for transmitting ePrescribing communications between PBM, EMR and pharmacy. Medicare Part D enrollment services Member and pharmacy check payments, EOPs Print fulfillment Printing membership cards Direct Member Reimbursement payment processing Translation services for written communication materials Translation of languages for our customer service department Pharmacy help desk and supplemental customer service for nights and weekend overflow for Medicare Part D members only Automated outbound calls notifying members of mail order status, prior authorization status and requesting member satisfaction surveys. Retrospective compliance audits The vendor provides an audit application to OptumRx. The application is utilized by OptumRx staff to conduct audits of prescriptions provided to individuals. Convey Health Solutions Diamond Marketing Solutions Xerox Corporation Fiserv Change Healthcare Interpreting Services International, Inc. Language Line Solutions Alorica – a division of West Customer Management Group, LLC Eliza Corporation The Rawlings Company SCIO Health Analytics Print vendors are identified at the time of implementation. Printer vendors are used for printing member and pharmacy check payments, EOPs, member communications, EOBs, statements, letters, and more. We utilize multiple print subcontractors and have a Master Services Agreement (MSA) in place with each subcontractor that covers Confidentiality, Security, HIPAA, Warranties, Indemnification, Insurance, and government required language. Each vendor is vetted through a due diligence process to cover compliance, risk, capabilities, financial status, and more. June 2017 optumrx.com DPP - 957 Page 8 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Mobilization and Implementation Plan (1) OptumRx uses the following vendors : CONFIDENTIAL, PROPRIETARY AND TRADE SECRET INFORMATION OF OPTUMRX Vendor Name Delegated Services Medical Review Institute of America Independent Medical Review Services. IRO we utilize to comply with federal rotating IRO external review requirements. Independent Medical Review Services. IRO we utilize to comply with federal rotating IRO external review requirements. Independent Medical Review Services. IRO we utilize to comply with federal rotating IRO external review requirements. IRO we utilize for physician reviews, medical necessity review and appeals support. Advanced Medical Reviews, Inc. (AMR) Medical Evaluation Specialists (MES) MCMC, LLC B U I L D I N G Y O U R I M P L E M E N T A T I O N P AT H W A Y We schedule an implementation kick-off meeting with DPB to introduce the members of the client management and implementation teams, confirm the roles of each team, and document customer approval of operational requirements. During this meeting, we review the implementation process and applicable documentation to assess the details necessary to successfully implement the plan. CONTRIBUTIONS TO THE IMPLEMENTATION ● Minimum of three to five hours per week to complete assigned tasks ● Weekly one-hour implementation conference call ● Weekly one-hour conference call to address specific project components (eligibility, benefit design, historical files, data exchange, and open refill transfer) C U S T O M E R AP P R O V A L F O R T H E F O L L O W I N G I T E M S June 2017 ● Business account structure ● Prescription ID card and member welcome kit ● Member service requirements ● Prescription benefit plan ● Documented benefit plans (60 days prior to the effective date) ● Documented clinical benefits (60 days prior to the effective date) ● Plan specific member service procedures ● Mail Service Open Refill Transfer File (ORT) ● Test and production load results of member eligibility files optumrx.com DPP - 958 Page 9 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Mobilization and Implementation Plan ● Test and production load results of historical claims files (if applicable to the prescription program from the previous vendor) ● Test and production load results of the historical prior authorization files (if applicable to the prescription program from the previous vendor) ● Test and production load results of the historical accumulations files (if applicable to the prescription program from the previous vendor) S UBM ISSION OF THE F OLLOWING D ATA F ILES ● Member eligibility in a mutually agreed-upon file format ● Open refill transfer files (if applicable to the prescription program) ● Contact information for prior PBM and all vendors where OptumRx with which is required to interface, at least 90 days prior to go live IMPLEMENTATION PROCESS Our exceptional teams of experts work closely with DPB to guide you through the initial stages of discovery, benefit plan interpretation, benefit plan design architecture, and testing. From the batch loading of eligibility information to our sophisticated benefit testing, our structured, technical approach results in an implementation that is executed efficiently, accurately, and in a timely manner. After the kick-off meeting, the lead implementation manager creates a DPB-specific project plan with delegated tasks and milestones. DPB’s custom project plan outlines all of the components and requirements of the implementation. This project plan is maintained throughout the implementation and includes measurable pre-implementation and post-implementation metrics. Through detailed discussions with DPB and on-going meetings, each task within the project plan is scoped and monitored for completion. Along with the project plan, additional documentation in the implementation process includes: ● An Eligibility Configuration Setup details the eligibility files, member data components, and the process of securely feeding that data to us. ● Benefit and clinical design templates outline the benefit plan in detail (for example, copayments, drug coverage and exclusion, prior authorization, deductibles, maximums, stop/loss, step therapy, quantity limits, generic substitutions, maintenance medication management, and mandatory mail programs). ● Meeting agendas are provided prior to each meeting. In addition, comprehensive meeting minutes are issued after each meeting to document the discussion and resulting action items. ● A comprehensive Tracking and Issue Log captures and tracks the progress of all risks, issues, action items, decisions and future considerations. ● A “T-Minus” schedule provides an illustrative milestone summary depicting all activities and deliverables that must occur during the end-to-end implementation process. ● A Weekly Status Executive Summary Report provides the overall status of the implementation, activities completed, activities in progress, issues and risks, and a milestone summary. June 2017 optumrx.com DPP - 959 Page 10 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Mobilization and Implementation Plan In addition, our Change Advisory Board plays an integral role in the implementation process. A delegate of each internal team that supports the implementation process attends the regularly scheduled meeting of the Change Advisory Board. The primary focus of the board meetings is to proactively review new or updated processes or personnel changes in each represented department. The meetings serve as a mechanism for identification of resulting issues that may influence the implementation process and solutions so accurate and timely customer implementations continue. HISTORY TRANSFER PROCESS In transitioning historical data files, we employ a process that is customized to your needs. DPBsubmitted claim history files are scrutinized by the technical implementation team and verified for proper formatting, syntax, required fields and consistency. We report issues, questions or recommendations to DPB for resolution or verification. Corrected files are loaded to verify that loading and processing are completed without processing errors. Results of the load are reported and verified internally by our technical and business implementation teams for accuracy and integrity. We provide results to the customer for verification and sign-off. BENEFIT TESTING The benefit process includes claims testing for all benefit plans with scripted claim scenarios performed by the benefit review team. These are scripted to the exact plans built for each customer and reviewed by the implementation manager for accuracy. They are then executed and any issues resolved, before the effective date of the customer. P O S T -I M P L E M E N T A T I O N Following DPB’s effective date, the implementation team monitors claim and service activity to verify that all claims are processing in accordance to the benefit plan design. The implementation team is also in constant contact with other service touch points (for example, home delivery pharmacy, member services, prior authorization, and specialty pharmacy) to identify and remedy any member disruption. The implementation manager provides a daily report and status on overall claim processing performance, as well as other key metrics that provide the customer a status on overall go live activities for two to four weeks following go live. Once the implementation phase is complete, the lead implementation manager transitions DPB’s program to the assigned client management team. While the client management team is actively involved throughout the implementation and attends all implementation meetings, the lead implementation manager serves as the primary contact during the implementation. The transition from implementation to client management concludes the implementation phase. June 2017 optumrx.com DPP - 960 Page 11 B D 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Commercial & EGWP Project Plan All Resources Assigned Kick-Off Meeting Preparation INTERNAL- Scope of Products & Services Sold Meeting EXTERNAL- Introductory Call/Kickoff INTERNAL- Core Team Meeting Project Tracking Create Implementation Case in ServiceNow Create Project Folders on SharePoint Implementation Kick-Off Implementation Timeline Effective Date Sales/Legal/Underwriting Win Client Complete NOS and provide to Implementations Complete Negotiations and Submit BAA Underwriting Process Receive Email of Sale Complete PDF1 and distribute Receive MAC & Network from Industry Relations Complete PDF2 and distribute Implementation Planning Sales Notification Documents Receive Notice of Sale Form from Sales Receive Contract/Letter of Agreement/Implementation Agreement from Sales Receive RFP Response (Request for Proposal) from Sales Receive Copy of Finalist Presentation from Sales Receive PGs/SLAs (Performance Guarantees/Service Level Agreements) Determine key milestones Determine reporting specifics for milestone reporting Implementation Assignments Implementation Manager Assigned Implementation Team Assignments State of New Jersey Commercial & EGWP Project Plan State of New Jersey ID 3.9 % Work Task Name Implementation Complete Key 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 Page 1 DPP - 961 7/6/17 7/4/17 7/4/17 7/7/17 7/5/17 7/4/17 7/4/17 7/4/17 7/10/17 1/1/18 1/1/18 7/3/17 7/3/17 7/3/17 7/3/17 7/3/17 7/3/17 7/4/17 7/7/17 7/7/17 7/3/17 7/4/17 7/4/17 7/4/17 7/4/17 7/4/17 7/4/17 7/10/17 7/10/17 7/3/17 7/3/17 7/6/17 7/3/17 Start 7/6/17 7/7/17 7/4/17 7/7/17 7/7/17 7/17/17 7/17/17 7/17/17 7/10/17 1/1/18 1/1/18 8/3/17 7/3/17 7/3/17 7/14/17 8/3/17 7/3/17 7/6/17 8/3/17 7/20/17 8/17/17 7/12/17 7/5/17 7/5/17 7/5/17 7/5/17 7/5/17 7/11/17 7/12/17 7/6/17 7/3/17 7/6/17 2/28/18 Finish 0 days 4 days 1 day 1 day 3 days 10 days 10 days 10 days 1 day 1 day 1 day 24 days 0 days 1 day 10 days 24 days 1 day 3 days 20 days 10 days 34 days 7 days 2 days 2 days 2 days 2 days 2 days 2 days 3 days 4 days 1 day 1 day 173 days Duration Dept/Role Owner Sales Sales Sales Underwriting Underwriting Industry Relations Underwriting Manager Impl Manager Impl Manager Impl Manager Impl Manager Impl Implementation Manager Implementation Manager Manager Impl Manager Impl Manager Impl Manager Impl IPM,Sales,Client IPM IPM IPM C C C C 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Commercial & EGWP Project Plan Kick-Off Meetings Establish Ongoing Internal Meeting Schedule Establish Ongoing Client Meeting Schedule Transition Plan Creation Create/Initiate Implementation Project Plan Create/Initiate Monitoring Plan - Change Control Create/Initiate Member Communication Strategy Initiate Implementation / Issue and Risk Tracking Create and Distribute Contact List Transition Plan Provided Requirements Gathering Business Structure Discuss Carrier/Account/Group (CAG) Hierarchy Document CAG Hierarchy Assign Client Code and GIS Identifier Review/Revise CAG Hierarchy Approve CAG Hierarchy CAG Hierarchy Built in RxCLAIM B/P/G Secure approval for Custom BIN or PCN Assign BIN/PCN/GROUP Benefit Plan Requirements Discuss Benefit Plan Requirements Discuss BDT Determine number of Benefit Plans Document Requirements in BDT Review/Revise Benefit Plan Template Approve Benefit Plan Template RxBuilder Setup Benefit Plan Build BDT requirements Configuration CBDT requirements Configuration Specialty Pricing Med D Profile State of New Jersey ID 3.9 % Work Task Name Implementation Complete Key 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 Page 2 DPP - 962 7/10/17 7/10/17 7/10/17 7/7/17 7/7/17 7/7/17 7/7/17 7/7/17 7/7/17 7/17/17 7/3/17 7/24/17 7/24/17 7/31/17 7/31/17 8/2/17 8/9/17 8/11/17 7/3/17 7/3/17 8/11/17 7/17/17 7/17/17 7/17/17 7/31/17 8/2/17 8/7/17 8/23/17 8/28/17 8/28/17 8/28/17 8/28/17 8/28/17 8/28/17 Start 7/10/17 7/10/17 7/10/17 7/17/17 7/17/17 7/17/17 7/17/17 7/17/17 7/17/17 7/17/17 8/17/17 8/17/17 7/28/17 8/1/17 8/4/17 8/8/17 8/10/17 8/17/17 8/17/17 7/4/17 8/17/17 10/18/17 9/8/17 7/28/17 8/1/17 8/4/17 8/22/17 8/25/17 9/8/17 10/18/17 9/28/17 9/28/17 9/1/17 9/1/17 Finish 1 day 1 day 1 day 7 days 7 days 7 days 7 days 7 days 7 days 0 days 34 days 19 days 5 days 2 days 5 days 5 days 2 days 5 days 34 days 2 days 5 days 68 days 40 days 10 days 2 days 3 days 12 days 3 days 10 days 38 days 24 days 24 days 5 days 5 days Duration Dept/Role Owner IPM IPM IPM IPM IPM IPM,Client IPM PBM Tech Ops IPM,Client Client Benefit Analyst IPM,Retail Network IPM Benefit Analyst,Client Benefit Admin Benefit Analyst,Clinical Consultant Benefit Analyst,Clinical Consultant,Client Client Formulary Benefit Admin Benefit Admin Benefit Admin F 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Commercial & EGWP Project Plan Formulary Network Creation Pricing ePrescribing QA Analysis QA Med D Formulary Testing Round 1 Formulary Testing Round 1 Formulary Review Round 1 Formulary Testing corrections Round 2 Formulary Testing Round 2 Formulary Review Round 2 Formulary Testing Corrections Round 3 Formulary Testing Round 3 Formulary Review Round 3 Formulary Completion QA Med D Baseline Testing Baseline testing starts (minus system enhancements) Baseline Testing defects submitted Baseline defects resolved QA retesting and summaries generated for Baseline QA Med D Benefit Enhancement Testing Enhancement coding pieces coded and sent to QA Enhancement pieces tested and defects submitted Enhancement pieces defects resolved QA retesting and summaries generated for Enhancement pieces Commercial Benefit Plan QA Testing Baseline testing starts Baseline Testing defects submitted Baseline defects resolved QA retesting and summaries generated for Baseline EGWP & Commercial Benefit Plan Testing Eligibility Member Eligibility Determine Eligibility Provider State of New Jersey ID 3.9 % Work Task Name Implementation Complete Key 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 Page 3 DPP - 963 Start 10/18/17 10/16/17 10/16/17 10/16/17 1/10/18 1/10/18 10/25/17 11/15/17 11/22/17 11/29/17 12/20/17 12/27/17 1/3/18 1/10/18 1/10/18 11/15/17 11/1/17 11/2/17 11/9/17 11/15/17 11/15/17 10/23/17 11/3/17 11/10/17 11/15/17 11/15/17 10/19/17 10/26/17 11/9/17 11/15/17 11/15/17 12/1/17 12/1/17 8/8/17 Finish 5 days 5 days 5 days 5 days 74 days 60 days 5 days 15 days 5 days 5 days 15 days 5 days 5 days 5 days 1 day 20 days 10 days 1 day 5 days 4 days 34 days 17 days 9 days 5 days 3 days 34 days 15 days 5 days 10 days 4 days 0 days 84 days 84 days 1 day Duration IPM,Client Dept/Role Owner QA Analyst QA Analyst BA Analyst QA Analyst BA QA Analyst BA Analyst QA Analyst QA Analyst QA Analyst BA Analyst QA Analyst QA Analyst Formulary OPs analyst BA Analyst QA Analyst Formulary OPs analyst BA Analyst QA Analyst Formulary OPs analyst BA Analyst Benefit Admin Benefit Admin Benefit Admin 10/12/17 10/10/17 10/10/17 10/10/17 9/29/17 10/19/17 10/19/17 10/26/17 11/16/17 11/23/17 11/30/17 12/21/17 12/28/17 1/4/18 1/10/18 10/19/17 10/19/17 11/2/17 11/3/17 11/10/17 9/29/17 9/29/17 10/24/17 11/6/17 11/13/17 9/29/17 9/29/17 10/20/17 10/27/17 11/10/17 11/15/17 8/8/17 8/8/17 8/8/17 H 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Commercial & EGWP Project Plan Standard Eligibility (v8.0/8.1) Provide OptumRx Member Eligibility Layout for review Discuss OptumRx Member Eligibility Layout Format Confirm Eligibility Details 834 Eligibility Discuss 834 Eligibility Layout and Mapping Confirm Eligibility Details Custom Eligibility Discuss Custom Eligibility Format and Requirements Confirm Eligibility Details Submit PRF for Custom Eligibility Format Develop Custom Eligibility Reformat Program Test Custom Eligibility Reformat Program Create Eligibility Setup Confirmation Document Approve Eligibility Setup Confirmation Document Request Eligibility Automation and Inventory ID Complete setup for Eligibility Automation Test Eligibility File load Receive Test Member Eligibility File Load Test Member Eligibility File Review Results of Test Member Eligibility Load Test Eligibility File load #2 Receive Test Member Eligibility File Load Test Member Eligibility File Review Results of Test Member Eligibility Load Member Eligibility Production File Ready Production Eligibility File Load Provide Production Member Eligibility File Load Production Member Eligibility File Review Results of Production Member Eligibility Load Promote Member Eligibility to Production RxCLAIM environment Send load confirmation to IPM, Print fulfillment, & Client Establish Automated Eligibility Load Group Load (Group Eligibility) State of New Jersey ID 3.9 % Work Task Name Implementation Complete Key 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 Page 4 DPP - 964 8/9/17 8/9/17 8/9/17 8/23/17 8/9/17 8/9/17 8/9/17 8/9/17 8/9/17 8/9/17 8/16/17 8/18/17 8/18/17 8/30/17 9/13/17 8/30/17 9/1/17 9/6/17 9/6/17 9/7/17 9/14/17 10/2/17 10/2/17 10/3/17 10/10/17 11/15/17 11/16/17 11/16/17 11/17/17 11/22/17 11/29/17 11/30/17 11/30/17 9/12/17 Start 8/29/17 8/9/17 8/22/17 8/29/17 8/15/17 8/15/17 8/15/17 9/7/17 8/15/17 8/15/17 8/17/17 9/7/17 8/31/17 9/12/17 9/19/17 8/31/17 9/28/17 9/22/17 9/6/17 9/13/17 9/22/17 10/18/17 10/2/17 10/9/17 10/18/17 11/15/17 12/1/17 11/16/17 11/21/17 11/22/17 11/29/17 12/1/17 11/30/17 10/26/17 Finish 15 days 1 day 10 days 5 days 5 days 5 days 5 days 22 days 5 days 5 days 2 days 15 days 10 days 10 days 5 days 2 days 20 days 13 days 1 day 5 days 7 days 13 days 1 day 5 days 7 days 0 days 12 days 1 day 3 days 1 day 1 day 2 days 1 day 33 days Duration Dept/Role Owner IPM Eligibility Analyst,Eligibility Provider Eligibility Analyst,Client,Eligibility Provide Eligibility Analyst,EDI,Eligibility Provider Eligibility Analyst,Client,Eligibility Provide Eligibility Analyst,Eligibility Provider Eligibility Analyst,Client,Eligibility Provide Eligibility Analyst Eligibility Analyst Development Eligibility Analyst Eligibility Provider Eligibility Analyst DCO Eligibility Provider Eligibility Analyst Eligibility Analyst,Eligibility Provider,Clien Eligibility Analyst,Eligibility Provider Eligibility Provider Eligibility Analyst Eligibility Analyst,Eligibility Provider,Clien Eligibility Provider Eligibility Analyst Eligibility Analyst,Eligibility Provider,Clien Eligibility Analyst Eligibility Analyst Eligibility Analyst,DCO 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Commercial & EGWP Project Plan Send active member report to client (Account by relationship) Provide OptumRx Group Load Layout for Review Discuss OptumRx Group Load Layout Confirm Group Load Details Request Group Load Automation and Inventory ID Complete setup for Group Load Automation Provide Test Group Load File Load Test Group Load File Review Results of Test Group Load Additional rounds of Group Load Testing Provide Production Group Load File Load Production Group Load File Review Results of Production Group Load Promote Groups to Production RxCLAIM environment Provide Reports for Production Load Establish Automated Group Load Clinical Kickoff Call to verify Clinical Requirements / Gather Client Intent Prefill Clinical design template Prefill PA Survey Clinical Requirement Received Obtain Initial Historical claims data from Sales (if available) Make Clinical Recommendations Update Clinical Intent Document Update PA Survey Submit Clinical Intent Document to BA or BC Formulary Build PA Survey to PAS Drug Intelligence Discuss Drug Recall Program Confirm Drug Recall Requirements with Drug Intelligence Set up Client for Drug Recall Program Request Clinical Publications Establish Clinical Publications State of New Jersey ID 3.9 % Work Task Name Implementation Complete Key 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 Page 5 DPP - 965 Start 9/13/17 9/14/17 9/21/17 9/21/17 9/25/17 10/23/17 9/28/17 10/3/17 10/5/17 10/12/17 10/16/17 10/18/17 10/20/17 10/24/17 10/26/17 10/25/17 12/18/17 7/17/17 8/7/17 8/7/17 7/31/17 7/24/17 8/21/17 8/3/17 8/1/17 10/23/17 10/11/17 8/2/17 12/18/17 7/7/17 7/14/17 7/21/17 12/11/17 12/18/17 Finish 2 days 1 day 5 days 5 days 2 days 20 days 5 days 3 days 2 days 5 days 2 days 2 days 2 days 2 days 2 days 1 day 121 days 1 day 15 days 15 days 10 days 5 days 15 days 3 days 1 day 1 day 40 days 2 days 121 days 5 days 5 days 5 days 1 day 5 days Duration IPM,Client IPM Drug Intelligence IPM,Clinical Consultant Clinical Dept/Role Owner Clinical Consultant Clinical Consultant Clinical Consultant Client,Consultant Clinical Consultant Clinical Consultant Clinical Consultant Clinical Consultant Client,Consultant Formulary OPs analyst Client,Consultant Eligibility Analyst IPM,Eligibility Analyst Eligibility Analyst,Client Client,Eligibility Analyst Eligibility Analyst DCO Client Eligibility Analyst Eligibility Analyst,Client Eligibility Analyst,Client Client Eligibility Analyst Eligibility Analyst,Client Eligibility Analyst Eligibility Analyst Eligibility Analyst,DCO 9/12/17 9/14/17 9/15/17 9/15/17 9/22/17 9/26/17 9/22/17 9/29/17 10/4/17 10/6/17 10/13/17 10/17/17 10/19/17 10/23/17 10/25/17 10/25/17 7/3/17 7/17/17 7/18/17 7/18/17 7/18/17 7/18/17 8/1/17 8/1/17 8/1/17 10/23/17 8/17/17 8/1/17 7/3/17 7/3/17 7/10/17 7/17/17 12/11/17 12/12/17 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185 186 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Commercial & EGWP Project Plan Prescriber Network Provide OptumRx Prescriber Load Layout for review Discuss OptumRx Prescriber Load Layout Format Request Prescriber Load Automation and Inventory ID Complete setup for Prescriber Network Provide Test Prescriber Load File Load Test Prescriber File Review Results of Test Prescriber Load Approve Test Prescriber Load Provide Production Prescriber Load File Load Production Prescriber File Establish Automated Prescriber Load Claim Extract Standard Extract Provide OptumRx Claim Extract Layout for review Prior Authorization (Clinical Call Center) Discuss Requirements for Prior Authorization Management Review Prior Authorization Process Discuss Clinical Appeals Process Discuss Administrative Appeals Process Assign Clinical Call Center Toll Free Number Complete PA Survey Review/Revise PA Survey Approve PA Survey Set up process for Prior Authorization Management Set up PAS application for Prior Authorization Management Train Prior Authorization Agents on Client Requirements Data Interfaces Discuss and Receive Data Interface Requirements Obtain approval for Custom Requirements ( if applicable) Capture detail Requirements for Custom layout Obtain client sign off on Custom Requirements Obtain necessary NDA and/or PHI Authorization Release Forms for Data Exchange State of New Jersey ID 3.9 % Work Task Name Implementation Complete Key 187 188 189 190 191 192 193 194 195 196 197 198 199 200 201 Page 6 DPP - 966 7/3/17 7/3/17 7/10/17 7/10/17 7/10/17 7/17/17 7/17/17 7/24/17 7/31/17 8/7/17 8/7/17 8/28/17 7/3/17 7/3/17 7/27/17 7/28/17 8/11/17 8/16/17 Start 12/20/17 7/3/17 7/10/17 7/12/17 8/9/17 11/13/17 11/20/17 11/27/17 12/5/17 12/11/17 12/13/17 12/20/17 1/3/18 1/3/18 7/3/17 9/8/17 7/7/17 7/14/17 7/14/17 7/14/17 7/17/17 7/21/17 7/28/17 8/4/17 8/25/17 8/25/17 9/8/17 2/2/18 7/3/17 7/27/17 8/10/17 8/15/17 9/26/17 Finish 123 days 1 day 5 days 2 days 20 days 15 days 5 days 5 days 1 day 5 days 2 days 5 days 133 days 133 days 1 day 50 days 5 days 5 days 5 days 5 days 1 day 5 days 5 days 5 days 15 days 15 days 10 days 155 days 1 day 1 day 10 days 3 days 30 days Duration IPM Client Client Data Analyst Data Analyst,IPM Legal,IPM,Client Dept/Role Owner IPM Data Analyst,Client Data Analyst DCO Client Data Analyst Data Analyst,Client Client Client Data Analyst DCO,Data Analyst IPM,Client PA,Client PA,Client PA,Client PA Clinical Consultant PA,Client Client PA PA PA 7/3/17 7/3/17 7/4/17 7/11/17 7/13/17 10/24/17 11/14/17 11/21/17 12/5/17 12/5/17 12/12/17 12/14/17 7/3/17 7/3/17 7/3/17 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Commercial & EGWP Project Plan Discuss Claim Extract Layout Format Confirm Claim Extract Details Request Robot Job for Claim Extract Set up Claim Extract Automation Provide Test Claim Extract File Load Test Claim Extract File Review Results of Test Claim Extract File Additional rounds of Extract Testing Provide Production Claim Extract File Obtain client approval Establish Automated Extract Process Custom Extract Obtain Sr. Management Approval for Custom File Discuss Custom Claim Extract Format and Requirements Confirm Claim Extract Details Submit PRF for Custom Claim Extract Format SR is created and approved Develop Custom Claim Extract Program Test Custom Claim Extract Program Client Signoff on Testing Ongoing Accumulations Sharing (HSA/HDHP/etc.) Discuss Accumulations Sharing Layout and Requirements Discuss timing and route of File Exchange Determine need for Custom Accums Load and/or Extract Test Accumulations Sharing File Exchange and Load Custom Accums Load and/or Extract Obtain Sr. Management Approval for Custom File Submit PRF for Custom Accums Program Develop and test Custom Accums Program Request Accumulation Automation and Inventory ID Complete setup for Accums Automation Client Signoff on Testing Provide/Receive Production Accumulation Load File Load Production Accumulations File State of New Jersey ID 3.9 % Work Task Name Implementation Complete Key 202 203 204 205 206 207 208 209 210 211 212 213 214 215 216 217 218 219 220 221 222 223 224 225 226 227 228 229 230 231 232 233 234 235 Page 7 DPP - 967 Start 7/31/17 7/31/17 8/2/17 8/30/17 10/30/17 11/6/17 11/13/17 11/20/17 1/3/18 12/6/17 1/3/18 8/24/17 7/13/17 7/14/17 7/14/17 7/18/17 7/20/17 8/15/17 8/23/17 8/24/17 12/8/17 7/7/17 7/7/17 7/14/17 11/13/17 12/5/17 7/13/17 7/14/17 8/4/17 7/11/17 8/8/17 12/5/17 12/5/17 12/6/17 Finish 5 days 5 days 2 days 20 days 5 days 5 days 5 days 5 days 1 day 2 days 2 days 39 days 4 days 10 days 10 days 2 days 2 days 20 days 6 days 1 day 115 days 5 days 5 days 10 days 15 days 107 days 4 days 5 days 15 days 2 days 20 days 1 day 1 day 1 day Duration Data Analyst Data Analyst Development Data Analyst DCO Client Medical Vendor Data Analyst Dept/Role Owner Data Analyst,Client,Medical Vendor Data Analyst,IPM,Medical Vendor Data Analyst Data Analyst,Medical Vendor Data Analyst Data Analyst,Client Data Analyst,Client Data Analyst Data Analyst Data Analyst Development Client Data Analyst,Client Data Analyst,Client Data Analyst DCO Data Analyst Client Data Analyst,Client,IPM Data Analyst,Client Data Analyst Client Data Analyst,DCO 7/25/17 7/25/17 8/1/17 8/3/17 10/24/17 10/31/17 11/7/17 11/14/17 1/3/18 12/5/17 1/2/18 7/3/17 7/10/17 7/3/17 7/3/17 7/17/17 7/19/17 7/19/17 8/16/17 8/24/17 7/3/17 7/3/17 7/3/17 7/3/17 10/24/17 7/10/17 7/10/17 7/10/17 7/17/17 7/10/17 7/12/17 12/5/17 12/5/17 12/6/17 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Discuss timing and route of File Exchange Commercial & EGWP Project Plan Review Results of Production Accumulations Load Provide Production Accumulation Load Extract Establish Automated Accumulations Load Historical File Loads Historical Claims Discuss Historical Claim Transfer Layout and Requirements Discuss timing and route of File Exchange Adjust Load Program if Necessary Set up Historical CAG Set up Historical TCT Test Historical Claims File Provide Test Historical Claim File Load Test File Load and Error report Match Historical Data to Test Eligibility Share Match Rate with IPM Historical Claim File Production Ready Production Historical Claims File Provide Initial Historical Claim Production File Load Initial Historical Claim Production File to Historical CAG Review/Revise Initial Historical Claim Load Match Initial Historical Claim Load to Eligibility Share Match Rate with IPM Historical Claims Lag File Provide Lag Historical Claim Production File Load Lag Historical Claim Production File to Historical CAG Review/Revise Lag Historical Claim Load Match Lag Historical Claim Load to Eligibility Share Match Rate with IPM Push Claim History to Data Warehouse (if applicable) Historical Accums Discuss Historical Accums Transfer Layout and Requirements State of New Jersey ID 3.9 % Work Task Name Implementation Complete Key 236 237 238 239 240 241 242 243 244 245 246 247 248 249 250 251 252 253 254 255 256 257 258 259 260 261 262 263 264 265 266 267 0% I 268 Page 8 DPP - 968 12/7/17 12/7/17 12/8/17 7/3/17 7/3/17 7/3/17 7/3/17 7/10/17 8/11/17 8/11/17 8/29/17 8/29/17 9/5/17 9/14/17 9/18/17 9/27/17 11/29/17 11/14/17 11/14/17 11/21/17 11/28/17 12/5/17 12/12/17 1/9/18 1/9/18 1/10/18 1/12/18 1/17/18 1/22/18 1/22/18 8/8/17 8/8/17 Start 8/14/17 12/7/17 12/7/17 12/8/17 2/2/18 2/2/18 7/7/17 7/7/17 7/28/17 8/17/17 8/11/17 9/27/17 9/4/17 9/13/17 9/15/17 9/26/17 9/27/17 11/29/17 12/12/17 11/20/17 11/27/17 12/4/17 12/11/17 12/12/17 1/23/18 1/9/18 1/11/18 1/16/18 1/19/18 1/23/18 2/2/18 9/25/17 8/14/17 Finish 5 days 1 day 1 day 1 day 155 days 155 days 5 days 5 days 15 days 5 days 1 day 22 days 5 days 7 days 2 days 7 days 1 day 0 days 21 days 5 days 5 days 5 days 5 days 1 day 11 days 1 day 2 days 3 days 3 days 2 days 10 days 35 days 5 days Duration IPM,Incumbent,Data Analyst Data Analyst,Client,Incumbent Dept/Role Owner Incumbent EDMI EDMI,IPM,Client EDMI EDMI EDMI,Development Incumbent EDMI EDMI,IPM,Client EDMI EDMI Incumbent EDMI EDMI EDMI EDMI EDMI,Client,Incumbent IPM,Incumbent,EDMI EDMI Benefit Analyst Benefit Analyst Data Analyst,Medical Vendor,Client Data Analyst DCO,Data Analyst 8/8/17 N 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Commercial & EGWP Project Plan Discuss timing and route of File Exchange Adjust Load Program if Necessary Test Historical PAs Map PAs to RxCLAIM Flags Receive/Test Historical PA Test File Production Historical PAs Provide Initial Historical PA Production File Map PAs to RxCLAIM Flags Load Initial Historical PA Production File Review/Revise Initial Historical PA Load Historical PA Lag File Provide Lag Historical PA Production File Map PAs to RxCLAIM Flags Load Lag Historical PA Production File Review/Revise Lag Historical PA Load Member Services (Member/Pharmacy Call Center) Assign Toll Free # Discuss Requirements / Service Levels for Member and Pharmacy Call Center Complete Member Services Client Sign Off document Review/Revise Member Services Client Sign Off document Approve Member Services Client Sign Off document Set up process for Member and Pharmacy Call Center Complete RXCCR Setup Train Member Services Representatives on Client Requirements Test Phone Line Phone Lines Open Adjust Load Program if Necessary Receive/Test Historical Accums Test File Provide Initial Historical Accums Production File Load Initial Historical Accums Production File Review/Revise Initial Historical Accums Load Historical PAs Discuss Historical PA Transfer Layout and Requirements State of New Jersey ID 3.9 % Work Task Name Implementation Complete Key 269 270 271 272 273 274 275 276 277 278 279 280 281 282 283 284 285 286 287 288 289 290 291 292 293 294 295 296 297 298 299 300 301 Page 9 DPP - 969 8/15/17 8/15/17 9/5/17 9/12/17 9/19/17 8/15/17 8/15/17 Start 8/21/17 9/11/17 12/4/17 12/4/17 11/27/17 1/1/18 12/11/17 12/18/17 12/25/17 1/1/18 1/19/18 1/9/18 1/11/18 1/16/18 1/19/18 9/29/17 7/17/17 7/24/17 7/31/17 8/14/17 8/21/17 8/28/17 9/25/17 9/29/17 9/29/17 9/29/17 9/4/17 9/4/17 9/11/17 9/18/17 9/25/17 1/19/18 8/21/17 Finish 5 days 15 days 20 days 5 days 15 days 20 days 5 days 5 days 5 days 5 days 9 days 1 day 2 days 3 days 3 days 64 days 10 days 5 days 5 days 10 days 5 days 5 days 20 days 29 days 3 days 0 days 15 days 15 days 5 days 5 days 5 days 114 days 5 days Duration Customer Care IPM,Client Customer Care Customer Care,Client Client Customer Care Customer Care Customer Care Customer Care Customer Care PBM Tech Ops,Client,Incumbent Dept/Role Owner Incumbent PBM Tech Ops PBM Tech Ops PBM Tech Ops,IPM,Client Incumbent PBM Tech Ops PBM Tech Ops PBM Tech Ops,IPM,Client PBM Tech Ops Incumbent IPM,Incumbent,PBM Tech Ops PBM Tech Ops Data Analyst Incumbent Incumbent Data Analyst Data Analyst,Client,IPM 8/15/17 8/22/17 11/7/17 11/28/17 11/7/17 12/5/17 12/5/17 12/12/17 12/19/17 12/26/17 1/9/18 1/9/18 1/10/18 1/12/18 1/17/18 7/4/17 7/4/17 7/18/17 7/25/17 8/1/17 8/15/17 8/22/17 8/29/17 8/22/17 9/27/17 9/29/17 O Digital Solutions 7/3/17 Member Portal (myOptumRxRx.com) 7/3/17 Provide Member Portal Overview 10/3/17 Determine Member Portal Setup Requirements 10/10/17 Complete www.optumrx Implementation Form 10/17/17 Configure Member Portal 11/21/17 Test Member Portal Configuration 12/12/17 Receive dummy/test login information from Digital Solutions 12/12/17 Review Web Portal to ensure reference documents and overall information is accurate 12/14/17 12/15/17 8/9/17 7/21/17 7/4/17 7/14/17 7/21/17 8/9/17 7/4/17 7/12/17 8/9/17 2/28/18 7/17/17 7/14/17 7/17/17 7/17/17 7/17/17 2/28/18 10/9/17 9/18/17 10/9/17 11/21/17 11/6/17 11/15/17 11/20/17 12/15/17 12/15/17 10/9/17 10/16/17 10/18/17 12/11/17 12/14/17 12/13/17 12/15/17 Finish 0 days 28 days 15 days 2 days 8 days 5 days 28 days 2 days 8 days 20 days 173 days 11 days 10 days 5 days 1 day 1 day 118 days 16 days 1 day 5 days 11 days 0 days 7 days 3 days 120 days 120 days 5 days 5 days 2 days 15 days 3 days 2 days 2 days Duration Incumbent Mail Order Mail Order IPM IPM,Client IPM Digital Solutions Digital Solutions,IPM Digital Solutions IPM Dept/Role Owner Start 12/15/17 7/3/17 7/3/17 7/3/17 7/5/17 7/17/17 7/3/17 7/3/17 7/3/17 7/13/17 7/3/17 7/3/17 7/3/17 7/11/17 7/17/17 7/17/17 9/18/17 9/18/17 9/18/17 10/3/17 11/6/17 11/6/17 11/7/17 11/16/17 Commercial & EGWP Project Plan 0% 0% 0% 0% 0% 0% 0% 0% 0% Portal Configuration Complete SSO SSO (standard) Submit SSO request form to Digital Solutions Coordinate any technical meetings if needed Confirm Connectivity with Client SSO (SAML) Provide singed amendment for SAML to Digital Solutions Coordinate SAML kick off meeting with Client and OptumRx Confirm Connectivity with Client Home Delivery Home Delivery Setup Discuss Home Delivery Setup Requirements Complete OptumRx Home Delivery Implementation Form Setup Client for OptumRx Home Delivery in IRIS Enable Mail Tab Home Delivery Open Refill Transfer File Discuss Home Delivery Transfer Requirements (ORT/New Rx) Discuss timing and route of File Exchange Complete ORT File Data Grid Test ORT File (Mail & Specialty) Provide Test ORT Test File Load ORT Test File ORTF QA IPM,Incumbent,Mail Order Incumbent Account Management Operations IPM,Client,Mail Order IPM IPM IPM Digital Solutions IPM IPM IPM,Digital Solutions Digital Solutions 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% State of New Jersey ID 3.9 % Work Task Name Implementation Complete Key 302 303 304 305 306 307 308 309 310 311 312 313 314 315 316 317 318 319 320 321 322 323 324 325 326 327 328 329 330 331 332 333 334 Page 10 DPP - 970 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Commercial & EGWP Project Plan Review and discuss who will mail the Annual Notice of Change CY Provide draft of ANOC Confirm mailing date of ANOC and provide final total for mailing Summary of Benefits ORx and Client to review and determine requirements for EGWP Pre/Post Enrollment Letters Letter approval from Client Mail file created Approved documents sent to Print Fulfillment Production file sent to Vendor Communication Materials Mailed to members Pre-Enrollment Letter in Members Hands prior to Open Enrollment Summary of Load Provided Pre-Production ORT File (Mail & Specialty) ORT Pre-Production File Ready - Mail & Specialty Load ORT Pre-Production File ORTF QA Summary of Load Provided ORT Production File Provide ORT Production File Load ORT Production File ORTF QA Summary of Load Provided ORT Lag File Provide ORT Lag File Load Lag ORT File ORTF QA Summary of Load Provided ORTF Cover Letter Mailing Send any new scripts received post-go live Print Fulfillment Complete New Client Member ID Card & Communication Notification Form Annual Notice of Change (ANOC) State of New Jersey ID 3.9 % Work Task Name Implementation Complete Key 335 336 337 338 339 340 341 342 343 344 345 346 347 348 349 350 351 352 353 354 355 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% J 356 357 358 359 360 361 362 363 364 365 366 367 Page 11 DPP - 971 7/3/17 7/12/17 8/1/17 7/10/17 7/10/17 8/29/17 8/29/17 9/11/17 9/18/17 9/25/17 10/5/17 10/10/17 11/21/17 11/29/17 11/29/17 11/30/17 12/5/17 12/8/17 1/1/18 1/1/18 1/1/18 1/4/18 1/9/18 1/10/18 1/10/18 1/11/18 1/16/18 1/19/18 1/18/18 1/18/18 7/3/17 9/19/17 7/3/17 Start 7/11/17 7/31/17 8/9/17 7/28/17 7/28/17 10/16/17 9/8/17 9/15/17 9/22/17 10/4/17 10/12/17 10/16/17 11/21/17 12/8/17 11/29/17 12/4/17 12/7/17 12/8/17 1/9/18 1/1/18 1/3/18 1/8/18 1/9/18 1/19/18 1/10/18 1/15/18 1/18/18 1/19/18 2/28/18 2/28/18 12/7/17 9/25/17 8/9/17 Finish 7 days 14 days 7 days 15 days 15 days 35 days 9 days 5 days 5 days 8 days 6 days 5 days 1 day 7 days 0 days 3 days 3 days 1 day 7 days 1 day 3 days 3 days 1 day 8 days 1 day 3 days 3 days 1 day 30 days 30 days 114 days 5 days 28 days Duration Dept/Role Owner Mail Order Incumbent Mail Order Mail Order,Client,IPM Mail Order Incumbent Mail Order Mail Order,Client,IPM Mail Order Incumbent Mail Order Mail Order,Client,IPM Mail Order Incumbent IPM IPM,Client,Darci IPM,Darci Darci Med D Ops / Client Client IT IPM Print Fulfillment Vendor L M 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Commercial & EGWP Project Plan Opt Out Letter Determine Opt Out letter Requirements ORx to develop Opt Out Letter ORx to review Opt Out Process with Client Receive approval from Client on Opt Out Letter ORx to mail Opt Out Letter to members Other Member Materials Evident of Coverage (EOC) Pharmacy Network List (Pharmacy Directory) Abridged Formulary Comprehensive Formulary OptumRx Home Delivery Home Delivery brochure OptumRx Notice of Privacy Practices Explanation of Benefits (EOB) Transitional Benefit (TB) Letter TRR Exhibit/LIS/LEP letters Briova Specialty Services letter OptumRx Home Delivery Transition letter Prescription Transfer letter - model ID Card Production by OptumRx Review ID Card Requirements (NCPDP if applicable) Provide Logo/Custom Information for ID Cards Mock Up ID Card Review/Revise ID Card Proof Approve ID Card Proof Build ID Card for Production Print ID Cards Print/Ship ID Cards to Members or Client ID Card Production Outside of OptumRx Provide BIN/PCN/RxGroup for ID Cards Provide Customer Care Phone Number Provide OptumRx Logo (optional) Provide www.optumrx.com website (optional) Review and Approve ID Card Proof State of New Jersey ID 3.9 % Work Task Name Implementation Complete Key 368 369 370 371 372 373 374 375 376 377 378 379 380 381 382 383 384 385 386 387 388 389 390 391 392 393 394 395 396 397 398 399 400 401 Page 12 DPP - 972 Start 10/16/17 7/14/17 7/28/17 8/11/17 9/4/17 10/16/17 8/29/17 8/29/17 8/29/17 8/29/17 8/29/17 8/29/17 8/29/17 8/29/17 8/29/17 8/29/17 8/29/17 8/29/17 8/29/17 12/7/17 7/24/17 7/24/17 8/7/17 8/21/17 10/31/17 11/7/17 12/5/17 12/7/17 8/15/17 7/24/17 7/24/17 7/24/17 7/24/17 8/14/17 Finish 76 days 10 days 10 days 10 days 5 days 5 days 1 day 1 day 1 day 1 day 1 day 1 day 1 day 1 day 1 day 1 day 1 day 1 day 1 day 103 days 5 days 5 days 10 days 10 days 5 days 5 days 10 days 2 days 21 days 5 days 5 days 5 days 5 days 15 days Duration IPM IPM IPM IPM IPM,Client Dept/Role Owner Client,Print Analyst Client Print Analyst Client,Print Analyst Client Print Analyst Print Vendor Print Vendor Med D Ops Med D Ops/Member Communications Med D Ops Client/IPM Print Fulfillment /Vendor 7/3/17 7/3/17 7/17/17 7/31/17 8/29/17 10/10/17 8/29/17 8/29/17 8/29/17 8/29/17 8/29/17 8/29/17 8/29/17 8/29/17 8/29/17 8/29/17 8/29/17 8/29/17 8/29/17 7/18/17 7/18/17 7/18/17 7/25/17 8/8/17 10/25/17 11/1/17 11/22/17 12/6/17 7/18/17 7/18/17 7/18/17 7/18/17 7/18/17 7/25/17 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Commercial & EGWP Project Plan Provide ID Card Proof to Customer Care Confirm ID Card Shipment with Print Vendor Member Welcome Letter Provide Standard Welcome Letter for Review Review/Adjust Welcome Letter Approve Member Welcome Letter Create Member Welcome Letter Print Member Materials Ship Member Materials to Members or Client Custom Member Kit Communication Materials (if applicable) Provide Quote / Approval for Custom Communications Approve Custom Communications Produce Custom Communications Review/Revise Custom Communications Queue Member Materials to Print Vendor Obtain proofs from Print Vendor Review Print Vendor proofs Provide Member Materials to Customer Care File Transfer Connectivity Discuss sFTP Requirements for File Transfer Request sFTP Setup/Structure Establish sFTP Site and Structure Provide Connection & Login Information for sFTP Site Test sFTP Connectivity Manual Claims Discuss Requirements for Manual Claims Processing Review Manual Claims Process Complete Manual Claim Implementation Questionnaire (MCIQ) Review/Revise MCIQ Approve MCIQ Set up process for Manual Claims Processing with Benefit Administration Pharmacy Networks Retail Network Determine Network Requirements State of New Jersey ID 3.9 % Work Task Name Implementation Complete Key 402 403 404 405 406 407 408 409 410 411 412 413 414 415 416 417 418 419 420 421 422 423 424 425 426 427 428 429 430 431 432 433 434 435 Page 13 DPP - 973 Start 8/15/17 8/15/17 10/16/17 7/18/17 8/22/17 9/4/17 9/11/17 10/13/17 10/16/17 11/15/17 7/24/17 9/4/17 8/14/17 8/21/17 11/9/17 11/13/17 11/15/17 11/10/17 8/18/17 7/7/17 7/11/17 8/14/17 8/16/17 8/18/17 1/1/18 7/7/17 7/28/17 8/11/17 8/18/17 8/25/17 1/1/18 12/18/17 12/18/17 7/7/17 Finish 1 day 1 day 65 days 1 day 25 days 5 days 5 days 4 days 5 days 87 days 5 days 5 days 15 days 5 days 2 days 2 days 2 days 1 day 35 days 5 days 2 days 10 days 2 days 2 days 131 days 5 days 15 days 10 days 5 days 5 days 10 days 121 days 121 days 5 days Duration IPM,Client Dept/Role Owner Client,IPM Manual Claims,Client Manual Claims Manual Claims,Client Client Manual Claims,Benefit Analyst Client,Data Analyst Data Analyst DCO Data Analyst Client Sales,Acct Exec Client Client,IPM,Marketing Client,IPM,Marketing,Print Analyst Print Analyst Print Analyst IPM,Client IPM IPM Client Client Acct Exec,IPM Print Vendor Print Vendor IPM IPM 8/15/17 8/15/17 7/18/17 7/18/17 7/19/17 8/29/17 9/5/17 10/10/17 10/10/17 7/18/17 7/18/17 8/29/17 7/25/17 8/15/17 11/8/17 11/10/17 11/14/17 11/10/17 7/3/17 7/3/17 7/10/17 8/1/17 8/15/17 8/17/17 7/3/17 7/3/17 7/10/17 7/31/17 8/14/17 8/21/17 12/19/17 7/3/17 7/3/17 7/3/17 Determine Pharmacy Contracting Requirements Set up Retail Network Pharmacy Contracting Outreach to Pharmacies to add to Network Complete addition of Pharmacy to Network Home Delivery Network Determine Network Requirements (Contract/LOA) Custom Home Delivery Network Set up Home Delivery Network Pharmacy Notification Pharmacy Fax Blasts Data Transfer (Loads & Extracts) Obtain necessary NDA and/or PHI Authorization Release Forms for Data Exchange 8/15/17 8/29/17 8/29/17 8/29/17 12/5/17 8/29/17 8/29/17 8/29/17 8/29/17 9/12/17 12/5/17 8/15/17 8/15/17 9/13/17 9/13/17 9/13/17 9/27/17 9/29/17 7/27/17 7/27/17 7/17/17 10/10/17 10/10/17 10/10/17 11/21/17 7/3/17 7/3/17 7/10/17 7/10/17 11/20/17 11/20/17 7/3/17 7/3/17 Start 1/1/18 1/1/18 9/4/17 9/4/17 12/25/17 1/1/18 9/11/17 9/11/17 9/11/17 9/13/17 1/1/18 10/12/17 8/15/17 9/26/17 9/26/17 9/26/17 9/28/17 10/12/17 9/29/17 9/29/17 7/21/17 12/18/17 12/18/17 11/20/17 12/18/17 7/21/17 7/7/17 7/21/17 7/21/17 11/20/17 11/20/17 8/11/17 8/11/17 Finish 100 days 90 days 5 days 5 days 15 days 90 days 10 days 10 days 10 days 2 days 20 days 43 days 1 day 10 days 10 days 10 days 2 days 10 days 47 days 47 days 5 days 50 days 50 days 30 days 20 days 15 days 5 days 10 days 10 days 1 day 1 day 30 days 30 days Duration Legal,IPM,Client Dept/Role Owner Commercial & EGWP Project Plan 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Finance Payments Complete Carrier Payment Setup Request Form Complete W-9 Form for Billing Establish Pharmacy & Member Payments Rebates Determine Rebate Requirements Complete IRS W-9 Form Complete EFT Request Form Complete New Client Rebate Implementation Request Form Set up Client for Rebates Invoicing/Billing Provide Sample Invoice and Billing Reports Review Invoice and Billing Reports and Process Provide Primary and Secondary contact for Invoice and Billing Complete IRS W-9 Form Complete New Client Billing & Invoice Notification Form Set up Client Invoice and Billing System Access Client Information Center (CIC) State of New Jersey ID 3.9 % Work Task Name Implementation Complete Key 436 437 438 439 440 441 442 443 444 445 446 447 448 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% IPM IPM,Client Client Client IPM Finance IPM,Client Client Client IPM Rebates IPM Client IPM,Retail Network IPM Network Ops IPM,Client Network Ops Network Ops IPM,Retail Network Network Ops 449 450 451 452 453 454 455 456 457 458 459 460 461 462 463 464 465 466 467 468 Page 14 DPP - 974 E 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Commercial & EGWP Project Plan Determine CIC Access & Requirements Complete CIC User Request Form Set up Client Account in ServiceNow Add OptumRx and Client Contacts into ServiceNow Account Configure CIC Provide User IDs and Passwords for CIC Conduct CIC Training CBS (OptumRx Billing System) Provide Billing Samples/Reports Complete CBS Billing Form RxCLAIM Determine RxCLAIM Access & Requirements Complete RxCLAIM User Request Form Create Client Logical Create RxCLAIM User Accounts Provide User IDs and Passwords for RxCLAIM Conduct RxCLAIM Training RxTRACK (Reporting) Provide RxTRACK Report Catalog Determine RxTRACK Access & Requirements Complete RxTRACK Security Setup Request Form Complete RxTRACK Client and User Setup Provide User IDs and Passwords for RxTRACK Conduct RxTRACK Training State of New Jersey Department of Pension & Benefits Training Completed Medicare Services Schedule initial Medicare Services discussion PDE Set-up PDE file creation & submission schedule Confirm PDE submitters recertified prior to effective date FIR and Troop Balance Transfer Discuss FIR Accumulator & Transaction report sample & layout Set up current format for FIR Accumulator & Transaction reports OptumRx to review reports State of New Jersey ID 3.9 % Work Task Name Implementation Complete Key 469 470 471 472 473 474 475 476 477 478 479 480 481 482 483 484 485 486 487 488 489 490 491 492 493 494 495 496 497 498 499 500 501 502 Page 15 DPP - 975 Start 8/9/17 8/11/17 8/18/17 8/25/17 9/8/17 9/15/17 9/29/17 8/23/17 8/16/17 8/23/17 9/29/17 8/16/17 8/18/17 9/8/17 9/15/17 9/22/17 9/29/17 9/29/17 8/10/17 8/17/17 8/24/17 9/21/17 9/22/17 9/29/17 9/29/17 12/1/17 7/7/17 11/20/17 9/18/17 11/20/17 10/6/17 8/18/17 9/15/17 10/6/17 Finish 10 days 2 days 5 days 5 days 10 days 5 days 10 days 10 days 5 days 5 days 37 days 5 days 2 days 15 days 20 days 5 days 5 days 37 days 1 day 5 days 5 days 20 days 1 day 5 days 0 days 110 days 5 days 90 days 45 days 45 days 65 days 30 days 20 days 15 days Duration OptumRx MED TEAM OptumRx MED TEAM OptumRx MED TEAM Dept/Role Owner OptumRx MED TEAM OptumRx MED TEAM IPM IPM,Client,Acct Exec IPM Business Intelligence IPM Business Intelligence,Acct Exec IPM,Client IPM PBM Tech Ops PBM Tech Ops,DCO IPM Training IPM CSM IPM,Client IPM Pulse CSM ECommerce IPM OptumRx,Acct Exec,CSM 7/27/17 8/10/17 8/14/17 8/21/17 8/28/17 9/11/17 9/18/17 8/10/17 8/10/17 8/17/17 8/10/17 8/10/17 8/17/17 8/21/17 8/21/17 9/18/17 9/25/17 8/10/17 8/10/17 8/11/17 8/18/17 8/25/17 9/22/17 9/25/17 9/29/17 7/3/17 7/3/17 7/18/17 7/18/17 9/19/17 7/10/17 7/10/17 8/21/17 9/18/17 513 512 503 504 505 506 507 508 509 510 511 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% OptumRx & Client receive Final Notification from CMS for CY 2015 Formulary. 10/2/17 7/10/17 9/21/17 8/31/17 7/14/17 10/27/17 8/31/17 9/29/17 OptumRx to review rejects or questions from CMS with Client and provide corrections 9/1/17 for the formulary. 9/20/17 OptumRx to upload Formulary Files for upcoming year to the CMS website. 7/10/17 7/10/17 8/3/17 20 days 14 days 39 days 5 days 20 days 39 days 7 days 14 days 7 days OptumRx Formulary Team OptumRx Formulary Team OptumRx Formulary Team IPM,Formulary Services OptumRx MED TEAM OptumRx MED TEAM,CAM OptumRx MED TEAM Dept/Role Owner 514 0% 0% Supplemental Files to CMS (PA, ST, UM) Confirm which Supplemental Files will be upload 7/17/17 8/31/17 Duration 515 516 0% 0% Review and discuss CMS Supplemental Files 8/4/17 Finish 517 518 0% Confirm supplemental file uploads Start 519 0% HPMS Reports 7/10/17 12/1/17 105 days Review current HPMS reporting and confirm who will submit to CMS. IRX to request access 7/10/17 into CMS website 8/18/17 to post HPMS reports 30 daysfor Client OptumRx MED TEAM,Client Commercial & EGWP Project Plan 520 0% 0% Document HPMS reporting and obtain confirmation MTM Confirm MTM program OptumRx or Client Discuss CMS requirements for MTM State of New Jersey ID 3.9 % Work Task Name Implementation Complete Key 521 522 0% 0% 0% 0% Formulary Submission by OptumRx Confirm completion of formulary build in RxBuilder or Zynchros 8/23/17 8/21/17 7/3/17 7/3/17 7/10/17 8/31/17 12/1/17 8/29/17 7/5/17 8/18/17 75 days 42 days 3 days 30 days CAM,Client CAM,Client Susan Dunne Transition Process 7/10/17 11/20/17 96 days Determine Transition Process: Clients or ORx. Also determine Transition Process and 7/10/17 coverage : (Minimum7/28/17 Vs. Maximum, OTC, 15Step days& PA)CAM,Client Review and approve Transition Letter Samples 8/29/17 10/9/17 30 days CAM,Client Build Transition Process 10/10/17 10/30/17 15 days Test functionality for Transition Process 10/31/17 11/20/17 15 days Benefit Admin Formulary Submission by OptumRx 7/10/17 10/27/17 80 days Confirm OptumRx will be submitting formulary to CMS 7/10/17 7/11/17 2 days IPM,Client Request CMS access to submit formulary files for upcoming plan year. 7/12/17 8/22/17 30 days Client Discuss coverage for CY 2015 including: Formulary, PA, Step, Qty, Exclusions, BvsD, BAE 7/12/17 Measures, 20 HEDIS 8/22/17 List for Elderly &30 CMS days 2015 updates CAM,Client 523 524 525 526 Page 16 DPP - 976 Finish Duration Benefit Admin Dept/Role Owner Start 7 days 50 days 10 days 10 days 30 days 78 days 10 days 1 day 5 days 2 days 12 days 15 days 15 days 30 days 30 days 60 days 60 days 140 days 16 days 16 days Commercial & EGWP Project Plan 8/29/17 9/15/17 7/21/17 8/4/17 9/15/17 10/25/17 7/21/17 8/29/17 9/5/17 9/7/17 10/25/17 7/28/17 7/28/17 8/18/17 8/18/17 9/29/17 9/29/17 1/18/18 7/28/17 7/28/17 CTRX Member Communications State of New Jersey ID 3.9 % Work Task Name Implementation Complete Key Document MTM program and obtain approval 8/21/17 Reprocessing 7/10/17 Create Pulse task for reprocessing job/schedule 7/10/17 Discuss & confirm reprocessing schedule 7/24/17 Set-up Reprocessing job & schedule 8/7/17 EOB Processing 7/10/17 Review & document EOB Requirements 7/10/17 ORx to provide sample print ready EOB to Client 8/29/17 Approve EOB 8/30/17 Send EOB file to vendor 9/6/17 Vendor creates & mails Monthly EOB 10/10/17 Member Collection Report (MCR) 7/10/17 Review and discuss requirements to support MCR 7/10/17 Benefit Available Evidence (BAE) 7/10/17 Review and discuss requirements to support CMS BAE requirements. 7/10/17 Star Ratings 7/10/17 Discuss Star Ratings and how OptumRx will support 7/10/17 EGWP Operations 7/7/17 Router Control Set up 7/7/17 Submit task to set up Router Control; See IPM checklist for router control set up requirements 7/7/17 79 days 13 days Vendor/Client Compliance Member Services Med D Ops Med D Ops,Client Med D Ops Client Med D Ops Med D Ops IPM OptumRx,Client Greg Smith CAM,Client 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 1/18/18 10/17/17 527 528 529 530 531 532 533 534 535 536 537 538 539 540 541 542 543 544 545 546 10/1/17 10/1/17 0% 0% CMS Enrollment, OptumRx Member Communications to Enrollment Vendor 547 548 CTRX Enrollment Client Grids to Enrollment Vendor 13 days 0% Program Member Communications 10/20/17 12/1/17 31 days Enrollment Vendor Setup of Client Grids by Enrollment Vendor 10/20/17 12/1/17 31 days Enrollment Vendor Eligibility file to Enrollment Vendor 11/1/17 11/16/17 12 days CTRX Eligibility Vendor to receive notification of incomplete enrollment request/ denied enrollment 11/14/17 requests/enrollment11/17/17 cancellations & forward 4 daysActionable Vendor/Client report to (Client) 10/17/17 549 0% 0% 0% 0% 10/1/17 550 551 552 553 4 days Vendor provides (Client) notification of enrollment validation 11/23/17 0% 11/20/17 554 Page 17 DPP - 977 555 0% 0% 0% Setup of Report/File Delivery 12/4/17 12/15/17 10/31/17 11/29/17 11/17/17 11/17/17 11/17/17 11/17/17 7/10/17 7/18/17 8/1/17 10/31/17 Opt Out Letter Mailings 11/17/17 Review/Approval of Member Communications programmed at Enrollment Vendor 10/31/17 8/28/17 9/11/17 10/10/17 10/31/17 11/7/17 11/2/17 11/23/17 12/21/17 12/22/17 1/18/18 12/15/17 12/5/17 11/23/17 11/23/17 11/22/17 11/23/17 1/4/18 7/31/17 8/14/17 12/12/17 12/14/17 11/29/17 ORx loads enrollment file to production once validation process has been completed.Total 11/24/17 live count loaded: 11/28/17 10 days 51 days 51 days 51 days 51 days 157 days 10 days 10 days 21 days 15 days 20 days 17 days 15 days 20 days 15 days 25 days 34 days 5 days 5 days 5 days 4 days 5 days 129 days 10 days 10 days 31 days 20 days 22 days 3 days Duration Provider Relations /IPM/AM Provider Relations Provider Relations Provider Relations/ Med D Ops Provider Relations/ Med D Ops Provider Relations /Client Provider Relations /Client IPM/Provider Relations Provider Relations Provider Relations Provider Relations Provider Relations Provider Relations Client Client CTRX Enrollment CTRX Eligibility Analyst/ Med D Services Enrollment Vendor/CTRX Enrollment CTRX Member Communications Dept/Role Owner Finish 556 557 0% Review Setup of Client Grids Review Setup of Report/File Delivery First Run Proof of Member Communications Review Actionable Report with Client CMS Enrollment, Client ORx confirms enrollment file sent to CMS ORx confirms Actionable report received Vendor provides ORx enrollment file Client Custom Pharmacy Network - ORx Wrap Provide list of network Pharmacies to ORx Provide Contact information for pharmacies in which a specific contract is held 8/15/17 8/29/17 9/12/17 10/11/17 10/11/17 10/11/17 11/3/17 11/24/17 1/4/18 9/18/17 9/18/17 9/18/17 9/18/17 2/6/18 Start 558 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Discuss and determine who is responsible for pharmacy contracting Review Medicare Network Requirements Create Pharmacy notification( Payor sheet to ORx Network) Mail Pharmacy notification to the network pharmacies Send notification to Network Pharmacies of FWA Training/ Attestation Load Pharmacy Attestation Test Pharmacy Attestation Set up ongoing report for sanctioned prescribers / sanctioned pharmacies 12/22/17 7/10/17 7/10/17 7/10/17 7/10/17 7/3/17 Commercial & EGWP Project Plan 559 560 561 562 563 564 565 566 567 568 569 0% 0% 0% 0% 0% 0% 0% 0% Conduct go live network review & confirm network access & composition Discuss Fraud Waste & Abuse (FWA) Prompt Pay by Part D Sponsor Discuss Home Infusion Access Discuss CMS Requirements for Long Term Care Auditing State of New Jersey ID 3.9 % Work Task Name Implementation Complete Key 570 571 572 573 574 575 576 577 0% 0% 0% 0% 0% 0% Med D Ops Med D Ops Vendor CTRX Enrollment CTRX Enrollment CTRX Enrollment Med D Ops 578 579 580 581 582 583 Page 18 DPP - 978 F G 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Commercial & EGWP Project Plan Pre Implementation Audit Discuss /Determine Pre-Implementation Audit Request Commence State of New Jersey Independent Plan Testing Commence State of New Jersey Plan Design Quality Review Review State of New Jersey Testing Results - updates as necessary Pre Implementation Audit/Testing Complete Post Implementation Audit Discuss /Determine Post Implementation Audit Request Conduct Audit Provide Audit Results Post implementation Audit Complete Go Live Preparation Confirm Contract has been Executed Confirm all tasks have been completed Configure Go Live Claim Reports Determine Go Live Meeting Frequency & Schedule Determine Go Live Communication & Escalation Process Go Live Process Claims Monitor & Validate Claims Provide Status Communications as Scheduled Conduct Internal Meetings as Scheduled Conduct Client Meetings as Scheduled Project Closure Satisfaction Surveys Distribute Survey Requests Complete Survey Requests Compile Survey Results Transition to Account Management Provide all necessary Documentation Conduct Internal Transition Call Conduct Client Transition Call Review & Approve 1st Invoice Complete Implementation Lessons to Learn State of New Jersey ID 3.9 % Work Task Name Implementation Complete Key 584 585 586 587 588 589 590 591 592 593 594 595 596 597 598 599 600 601 602 603 604 605 606 607 608 609 610 611 612 613 614 615 616 617 Page 19 DPP - 979 Start 12/25/17 8/9/17 11/30/17 12/11/17 12/18/17 12/25/17 2/6/18 7/4/17 1/8/18 1/30/18 2/6/18 12/28/17 12/18/17 12/22/17 12/28/17 12/18/17 12/18/17 1/12/18 1/1/18 1/12/18 1/12/18 1/12/18 1/12/18 2/12/18 1/29/18 1/8/18 1/22/18 1/29/18 2/12/18 1/18/18 1/19/18 1/22/18 1/22/18 2/12/18 Finish 101 days 3 days 0 days 0 days 5 days 5 days 157 days 2 days 16 days 16 days 5 days 13 days 1 day 4 days 10 days 5 days 5 days 10 days 1 day 10 days 10 days 10 days 10 days 26 days 16 days 1 day 10 days 5 days 18 days 1 day 1 day 1 day 1 day 1 day Duration IPM IPM,Acct Exec,CSM,Clinical Consultant IPM,Acct Exec,CSM,Clinical Consultant,Cl Acct Exec IPM Dept/Role Owner Manager Impl Client,OptumRx Manager Impl OptumRx IPM IPM IPM IPM IPM,Sales,Legal IPM IPM,DCO IPM,Client IPM,Client IPM,Account Mgr,Client Team IPM,Account Mgr,Client IPM Team IPM,Acct Mgr IPM IPM,Account Mgr,Client 8/7/17 8/7/17 11/30/17 12/11/17 12/12/17 12/19/17 7/3/17 7/3/17 12/18/17 1/9/18 1/31/18 12/12/17 12/18/17 12/19/17 12/15/17 12/12/17 12/12/17 1/1/18 1/1/18 1/1/18 1/1/18 1/1/18 1/1/18 1/8/18 1/8/18 1/8/18 1/9/18 1/23/18 1/18/18 1/18/18 1/19/18 1/22/18 1/22/18 2/12/18 0% 0% 0% Commercial & EGWP Project Plan Project Tracking Archive all Implementation Documentation Close Out Implementation Case in ServiceNow State of New Jersey ID 3.9 % Work Task Name Implementation Complete Key 618 619 620 Page 20 DPP - 980 2/6/18 2/6/18 2/6/18 Start 2/12/18 2/12/18 2/12/18 Finish 5 days 5 days 5 days Duration IPM IPM Dept/Role Owner State of New Jersey Department of the Treasury, Division of Pensions and Benefits Technology Project Plan CONFIDENTIAL MATERIAL: CONTAINS HIGHLY SENSITIVE PROPRIETARY AND/OR TRADE SECRET INFORMATION; PUBLIC DISCLOSURE WILL CAUSE SIGNIFICANT COMPETITIVE INJURY AND DISRUPTION. OptumRx, Inc. is a wholly-owned indirect subsidiary of UnitedHealth Group Incorporated. All UnitedHealth Group development initiatives follow a formal and approved development methodology, such as the United Development Process (UDP), or the Optum Scalable Agile Method (OSAM), which includes documentation and approval requirements for: 1. Business and functional requirements 2. Security and privacy requirements 3. Documentation of impact analysis 4. Scope management 5. Design 6. Input and output process validation controls 7. Logging of system changes 8. Test planning and execution 9. Deployment planning and execution 10. Back-out procedures Per UnitedHealth Group's Information Security Application Development policies and standards, where possible, source code should be reviewed before it is deployed to identify coding vulnerabilities. A code review process is included within the Software Development Life Cycle (SDLC). UnitedHealth Group's United Development Process (UDP) calls for the reviews to be performed by peers assigned by the development lead during the Development Phase of the SDLC. Please refer to Volume 2, Section 2, 4.4.3.3.3 for the UnitedHealth Group Software Development Overview attachment for in depth details. IMPLEMENTATION PLAN Application access to resources which are critical to business or infrastructure operations must be reviewed and approved by the appropriate UnitedHealth Group Information Technology support organization, in conjunction with IRM. This is necessary to protect critical resources from accidental or intentional misuse. Application planning must include a review of access requirements to resources which are critical to business or infrastructure operations to eliminate misuse and unplanned system outages. Resources that are required to be reviewed as part of the application testing are as follows: ● UnitedHealth Group owned networks network ● UnitedHealth Group owned websites June 2017 optumrx.com DPP - 981 Page 1 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Technology Project Plan ● UnitedHealth Group owned Lightweight Directory Access Protocol (LDAP) and Identity Management Systems ● UnitedHealth Group owned desktops ● UnitedHealth Group owned databases To verify that applications are installed in the production environment without disruption to informationprocessing activities, installations in the production environment must follow a formal installation process. The installation process must include the following steps: ● Validating the load or conversion of data files; ● Implementing new/revised procedures, documentation and discontinuing older versions; ● Arranging for rollback in the event of failure; ● Informing the employees and contractors of their roles and responsibilities; ● Handing over responsibility to the employees and contractors running the production environment; and ● Logging installation activity. The content of the production release must be validated and approved by multiple qualified individuals. When possible, the production release must be validated against a full list of release components prepared at build time. Installation of desktop software on UnitedHealth Group Information Technology-supported devices must be approved and accepted or certified by Infrastructure Services. Deployment of desktop software must use Infrastructure services standard methods. All changes to UnitedHealth Group's environment follow UnitedHealth Group's Change Management Policies and Procedures to confirm that standardized methods and procedures are used for efficient and prompt handling of all changes. This process is used to minimize the impact of change-related incidents upon service quality and consequently to improve the day-to-day operations of the organization. Changes to an application or to the infrastructure include clear requirements, a back-out plan, appropriate test plan, and are approved by the appropriate Information Technology (IT) owner for implementation into production. All reasonable and industry practices are applied to verify any system changes are free from defect. The method of implementation, manual or automated, will depend on the change activity, what is being implemented, how it is being implemented, and what group is performing the change. That determines whether the change is implemented in a manual or automated fashion. June 2017 optumrx.com DPP - 982 Page 2 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Technology Project Plan O P E R A T I O N S A N D M AI N T E N A N C E P L A N S UnitedHealth Group invests in technology enhancements or new processes using a risk-based approach in order to align with regulations and customer expectations. UnitedHealth Group upgrades and enhances systems regularly. In addition to minor monthly enhancements, UnitedHealth Group implements comprehensive upgrades to systems on a quarterly basis. These planned enhancements do not represent a material reconfiguration or replacement of the existing platform or processes. UnitedHealth Group continually modifies its schedule based on business requirements/needs. Application upgrades are scheduled in accordance with UnitedHealth Group schedule and release protocols. June 2017 optumrx.com DPP - 983 Page 3 Last Update Date: 05.2016 Last Review Date: 05.2016 United Development Process (UDP) Overview Software Engineering Practices, Enterprise Technology Services DPP - 984 © 2016 UnitedHealth Group. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited 1 United Development Process (UDP) Definition UDP is a structured, defined and documented application development process (SDLC or Methodology) utilized by United Health Group IT.n – UDP covers all bases relative to internal and external control requirements including: ► Information Security, ► Sarbanes Oxley, Quality Assurance. ► Software Last Update Date: 05.2016 Last Review Date: 05.2016 – UDP is the set of required processes for software development and maintenance. DPP - 985 © 2016 UnitedHealth Group. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited 2 United Development Process (UDP) Definition – There are three paths through the process: ► Software Engineering – Uses Value Analysis methodology to iterate and collaborate through the requirements and design process activities. It covers Program Definition, Project Planning & Initiation, and Application Delivery and Release Management. ► Work Order – Uses a streamlined Software Development Lifecycle for minor enhancements addressed independent of an application release. ► Break Fix – Provides a Software Development Life Cycle for application repairs, corrections to code and data problems addressed independent of an application release. Last Update Date: 05.2016 Last Review Date: 05.2016 – Each path includes descriptions of process activities, workflows, roles and responsibilities (RACI) and templates. DPP - 986 © 2016 UnitedHealth Group. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited 3 Last Update Date: 05.2016 Last Review Date: 05.2016 UDP Software Engineering Process Diagram UAT = United Application Testing DPP - 987 © 2016 UnitedHealth Group. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited 4 Program Definition Interfacing Processes Capital Planning Budgetary Guidance Enterprise Data Management (EDM) Enterprise Design Patterns Project Review IET = Impact Estimation Table VFQ = Values, Functions and Qualities DPP - 988 © 2016 UnitedHealth Group. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited Last Update Date: 05.2016 Last Review Date: 05.2016 Artifacts VFQ Document VFQ Docu ment Program Solution Analysis IET Program Solution Outline 5 Project Initiation and Planning projects may start here Interfacing Processes Capital Funding Enterprise Project Management Office (EPMO) Enterprise Data Management (EDM) Architecture and Strategy Knowledgebase (ASK) Enterprise Design Patterns Project Review Business Project Management Demand Intake Artifacts Project Requirements Document Project Solution Analysis IET BRTM Project Solution Summary Last Update Date: 05.2016 Last Review Date: 05.2016 Note: Projects can begin at Project Initiation and Planning with adequate analysis and completion of a Budgetary Guidance Estimate (BGE) BRTM = Business Requirements Traceability Matrix DPP - 989 © 2016 UnitedHealth Group. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited 6 Release Management DPP - 990 © 2016 UnitedHealth Group. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited Last Update Date: 05.2016 Last Review Date: 05.2016 7 Release Planning Interfacing Processes Security Architecture and Strategy Knowledgebase (ASK) Release Entry Frame Work (REF) transitioning to Production Operational Support Infrastructure Services Release Management (ISRM) Support Readiness DPP - 991 © 2016 UnitedHealth Group. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited Sign-Off Plan Release Artifacts Last Update Date: 05.2016 Last Review Date: 05.2016 8 Release Closure Release Execution & Control Risk Management Issue Management Quality Management Release Closure Artifacts Risk Log Issue Log Change Control Log Last Update Date: 05.2016 Last Review Date: 05.2016 Release Management – Release Execution & Control Release Planning Communication Management Release Change Management DPP - 992 © 2016 UnitedHealth Group. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited 9 Release Completion Release Closure Release Closure Release Execution and Control Close Release DPP - 993 © 2016 UnitedHealth Group. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited Service Management Artifacts Release Closure Memo Last Update Date: 05.2016 Last Review Date: 05.2016 10 Application Delivery DPP - 994 © 2016 UnitedHealth Group. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited Last Update Date: 05.2016 Last Review Date: 05.2016 11 Risk Analysis New RTM App Spec Artifacts Last Update Date: 05.2016 Last Review Date: 05.2016 Sign-Off Release Delivery - Requirements Analysis Interfacing Processes Security Support Readiness DPP - 995 © 2016 UnitedHealth Group. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited 12 Last Update Date: 05.2016 Last Review Date: 05.2016 Release Delivery – High Level Design Interfacing Processes Security DPP - 996 © 2016 UnitedHealth Group. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited Artifacts Logical Data Model Data Classification Document Access Control Matrix 13 Release Delivery – Detail Design Interfacing Processes Release Entry Frame Work (REF) transitioning to Production Operational Support Infrastructure Services Release Management (ISRM) Production Control Services – Enterprise Scheduling DPP - 997 © 2016 UnitedHealth Group. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited Artifacts Physical Data Model Technical Specification Data Conversion User Interface Component Specification Last Update Date: 05.2016 Last Review Date: 05.2016 14 Release Delivery - Development Interfacing Processes Security Release Entry Framework (REF) transitioning to Production Operational Support Defect Tracking DPP - 998 © 2016 UnitedHealth Group. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited Artifacts Code Test Summary Report Last Update Date: 05.2016 Last Review Date: 05.2016 15 Release Delivery – Test Sign-Off Artifacts Test Plan Test Scripts & Results Test Summary Report Interfacing Processes Vulnerability Scan Report Last Update Date: 05.2016 Last Review Date: 05.2016 Security Infrastructure Services Release Management (ISRM) Production Control Services – Enterprise Scheduling Performance Engineering Defect Tracking DPP - 999 © 2016 UnitedHealth Group. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited 16 Release Delivery - Deployment Interfacing Processes Security Architecture and Strategy Knowledgebase (ASK) Release Entry Framework(REF) transitioning to Production Operational Support Application Bodies of Knowledge Change Management DPP - 1000 © 2016 UnitedHealth Group. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited Artifacts Deployment Plan Deployment Readiness Check List Last Update Date: 05.2016 Last Review Date: 05.2016 17 Requirements Test Deployment Sign-Off Work Order Release Management & Delivery Interfacing Processes Security Change Management Demand Management Job Scheduling Defect Tracking Note: A slightly modified Work Order process can be used for reference data changes that merely guides program execution. DPP - 1001 © 2016 UnitedHealth Group. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited Artifacts Work Order Requirements Work Order Detail Design Work Order Test Planning & Execution Work Order Deployment Last Update Date: 05.2016 Last Review Date: 05.2016 18 Requirements Test Deployment Sign-Off Break Fix Management & Delivery Interfacing Processes Security Change Management Incident Management Defect Tracking DPP - 1002 © 2016 UnitedHealth Group. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited Artifacts Break Fix Request Break Fix Solution Design Break Fix Test Planning & Execution Break Fix Deployment Last Update Date: 05.2016 Last Review Date: 05.2016 19 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Plans Required by Bid Solicitation Section 3.12 CONFIDENTIAL MATERIAL: CONTAINS HIGHLY SENSITIVE PROPRIETARY AND/OR TRADE SECRET INFORMATION; PUBLIC DISCLOSURE WILL CAUSE SIGNIFICANT COMPETITIVE INJURY AND DISRUPTION. OptumRx, Inc. is a wholly-owned indirect subsidiary of UnitedHealth Group Incorporated. S E C U R I T Y P L A N A S D E S C R I B E D I N S E C T I O N 3.12.1 As allowed in the questions and answers provided to question 100 on May 30, 2017, we have responded with the following: Due to the sensitive nature of the information, our complete business continuity and disaster recovery plans are considered proprietary and confidential. For audit purposes, the plans may be viewed in a controlled environment with UnitedHealth Group subject matter experts available to answer questions. The plans may not be copied or removed after the meeting. This policy is in place to protect not only UnitedHealth Group operations and employees, but also the security, integrity, and confidentiality of protected information. D I S A S T E R R E C O V E R Y P L A N A S D E S C R I B E D I N S E C T I O N 3.12.2 Due to the sensitive nature of the information, our complete business continuity and disaster recovery plans are considered proprietary and confidential. For audit purposes, the plans may be viewed in a controlled environment with UnitedHealth Group subject matter experts available to answer questions. The plans may not be copied or removed after the meeting. This policy is in place to protect not only UnitedHealth Group operations and employees, but also the security, integrity, and confidentiality of protected information. An overview document is available, which describes the governance, strategy, and controls for the entire program. This document is not intended to replace the business continuity or disaster recovery plan review, but does provide the reassurance that UnitedHealth Group has a well-defined program in place to verify customer impact is minimized during a disaster. Please refer to Volume 2, Section 2, 4.3.3.3.4 for the uploaded attachment UnitedHealth Group – Business Continuity Plan – Disaster Recovery and the OptumRx Enterprise Resiliency and Response Customer Response Document for further review. C O N T I N G E N C Y P L A N A S D E S C R I B E D I N S E C T I O N 3.12. 3 Due to the sensitive nature of the information, our complete business continuity and disaster recovery plans are considered proprietary and confidential. For audit purposes, the plans may be viewed in a controlled environment with UnitedHealth Group subject matter experts available to answer questions. The plans may not be copied or removed after the meeting. This policy is in place to protect not only UnitedHealth Group operations and employees, but also the security, integrity, and confidentiality of protected information. An overview document is available, which describes the governance, strategy, and controls for the entire program. This document is not intended to replace the business continuity or disaster recovery plan review, but does provide the reassurance that UnitedHealth Group has a well-defined program in place to verify customer impact is minimized during a disaster. Please refer to Volume 2, Section 2, 4.3.3.3.4 for the uploaded attachment UnitedHealth Group – Business Continuity Plan – Disaster Recovery and the OptumRx Enterprise Resiliency and Response Customer Response Document. June 2017 optumrx.com DPP - 1003 Page 1 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Plans Required by Bid Solicitation Section 3.12 B A C K U P P L A N A S D E S C R I B E D I N S E C T I O N 3.12.4 Please refer Volume 2, Section 2, 4.3.3.3.4 for the uploaded document titled UnitedHealth Group - Data Management - Data Storage and Tape Management Overview. June 2017 optumrx.com DPP - 1004 Page 2 Enterprise Resiliency & Response Program OptumRx Customer Overview November 2016 © 2016 Optum. Any use, copying or distribution without written permission from Optum is prohibited. DPP - 1005 Table of Contents Section I – Enterprise Resiliency & Response Overview .......................... 1 Background ................................................................................................................................1 Mission Statement ......................................................................................................................1 Policy ...........................................................................................................................................1 Objective .....................................................................................................................................1 Program Strategy.......................................................................................................................2 The Layered Program Model ...................................................................................................3 Organizational Accountabilities and Governance ..................................................................3 Section II - Event Management Plan ........................................................... 5 Event Management Strategy ....................................................................................................5 Event Management Team .........................................................................................................5 Section III – Site Emergency Response ...................................................... 7 Site Emergency Response Strategy ..........................................................................................7 Site Emergency Planning Standards ........................................................................................7 Lifecycle Maintenance ...............................................................................................................7 Section IV - Business Continuity Planning ................................................ 9 Risk Assessment & Management .............................................................................................9 Business Continuity Plan Strategy ...........................................................................................9 Business Continuity Program Development Standards .......................................................10 Lifecycle Maintenance .............................................................................................................11 Section V - Disaster Recovery Planning ................................................... 13 Disaster Recovery Objectives .................................................................................................13 Disaster Recovery Strategies ..................................................................................................13 Prevention .................................................................................................................................13 Protection..................................................................................................................................14 Telecommunications Infrastructure ......................................................................................14 Lifecycle Maintenance .............................................................................................................15 Section VI – Public Health Emergency and Pandemic Planning ............ 16 Public Health Emergency Objectives .....................................................................................16 Clinical Resources Available in a Public Health Emergency ..............................................16 Public Health Event Management Approach .......................................................................17 Section VII - Conclusion ............................................................................ 19 © 2016 Optum. Any use, copying or distribution without written permission from Optum is prohibited. DPP - 1006 Enterprise Resiliency & Response Program Section I – Enterprise Resiliency & Response Overview Section I – Enterprise Resiliency & Response Overview Background The recovery of Optum operations and technology falls under the Enterprise Resiliency & Response Program (the Program). The purpose of this Program is to help prevent and/or mitigate the impact of events that could disrupt our business operations by containing the impact within a predictable and predetermined period of time. Effective business continuity planning establishes the basis from which business processes and operations, including service to customers, are resumed. We have business contingency planning preventative controls, contingency resources, and procedures administered by a formal internal management organization. In addition, we have developed a contingency process that minimizes customer impact from disrupted service in a disaster while aiding compliance to published regulatory guidelines. Mission Statement The mission of the Program is to: Provide for the safety of our employees in the event of a business disruption or disaster Demonstrate our consumer-focus and service excellence when our customers and members are vulnerable after a crisis Minimize service disruptions Meet customer and other stakeholder expectations Preserve customer information Protect and preserve organizational assets, including people, process, technology and information Comply with laws and regulations regarding the continuity of operations Enhance our competitive position, market share and reputation This mission can only be achieved through management and control of business impact and risk; therefore, the program focuses on designated critical operations and sites. The level of business continuity safeguards are based on the business impact of the business segment’s critical operations, sites, assets, and their inherent vulnerabilities. Policy We recognize and acknowledge that the protection of its assets and business operations is a major responsibility to its employees, shareholders, business associations, customers and other communities that it services. Therefore, it is Optum’s policy that business continuity and disaster recovery plans must be developed, tested, and maintained in order to limit losses caused by disruptions to critical business operations and to enable efficient and effective recovery. The Program include processes and controls to protect the business of Optum, the life and safety of workforce members, as well as to protect the image, reputation, assets, and resources of the organization. Objective The objectives of the Program are to continue to serve customers, minimize financial loss to the organization, and minimize the negative effects disruptions can have on strategic plans, reputation, operations, liquidity, credit quality, market position and ability to remain in compliance with applicable laws and regulations. Changing business processes, internally to the organization and externally among © 2016 Optum. Any use, copying or distribution without written permission from Optum is prohibited. DPP - 1007 1 Enterprise Resiliency & Response Program Section I – Enterprise Resiliency & Response Overview interdependent vendors and partners, and new threat scenarios require us to maintain updated and viable business continuity plans. In order to carry out the Program mission, we have adopted a business continuity strategy to address the key business interruption risks that stem from the deployment and use of our people, processes, technology and financial assets in carrying out the day-to-day business operations. This strategy focuses on our critical business functions and planning for the worst-case scenario so that we can react quickly and efficiently, adding value to our business and customers through effective risk reduction, compliance with industry, contractual or regulatory standards, and safeguarding of our operations and assets. This worst-case scenario covers all forms of disasters, both natural and man-made (e.g., hurricane, flood, fire, terrorism, public health emergencies, including pandemics, etc.). Program Strategy The Program strategy requires that the ownership, responsibility and accountability for business continuity planning reside at the segment business operations level while providing for governance, standardization, and oversight at the enterprise level. This program encompasses a “layered” approach to continuity planning, which recognizes that risks to our business operations are inherent individually and to the environment as a whole due to the interdependent nature of our operations. Therefore, the continuity strategy is an appropriate combination of safeguards within our operations that work together to address inter-segment dependencies and meet the business continuity requirements of the segments individually, as well as Optum as a whole. Risk assessment, organizational accountabilities, governance and metrics are the foundational components of the Program and layered approach. The Program integrates the appropriate levels of skills and required activities across all business operations. The level of business continuity safeguards required is based on the business impact of the critical operations, sites, assets and their inherent vulnerabilities. Internal and external factors continually change business processes as well as risks, so the Program also includes lifecycle maintenance, testing and third-party validation. The Program strategy integrates core planning assumptions in plan development. They are: The incident/disaster which prompted the recovery process affects only internal business function(s) and/or site(s) – certain other public services infrastructure (fire, ambulance, police, etc…) remain intact. Worst-case scenario is total disruption. If the actual disaster is not worse-case scenario, procedures will be modified within the appropriate strategies to only cover those critical business function(s) and processes affected by a disaster. Up to 50% of the function’s staff at a particular site may be unavailable for work following the disaster. The disaster may affect multiple sites within a regional area. The off-site storage location in unaffected by the disaster since geographical proximity and accessibility were considered in site selection which minimizes the potential for the same disaster impacting both locations Operating efficiency will be reduced during the recovery and stabilization periods. Processing will take longer and/or there may be greater instances of human error during survival-mode operation of the business function(s). © 2016 Optum. Any use, copying or distribution without written permission from Optum is prohibited. DPP - 1008 2 Enterprise Resiliency & Response Program Section I – Enterprise Resiliency & Response Overview The Layered Program Model The layered Program model is focused on ensuring consistency between the organization’s event management, site emergency response, business continuity, disaster recovery and public health emergency planning efforts. These layers are interrelated and work together to provide maximum protection and risk mitigation. The model is built upon the following key components: Event Management (Enterprise & Segment) Command and control – engaged whenever business operations are interrupted or when emergencies impact our customers, members or patients Site Emergency Response Business Continuity Immediate employee safety response Recovery / failover of business operations Disaster Recovery Public Health Emergency Recovery / failover of IT infrastructure and applications Response to support customers, members and the community Organizational Accountabilities and Governance The Program is implemented through an organization structure that requires active participation among all business stakeholders; including technology and business operations. The Enterprise Resiliency & Response Office, together with the Enterprise Resiliency & Response Steering Committee, comprised of corporate and segment executives, have the responsibility for defining the recovery project initiatives, oversight and support of the program which is in compliance with regulatory guidelines and customer expectations. Through the Program, the segments have responsibility and accountability to sustain the organization’s capacity and readiness to manage a major incident or disaster through to resolution. © 2016 Optum. Any use, copying or distribution without written permission from Optum is prohibited. DPP - 1009 3 Enterprise Resiliency & Response Program Section I – Enterprise Resiliency & Response Overview © 2016 Optum. Any use, copying or distribution without written permission from Optum is prohibited. DPP - 1010 4 Enterprise Resiliency & Response Program Section II – Event Management Plan Section II - Event Management Plan Event Management Strategy Effectively managing a crisis situation through to resolution in a large organization requires more rapid decision-making and communication process than is used for normal day-to-day business operations. As a result, the event management plan outlines the management organization (event management team) and communication process to be utilized to facilitate a timely response to major events affecting our personnel, business operations, and site locations, with the goal of avoiding or minimizing damage to the organization’s ability to serve patients, members, customers and key stakeholders. This plan identifies the event management team and outlines their key roles and responsibilities. The event management team is collectively responsible for managing the situation and making the critical decisions that drive remediation and coordination with various internal and external stakeholders as determined by the nature of the event and the short- and long-term impact on the organization. The event management team also supports execution on the event management decisions and provides central coordination of communications, resources, personnel, issues, and other information through the notification and response phases of event management. The event management plan has been established to provide a framework to facilitate the effective response and recovery of a major event. This plan provides the structure for: The event management team; Event management process, including identification, escalation, notification and response channels as well as roles and responsibilities of the event management team; Established standards and checklist for the event management team, including, but not limited to: command center activation; damage assessment of people, information and property; risk management and safety; technology impact and response; and, employee, media and customer communications; and Disaster declaration standards Event Management Team The primary purpose of the event management team is to provide a consistent and reliable approach for communication and engagement between all required parties necessary to manage a major event. Subject matter experts, both at the corporate and segment level, continue to manage actions within their functional teams, however, will leverage the event management team as a forum to more quickly and reliably engage, communicate and make decisions between teams. The event management team: Consists of corporate and segment leadership with responsibility for event communication and response execution Engages required executive leadership necessary to respond to the event Executes on the decisions made by executive leadership and provide central coordination of communications, resources, personnel, issues, and other information through the notification and response phases of event management Determines the strategy for how an event will be managed effectively and efficiently through to resolution. Responsible for facilitating the critical decisions that drive the remediation and coordination efforts with various internal and external stakeholders as determined by the nature of the event and the short- and long-term impact on the organization. DPP - 1011 © 2016 Optum. Any use, copying or distribution without written permission from Optum is prohibited. 5 Enterprise Resiliency & Response Program Section II – Event Management Plan Comprised of the following functional leaders or appropriate alternatives, as required: DPP - 1012 © 2016 Optum. Any use, copying or distribution without written permission from Optum is prohibited. 6 Enterprise Resiliency & Response Program Section III – Site Emergency Response Section III – Site Emergency Response Site Emergency Response Strategy To support and facilitate a coordinated and controlled building occupant response in an emergency, Optum policy requires all offices with over 10 employees have a site emergency response plan. These plans focus on the immediate site needs during an emergency, such as employee evacuation and public services engagement. The company’s emergency response team is often the first responder to a situation and help ensure that employees remain safe, sheltered and their basic life/safety needs are met. The emergency response plans are used in conjunction with the event management process. These plans focus on the immediate site needs during an emergency, such as employee evacuation and public services engagement. Site Emergency Planning Standards To help ensure consistency and effectiveness, the site emergency response plans are developed using standard tools and templates. The following provides a high-level description of each of the sections contained within the individual site plans: Purpose – The purpose of the Emergency Response Plan. Location Information – Information pertaining to the physical location including building address and primary contact phone numbers. Emergency Contact Information – A list of key phone numbers including emergency services, Facilities Management and Security, where applicable. Site Emergency Response Team Roles and Responsibilities – Specific roles and responsibilities as defined including Event Management Team Site Lead, Emergency Response Team Site Lead, Floor Marshals, and Facilities Management. Emergencies that may Result in Business Interruption or Office Closing – Procedures to engage the Event Management Team. One Breath Situations – Procedures to engage Human Capital, where applicable. Medical Emergencies – Specific procedures to respond to medical emergencies including location and contents of first aid supplies. Fire(s) – Specific procedures pertaining to fires within the building including building alarm sounds, high rise procedures (where applicable), evacuation maps and post evacuation assembly areas. Severe Weather – Specific procedures to respond to monitoring/notification procedures and areas to shelter-in-place. severe weather events including Additional Hazard-Specific Procedures - if applicable, including but not limited to: Facility Related Emergencies; Criminal, Terroristic or Violent Behavior; Bomb Threats; Suspicious Packages; Civil Disturbances or Demonstrations; Hazardous Materials Exposures or Release; Biohazard Exposures or Release, and Earthquakes. Lifecycle Maintenance Change Management and Update Process In order to maintain an effective Program, site emergency response plans are updated annually and monitored for compliance by the Risk Management and Safety organization. © 2016 Optum. Any use, copying or distribution without written permission from Optum is prohibited. DPP - 1013 7 Enterprise Resiliency & Response Program Section III – Site Emergency Response Testing The site emergency response plans are tested at a minimum annually through drill techniques including fire, severe weather and/or earthquake. Drills may include tabletop (practical or simulated exercise), structured walk-through (functional), and/or large or full-scale (live or real-life exercise). © 2016 Optum. Any use, copying or distribution without written permission from Optum is prohibited. DPP - 1014 8 Enterprise Resiliency & Response Program Section IV – Business Continuity Planning Section IV - Business Continuity Planning Risk Assessment & Management Business continuity planning requirements are driven by a business impact analysis, supporting the company’s Enterprise Risk Management discipline as an integral part of our culture, decision-making processes, and governance processes. The business impact analysis, combined with threat and risk assessments, helps assure that business continuity risks are appropriately prioritized and remediated by applying cost effective strategies and mechanisms to reduce risk to a tolerable level. The enterprise business impact analysis process: Identifies potential impact of uncontrolled, nonspecific events on our critical business processes and customers; Considers all business segment functions; and Provides an estimation of maximum allowable downtime and acceptable levels of data and operational loss. Each critical function is required to perform a risk assessment utilizing the business impact analysis, threat and vulnerability assessment, and gap analysis of business continuity mechanisms currently in place. The end result of this risk assessment is a segment commitment to reduce risk to an acceptable level within reasonable resource and budgetary constraints. This risk-based approach further optimizes business continuity planning by creating common definitions, defining standards and best practices and using common recovery strategies to meet the business requirements. Business Continuity Plan Strategy The business continuity plans are part of the overall program designed and structured to respond to disaster events, restore critical business function processes, and resume normal business function operations in a prioritized manner. The plans focus on critical business functions and planning for the worst-case scenarios so that we can react quickly and efficiently. These worst-case scenarios cover impacts from all types of disasters, both natural and man-made. The following scenarios are provided as planning recovery objectives: Loss of Facility - Complete interruption of facilities without access to its equipment, local data and content. The interruption may impact a single site or multiple sites in a geographic region; Loss of Critical Resources - Complete interruption with 100% loss of personnel within the first 24 hours and 50% loss of personnel long-term. The interruption may impact a single site or multiple sites in a geographic area; Loss of Critical Systems - Complete interruption and/or access of critical systems and data located at our various datacenters until the DR Recovery Time Objective is met; and Loss of Critical Vendors - Complete interruption in a service or supply provided by a third-party vendor(s) for an extended period of time © 2016 Optum. Any use, copying or distribution without written permission from Optum is prohibited. DPP - 1015 9 Enterprise Resiliency & Response Program Section IV – Business Continuity Planning Recovery from anything less than complete interruption will be achieved by using appropriate portions of the plan. Having clearly defined the business recovery objectives, Optum developed recovery strategies needed to meet these objectives. These recovery strategies vary between Business Segment and the overall criticality rating of the business function or process, which in turn provides guidance on a minimum recovery time objective. The objective is to have the business functions which are classified as critical generally provide for near immediate failover of core services by leveraging geographically dispersed redundant operations and maintain a recovery time objective of 72 hours or less. Optum’s critical business functions include, but not limited to, healthcare delivery, customer and provider call services, claims processing services, clinical and pharmaceutical services, banking operations and core corporate functions. A variety of business continuity strategies are deployed depending on the business function, criticality ranking and established recovery time objectives. These strategies include: Resilient operations - include dual site operations and continuous availability solutions. In the event of an interruption at one site the business function is transferred to one or more alternate locations at which staff and facilities are already prepared to handle it; Remote working - includes the concept of “working from home or telecommuting” and working from other non-corporate locations through secured connections; Multiple shifts – makes alternate space available to greater number of staff by dividing staff into two shifts (e.g., morning and evening); Buddy up - makes use of existing in-company accommodation such as a training facility or lunch rooms to provide recovery space or increasing the office density; Off-loading – consists of off-loading additional critical tasks to staff at available sites or staff cross-trained to perform that function; Displacement - involves displacing workspace used by staff performing less urgent business processes with staff performing a higher priority activity; and A “do nothing” strategy may be acceptable for certain non-urgent functions identified in the business impact assessment. Business Continuity Program Development Standards To help ensure consistency and effectiveness, the business continuity plans are developed using standard tools and templates. The following provides a high-level description of each of the sections contained within the individual business continuity plans: Plan Intro, Plan Overview and General Recovery Standards: Standards for document use, intended audience, plan availability and distribution. Plan objectives, assumptions, scenarios and life-cycle maintenance, review and updated procedures and budget guidelines. General Recovery Standards – including disaster response, assessment, disaster declaration standards, command center activation, as well as internal and external communication standards © 2016 Optum. Any use, copying or distribution without written permission from Optum is prohibited. DPP - 1016 10 Enterprise Resiliency & Response Program Section IV – Business Continuity Planning Business Recovery Overview: Uses the results of the business impact analysis to define the business process criticality and prioritization, recovery time objectives, and overall business function recovery strategy. Defines the recovery sustainability analysis for loss of critical facility, loss of critical resources, loss of critical system and loss of critical vendor. Defines the recovery checklist, chain of events, critical tasks and detailed steps that need to be taken to stabilize operations in survival-mode and restore the business function processes in order of their criticality. Establishes the process for plan evaluation and defines the detailed steps for evaluating the business continuity plan performance to learn from the experience and enhance our business function preparedness and capabilities to respond and recover more effectively and efficiently. Remaining BC Plan Sections: Process Details - Provides key impact metrics utilized during prioritization analysis Function, Segment and Enterprise Recovery Teams – Identifies team members with responsibility to execute and coordinate recovery activities defined in the BC Plan. Call List – Provides the call sequence and emergency contact information of individuals to start the call tree. Segment Interdependencies – Defines the business function’s critical dependencies on other internal Group business functions/processes Critical Applications – Defines the business function’s critical dependencies on systems/applications Locations – Defines the main locations, alternate recovery and command center locations used by the business operations Critical Customers, Regulators and Other Third Parties – Identifies the critical external stakeholders and/or communication process to be used at the time of the event. Critical Vendors – Identifies the critical vendors and/or suppliers the business requires to sustain operations Critical Equipment – Defines the business function’s minimum equipment configuration needed to sustain operations Vital Records – Defines the specific vital records stored offsite, as well as their storage location and contact information to use to retrieve them during a disaster. Lifecycle Maintenance Change Management and Update Process Change is inevitable in any organization. Applications, infrastructure, function alignments, customer, vendors, site and contacts must continually be monitored and updated. In order to maintain an effective Program, business continuity plans are updated a minimum of twice annually and monitored for compliance by the Program staff. Metrics and Measurements The Program metrics and reporting provide status and information necessary to manage current and future efforts. Key performance indicators are used to derive the “health” of the business continuity plans. Annually, each segment is required to provide executive sign-off on the certification of the plans. This reporting is © 2016 Optum. Any use, copying or distribution without written permission from Optum is prohibited. DPP - 1017 11 Enterprise Resiliency & Response Program Section IV – Business Continuity Planning delivered and reviewed by the Program Steering Committee and the Executive Sponsor to help ensure compliance with the Program strategy. Testing and Certification The business continuity plans must be exercised at a minimum annually through a variety of formats, using scenarios that vary annually. Exercises may include structured walk-throughs, call tree validation, tabletop event simulation, and large or full-scale simulations. The Program uses an exercise roadmap to track what scenarios have been exercised in the past to ensure each exercise introduces a new situation that challenges the recovery team. Exercises are created and facilitated by the Program staff using scenarios that are tailored to the individual operations being exercised. A formal test exercise report, identifying any gaps, issues and/or enhancements identified through testing, is published and monitored for remediation. When the remediation plan is complete, the plan is certified by the appropriate Executive Leadership. This certification process is monitored by the Program Steering Committee. © 2016 Optum. Any use, copying or distribution without written permission from Optum is prohibited. DPP - 1018 12 Enterprise Resiliency & Response Program Section V – Disaster Recovery Planning Section V - Disaster Recovery Planning Disaster Recovery Objectives Optum relies on a diverse array of interconnected information systems to meet the needs of its clients. The goal of disaster recovery planning is to protect the organization in the event all or key aspects of our operations are rendered unusable. Preparedness is the key. The company has instituted an Enterprise Disaster Recovery Program to first eliminate or reduce disaster recovery risk in critical technology areas, and then plans for the facilitation and of timely and predictable restoration of key applications, data, and supporting critical infrastructure. The mission of the Enterprise Disaster Recovery Program is to minimize the aggregate risk and impact to Optum from the occurrence of disaster recovery events. Following are the objectives of the Enterprise Disaster Recovery Program that are in support of the mission: Provide a “systems solution” that accommodates the interdependencies between business processes and applications (i.e., recover the entire business transaction) Drive systemic and measurable improvements in disaster recovery capability (e.g., business process recovery time objective) Recognizing funding and time constraints, evolve and improve the disaster recovery capability in a manner that provides greatest good for greatest number Establish disaster recovery requirements as part of Optum’s systems architecture, delivery and operations as opposed to an after-thought once a new application goes into production Develop and deploy a modular, adaptive set of capabilities rather than one size fits all Deal with the most probable disaster recovery scenarios in addition to worst case “smoking hole” In addition to protecting our on-going viability, make the disaster recovery capability a competitive strength that can be leveraged in the market. Disaster Recovery Strategies Optum’s approach to disaster recovery is based on the two fundamentals: prevention and protection. A focus on balancing the combination of disaster prevention and protection results in reducing both the probability and impact of a disaster. The Enterprise Disaster Recovery Program first eliminates or reduces disaster recovery risk in critical areas, and then plans for the most probable disaster scenarios. Prevention For many companies, disaster recovery means minimizing downtime as they try to restore systems and get them back online. Our strategy includes focusing on items that would assist in preventing a disaster from taking down systems in the first place. We have invested in creating an effective combination of people, process and technology that provides the fundamentals for a proven production method resulting in a stable, scalable environment for our applications to perform at operational excellence. © 2016 Optum. Any use, copying or distribution without written permission from Optum is prohibited. DPP - 1019 13 Enterprise Resiliency & Response Program Section V – Disaster Recovery Planning This investment creates the “prevention” which is fundamental to the Enterprise Disaster Recovery Program. Prevention is the proactive remediation of known technology exposures. Prevention includes removing the “accidents just waiting to happen”. Protection Completely avoiding a technology disaster is impossible. However, the Enterprise Disaster Recovery Program is based on anticipating and planning for the common types of disasters and designing solutions to address them. Disaster protection addresses recovery from the most probable disaster scenarios and a worst case “smoking hole” scenario. Highlights of the disaster recovery protection components include: Our data centers can operate in a “lights out” mode for up to three days. If the data center continues to get fuel to run the generators, they are designed to run in this mode indefinitely. Operational backups are designed to use high performance disk-to-disk primary copy with physical offsite second copy tape. Our claims adjudication platform RxClaim employs active-passive components located on separate server infrastructure, where either the primary or secondary server infrastructure fully support the production application in the event of a disaster with little to no manual intervention. Storage area network (SAN) replication “rapid recovery” employs full asynchronous data replication between the production host and the geographically dispersed hot standby disaster recovery host. Our highly available claims adjudication platform RxClaim “switches” to the secondary system and operates the business for a minimum of 1 week during the switch period as part of normal operations. This switch is done 5-6 times per year to allow for routine server patching and maintenance. In addition, our claims platform has a disaster recovery plan that documents the planned failover to a separate, geo-dispersed datacenter. This disaster recovery plan is refreshed a minimum of annually, and tested annually. The our enterprise disaster recovery strategy involves identifying critical business processes and transitioning these critical applications, data, and supporting infrastructure to an alternate recovery location in a timely manner, thereby reducing the impact of a technology event to our critical business clients. A variety of recovery strategies are utilized which align to the defined criticality of the application. Business critical applications, as defined by the business impact analysis and subsequent business continuity plan, are given the highest priority and have the shortest recovery time objectives. Telecommunications Infrastructure Our Wide Area Network (WAN) is comprised of a diverse dual carrier Multiprotocol Label Switching (MPLS) network that provides redundant connectivity between the remote sites and the Data Centers. Open Shortest Path First (OSPF) and Border Gateway Protocol (BGP) are used to detect path failure and restoration of services. Tuning and provisioning of the data paths, allows full failover to the alternate carrier in the event of a carrier outage and/or a circuit failure. Internet access at our Optum Data Centers is via dual carriers in a fully redundant design. Virtual Private Networks (VPN), Business-to-Business (B2B), and other access are fully redundant by carrier diversity. Internet Protocol (IP) services provide Domain Name Server (DNS) functionality with multiple deployed DNS servers. These servers provide zone transfers of IP data between devices and will fail over in the event of a © 2016 Optum. Any use, copying or distribution without written permission from Optum is prohibited. DPP - 1020 14 Enterprise Resiliency & Response Program Section V – Disaster Recovery Planning server failure. Optum provides multiple paths from different telecommunication carriers to connect our internal operations and connect to the internet. This allows for a high degree of communications redundancy, and virtually instantaneous recovery from a failure in the affected communication path. For voice communications, we employ a Voice Over IP (VOIP) Cisco and Avaya telephone management system, which is configured with hardware and software fault tolerance that is rated at over 99% reliability and redundancy. If there is a failure in the toll free Customer Service line that routes into any of our locations, inbound calls are automatically routed to back-up locations. Telecommunication features include: VoIP service routes calls to any phone with a registered IP address, increasing system flexibility and ensuring a crisis call is always answered—even in the event of a complete worksite outage. All call center routing and user information is duplicated on an Enterprise Survivable Server. Local Survivable Servers maintain service in the event of a WAN failure. Avaya Call Management Service (CMS) provides call routing, advanced vectoring, messaging and information tracking for seamless and efficient call answering service. All offices are fully integrated using Automatic Call Distribution (ACD) functionality allowing employees to login to their queue from any office nationwide. The system features reporting tools used to analyze trends and manage incoming calls to optimize staffing and service levels. Optum will conduct real-time monitoring to capture call activity by time, date, call queue and staff member. By the mid-2017, this Virtual Contact Center platform will be fully deployed to call agents supporting OptumRx customers. Lifecycle Maintenance Existing disaster recovery plans follow standard lifecycle maintenance and are refreshed at least annually. Application disaster recovery plans are approved and certified annually by the appropriate Business Segment Senior Leadership team. © 2016 Optum. Any use, copying or distribution without written permission from Optum is prohibited. DPP - 1021 15 Enterprise Resiliency & Response Program Section VI – Public Health Emergency and Pandemic Planning Section VI – Public Health Emergency and Pandemic Planning Public Health Emergency Objectives As a health and well-being company, we believe it is critical to plan for the impact of a public health emergency, including pandemics, on our customers, members, providers and our own operations. Natural disasters such as hurricanes, wild fires and pandemics can expand very quickly and arrive with little or no warning; therefore companies need to be vigilant and prepared. We recognize the need to provide ongoing access to health care for our members and customers who may be impacted by these events. Pandemics can spread very quickly, so understanding what we need to address in advance, and being prepared to readily implement these actions will help sustain our operations and minimize impact to our customers during a pandemic or other public health emergency. Optum plans for such public health emergencies within the Enterprise Resiliency & Response Program to ensure the availability of critical services for our customers. Individual business continuity plans require planning for a loss of 50% of personnel, loss of facilities, critical vendors and loss of or disruption to our technology. The event management plan provides the command and control structure to ensure effective monitoring, communication and decision making during the emergency. Information technology disaster recovery plans are in place to manage any impact to technology infrastructure and applications that could negatively affect our ability to serve customers, physicians, members, and others. As a national company with vast local resources, we have geographically dispersed computing, customer service facilities and health care networks that can support and supplement the work of compromised localities. Where a pandemic involves a virulent strain, we may experience a surge in the need for our services, but may simultaneously see a reduction in our ability to provide these services. Therefore, pre-planning is critical to address any adverse impact to our services and systems from anticipated demands. During a pandemic, health services access will likely be altered from the services that are provided now. For example, demand for elective medical and surgical procedures will probably decrease; demand for acute care services in emergency departments and hospitals will likely increase. Public health officials will have the responsibility of triaging and prioritizing where, when and how health services will be provided. We will work in collaboration with local and state health department officials to disseminate information on the availability of health services and will adhere to the public health direction on prioritization efforts for the provision of such services during public health emergencies. We will use our communication vehicles, including print and electronic media, to make information on provisions and availability of services widely accessible to our members, as well as members of the broader community where we operate. We are committed to providing our customers, physicians who contract with us, members and others with timely clinical information. We will work to ensure that benefit designs and their interpretation will facilitate socially and medically appropriate access to clinical care, medical supplies, vaccines and pharmaceuticals. For example, we will assure that quantity limits for antiviral medications used to prevent and treat influenza are consistent with recommendations of the Centers for Disease Control and Prevention (CDC). Clinical Resources Available in a Public Health Emergency With over 16,000 physicians, nurses, and clinical practitioners directly on our staff, we have the national and local resources to respond quickly and effectively during a public health crisis. The event management team serves as the vehicle to provide our customers with timely clinical information based upon CDC guidance, expert health professionals’ input, and our real-time experience in serving more than 85 million people across the nation. This team is also responsible for reviewing and providing any information that is relevant to changes in Optum policies and procedures that may affect customers, members and clinical partners. © 2016 Optum. Any use, copying or distribution without written permission from Optum is prohibited. DPP - 1022 16 Enterprise Resiliency & Response Program Section VI – Public Health Emergency and Pandemic Planning We can support federal, state, and local health department disease surveillance activities to identify and track disease outbreaks through data on emergency room usage, visits to physicians for a particular illness, and the filling of prescriptions. As we have seen during the H1N1 pandemic, and impact of major hurricanes, flooding and wild fires, health services access may be altered in a public health crisis from the services that are provided during normal times. Public health officials will have the responsibility of triaging and prioritizing where, when and how health services will be provided. Epidemiologically-based decisions will be made to provide critical services in appropriate places. For example, depending on the severity of the situation: Hospital care will probably be limited to those who are most critically ill from the pandemic and from other conditions. Services to those who are immunocompromised will not be provided in the same facilities as services for those who are critically ill with infection from a pandemic virus. Emergency medical services will be triaged by public health officials. We will work in collaboration with these agencies to ensure that our members, as well as all persons in the community, have access to appropriate health services. Non-pandemic-related medical care that is now delivered in the emergency room likely will be delivered in other settings Our locally-based Market Medical Directors have established relationships with local health care providers, local medical societies, state medical licensure boards and state and local health departments. Regardless of the cause of the public health emergency, our medical directors work in collaboration with public health agencies to help ensure access to care in the event of a public health emergency. Relationships are also wellestablished with regulators and other government agencies, our customers, members and local community groups. Our medical directors work in collaboration with public health agencies and non-governmental organizations, such as the American Red Cross, to help ensure access to care for our members in the event of a disaster. Public Health Event Management Approach Optum has established procedures for handling emergency management situations including: initial assessment of the severity of the situation; prioritization of actions needed to resolve the immediate care needs of our members; development of an action plan, which includes assigning resources for implementation; implementation of action plan, including continuous monitoring; documenting successful interventions; and validation of successful intervention. Our Event Management Team monitors for impending disasters such as those caused by hurricanes and flooding and proactively mobilizes the appropriate planning and response resources to address the needs of our business, members and providers. The Public Health Event Management Team assesses the risk and engages both enterprise-level executives and local healthplan leadership to mobilize a complete response. Leaders engaged in the response may include healthplan CEO’s, Medical Directors, Provider Services, Member Services, Communication Specialists, Compliance Officers, and others as appropriate. The Public Health Event Management Team convenes to discuss the current situation and defines actions to be taken, resources to be deployed, and specific timeframes and touch points for monitoring to ensure continuous communication and care continuity for members and providers. Each disaster is unique and our response is customized based on need and based on the services we provide in the impacted area. The following activities may be included as part of our overall efforts: © 2016 Optum. Any use, copying or distribution without written permission from Optum is prohibited. DPP - 1023 17 Enterprise Resiliency & Response Program Section VI – Public Health Emergency and Pandemic Planning Medical benefits may be temporarily modified to assist members preparing for, or responding to, the disaster in order to ease access to healthcare. These actions may include: removing prior authorization/notification requirements, allowing early refills of prescription medication, easing restrictions on use of out-of-network providers and providing early replacement of Durable Medical Equipment (DME). The Optum Crisis Counseling line may be made available to the community as a whole to provide mental health support to those who may need it. This service is free of charge and open to anyone impacted by the event. Our local clinical directors collaborate to identify members currently hospitalized or at long-term care facilities, evaluate the provider capacity within the geographic area, and where appropriate, identify reassignments and communicate this information to members and providers. Our Medical Directors review case management and disease management files to identify members at most risk due to disease severity or fragility. These members are a priority to contact to arrange for care continuity and determine if they need evacuation assistance. Hospice and Post-acute Care patients are identified and our care managers ensure adequate supplies and prescriptions medication are available. In the event the member is to be evacuated, appropriate sites and resources are identified that will meet the transportation and ongoing needs of individual. We often provide financial support to aid both proactive and post-disaster community response. Our employees and local leaders often participate in community recovery and rebuilding efforts as part of our social responsibility efforts to support the communities in which we work. Our compliance team proactively searches for any regulatory orders related to the event, such as state-level Executive Orders, Department of Insurance Orders or federal-level HHS or CMS orders, to ensure we are addressing all regulatory requirements. © 2016 Optum. Any use, copying or distribution without written permission from Optum is prohibited. DPP - 1024 18 Enterprise Resiliency & Response Program Section VII – Conclusion Section VII - Conclusion In support of Optum’s mission as a health services business dedicated to making the health system work better for everyone, we are committed to providing vital services to our members and community during times of calm as well as crisis. The Enterprise Resiliency & Response Program, with the interrelated services of event management, site emergency planning, business continuity planning, disaster recovery planning, and public health emergency response, are designed to ensure we can react quickly to all forms as disasters, minimizing potential negative impacts to our operations and vital services. If additional information is required regarding any component of this program, please direct questions to your account executive team, or regulatory officer. © 2016 Optum. Any use, copying or distribution without written permission from Optum is prohibited. DPP - 1025 19 UnitedHealth Group Data Storage and Tape Management Overview 1-18-17 Accountability UnitedHealth Group understands the responsibility it has to protect confidential and proprietary information and to maintain availability and integrity of information systems and assets. This commitment is integral to the relationships we have with all of our customers and vendors alike. Security UnitedHealth Group manages and supports a robust Information Security Program. Its protocols are based on industry practices, all applicable regulatory obligations, and customer considerations. Policies and standards are used to manage the specific requirements and basic premise of general computing, audit, and security controls. The Information Security Policies and Standards represent the foundation of security applied to and within the UnitedHealth Group’s proprietary network infrastructure and critical application services. Data Protection Data stored within UnitedHealth Group facilities has multiple layers of protection, specifically surrounding its state of the art data center security systems and access management processes and policies. Access to the data, storage areas, and computer rooms are strictly managed and only granted to those requiring access to perform functions specific to the employee’s responsibilities. Other Controls UnitedHealth Group’s robust control structure ensures that resident data is protected. These controls include in- sourcing of tape management facilities; in sourcing of IT engineering, maintenance and administrative functions; a Rapid Recovery/DR solution to ensure data is protected and quickly available for a recovery event; onsite data eradication of maintenanced disk drives, data eradication (to DOD standards) of decommissioned storage arrays, etc. Data Center Facilities UnitedHealth Group has three technology data centers located in central Minnesota (Plymouth, Elk River, and Chaska), which have the potential to house customer data. Due to the nature of our dynamic business climate, the primary and secondary (rapid recovery) locations for customer data are not fixed entities. The primary drivers behind this business model are the constant demands of growth, expansion and business continuity. All data centers are owned by UnitedHealth Group. Encryption Strategy – Data at Rest UnitedHealth Group invests significant resources in its information security program and uses a number of network, security monitoring and encryption technologies to protect our environment and maintain the confidentiality and integrity of the data and information entrusted to us. In both mainframe and distributed environments, UnitedHealth Group’s strategy is to encrypt data at rest without regard to its content or type at the storage media (device) level on both disk and tape. In the mainframe environment The standard/methodology utilized for encryption on disk is Tivoli Key Lifecycle Manager, AES 256 The standard/methodology utilized for encryption on tape is Oracle Key Manager, AES 256 In the distributed environment The standard/methodologies utilized for encryption of data on tape are: Tivoli Key Lifecycle Manager, AES 256 Tivoli Storage Manager, AES 256 The standard/methodologies utilized for encryption on disk are: HDS/HP USPV/USP/XP/VSP products AES 256 – AEVS Certified (Advanced Encryption Verification Suite) © 2017 UnitedHealth Group. Any use, copying or distribution without written permission from UnitedHealth Group prohibited. Last Update: 01.2017 Last Review: 01.2017 1 DPP - 1026 UnitedHealth Group Data Storage and Tape Management Overview 1-18-17 Encryption Key Management When a storage array is placed into production, the encryption key is enabled. All data that is subsequently written to that array, regardless of type, origin or classification, is encrypted. UHG does not “partially” encrypt its arrays. Encryption keys are managed entirely within the systems themselves and are not visible, recognizable, or changeable by any administrator. There is no external list. Even if encryption is turned off, encrypted data cannot be “read” or deciphered by any individual. Strategy – Data In-Flight (transmission) to Third Party Locations All data electronically transmitted off-site to third party providers is encrypted at AES 256. High Availability & Rapid Recovery Environments Strategy In both the Mainframe and iSeries environments, UnitedHealth Group maintains Production and HA paired storage devices at its primary data center and another set of Rapid Recovery storage devices at its DR data center to ensure that three current copies of critical data are maintained on-line at all times. UnitedHealth Group maintains sole custody of all data by continuously replicating between data centers over our secured channels. Operational Backups Strategy – Data Center Locations In both the mainframe and distributed environments, UnitedHealth Group’s backup policy maintains two copies of operational data at its secured technology centers. A Virtual Tape Library System is maintained at the primary data center that emulates physical tape and stores data on hard drives for the purpose of daily operational recovery in case of data corruption or accidental deletion. The data is then electronically transmitted to another disk-based array or Physical Tape Library located in UnitedHealth Group’s geographically dispersed data center(s). UnitedHealth Group maintains sole custody of the data at all times by transmitting over our secured channels. Frequency of Backups - Distributed UnitedHealth Group’s Backup Strategy includes: Systems and databases are backed up daily and weekly Database backups are retained for 28 days. Deleted files are retained in the system for 90 days. Strategy - Field Locations Data at field office locations is backed up daily and weekly to one of the three primary data centers to facilitate data protection and rapid recovery in the event of localized data loss. Data Retention UnitedHealth Group maintains strict data retention policies and standards that are maintained and managed by Enterprise Storage Services and Records Information Management for both Mainframe and Distributed environments: Operational – Daily backups that are utilized for file/database restoration resulting from a near term operational loss are retained for a period of 28 – 90 days. Regulatory – Records Information Management establishes the policies and standards for data retention necessary to meet regulatory requirements (SOX, HIPAA, Contracts, Financial, etc). These retention periods range from 3 – 10+ years depending on the content, risk, and regulatory requirements of the data. Legal Holds – This process is driven by UnitedHealth Group’s legal department and supersedes all other retention specifications when initiated, including the suspension of all data destruction. © 2017 UnitedHealth Group. Any use, copying or distribution without written permission from UnitedHealth Group prohibited. Last Update: 01.2017 Last Review: 01.2017 2 DPP - 1027 UnitedHealth Group Data Storage and Tape Management Overview 1-18-17 Disk System Protection UnitedHealth Group utilizes both Raid5 and Raid10 to protect its centralized storage arrays. © 2017 UnitedHealth Group. Any use, copying or distribution without written permission from UnitedHealth Group prohibited. Last Update: 01.2017 Last Review: 01.2017 3 DPP - 1028 State of New Jersey Department of the Treasury, Division of Pensions and Benefits (DPB) Location Mike Maguire, Area Vice President, Public Sector Sales, is responsible for managing the State of New Jersey Department of Treasury, Division of Pensions and Benefits (DPB)’s contract. Based in New Jersey, he can be contacted by phone at (917) 921-7039 or by e-mail at michael.maguire@optum.com. We maintain offices throughout the United States from which we perform our core pharmacy benefit management services and activities. In addition, our sales and client management staff operates from key states throughout the country. The following table lists the functions and locations of our primary offices. Functions Corporate Headquarters Address 1600 McConnor Parkway Schaumburg, IL 60173-6801 1650 Arch Street, Suite 2600 Philadelphia, PA 19103-2029 Centers of Excellence 200 SW Market Street, Suite 600 Portland, OR 97207 Innovation Center Billing 300 N. LaSalle Street, 16th Floor Chicago, IL 60654 1600 McConnor Parkway Schaumburg, IL 60173-6801 2300 Main Street Irvine, CA 92614 Claims Processing* 1600 McConnor Parkway Schaumburg, IL 60173-6801 388 State Street, Suite 420 Salem, OR 97301 2300 Main Street Irvine, CA 92614 Clinical Services 1600 McConnor Parkway Schaumburg, IL 60173-6801 June 2017 optumrx.com DPP - 1029 Page 1 State of New Jersey Department of the Treasury, Division of Pensions and Benefits (DPB) Functions Location Address 9040 South Rita Road Tucson, AZ 85747 4805 E. Thistle Landing, Suite 100D Phoenix, AZ 85044 3515 Harbor Boulevard Costa Mesa, CA 92626 7159 Corklan Road Jacksonville, FL 32258 8301 South Park Circle Orlando, FL 32819 2441 Warrenville Road Customer Service Call Centers Lisle, IL 60532 6860 W. 115th Street, Suite 100 Overland Park, KS 66211 755 Research Parkway, Suite 160 Oklahoma City, OK 73104 3723 Fairview Industrial Drive SE, Suite 270 Salem, OR 07302 11 Scott Street Wausau, WI 544031 1 This location participates in our work-at-home (WAH) program. WAH options are available to proven performers. June 2017 optumrx.com DPP - 1030 Page 2 State of New Jersey Department of the Treasury, Division of Pensions and Benefits (DPB) Functions Location Address 2858 Loker Avenue East, Suite A-1 Carlsbad,CA 92010 6860 W. 115th Street, Suite 150 Overland Park, KS 66211 Home Delivery Pharmacy – Fulfillment Centers 1050 Patrol Road Jeffersonville, IN 47130 8350 Briova Drive Las Vegas, NV 89113-2256 10801 Walker Street Home Delivery Pharmacy – Order Processing Cypress, CA 90630 13131 South Dairy Ashford Road Sugar Land, TX 77478 5995 Plaza Drive Cypress, CA 90630 Industry Relations 17900 Von Karman Avenue Irvine, CA 92614 Information Technology Services 2300 Main Street Irvine, CA 92614 1050 Patrol Road Patient Care Coordinators and Specialty Pharmacy Customer Service Advocates Jeffersonville, IN 47130 8350 Briova Drive Las Vegas, NV 89113-2256 June 2017 optumrx.com DPP - 1031 Page 3 State of New Jersey Department of the Treasury, Division of Pensions and Benefits (DPB) Functions Location Address 4805 East Thistle Landing, Suite 100-D Phoenix, AZ 850447 9040 South Rita Road Tucson, AZ 85747 3515 Harbor Boulevard Costa Mesa, CA 92626 10801 Walker Street Cypress, CA 90630 3131 Camino Del Rio North San Diego, CA 92108 7159 Corklan Drive Jacksonville, FL 32258 Prior Authorization Help Desk *All PA Help Desk locations are available from 8 a.m. to 5 p.m., CT on Saturdays. 2441 Warrenville Road Suite 610 Lisle, IL 60532 150 West Market Street, Suite 300 Indianapolis, IN 46204 6860 W. 115th Street, Suite 150 Overland Park, KS 66211 1650 Spring Gate Lane Las Vegas, NV 89134 755 Research Parkway, Suite 160 Oklahoma City, OK 73104 1650 Arch Street, Suite 2600 Philadelphia, PA 19103 13131 Dairy Ashford Road, Suite 500 Sugar Land, TX 77478 June 2017 optumrx.com DPP - 1032 Page 4 State of New Jersey Department of the Treasury, Division of Pensions and Benefits (DPB) Functions Address Rebate Management and Network Management 5995 Plaza Drive Cypress, CA 90630 Location 1050 Patrol Road Jeffersonville, IN 47130 Specialty Pharmacy – Fulfillment Centers 8350 Briova Drive Las Vegas, NV 89113-2256 June 2017 optumrx.com DPP - 1033 Page 5 Christine Levitt IT Analyst Chase Livengood Financial Analyst © 2017 Optum, Inc. All rights reserved. Legal Support Adrianne LaPilusa Clinical Account Executive Sara Sabin Account Executive Lauren Carney Vice President, State & Government and Reform Markets Ellen Nelson Senior Vice President, State & Government and Reform Markets Edward Pawula Eligibility Consultant Julian Nadolny EGWP Subject Matter Expert Michael Edwards Senior Vice President, Growth and Retention Paul Eberle Account Manager Executive leadership Internal support staff Client management leadership Account management support team Day-to-day contact for customer DPP - 1034 Cross-functional collaboration John Prince Chief Executive Officer Executive Sponsor Clinical Programs Industry and Network Relations Information Technology, Optum Quality Customer Service Eligibilty Operations Home Delivery Pharmacy Operations Benefit Operations Management Finance Internal Support Staff CONFIDENTIAL MATERIAL: CONTAINS HIGHLY SENSITIVE PROPRIETARY AND/OR TRADE SECRET INFORMATION; PUBLIC DISCLOSURE WILL CAUSE SIGNIFICANT COMPETITIVE INJURY AND DISRUPTION. Key Personnel Organizational Chart For the State of New Jersey Department of the Treasury, Division of Pensions and Benefits (DPB) OptumRx Senior Leadership Organizational Chart John Prince CEO Jon Mahrt Sr. VP, Industry & Network Relations and BriovaRx Ed Lagerstrom Chief of Staff to CEO Chief of Operations Chelsey Berstler Lisa Richards Diebel Chief Medical Officer Bruce Mead Executive VP, Chief Legal Officer Richard Mattera Jeff Grosklags Sr. VP, Product Development & UnitedHealthcare Gov’t. Program Relations Kirk Pumphrey Sr. VP, Strategic Business and Growth Sr. VP, Chief Financial Officer Sumit Dutta, M.D. Human Capital Partner DPP - 1035 1 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Resumes CONFIDENTIAL MATERIAL: CONTAINS HIGHLY SENSITIVE PROPRIETARY AND/OR TRADE SECRET INFORMATION; PUBLIC DISCLOSURE WILL CAUSE SIGNIFICANT COMPETITIVE INJURY AND DISRUPTION. S AR A E. S ABIN ACCOUNT M ANAGEMENT Pharmacy Benefit Management Healthcare Reform Medicare and Medicaid Services CrossStrategic Account Planning & Management Functional Team Leader Contract Negotiations Project Management Relationship Building Market Expansion Integrity, persistence and collaboration underscore a proven healthcare professional with broad-based expertise implementing business development and service pharmacy offerings in Medicare, Medicaid, and Commercial payers. Extensive experience leading account teams to deliver significant revenue performance within competitive markets while maintaining customer loyalty and retention. A decisive and self-driven change agent respected for comprehensive analysis and decision-making while proactively addressing customer concerns and rebuttals. Developed training solutions to help customers attain their strategic goals and healthcare objectives. Interpersonal skills transcend diverse multi-national and cultural backgrounds. PROFESSIONAL EXPERIENCE OPTUMRX SCHAUMBURG, ILLINOIS 2015- P R E S E N T SENIOR DI RECTOR, ACCOUNT M AN AG EMENT, HE ALTH PLANS Manage a $2 billion drug spend portfolio of regional payer accounts including – Oversight for overall account relationship management including –strategic planning, business intelligence, operations, expansion of service offerings, and performance guarantee management. Manage team of 10 direct reports and responsible for their professional development. High Customer Satisfaction scores including 100 percent customer retention. Experience working with Commercial, Medicare, Managed Medicaid, and Exchange books of business, as well as government affairs and state regulatory teams. Current mentor for OptumRx and coach for UnitedHealth Group emerging leader programs. Voted “2016 Most Valuable Professional” in the Health Plan Segment. June 2017 optumrx.com DPP - 1036 Page 1 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Resumes B OEHRINGER I NGELHEIM P H ARM ACEUTIC ALS RIDGEFIELD, CONNECTICUT 2013- 2015 DIRECTOR, RESPI RATORY MARKETING 2014-2015 Managed and implemented the managed markets strategy for a $4 billion respiratory franchise portfolio. ● Reviewed more than 100 customer rebate contracts annually including national PBMs and Health Plans ● Lead Managed Markets launch of three new prescription products within nine months ● Proactively spearheaded cross-functional team responsible for payer strategies that minimize market share loss anticipated with loss of patent protection for $2 billion blockbuster COPD agent. ● Managed $3 million marketing budget and oversee cross-functional team including HEOR, Managed Markets, Market Research, Marketing, Contracting, and Field Sales. ASSO CIATE DI RECTOR, KEY ACCO UNT & AREA MARKETER 2013-2014 Supported Health Plan & Integrated Delivery System (IDN) customer initiatives in Northeast and Mid-Atlantic regions including medication adherence and hospital discharge educational programs. E XPRESS S CRI PTS( F O R M E R L Y M E D C O H E AL T H S O L U T I O N S ) FRANKLIN LAKES, NEW JERSEY 2000-2013 NATIONAL ACCOUNT EXECUTIVE - HEALTH PLANS 2010 - 2013 Managed a $1.2 billion portfolio of marquee accounts including Oversight for overall account relationship management including –strategic planning, business intelligence, customer retention and loyalty, and expansion of service offerings. Oversight for a staff of 10 supporting healthcare programs. ● Spearheaded the strategic planning and business requirements restructuring three health plans in compliance with the 2011 NYS Medicaid Reform. 150,000 Medicaid participants were seamlessly transitioned within a tightly imposed schedule. Pioneering efforts underpinned a new revenue channel. June 2017 optumrx.com DPP - 1037 Page 2 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Resumes ● A catalyst and advocate for the continuous improvement and differentiation of service delivery. Proactively implemented the Medicare Part D Drug Benefit Program. Bridged the gap between regulatory complexities and business needs of Managed Care and Employer customers. ● Detail-oriented with excellent critical thinking and needs assessment aptitude. Developed the first Medicare Part D Group Health Waiver Plans. Programs resulted in unprecedented territory expansion from 11 to more than 70 customers touching over 1.5 million lives. ● Chaired the Voice of the Employee Action Committee, launching a division-wide mentoring program and selection process for quarterly Excellence awards. ACCOUNT EXECUTIVE, SYSTEMED 2006 - 2010 Managed overall relationship for over $150 million portfolio of companies which included 20 of the top 25 division accounts ● Devised the strategic planning and tactics resulting in a 99 percent customer retention rate - including the contract renewal for seven premier accounts. ● Selected for ‘EMPLOYER ACCOUNTS GROUP LEADERSHIP ACADEMY’ (only 10 of 300 chosen). ● Exceeded up-sell quotas for three consecutive years - generating more than $500,000 in revenue (2007-2009). SENIOR PRODUCT MANAGER, MEDICARE PART D 2003 - 2006 Launched Medicare Part D Retiree Drug Subsidy (RDS) and Employer Group Waiver Plan (EGWP) product offerings (2006). Coordinated logistics, support and training for a 200+ account teams and customers. ● Recipient of the ‘NATIONAL ACCOUNTS GROUP LEADERSHIP AWARD’ for creating novel revenue channels with an aggressive business plan. Resulted in 100 percent customer retention and a 200 percent increase in program enrollment (over two year term). ● Recipient of Medco’s ‘CHAIRMAN’S AWARD FOR OUTSTANDING PERFORMANCE’ for successfully launching a $5 million mail campaign within three months to promote the Medicare Discount Card program. PRODUCT MANAGER, MEDI CATION ADHERENCE PROGRAMS 2002 - 2003 Revitalized operations by structuring an aggressive business strategy and a high performance culture. Enhanced infrastructure to monitor KPI’s for cardiovascular and asthma compliance programs. June 2017 optumrx.com DPP - 1038 Page 3 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Resumes BUSI NESS ASSOCI ATE - LEADERSHI P TRAINING PROGRAM 2000 - 2002 Oversight for a comprehensive suite of business intelligence, predictive analytics and data mining solutions. BOEHRINGER INGELHEIM PH ARM ACEUTIC ALS RIDGEFIELD, CONNECTICUT 1999 - 2000 HE ALTH ECONOMIC RESE ARCHER – INTERN ATION AL DI VISION EDUCATION M A S T E R O F P U B L I C H E AL T H (M.P.H.) I N H E A L T H C A R E M AN A G E M E N T Yale University, School of Epidemiology and Public Health, 2000 B A C H E L O R O F A R T S (B. A.) I N G O V E R N M E N T Dartmouth College, 1996, GPA 3.4 PROFESSIONAL TRAINING / AFFILIATIONS Dartmouth Alumni Association, Student Interviewer & Career Advisor Yale University School of Public Health, Mentor Women Unlimited, Inc., Leadership Program, 2005 Academy for Healthcare Management (AHM) EXPERIENCE WITH SIMILAR CONTRACTS Sara has experience working with customer for over 10 years. Sara has been working with (1M lives) 2015-current. has been a from her date of hire in 2015 to the present. Sara leads the overall service team for Managed Medicaid program. She is responsible for compliance with all contractual commitments, service level agreements and overall customer satisfaction. Under Sara’s leadership, she has a100 percent retention rate over two contract terms. Additionally, she has also lead renewal contracting discussions. She is overseeing account management team servicing day to day operations, and serves as a resource for issue resolution. She also assists the customer with preparation for meetings with the State and serves as the key point of contact for executive relationships. She serves as senior internal advocate for the customer and provides recommendations on rebate management. Sara is proficient in NJ State Managed Medicaid regulation. June 2017 optumrx.com DPP - 1039 Page 4 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Resumes REFERENCE SUBCONTRACTOR’S RESUMES As a full service pharmacy benefit manager, OptumRx provides all core PBM-related services for your organization and does not subcontract any core PBM services. Specifically, we manage all aspects of our pharmacy program, own state-of-the-art mail service and specialty pharmacies, and have our own direct contracts with retail pharmacies for the dispensing of prescriptions as well as with drug manufacturers and intermediaries for rebate services. June 2017 optumrx.com DPP - 1040 Page 5 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Backup Staff CONFIDENTIAL MATERIAL: CONTAINS HIGHLY SENSITIVE PROPRIETARY AND/OR TRADE SECRET INFORMATION; PUBLIC DISCLOSURE WILL CAUSE SIGNIFICANT COMPETITIVE INJURY AND DISRUPTION. Since we employ a team approach to client management, the State of New Jersey Department of the Treasury, Division of Pensions and Benefits (DPB) has access to a team member who is familiar with your account should the key point of contact be unavailable. We provide each member of the client management team with mobile devices to further allow access to email and telephone service when traveling or out of the office. The client management team is also fully supported by our customer service team which is available to assist customers and members 24 hours a day, seven days a week. In addition, OptumRx assign the following backup staff to assist DPB’s dedicated client management team as needed: ● Bart Gerber, Assistant Director, Client Management, provides backup support to the assigned Account Executive, Sara Sabin. ● Duane Tarrant, Senior Account Manager, provides backup support to the assigned Account Manager, Paul Eberle. ● Antonina Evans, Director, Clinical Consulting, provides backup services to the Clinical Account Executive, Adrianne LaPilusa. ● Christopher Pinta, Director of Finance, provides backup support to Chase Livengood, the assigned financial analyst. ● Chris Tipkins, Associate Director, provides backup support to the IT Analyst, Christine Levitt. ● Brian Ripes, Director of Business Process, OptumRx Government Programs, provides backup EGWP support to Julian Nadolny. ● Brett Smith, Senior Business Analyst, provides backup support to Edward Pawula, the assigned eligibility consultant. June 2017 optumrx.com DPP - 1041 Page 1 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Experience with Contracts of Similar Size and Scope Prior to submission of its Quote {Proposal}, the Vendor {Bidder} shall have met all of the following requirements: A. Has completed a minimum of five (5) years of experience as an administrator and/or manager of an employer pharmacy benefit program; Confirmed. OptumRx has 28 years of experience providing high-quality, integrated pharmacy benefit management services designed to promote optimal member outcomes, superior savings, and outstanding customer service. The table below shows the years in which we established our key services. Services Year Established Retail Pharmacy Network 1993 Mail Service Pharmacy 1991 Internet Pharmacy 1999 Drug Utilization Review 1989 Specialty Pharmacy 1999 Claims Processing 1989 B. Has annual pharmacy benefit management revenue in excess of $0.5 billion; Confirmed. Our 2016 revenue was $60.4 billion. C. Offers a Retail Pharmacy Network available in all 50 states; Confirmed. Our core broad network pharmacy offering, comprised of more than 68,000 pharmacies which equates to 93 percent of available retail pharmacies, is extensive, inclusive, and established. All major chains are included in our network. D. Has managed a public sector customer for at least one (1) year duration; CONFIDENTIAL MATERIAL: CONTAINS HIGHLY SENSITIVE PROPRIETARY AND/OR TRADE SECRET INFORMATION; PUBLIC DISCLOSURE WILL CAUSE SIGNIFICANT COMPETITIVE INJURY AND DISRUPTION. Confirmed. We have an extensive track record of managing the pharmacy benefit for many public sector customers, including state government customers, around the country. A representative sample includes Michigan Public Schools Employee Retirement System (since 2010); State of Nevada (since 2004); Indiana Family and Social Services Administration/Office of Medicaid Policy and Planning (since 2013); the State of Ohio (since 2007); Georgia Department of Community Health (since 2006); and Department of Veterans Affairs Health Administration Center (since 2008). OptumRx manages 2,703 customers representing more than 65 million members. Our largest customer is a nationwide health plan representing approximately 9.5 million lives; our smallest customer represents fewer than 500 lives. Our focus on customized pharmacy benefit management programs for each of our customers allows us to specifically target the unique needs and requirements of each customer, no matter what their size. June 2017 optumrx.com DPP - 1042 Page 1 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Experience with Contracts of Similar Size and Scope E. Currently administers/manages three (3) or more accounts with at least 100,000 covered Members; and CONFIDENTIAL MATERIAL: CONTAINS HIGHLY SENSITIVE PROPRIETARY AND/OR TRADE SECRET INFORMATION; PUBLIC DISCLOSURE WILL CAUSE SIGNIFICANT COMPETITIVE INJURY AND DISRUPTION. Confirmed. OptumRx has extensive experience providing pharmacy benefit management services to large, complex public sector customers. A representative sample includes Michigan Public Schools Employee Retirement System lives); Indiana Family and Social Services Administration/Office of Medicaid Policy and Planning lives); Independence Blue Cross (IBC) lives); the State of Ohio lives); Georgia Department of Community Health lives); and Department of Veterans Affairs Health Administration Center lives). F. Administers an EGWP + WRAP for at least one client with over 20,000 covered Medicareeligible retirees. CONFIDENTIAL MATERIAL: CONTAINS HIGHLY SENSITIVE PROPRIETARY AND/OR TRADE SECRET INFORMATION; PUBLIC DISCLOSURE WILL CAUSE SIGNIFICANT COMPETITIVE INJURY AND DISRUPTION. Confirmed. We currently administer an EGWP + WRAP for Michigan Public Schools Employee Retirement System, which has covered Medicare-eligible retirees. We have held a Medicare Part D Prescription Drug Plan (PDP) Employer Group Waiver Plan (EGWP) contract with the Centers for Medicare & Medicaid Services (CMS) since 2007. We administer plans for 24 customers under our EGWP contract. C URRENT C USTOMER R EFERENCES Below, we have provided our current customer references. CONFIDENTIAL MATERIAL: CONTAINS HIGHLY SENSITIVE PROPRIETARY AND/OR TRADE SECRET INFORMATION; PUBLIC DISCLOSURE WILL CAUSE SIGNIFICANT COMPETITIVE INJURY AND DISRUPTION. June 2017 optumrx.com DPP - 1043 Page 2 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Experience with Contracts of Similar Size and Scope Client Name: Primary Contact Information Name: Street Address: City, State, Zip: Phone: Alternate Contact Information Name: Street Address: City, State, Zip: Phone: Contract Start Date: Contract End Date: Client Name: Primary Contact Information Name: Street Address: City, State, Zip: Phone: Alternate Contact Information Name: Street Address: City, State, Zip: Phone: Contract Start Date: Contract End Date: Client Name: Primary Contact Information Name: Street Address: City, State, Zip: Phone: Alternate Contact Information Name: Street Address: City, State, Zip: Phone: Contract Start Date: Contract End Date: June 2017 optumrx.com DPP - 1044 Page 3 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Experience with Contracts of Similar Size and Scope SER VIC E DES CRI PTI ONS CONFIDENTIAL MATERIAL: CONTAINS HIGHLY SENSITIVE PROPRIETARY AND/OR TRADE SECRET INFORMATION; PUBLIC DISCLOSURE WILL CAUSE SIGNIFICANT COMPETITIVE INJURY AND DISRUPTION. M ICHIGAN P UBLIC S CHOOLS E M PLOYEE R ETIREM ENT S YSTEM ( MPSERS) OptumRx administers pharmacy management benefit services for the Michigan Public Schools Employee Retirement System (MPSERS) which provide post-employment health coverage to non- Medicare eligible and Medicare eligible members, including retirees, beneficiaries and dependents. On behalf of MPSERS, OptumRx administers an Enhanced EGWP solution for the Medicare eligible beneficiaries through a fully CMS compliant Medicare Prescription non-Medicare eligible lives. Drug Plan. We also administer a Commercial Plan for the OptumRx provides a full array of pharmacy benefit management services tailored to support MPSERS’ unique benefit design, custom processes and strategic goals. For both the Medicare Prescription Part D Plan and the Commercial Plan, we provide claims administration, support a custom enrollment and eligibility process, and provide member services, including call center services, the development of member communications, member website portal and mobile application. In addition, we provide retail pharmacy management, home delivery services and access to a reporting tool that offers a wide range of standard, optional and ad hoc reporting capabilities. OptumRx also administers a full clinical offering on behalf of MPSERS, including Medication Therapy Management services, Comprehensive Medication Review Program, RDUR, formulary assistance, fraud, waste and abuse program, e-prescribing services, compound drug management program, pipeline and industry monitoring, prior authorization programs, grievances and appeals administration. OptumRx also provides specialty medication delivery through BriovaRx which includes patient centric care management programs such as video consultation, clinical guideline management, specialty pharmacy utilization management, dosing management, care coordination and a BriovaRx Infusion Program. For the EGWP product, OptumRx provides administrative services required by CMS including subsidy management, Prescription Drug Event (PDE) submission and management and administration of the additional level of appeals and grievances as required by CMS. For those Medicare eligible retirees not participating in the EGWP Plan, OptumRx provides support for MPSERS for Retiree Drug Subsidy Program. OptumRx also provides analytical support, trend forecasting, outcomes reporting, consultation services, and actionable recommendations to assist MPSERS in effectively managing their overall pharmacy trend. June 2017 optumrx.com DPP - 1045 Page 4 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Experience with Contracts of Similar Size and Scope CONFIDENTIAL MATERIAL: CONTAINS HIGHLY SENSITIVE PROPRIETARY AND/OR TRADE SECRET INFORMATION; PUBLIC DISCLOSURE WILL CAUSE SIGNIFICANT COMPETITIVE INJURY AND DISRUPTION. I NDEPENDENCE B LUE C ROSS (IBC) OptumRx administers full pharmacy management services for Commercial, Exchange and Medicare members. We provide a full array of pharmacy benefit management services tailored to IBC to support their needs and goals. We provide claims administration, member services, member Web portal and mobile application, retail network, specialty pharmacy and home delivery services. We also administer a number of clinical programs, including MTM, RDUR, formulary assistance, prior authorizations, quantity limits, step therapy, compound management, and a custom anti-viral step therapy program. In addition, OptumRx provides plan analysis, reporting and consultation to assist in managing overall pharmacy trend and identifying savings opportunities. CONFIDENTIAL MATERIAL: CONTAINS HIGHLY SENSITIVE PROPRIETARY AND/OR TRADE SECRET INFORMATION; PUBLIC DISCLOSURE WILL CAUSE SIGNIFICANT COMPETITIVE INJURY AND DISRUPTION. I NDIANA F AM ILY AND S OCIAL S ERVICES AD M INISTRATIO N OptumRx administers pharmacy management services for the Indiana Family and Social Services Administration. We provide a full array of pharmacy benefit management services, including: ● Pharmacy claims processing for the pharmacy fee-for-service program June 2017 ● Provider payments and financial reconciliations ● Custom integration with MMIS ● Clinical and technical call center operations including first line prior authorization calls ● Formulary development and maintenance ● Pharmacy prior authorization management including point-of-service ● Maximum Allowable Cost rate setting for prescription, OTC, and blood factor products ● Federal and supplemental rebate invoicing, processing, and payment reconciliation ● Diabetic Supply Rebate Program ● Rebate dispute tracking and resolution with pharmaceutical manufacturers ● Rebate data collection and question assistance for internal and external audits ● Provider education to correct and resolve billing issues ● 340B covered entity identification and exclusion of appropriate 340B claims from rebate invoicing optumrx.com DPP - 1046 Page 5 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Experience with Contracts of Similar Size and Scope ● Reporting (ad hoc and standard) ● Drug Utilization Board support ● Therapeutics Committee support ● Mental Health Quality Advisory Board support ● Prospective DUR edits ● RDUR ● Clinical analytics support including reporting and therapeutic class reviews ● Pharmacy provider audits ● Electronic coordination of benefits monitoring and support ● e-prescribing support ● Web portal services ● Coordination of services and communications with Medicaid managed care organizations SU B C O N T R A C T O R S As a full service pharmacy benefit manager, OptumRx provides all core PBM-related services for your organization and does not subcontract any core PBM services. Specifically, we manage all aspects of our pharmacy program, own state-of-the-art mail service and specialty pharmacies, and have our own direct contracts with retail pharmacies for the dispensing of prescriptions as well as with drug manufacturers and intermediaries for rebate services. A listing of subcontractors and vendors for non-core services is provided below. CONFIDENTIAL MATERIAL: CONTAINS HIGHLY SENSITIVE PROPRIETARY AND/OR TRADE SECRET INFORMATION; PUBLIC DISCLOSURE WILL CAUSE SIGNIFICANT COMPETITIVE INJURY AND DISRUPTION. Subcontractor Name Delegated Services SureScripts Surescripts has certified our claims, eligibility, and medication history system/processes for e-prescribing purposes. Surescripts also serves as a network routing solution for transmitting ePrescribing communications between PBM, EMR and pharmacy. Convey Health Solutions Medicare Part D enrollment services Diamond Marketing Solutions Member and pharmacy check payments, EOPs Xerox Corporation Print fulfillment Fiserv Printing membership cards Change Healthcare June 2017 Direct Member Reimbursement payment optumrx.com DPP - 1047 Page 6 State of New Jersey Department of the Treasury, Division of Pensions and Benefits Experience with Contracts of Similar Size and Scope processing Interpreting Services International, Inc. Translation services for written communication materials Language Line Solutions Alorica – a division Management Group, LLC Translation of languages for our customer service department of West Customer Eliza Corporation Pharmacy help desk and supplemental customer service for nights and weekend overflow for Medicare Part D members only Automated outbound calls notifying members of mail order status, prior authorization status and requesting member satisfaction surveys. The Rawlings Company Retrospective compliance audits SCIO Health Analytics The vendor provides an audit application to OptumRx. The application is utilized by OptumRx staff to conduct audits of prescriptions provided to individuals. Print vendors are identified at the time of implementation. Printer vendors are used for printing member and pharmacy check payments, EOPs, member communications, EOBs, statements, letters, and more. We utilize multiple print subcontractors and have a Master Services Agreement (MSA) in place with each subcontractor that covers Confidentiality, Security, HIPAA, Warranties, Indemnification, Insurance, and government required language. Each vendor is vetted through a due diligence process to cover compliance, risk, capabilities, financial status, and more. (1) OptumRx uses the following vendors : CONFIDENTIAL MATERIAL: CONTAINS HIGHLY SENSITIVE PROPRIETARY AND/OR TRADE SECRET INFORMATION; PUBLIC DISCLOSURE WILL CAUSE SIGNIFICANT COMPETITIVE INJURY AND DISRUPTION. Vendor Name Delegated Services Medical Review Institute of America Independent Medical Review Services. IRO we utilize to comply with federal rotating IRO external review requirements. Advanced Medical Reviews, Inc. (AMR) Independent Medical Review Services. IRO we utilize to comply with federal rotating IRO external review requirements. Medical Evaluation Specialists (MES) Independent Medical Review Services. IRO we utilize to comply with federal rotating IRO external review requirements. MCMC, LLC June 2017 IRO we utilize for physician reviews, medical necessity review and appeals support. optumrx.com DPP - 1048 Page 7 State of New Jersey Department of the Treasury, Division of Pensions and Benefits (DPB) Financial Capability OptumRx, Inc. is a wholly-owned indirect subsidiary of UnitedHealth Group Incorporated. UnitedHealth Group, Inc. is a publicly traded company on the New York Stock Exchange, trading under the symbol UNH. Please refer to Volume 2, Section 3 for our most recent Form 10-K, including certified financial statements, This can also be accessed from the Investors page of the company’s website: http://www.unitedhealthgroup.com/Investors/FinancialReports.aspx In addition, we encourage you to refer to our Dun & Bradstreet number, 86-866-7106, for the company’s credit and financial information. S AR B A N E S -O X L E Y C O M P L I A N C E OptumRx complies with Sarbanes-Oxley (SOX) requirements. To demonstrate the quality and transparency in financial reporting, independent audits and accounting services in force within OptumRx, we welcome the opportunity to provide authorized governmental representatives of the state and the federal government full access to all financial, accounting records and information related to the performance of the Contract resulting from this RFP, as we do with regard to all of our customer contracts. SS AE-16 A U D I T I N G Our information security program is designed to satisfy all applicable regulatory requirements, such as the HIPAA Security Rule. The security program incorporates different industry-accepted security standards and frameworks, such as ISO 2700x, the NIST 800 series of publications and others. As a component of UnitedHealth Group, Optum businesses are governed by the UnitedHealth Group enterprise security polices and capabilities. We are heavily regulated and have audits performed from a number of sources including Deloitte & Touche for our annual report, State Departments of Insurance, Model Audit Rule, customers and other stakeholders. In addition, we have a SSAE16 SOC 1 report covering the Pharmacy Benefits Management services on the RxClaim application. COMPANY HISTORY We have 28 years of experience providing high-quality, integrated services designed to promote optimal member outcomes, superior savings and outstanding customer service. What started as a department designed to support internal pharmacy operations at PacifiCare Health Systems, Inc. has grown into a fullscale pharmacy benefit management operation. Our history illustrates our strength as an adaptive and innovative pharmacy solution looking for ways to make the health care system work better for everyone. E AR L Y G R O W T H A N D A C C O M P L I S H M E N T S Between our inception in 1989 to our acquisition by UnitedHealth Group in 2005, we opened our first mail service operations, acquired Preferred Solutions so we could process claims in-house, launched our Specialty Pharmacy Program and opened a new mail service facility. Once acquired, we steadily grew to support the transition and integration of in-house pharmacy services for UnitedHealthcare. In 2013, we successfully transitioned 12 million members, effectively replacing a top competitor as the pharmacy benefit manager for UnitedHealthcare. June 2017 optumrx.com DPP - 1049 Page 1 State of New Jersey Department of the Treasury, Division of Pensions and Benefits (DPB) Financial Capability FORWARD PROGRESS From that moment onward, we continue to expand our focus to look for opportunities to help the health care system work together to benefit the customers, health care providers and members we serve. We have continued to expand our portfolio of products and have enhanced our capabilities through our most recent acquisitions. Throughout our evolution, we remain committed to adhering to the high quality standards and support our customers and members expect from us. We manage over one billion pharmacy claims annually and serve more than 64 million members across a broad spectrum of customers, including public and government entities, managed care organizations, Medicare and Medicaid plan sponsors, employer groups, collective bargaining groups, and third-party administrators. We are more than a PBM—we are a pharmacy care services company focused on driving transformative change and delivering quality holistic care. MILESTONES We have outlined our growth, ownership history and company milestones in the table below: 1989 Established to support internal pharmacy benefit management operations at PacifiCare Health Systems, Inc. 1991 Opened first mail service operations in Mira Mesa, California. 1995 Acquired Preferred Solutions, enabling us to process claims in-house. 1999 Launched our Specialty Pharmacy Program to create additional cost, clinical and disease state management support services. 2000 Opened a new mail service facility in Carlsbad, California. 2001 Changed company name to Prescription Solutions. 2005 Became a subsidiary of UnitedHealth Group as part of the acquisition of PacifiCare Health Systems. 2006 Began offering Medicare Part D services as an approved Centers for Medicare & Medicaid Services (CMS) vendor. Opened a new 300,000-square-foot mail service pharmacy in Overland Park, Kansas to support membership growth and create improved efficiencies in the company’s nationwide delivery of mail service prescriptions. 2007 Doubled member population through the transition of more than 4 million UnitedHealthcare Community & State/AARP members enrolled in PDP and MAPD plans. 2008 Expanded program and service offering through the UnitedHealth Group acquisition of Fiserv’s health-related businesses, including Innoviant, Fiserv’s pharmacy benefit management division. 2009 Expanded Medicaid business by serving Unison, previously acquired by UnitedHealthcare Community & State. June 2017 optumrx.com DPP - 1050 Page 2 State of New Jersey Department of the Treasury, Division of Pensions and Benefits (DPB) 2011 Financial Capability Changed our name to OptumRx, Inc. and became a part of Optum, a UnitedHealth Group health services business dedicated to making the health system work better for everyone. In addition to pharmacy solutions, Optum provides information technology and consulting solutions (OptumInsight) and health and wellness solutions (OptumHealth). Launched several new products including a mobile website, a text messaging service that simplified mail service usage, and several customer tools (Pharmacy Benefit Advisor, Employee Benefit Advisor, Pharmacy Network Advisor) 2013 As part of bringing all of UnitedHealth Group’s pharmacy services in-house, transitioned 12 million UnitedHealthcare members to OptumRx. This move enhances our ability to deliver improved health outcomes and better manage total health care costs. 2014 Achieved 30 million members through our continued services managing mail service, specialty, formulary management and pharmacy benefit administration. 2015 Combined with Catamaran, a leading provider of pharmacy benefit management services and technology solutions, making us the nation’s third largest pharmacy benefit manager. The combination demonstrates a benefit to customers, partners and members through enhanced services and cost trend management driven by state-of-the-art technology and resources, greater efficiencies and scale. Acquired AxelaCare Health Solutions (now BriovaRx Infusion Services), a leading provider of home infusion solutions. The acquisition enables us to enhance our ability to deliver the best care to the growing number of consumers managing complex conditions through at-home infusions. 2016 Successfully transitioned 35 million Catamaran members on January 1st despite continued integration and acquisition efforts. Acquired Helios, now Optum for Workers’ Compensation and Auto No-Fault, a leading workers’ compensation health care services company, to help us better deliver increased value to payers, employers, government entities and consumers as they work to improve health and manage costs associated with worker’s compensation and auto no-fault. June 2017 optumrx.com DPP - 1051 Page 3 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2016 or ‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 1-10864 UnitedHealth Group Incorporated (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) UnitedHealth Group Center 9900 Bren Road East Minnetonka, Minnesota 55343 (Address of principal executive offices) (Zip Code) (952) 936-1300 (Registrant’s telephone number, including area code) 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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes È Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No ‘ No È 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 È No ‘ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes È No ‘ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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. È Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one) Large accelerated filer È Non-accelerated filer ‘ Accelerated filer ‘ Smaller reporting company ‘ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ‘ No È The aggregate market value of voting stock held by non-affiliates of the registrant as of June 30, 2016 was $132,269,813,351 (based on the last reported sale price of $141.20 per share on June 30, 2016, on the New York Stock Exchange), excluding only shares of voting stock held beneficially by directors, executive officers and subsidiaries of the registrant. As of January 31, 2017, there were 951,165,192 shares of the registrant’s Common Stock, $.01 par value per share, issued and outstanding. DOCUMENTS INCORPORATED BY REFERENCE The information required by Part III of this report, to the extent not set forth herein, is incorporated by reference from the registrant’s definitive proxy statement relating to its 2017 Annual Meeting of Shareholders. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates. DPP - 1052 UNITEDHEALTH GROUP Table of Contents Page Part I Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Part II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . 33 Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Item 8. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure . . . . 87 Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Item 9B. 90 Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Part III Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . 91 Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 Part IV Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 DPP - 1053 PART I ITEM 1. BUSINESS INTRODUCTION Overview UnitedHealth Group is a diversified health and well-being company dedicated to helping people live healthier lives and helping to make the health system work better for everyone. The terms “we,” “our,” “us,” “its,” “UnitedHealth Group,” or the “Company” used in this report refer to UnitedHealth Group Incorporated and its subsidiaries. Through our diversified family of businesses, we leverage core competencies in advanced, enabling technology; health care data, information and intelligence; and clinical care management and coordination to help meet the demands of the health system. These core competencies are deployed within our two distinct, but strategically aligned, business platforms: health benefits operating under UnitedHealthcare and health services operating under Optum. UnitedHealthcare provides health care benefits to an array of customers and markets. UnitedHealthcare Employer & Individual serves employers ranging from sole proprietorships to large, multi-site and national employers, public sector employers and other individuals. UnitedHealthcare Medicare & Retirement delivers health and well-being benefits for Medicare beneficiaries and retirees. UnitedHealthcare Community & State manages health care benefit programs on behalf of state Medicaid and community programs and their participants. UnitedHealthcare Global includes UnitedHealthcare Brazil, a health care company providing health and dental benefits and hospital and clinical services to employer groups and individuals in Brazil, and other diversified global health businesses. Optum is a health services business serving the broad health care marketplace, including payers, care providers, employers, governments, life sciences companies and consumers, through its OptumHealth, OptumInsight and OptumRx businesses. These businesses have dedicated units that help improve overall health system performance through optimizing care quality, reducing costs and improving consumer experience and care provider performance leveraging distinctive capabilities in data and analytics, pharmacy care services, population health, health care delivery and health care operations. Through UnitedHealthcare and Optum, in 2016, we processed more than one half trillion dollars in gross billed charges and we managed more than $200 billion in aggregate health care spending on behalf of the customers and consumers we serve. Our revenues are derived from premiums on risk-based products; fees from management, administrative, technology and consulting services; sales of a wide variety of products and services related to the broad health and well-being industry; and investment and other income. Our two business platforms have four reportable segments: • UnitedHealthcare, which includes UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare & Retirement, UnitedHealthcare Community & State and UnitedHealthcare Global; • OptumHealth; • OptumInsight; and • OptumRx. For our financial results and the presentation of certain other financial information by segment, including revenues and long-lived fixed assets by geographic source, see Note 13 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements.” 1 DPP - 1054 UnitedHealthcare Through its health benefits offerings, UnitedHealthcare is enabling better health, helping to control rising health care costs and creating a better health care experience for its customers. UnitedHealthcare’s market position is built on: • strong local market relationships; • the breadth of product offerings, which are responsive to many distinct market segments in health care; • service and advanced technology; • competitive medical and operating cost positions; • effective clinical engagement; • extensive expertise in distinct market segments; and • innovation for customers and consumers. UnitedHealthcare utilizes Optum’s capabilities to help coordinate patient care, improve affordability of medical care, analyze cost trends, manage pharmacy benefits, work with care providers more effectively and create a simpler consumer experience. In the United States, UnitedHealthcare arranges for discounted access to care through networks that include 1 million physicians and other health care professionals and approximately 6,000 hospitals and other facilities. UnitedHealthcare is subject to extensive government regulation. See further discussion of our regulatory environment below under “Government Regulation” and in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” UnitedHealthcare Employer & Individual UnitedHealthcare Employer & Individual offers an array of consumer-oriented health benefit plans and services nationwide for large national employers, public sector employers, mid-sized employers, small businesses, and individuals. UnitedHealthcare Employer & Individual provides access to medical services for over 30 million people on behalf of our customers and alliance partners. This includes more than 200,000 employer customers across all 50 states. Products are offered through affiliates that are licensed as insurance companies, health maintenance organizations (HMOs), or third-party administrators (TPAs). Large employer groups typically use self-funded arrangements where UnitedHealthcare Employer & Individual earns a service fee. Smaller employer groups and individuals are more likely to purchase risk-based products because they are less willing or unable to bear a greater potential liability for health care expenditures. Through its risk-based product offerings, UnitedHealthcare Employer & Individual assumes the risk of both medical and administrative costs for its customers in return for a monthly premium, which is typically a fixed rate per individual served for a one-year period. When providing administrative and other management services to customers that elect to self-fund the health care costs of their employees and employees’ dependents, UnitedHealthcare Employer & Individual receives a fixed monthly service fee per individual served. These customers retain the risk of financing medical benefits for their employees and employees’ dependents, while UnitedHealthcare Employer & Individual provides services such as coordination and facilitation of medical and related services to customers, consumers and health care professionals, administration of transaction processing and access to a contracted network of physicians, hospitals and other health care professionals, including dental and vision. The consolidated purchasing capacity represented by the individuals served by UnitedHealth Group makes it possible for UnitedHealthcare Employer & Individual to contract for cost-effective access to a large number of conveniently located care professionals and facilities. UnitedHealthcare Employer & Individual has relationships with network care providers that integrate data and analytics, implement value-based payments and care management programs, and enable us to jointly better manage health care across populations. 2 DPP - 1055 UnitedHealthcare Employer & Individual typically distributes its products through consultants or direct sales in the larger employer and public sector segments. In the smaller group segment of the commercial marketplace, UnitedHealthcare Employer & Individual’s distribution system consists primarily of direct sales and sales through collaboration with brokers and agents. UnitedHealthcare Employer & Individual also distributes products through wholesale agents or agencies that contract with health insurance carriers to distribute individual or group benefits and provide other related services to their customers. UnitedHealthcare Employer & Individual also distributes its products through professional employer organizations, associations and, increasingly, through both multi-carrier and its own proprietary private exchange marketplaces. Direct-to-consumer sales are supported by participation in multi-carrier health insurance marketplaces for individuals and small groups through exchanges. In 2017, UnitedHealthcare Employer & Individual will participate in individual public exchanges in three states, a reduction from 34 states in 2016. UnitedHealthcare Employer & Individual’s diverse product portfolio offers a continuum of benefit designs, price points and approaches to consumer engagement, which provides the flexibility to meet the coverage needs of employers of all sizes. The market for health benefit products is shifting, with benefit and network offerings shaped, at least in part, by the requirements and effects of the Patient Protection and Affordable Care Act (ACA) and related federal and state regulations, increased employer focus on quality and employee engagement and the urgent need to align the system around value. Cost pressures are stimulating demand for improved health care affordability and more coordinated care. UnitedHealthcare Employer & Individual is responding to this demand with medical network and contracting constructs (such as performance incentives and benefit designs that direct more patients to higher-performing care providers), alternative access to affordable and convenient care (such as through telehealth appointments with registered nurses and physicians) and a consumer-responsive service called Advocate4Me. UnitedHealthcare Employer & Individual offers affordable products and actionable information to enable better health outcomes and to help employers attract and retain talent. UnitedHealthcare Employer & Individual’s major product families include: Traditional Products. Traditional products include a full range of medical benefits and network options from managed plans, such as Choice and Options PPO, to more traditional indemnity products. The plans offer a full spectrum of covered services, including preventive care, direct access to specialists and catastrophic protection. Consumer Engagement Products. Consumer engagement products couple plan design with financial accounts to increase individuals’ responsibility for their health and well-being. This suite of products includes highdeductible consumer-driven benefit plans, which include health reimbursement accounts (HRAs), health savings accounts (HSAs) and consumer engagement services such as personalized behavioral incentive programs and consumer education. During 2016, more than 40,000 employer-sponsored benefit plans, including nearly 400 employers in the large group self-funded market, purchased HRA or HSA products from us. Clinical and Pharmacy Products. UnitedHealthcare Employer & Individual offers a comprehensive suite of clinical and pharmacy care services products, which complement its service offerings by improving quality of care, engaging members and providing cost-saving options. All UnitedHealthcare Employer & Individual members are provided access to clinical products that help them make better health care decisions and better use of their medical benefits, which contribute to improved health and lowered medical expenses. Each medical plan has a core set of clinical programs embedded in the offering, with additional services available depending on offering type (risk-based or self-funded), line of business (e.g., small business, key accounts, public sector, national accounts or individuals) and clinical need. UnitedHealthcare Employer & Individual’s clinical programs include: • wellness programs; • decision support; 3 DPP - 1056 • utilization management; • case and disease management; • complex condition management; • on-site programs, including biometrics and flu shots; • incentives to reinforce positive behavior change; • mental health/substance use disorder management; and • employee assistance programs. UnitedHealthcare Employer & Individual’s comprehensive and integrated pharmaceutical care services promote lower costs by using formulary programs to produce better unit costs, encouraging consumers to use drugs that offer improved value and outcomes, helping consumers take actions to improve their health and supporting the appropriate use of drugs based on clinical evidence through physician and consumer education programs. Specialty Offerings. UnitedHealthcare Employer & Individual also delivers dental, vision, life, critical illness and disability product offerings through an integrated approach, including a network of more than 20,000 vision offices and more than 80,000 dental offices, in private and retail settings. UnitedHealthcare Military & Veterans. UnitedHealthcare Military & Veterans is the provider of health care services for nearly 3 million active duty and retired military service members and their families in 21 states under the Department of Defense’s (DoD) TRICARE Managed Care Support contract. The contract that began on April 1, 2013 is scheduled to conclude in 2017 and has not been renewed. UnitedHealthcare Medicare & Retirement UnitedHealthcare Medicare & Retirement provides health and well-being services to individuals age 50 and older, addressing their unique needs for preventive and acute health care services, as well as services dealing with chronic disease and other specialized issues common among older individuals. UnitedHealthcare Medicare & Retirement is fully dedicated to serving this growing senior market segment, providing products and services in all 50 states, the District of Columbia and most U.S. territories. UnitedHealthcare Medicare & Retirement has distinct pricing, underwriting, clinical program management and marketing capabilities dedicated to health products and services in this market. UnitedHealthcare Medicare & Retirement offers a selection of products that allow people to obtain the health coverage and services they need as their circumstances change. UnitedHealthcare Medicare & Retirement is positioned to serve seniors who find that affordable, network-based care provided through Medicare Advantage plans meets their unique health care needs. For those who prefer traditional fee-for-service Medicare, UnitedHealthcare Medicare & Retirement offers both Medicare Supplement and Medicare Prescription Drug Benefit (Medicare Part D) prescription drug programs that supplement their government-sponsored Medicare by providing additional benefits and coverage options. Beneficiaries with special needs are served through UnitedHealthcare Medicare & Retirement Dual, Chronic and Institutional Special Needs Plans (SNPs) in many markets. UnitedHealthcare Medicare & Retirement services include care management and clinical management programs, a nurse health line service, 24-hour access to health care information, access to discounted health services from a network of care providers and administrative services. UnitedHealthcare Medicare & Retirement has extensive distribution capabilities and experience, including direct marketing to consumers on behalf of its key clients: AARP, the nation’s largest membership organization dedicated to the needs of people age 50 and over, and state and U.S. government agencies. Products are also offered through employer groups and agent channels. 4 DPP - 1057 UnitedHealthcare Medicare & Retirement’s major product categories include: Medicare Advantage. UnitedHealthcare Medicare & Retirement provides health care coverage for seniors and other eligible Medicare beneficiaries primarily through the Medicare Advantage program administered by CMS, including Medicare Advantage HMO plans, preferred provider organization (PPO) plans, Point-of-Service plans, Private-Fee-for-Service plans and SNPs. Under the Medicare Advantage program, UnitedHealthcare Medicare & Retirement provides health insurance coverage in exchange for a fixed monthly premium per member from CMS plus, in some cases, monthly consumer premiums. Premium amounts received from CMS vary based on the geographic areas in which members reside; demographic factors such as age, gender and institutionalized status; and the health status of the individual. Medicare Advantage plans are designed to compete at the local level, taking into account member and care provider preferences, competitor offerings, our quality and cost initiatives, our historical financial results and the long-term payment rate outlook for each geographic area. UnitedHealthcare Medicare & Retirement served 3.6 million people through its Medicare Advantage products as of December 31, 2016. Built on more than 20 years of experience, UnitedHealthcare Medicare & Retirement’s senior-focused care management model operates at a medical cost level below that of traditional Medicare, while helping seniors live healthier lives. Through UnitedHealth Group’s HouseCalls program, nurse practitioners performed more than 1 million in-home preventative care visits in 2016 to address unmet care opportunities and close gaps in care. For high-risk patients in certain care settings and programs, UnitedHealthcare Medicare & Retirement uses proprietary, automated medical record software that enables clinical care teams to capture and track patient data and clinical encounters, creating a comprehensive set of care information that bridges across home, hospital and nursing home care settings. Proprietary predictive modeling tools help identify members at high risk and allow care managers to reach out to those members and create individualized care plans that help them obtain the right care, in the right place, at the right time. Medicare Part D. UnitedHealthcare Medicare & Retirement provides Medicare Part D benefits to beneficiaries throughout the United States and its territories through its Medicare Advantage and stand-alone Medicare Part D plans. The stand-alone Medicare Part D plans address a large spectrum of beneficiaries’ needs and preferences for their prescription drug coverage, including low cost prescription options. Each of the plans includes the majority of the drugs covered by Medicare and provides varying levels of coverage to meet the diverse needs of Medicare beneficiaries. As of December 31, 2016, UnitedHealthcare enrolled 8.6 million people in the Medicare Part D programs, including 4.9 million individuals in the stand-alone Medicare Part D plans with the remainder in Medicare Advantage plans incorporating Medicare Part D coverage. Medicare Supplement. UnitedHealthcare Medicare & Retirement is currently serving 4.7 million seniors nationwide through various Medicare Supplement products in association with AARP. UnitedHealthcare Medicare & Retirement offers a full range of supplemental products at diverse price points. These products cover the various levels of coinsurance and deductible gaps that seniors are exposed to in the traditional Medicare program. Premium revenues from the Centers for Medicare & Medicaid Services (CMS) represented 25% of UnitedHealth Group’s total consolidated revenues for the year ended December 31, 2016, most of which were generated by UnitedHealthcare Medicare & Retirement. UnitedHealthcare Community & State UnitedHealthcare Community & State is dedicated to serving state programs that care for the economically disadvantaged, the medically underserved and those without the benefit of employer-funded health care coverage, in exchange for a monthly premium per member from the state program. In some cases, these premiums are subject to experience or risk adjustments. UnitedHealthcare Community & State’s primary customers oversee Medicaid plans, Children’s Health Insurance Programs (CHIP), SNPs, integrated MedicareMedicaid plans (MMP) and other federal, state and community health care programs. As of December 31, 2016, 5 DPP - 1058 UnitedHealthcare Community & State participated in programs in 24 states and the District of Columbia, and served 5.9 million beneficiaries. The Affordable Care Act provided for optional Medicaid expansion effective January 1, 2014. As of December 31, 2016, UnitedHealthcare Community & State served more than 1 million people through Medicaid expansion programs in 15 states. States using managed care services for Medicaid beneficiaries select health plans by using a formal bid process or by awarding individual contracts. A number of factors are considered by UnitedHealthcare Community & State when choosing programs for participation, including the state’s commitment and consistency of support for its Medicaid managed care program in terms of service, innovation and funding; the eligible population base, both immediate and long term; and the structure of the projected program. UnitedHealthcare Community & State works with its state customers to advocate for actuarially sound rates that are commensurate with medical cost trends. The primary categories of eligibility for the programs served by UnitedHealthcare Community & State and its participation are: • Temporary Assistance to Needy Families, primarily women and children – 22 markets; • CHIP – 21 markets; • Aged, Blind and Disabled – 20 markets; • SNP – 15 markets; • Medicaid Expansion – 15 markets; • Long-Term Services and Supports – 12 markets; • childless adult programs for the uninsured – 2 markets; • other programs (e.g., developmentally disabled, rehabilitative services) – 5 markets; and • MMP – 2 markets. These health plans and care programs offered are designed to address the complex needs of the populations they serve, including the chronically ill, those with disabilities and people with a higher risk of medical, behavioral and social conditions. UnitedHealthcare Community & State administers benefits for the unique needs of children, pregnant women, adults, seniors and those who are institutionalized or are nursing home eligible. These individuals often live in areas that are medically underserved and are less likely to have a consistent relationship with the medical community or a care provider. These individuals also tend to face significant social and economic challenges. UnitedHealthcare Community & State leverages the national capabilities of UnitedHealth Group locally, supporting effective care management, strong regulatory partnerships, greater administrative efficiency, improved clinical outcomes and the ability to adapt to a changing national and local market environment. UnitedHealthcare Community & State coordinates resources among family, physicians, other health care providers, and government and community-based agencies and organizations to facilitate continuous and effective care. Approximately 75% of the people in state Medicaid programs are served by managed care, but this population represents only 40% of total Medicaid spending. UnitedHealthcare Community & State’s business development opportunities include entering fee-for-service markets converting to managed care, which represents a population of nearly 8 million people; and growing in existing managed care markets, including state-carve-ins of populations with more complex needs requiring more sophisticated models of care. This expansion includes integrated management of physical, behavioral, long-term care services and supports and social services by applying strong data analytics and community-based collaboration. UnitedHealthcare Community & State continues to evolve its clinical model to enhance quality and the clinical experience for the people it serves. The model allows UnitedHealthcare Community & State to quickly identify the people who could benefit most from more highly coordinated care; typically, the 5% of members who are most at risk and drive over 50% of states’ medical costs. 6 DPP - 1059 UnitedHealthcare Global UnitedHealthcare Global participates in international markets through national “in country” and cross-border strategic approaches. UnitedHealthcare Global’s cross-border health care business provides comprehensive health benefits, care management and care delivery for multinational employers, governments and individuals around the world. UnitedHealthcare Global’s goal is to create health care business solutions that are based on local expertise, infrastructure, culture and needs. As of December 31, 2016, UnitedHealthcare Global provided medical benefits to 4.2 million people, principally in Brazil, but also residing in more than 125 other countries. UnitedHealthcare Brazil. UnitedHealthcare Brazil provides medical and dental benefits to nearly 6 million people. UnitedHealthcare Brazil owns and operates more than 40 acute hospitals and more than 50 specialty, primary care and emergency services clinics across Brazil, principally for the benefit of its members. UnitedHealthcare Brazil’s patients are also treated in its contracted provider network of nearly 22,000 physicians and other health care professionals, approximately 1,900 hospitals and nearly 7,000 laboratories and diagnostic imaging centers. UnitedHealthcare Brazil offers a diversified product portfolio with a wide range of product offerings, benefit designs, price points and value, including indemnity products. UnitedHealthcare Brazil’s products include various administrative services such as network access and administration, care management and personal health services and claims processing. Other Global Offerings. UnitedHealthcare Global includes other diversified global health services with a variety of offerings for international customers, including: • network access and care coordination in the United States and overseas; • TPA products and services for health plans and TPAs; • brokerage services; • practice management services for care providers; • government and corporate consulting services for improving quality and efficiency; and • global expatriate insurance solutions. Optum Optum is a health services business serving the broad health care marketplace, including: • Those who need care: the consumers who need the right support, information, resources and products to achieve their health goals. • Those who provide care: pharmacies, hospitals, physicians, practices and other health care facilities seeking to modernize the health system and support the best possible patient care and experiences. • Those who pay for care: employers, health plans, and state, federal and municipal agencies devoted to ensuring the populations they sponsor receive high-quality care, administered and delivered efficiently and effectively. • Those who innovate for care: global life sciences organizations dedicated to developing more effective approaches to care, enabling technologies and medicines that improve care delivery and health outcomes. Optum operates three reportable segments leveraging distinctive capabilities in data and analytics, pharmacy care services, population health, health care delivery and health care operations: • OptumHealth focuses on care delivery, care management, wellness and consumer engagement, and health financial services; • OptumInsight specializes in data and analytics and other health care information technology services, and delivers operational services and support; and • OptumRx provides pharmacy care services. 7 DPP - 1060 OptumHealth OptumHealth is a diversified health and wellness business serving the physical, emotional and health-related financial needs of 83 million unique individuals. OptumHealth enables population health management through programs offered by employers, payers, government entities and directly with the care delivery system. OptumHealth products and services deliver value by improving quality and patient satisfaction while lowering cost. OptumHealth builds high-performing networks and centers of excellence across the care continuum, by working directly with physicians to advance population health management and by coordinating care for the most medically complex patients. OptumHealth offers its products on a risk basis, where it assumes responsibility for health care costs in exchange for a monthly premium per individual served, on an administrative fee basis, under which it manages or administers delivery of the products or services in exchange for a fixed monthly fee per individual served, or on a fee-for-service basis, where it delivers medical services to patients in exchange for a contracted fee. For its financial services offerings, OptumHealth charges fees and earns investment income on managed funds. OptumHealth sells its products primarily through its direct sales force, strategic collaborations and external producers in three markets: employers (which includes the sub-markets of large, mid-sized and small employers), payers (which includes the sub-markets of health plans, TPAs, underwriter/stop-loss carriers and individual market intermediaries) and government entities (which includes states, CMS, DoD, the Veterans Administration and other federal procurement agencies). OptumHealth serves patients and care providers through its local ambulatory care services business and delivers care through a physician-led, patient-centric and data-driven organization comprised of over 20,000 employed, managed and contracted physicians. OptumHealth also enables care providers’ transition from traditional, fee-for-service care delivery to performance-based delivery and payment models that put patient health and outcomes first, such as those emerging through accountable care organizations (ACOs) and local care provider partnerships. Through OptumHealth’s strategic partnerships, alliances and ownership arrangements it helps care providers adopt new approaches and technologies that improve the coordination of care across all providers involved in patient care. MedExpress’ nearly 200 neighborhood care centers provide urgent and walk-in care services with a consumerfriendly approach. The HouseCalls program provides in-home health assessments that engage individuals, understand their health status and needs, and close gaps in care. In 2016, HouseCalls conducted more than 1 million in-home health assessments. OptumHealth’s mobile care delivery business delivers occupational health and medical services to government customers, with a particular focus on the U.S. military. OptumHealth serves people through population health management services that meet both the preventative care and health intervention needs of consumers across the care continuum — physical health and wellness, mental health, complex medical conditions, disease management, hospitalization and post-acute care. This includes offering access to proprietary networks of provider specialists in many clinical specialties, including behavioral health, organ transplant, chiropractic and physical therapy. OptumHealth engages consumers in managing their health, including guidance, tools and programs that help them achieve their health goals and maintain healthy lifestyles. Optum Financial Services, through Optum Bank, a wholly-owned subsidiary, serves consumers through over 4.6 million health savings and other accounts with $7 billion in assets under management as of December 31, 8 DPP - 1061 2016. During 2016, Optum Bank processed over $100 billion in medical payments to physicians and other health care providers. Organizations across the health system rely on Optum to manage and improve payment flows through its highly automated, scalable, electronic payment systems. OptumInsight OptumInsight provides services, technology and health care expertise to major participants in the health care industry. OptumInsight’s capabilities are focused on data and analytics, technology and information that help improve the quality of care and drive greater efficiency in the health care system. Hospital systems, physicians, health plans, governments, life sciences companies and other organizations that comprise the health care industry depend on OptumInsight to help them improve performance, achieve efficiency, reduce costs, meet compliance mandates and modernize their core operating systems to meet the changing needs of the health system. Many of OptumInsight’s software and information products and professional services are delivered over extended periods, often several years. OptumInsight maintains an order backlog to track unearned revenues under these long-term arrangements. The backlog consists of estimated revenue from signed contracts, other legally binding agreements and anticipated contract renewals based on historical experience with OptumInsight’s customers. OptumInsight’s aggregate backlog at December 31, 2016, was $12.6 billion, of which $6.9 billion is expected to be realized within the next 12 months. This includes $4.5 billion related to intersegment agreements, all of which are in the current portion of the backlog. OptumInsight’s aggregate backlog at December 31, 2015, was $10.4 billion. OptumInsight cannot provide any assurance that it will be able to realize all of the revenues included in the backlog due to uncertainties with regard to the timing and scope of services and the potential for cancellation, non-renewal or early termination of service arrangements. OptumInsight’s products and services are sold primarily through a direct sales force. OptumInsight’s products are also supported and distributed through an array of alliances and business partnerships with other technology vendors, who integrate and interface OptumInsight’s products with their applications. OptumInsight believes it is well positioned to address the needs of four primary market segments: care providers (e.g., physicians and hospital systems), health plans, governments and life sciences companies. Care Providers. Serving more than four out of five U.S. hospitals and tens of thousands of physicians, OptumInsight assists care providers in meeting their challenge to improve patient outcomes and care amid changing payment models and pressures. OptumInsight brings a broad array of solutions to help care providers meet these challenges, with particular focus on clinical performance and quality improvement, population health management, data management and analytics, revenue management, cost containment, compliance, cloudenabled collaboration and consumer engagement. Health Plans. OptumInsight serves approximately 300 health plans through cost-effective, technology-enabled solutions that help them improve efficiency, understand and optimize growth while managing risk, deliver on clinical performance and compliance goals, and build and manage strong networks of care. Governments. OptumInsight provides services tailored to government payers, including data and analytics technology, claims management and payment accuracy services, and strategic consulting. Life Sciences. OptumInsight provides services to global life sciences companies. These companies look to OptumInsight for data, analytics and expertise in core areas of health economics and outcomes research, market access consulting, integrated clinical and health care claims data and informatics services, epidemiology and drug safety, and patient reported outcomes. 9 DPP - 1062 OptumRx OptumRx provides a full spectrum of pharmacy care services to more than 65 million people in the United States through its network of more than 67,000 retail pharmacies and multiple home delivery facilities throughout the country. In 2016, OptumRx managed more than $80 billion in pharmaceutical spending, including more than $30 billion in specialty pharmaceutical spending. OptumRx provides retail network contracting, purchasing and clinical capabilities and works with customers to develop an optimal set of programs in areas such as step therapy, formulary management, drug adherence and disease/drug therapy management to achieve a high-quality, low-cost pharmacy offering. OptumRx’s comprehensive whole-person approach to pharmacy care services integrates demographic, medical, laboratory, pharmaceutical and other clinical data and applies analytics to drive clinical care insight to support care treatments and compliance, benefiting clients and individuals through enhanced services and cost trend management. OptumRx provides pharmacy care services to non-affiliated clients, including a number of health plans, large national employer plans, unions and trusts and government entities; as well as a substantial majority of UnitedHealthcare members. Additionally, OptumRx manages specialty pharmacy care services, including patient support and clinical programs designed to ensure quality and deliver value for consumers. OptumRx’s distribution system consists primarily of health insurance brokers and other health care consultants and direct sales. GOVERNMENT REGULATION Most of our health and well-being businesses are subject to comprehensive federal, state and international laws and regulations. We are regulated by federal, state and international regulatory agencies that generally have discretion to issue regulations and interpret and enforce laws and rules. The regulations can vary significantly from jurisdiction to jurisdiction and the interpretation of existing laws and rules also may change periodically. Domestic and international governments continue to enact and consider various legislative and regulatory proposals that could materially impact certain aspects of the health care system. New laws, regulations and rules, or changes in the interpretation of existing laws, regulations and rules, including as a result of changes in the political climate, could adversely affect our business. If we fail to comply with, or fail to respond quickly and appropriately to changes in, applicable laws, regulations and rules, our business, results of operations, financial position and cash flows could be materially and adversely affected. See Part I, Item 1A, “Risk Factors” for a discussion of the risks related to our compliance with federal, state and international laws and regulations. Federal Laws and Regulation We are subject to various levels of U.S. federal regulation. For example, when we contract with the federal government, we are subject to federal laws and regulations relating to the award, administration and performance of U.S. government contracts. CMS regulates our UnitedHealthcare businesses and certain aspects of our Optum businesses. Payments by CMS to our businesses are subject to regulations, including those governing fee-for-service and the submission of information relating to the health status of enrollees for purposes of determining the amounts of certain payments to us. CMS also has the right to audit our performance to determine our compliance with CMS contracts and regulations and the quality of care we provide to Medicare beneficiaries. Our commercial business is further subject to CMS audits related to medical loss ratios (MLRs), risk adjustment and reinsurance data. UnitedHealthcare Community & State has Medicaid and CHIP contracts that are subject to federal regulations regarding services to be provided to Medicaid enrollees, payment for those services and other aspects of these programs. There are many regulations affecting Medicare and Medicaid compliance and the regulatory environment with respect to these programs is complex. We are also subject to federal law and regulations 10 DPP - 1063 relating to the administration of contracts with federal agencies. Our business is also subject to laws and regulations relating to consumer protection, anti-fraud and abuse, anti-kickbacks, false claims, prohibited referrals, inappropriately reducing or limiting health care services, anti-money laundering, securities and antitrust. Affordable Care Act. The ACA expanded access to coverage and modified aspects of the commercial insurance market, as well as the Medicaid and Medicare programs, CHIP and other aspects of the health care system. Among other requirements, the ACA expanded dependent coverage to age 26, expanded benefit requirements, eliminated certain annual and lifetime maximum limits, eliminated certain pre-existing condition limits, required coverage for preventative services without cost to members, required premium rebates if certain MLRs are not satisfied, granted members new and additional appeal rights, created new premium rate review processes, established a system of state and federal exchanges through which consumers can purchase health coverage, imposed new requirements on the format and content of communications (such as explanations of benefits) between health insurers and their members, introduced new risk sharing programs, reduced the Medicare Part D coverage gap and reduced payments to private plans offering Medicare Advantage. The ACA is affecting how we do business and could impact our results of operations, financial position and cash flows. See also Part I, Item 1A, “Risk Factors” for a discussion of the risks related to the ACA and related matters. Privacy, Security and Data Standards Regulation. The administrative simplification provisions of the Health Insurance Portability and Accountability Act of 1996, as amended (HIPAA), apply to both the group and individual health insurance markets, including self-funded employee benefit plans. Federal regulations related to HIPAA contain minimum standards for electronic transactions and code sets and for the privacy and security of protected health information. The Health Information Technology for Economic and Clinical Health Act (HITECH) imposed requirements on uses and disclosures of health information; included contracting requirements for HIPAA business associate agreements; extended parts of HIPAA privacy and security provisions to business associates; added federal data breach notification requirements for covered entities and business associates and reporting requirements to the U.S. Department of Health and Human Services (HHS) and the Federal Trade Commission and, in some cases, to the local media; strengthened enforcement and imposed higher financial penalties for HIPAA violations and, in certain cases, imposed criminal penalties for individuals, including employees. In the conduct of our business, depending on the circumstances, we may act as either a covered entity or a business associate. Federal consumer protection laws may also apply in some instances to privacy and security practices related to personally identifiable information. The use and disclosure of individually identifiable health data by our businesses is also regulated in some instances by other federal laws, including the Gramm-Leach-Bliley Act (GLBA) or state statutes implementing GLBA. These federal laws and state statutes generally require insurers to provide customers with notice regarding how their non-public personal health and financial information is used and the opportunity to “opt out” of certain disclosures before the insurer shares such information with a third party, and generally require safeguards for the protection of personal information. Neither the GLBA nor HIPAA privacy regulations preempt more stringent state laws and regulations that may apply to us, as discussed below. ERISA. The Employee Retirement Income Security Act of 1974, as amended (ERISA), regulates how our services are provided to or through certain types of employer-sponsored health benefit plans. ERISA is a set of laws and regulations that is subject to periodic interpretation by the U.S. Department of Labor (DOL) as well as the federal courts. ERISA sets forth standards on how our business units may do business with employers who sponsor employee health benefit plans, particularly those that maintain self-funded plans. Regulations established by the DOL subject us to additional requirements for claims payment and member appeals under health care plans governed by ERISA. 11 DPP - 1064 State Laws and Regulation Health Care Regulation. Our insurance and HMO subsidiaries must be licensed by the jurisdictions in which they conduct business. All of the states in which our subsidiaries offer insurance and HMO products regulate those products and operations. The states require periodic financial reports and establish minimum capital or restricted cash reserve requirements. The National Association of Insurance Commissioners has adopted model regulations that, where implemented by states, require expanded governance practices and risk and solvency assessment reporting. Most states have adopted these or similar measures to expand the scope of regulations relating to corporate governance and internal control activities of HMOs and insurance companies. We are required to maintain a risk management framework and file a confidential self-assessment report with state insurance regulators. Reports are filed annually with Connecticut, our lead regulator, and with New York, as required by that state’s regulation. Certain states have also adopted their own regulations for minimum MLRs with which health plans must comply. In addition, a number of state legislatures have enacted or are contemplating significant reforms of their health insurance markets, either independent of or to comply with or be eligible for grants or other incentives in connection with the ACA, which may affect our operations and our financial results. Health plans and insurance companies are regulated under state insurance holding company regulations. Such regulations generally require registration with applicable state departments of insurance and the filing of reports that describe capital structure, ownership, financial condition, certain intercompany transactions and general business operations. Most state insurance holding company laws and regulations require prior regulatory approval of acquisitions and material intercompany transfers of assets, as well as transactions between the regulated companies and their parent holding companies or affiliates. These laws may restrict the ability of our regulated subsidiaries to pay dividends to our holding companies. Some of our business activity is subject to other health care-related regulations and requirements, including PPO, Managed Care Organization (MCO), utilization review (UR), TPA, pharmacy care services, durable medical equipment or care provider-related regulations and licensure requirements. These regulations differ from state to state and may contain network, contracting, product and rate, licensing and financial and reporting requirements. There are laws and regulations that set specific standards for delivery of services, appeals, grievances and payment of claims, adequacy of health care professional networks, fraud prevention, protection of consumer health information, pricing and underwriting practices and covered benefits and services. State health care antifraud and abuse prohibitions encompass a wide range of activities, including kickbacks for referral of members, billing for unnecessary medical services and improper marketing. Certain of our businesses are subject to state general agent, broker and sales distributions laws and regulations. UnitedHealthcare Community & State and certain of our Optum businesses are subject to regulation by state Medicaid agencies that oversee the provision of benefits to our Medicaid and CHIP beneficiaries and to our dually eligible (for Medicare and Medicaid) beneficiaries. We also contract with state governmental entities and are subject to state laws and regulations relating to the award, administration and performance of state government contracts. Guaranty Fund Assessments. Under state guaranty association laws, certain insurance companies can be assessed (up to prescribed limits) for certain obligations to the policyholders and claimants of impaired or insolvent insurance companies that write the same line or similar lines of business. Some states have similar laws relating to HMOs and other payers such as consumer operated and oriented plans (co-ops) established under the ACA. Assessments are generally based on a formula relating to our premiums in the state compared to the premiums of other insurers and could be spread out over a period of years. Some states permit member insurers to recover assessments paid through full or partial premium tax offsets or through premiums. Any such assessment could expose our insurance entities and other insurers to the risk of paying a portion of an impaired or insolvent insurance company’s claims through state guaranty associations. Pharmacy Regulation. OptumRx’s businesses include home delivery and specialty pharmacies that must be licensed as pharmacies in the states in which they are located. Certain of our home delivery and specialty pharmacies must also register with the U.S. Drug Enforcement Administration (DEA) and individual state controlled substance authorities to dispense controlled substances. In addition to the laws and regulations in the 12 DPP - 1065 states where our home delivery and specialty pharmacies are located, laws and regulations in non-resident states where we deliver pharmaceuticals may also apply, including the requirement to register with the board of pharmacy in the non-resident state. These non-resident states generally expect our home delivery and specialty pharmacies to follow the laws of the state in which the pharmacies are located, but some states also require us to comply with the laws of that non-resident state when pharmaceuticals are delivered there. As certain of our home delivery and specialty pharmacies maintain eligibility as Medicare and state Medicaid providers, their participation in the programs requires them to comply with the applicable Medicare and Medicaid provider rules and regulations. Other laws and regulations affecting our home delivery and specialty pharmacies include federal and state statutes and regulations governing the labeling, packaging, advertising and adulteration of prescription drugs and dispensing of controlled substances. See Part I, Item 1A, “Risk Factors” for a discussion of the risks related to our pharmacy care services businesses. State Privacy and Security Regulations. A number of states have adopted laws and regulations that may affect our privacy and security practices, such as state laws that govern the use, disclosure and protection of social security numbers and sensitive health information or that are designed to implement GLBA or protect credit card account data. State and local authorities increasingly focus on the importance of protecting individuals from identity theft, with a significant number of states enacting laws requiring businesses to notify individuals of security breaches involving personal information. State consumer protection laws may also apply to privacy and security practices related to personally identifiable information, including information related to consumers and care providers. Additionally, different approaches to state privacy and insurance regulation and varying enforcement philosophies in the different states may materially and adversely affect our ability to standardize our products and services across state lines. See Part I, Item 1A, “Risk Factors” for a discussion of the risks related to compliance with state privacy and security regulations. Corporate Practice of Medicine and Fee-Splitting Laws. Certain of our businesses function as direct medical service providers and, as such, are subject to additional laws and regulations. Some states have corporate practice of medicine laws that prohibit specific types of entities from practicing medicine or employing physicians to practice medicine. Moreover, some states prohibit certain entities from sharing in the fees or revenues of a professional practice (fee-splitting). These prohibitions may be statutory or regulatory, or may be imposed through judicial or regulatory interpretation. The laws, regulations and interpretations in certain states have been subject to limited judicial and regulatory interpretation and are subject to change. Consumer Protection Laws. Certain of our businesses participate in direct-to-consumer activities and are subject to regulations applicable to on-line communications and other general consumer protection laws and regulations. Banking Regulation Optum Bank is subject to regulation by federal banking regulators, including the Federal Deposit Insurance Corporation, which performs annual examinations to ensure that the bank is operating in accordance with federal safety and soundness requirements, and the Consumer Financial Protection Bureau, which may perform periodic examinations to ensure that the bank is in compliance with applicable consumer protection statutes, regulations and agency guidelines. Optum Bank is also subject to supervision and regulation by the Utah State Department of Financial Institutions, which carries out annual examinations to ensure that the bank is operating in accordance with state safety and soundness requirements and performs periodic examinations of the bank’s compliance with applicable state banking statutes, regulations and agency guidelines. In the event of unfavorable examination results from any of these agencies, the bank could become subject to increased operational expenses and capital requirements, enhanced governmental oversight and monetary penalties. International Regulation Certain of our businesses operate internationally and are subject to regulation in the jurisdictions in which they are organized or conduct business. These regulatory regimes vary from jurisdiction to jurisdiction. In addition, our non-U.S. businesses and operations are subject to U.S. laws that regulate the conduct and activities of U.S.based businesses operating abroad, such as the Foreign Corrupt Practices Act (FCPA), which prohibits offering, 13 DPP - 1066 promising, providing or authorizing others to give anything of value to a foreign government official to obtain or retain business or otherwise secure a business advantage. COMPETITION As a diversified health and well-being services company, we operate in highly competitive markets. Our competitors include managed health care companies, insurance companies, HMOs, TPAs and business services outsourcing companies, health care professionals that have formed networks to contract directly with employers or with CMS, specialty benefit providers, government entities, population health management companies and various health information and consulting companies. For our UnitedHealthcare businesses, our competitors include Aetna Inc., Anthem, Inc., Centene Corporation, Cigna Corporation, Humana Inc., Kaiser Permanente, numerous for-profit and not-for-profit organizations operating under licenses from the Blue Cross Blue Shield Association and, with respect to our Brazilian operations, several established competitors in Brazil and other enterprises that serve more limited geographic areas. For our OptumRx businesses, our competitors include CVS Health Corporation, Express Scripts, Inc. and Prime Therapeutics LLC. New entrants into the markets in which we compete, as well as consolidation within these markets, also contribute to a competitive environment. We compete on the basis of the sales, marketing and pricing of our products and services; product innovation; consumer engagement and satisfaction; the level and quality of products and services; care delivery; network and clinical management capabilities; market share; product distribution systems; efficiency of administration operations; financial strength; and marketplace reputation. If we fail to compete effectively to maintain or increase our market share, including by maintaining or increasing enrollments in businesses providing health benefits, our results of operations, financial position and cash flows could be materially and adversely affected. See Part I, Item 1A, “Risk Factors,” for additional discussion of our risks related to competition. INTELLECTUAL PROPERTY RIGHTS We have obtained trademark registration for the UnitedHealth Group, UnitedHealthcare and Optum names and logos. We own registrations for certain of our other trademarks in the United States and abroad. We hold a portfolio of patents and have patent applications pending from time to time. We are not substantially dependent on any single patent or group of related patents. Unless otherwise noted, trademarks appearing in this report are trademarks owned by us. We disclaim any proprietary interest in the marks and names of others. EMPLOYEES As of December 31, 2016, we employed more than 230,000 individuals. EXECUTIVE OFFICERS OF THE REGISTRANT The following sets forth certain information regarding our executive officers as of February 8, 2017, including the business experience of each executive officer during the past five years: Name Age Stephen J. Hemsley . . . . . . . . . . . . . . . . . . . . . . . . . . . David S. Wichmann . . . . . . . . . . . . . . . . . . . . . . . . . . Larry C. Renfro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 54 63 John F. Rex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Thomas E. Roos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Marianne D. Short . . . . . . . . . . . . . . . . . . . . . . . . . . . . D. Ellen Wilson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 59 14 DPP - 1067 Position Chief Executive Officer President Vice Chairman of UnitedHealth Group and Chief Executive Officer of Optum Executive Vice President and Chief Financial Officer Senior Vice President and Chief Accounting Officer Executive Vice President and Chief Legal Officer Executive Vice President, Human Capital Our Board of Directors elects executive officers annually. Our executive officers serve until their successors are duly elected and qualified, or until their earlier death, resignation, removal or disqualification. Mr. Hemsley is Chief Executive Officer of UnitedHealth Group, has served in that capacity since November 2006, and has been a member of the Board of Directors since February 2000. From May 1999 to November 2014, Mr. Hemsley also served as President of UnitedHealth Group. Mr. Wichmann is President of UnitedHealth Group. Mr. Wichmann has served as President of UnitedHealth Group since November 2014. From January 2011 to June 2016, Mr. Wichmann also served as Chief Financial Officer. From April 2008 to November 2014, Mr. Wichmann also served as Executive Vice President of UnitedHealth Group and President of UnitedHealth Group Operations. Mr. Renfro is Vice Chairman of UnitedHealth Group and Chief Executive Officer of Optum. Mr. Renfro has served as Vice Chairman of UnitedHealth Group since November 2014 and Chief Executive Officer of Optum since July 2011. From January 2011 to July 2011, Mr. Renfro served as Executive Vice President of UnitedHealth Group. Mr. Rex is Executive Vice President and Chief Financial Officer of UnitedHealth Group and has served in that capacity since June 2016. From March 2012 to June 2016, Mr. Rex served as Executive Vice President and Chief Financial Officer of Optum. Prior to joining Optum in 2012, Mr. Rex spent over a decade at JP Morgan, a global financial services firm, and its predecessors, concluding his tenure as a Managing Director. Mr. Roos is Senior Vice President and Chief Accounting Officer of UnitedHealth Group and has served in that capacity since August 2015. Prior to joining UnitedHealth Group, Mr. Roos was a Partner at Deloitte & Touche LLP, an independent registered accounting firm, from September 2007 to August 2015. Ms. Short is Executive Vice President and Chief Legal Officer of UnitedHealth Group and has served in that capacity since January 2013. Prior to joining UnitedHealth Group, Ms. Short served as the Managing Partner at Dorsey & Whitney LLP, an international law firm, from January 2007 to December 2012. Ms. Wilson is Executive Vice President, Human Capital of UnitedHealth Group and has served in that capacity since June 2013. From January 2012 to May 2013, Ms. Wilson served as Chief Administrative Officer of Optum. Prior to joining Optum, Ms. Wilson served for 17 years at Fidelity Investments concluding her tenure there as head of Human Resources. Additional Information UnitedHealth Group Incorporated was incorporated in January 1977 in Minnesota. On July 1, 2015, UnitedHealth Group Incorporated changed its state of incorporation from Minnesota to Delaware pursuant to a plan of conversion. Our executive offices are located at UnitedHealth Group Center, 9900 Bren Road East, Minnetonka, Minnesota 55343; our telephone number is (952) 936-1300. You can access our website at www.unitedhealthgroup.com to learn more about our Company. From that site, you can download and print copies of our annual reports to shareholders, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, along with amendments to those reports. You can also download from our website our certificate of incorporation, bylaws and corporate governance policies, including our Principles of Governance, Board of Directors Committee Charters and Code of Conduct. We make periodic reports and amendments available, free of charge, as soon as reasonably practicable after we file or furnish these reports to the Securities and Exchange Commission (SEC). We will also provide a copy of any of our corporate governance policies published on our website free of charge, upon request. To request a copy of any of these documents, please submit your request to: UnitedHealth Group Incorporated, 9900 Bren Road East, Minnetonka, MN 55343, Attn: Corporate Secretary. Information on or linked to our website is neither part of nor incorporated by reference into this Annual Report on Form 10-K or any other SEC filings. 15 DPP - 1068 Our transfer agent, Wells Fargo Shareowner Services, can help you with a variety of shareholder-related services, including change of address, lost stock certificates, transfer of stock to another person and other administrative services. You can write to our transfer agent at: Wells Fargo Shareowner Services, P.O. Box 64854, St. Paul, Minnesota 55164-0854, email stocktransfer@wellsfargo.com, or telephone (800) 468-9716 or (651) 450-4064. ITEM 1A. RISK FACTORS CAUTIONARY STATEMENTS The statements, estimates, projections or outlook contained in this Annual Report on Form 10-K include forwardlooking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (PSLRA). When used in this Annual Report on Form 10-K and in future filings by us with the SEC, in our news releases, presentations to securities analysts or investors, and in oral statements made by or with the approval of one of our executive officers, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “forecast,” “outlook,” “plan,” “project,” “should” or similar words or phrases are intended to identify such forward-looking statements. These statements are intended to take advantage of the “safe harbor” provisions of the PSLRA. These forwardlooking statements involve risks and uncertainties that may cause our actual results to differ materially from the expectations expressed or implied in the forward-looking statements. Any forward-looking statement speaks only as of the date of this report and, except as required by law; we undertake no obligation to update any forwardlooking statement to reflect events or circumstances, including unanticipated events, after the date of this report. The following discussion contains cautionary statements regarding our business that investors and others should consider. We do not undertake to address in future filings or communications regarding our business or results of operations how any of these factors may have caused our results to differ from discussions or information contained in previous filings or communications. In addition, any of the matters discussed below may have affected past, as well as current, forward-looking statements about future results. Any or all forward-looking statements in this Annual Report on Form 10-K and in any other public filings or statements we make may turn out to be wrong. Our forward-looking statements can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Many factors discussed below will be important in determining our future results. By their nature, forward-looking statements are not guarantees of future performance or results and are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. If we fail to estimate, price for and manage our medical costs in an effective manner, the profitability of our risk-based products and services could decline and could materially and adversely affect our results of operations, financial position and cash flows. Through our risk-based benefit products, we assume the risk of both medical and administrative costs for our customers in return for monthly premiums. Premium revenues from risk-based benefits products comprise nearly 80% of our total consolidated revenues. We generally use approximately 80% to 85% of our premium revenues to pay the costs of health care services delivered to these customers. The profitability of our products depends in large part on our ability to predict, price for, and effectively manage medical costs. In this regard, federal and state regulatory requirements obligate our commercial, Medicare Advantage and certain state-based Medicaid health plans to maintain minimum MLRs, which could make it more difficult for us to obtain price increases for our products. In addition, our OptumHealth business negotiates capitation arrangements with commercial thirdparty payers. Under the typical capitation arrangement, the health care provider receives a fixed percentage of a third-party payer’s premiums to cover all or a defined portion of the medical costs provided to the capitated member. If we fail to predict accurately, price for or manage the costs of providing care to our capitated members, our results of operations could be materially and adversely affected. We manage medical costs through underwriting criteria, product design, negotiation of favorable provider contracts and care management programs. Total medical costs are affected by the number of individual services rendered, the cost of each service and the type of service rendered. Our premium revenue on commercial policies is typically at a fixed monthly rate per individual served for a 12-month period and is generally priced one to six 16 DPP - 1069 months before the contract commences. Our revenue on Medicare policies is based on bids submitted in June the year before the contract year. Although we base the premiums we charge and our Medicare bids on our estimates of future medical costs over the fixed contract period, many factors may cause actual costs to exceed those estimated and reflected in premiums or bids. These factors may include medical cost inflation, increased use of services, increased cost of individual services, natural catastrophes or other large-scale medical emergencies, epidemics, the introduction of new or costly drugs, treatments and technology, new mandated benefits (such as the expansion of essential benefits coverage) or other regulatory changes and insured population characteristics. Relatively small differences between predicted and actual medical costs or utilization rates as a percentage of revenues can result in significant changes in our financial results. For example, if our 2016 medical costs for commercial insured products were 1% higher, without proportionally higher revenues from such products, our annual net earnings for 2016 would have been reduced by approximately $240 million, excluding any offsetting impact from risk adjustment, reinsurance or from reduced premium rebates due to minimum MLRs. In addition, the financial results we report for any particular period include estimates of costs that have been incurred for which claims are still outstanding. These estimates involve an extensive degree of judgment. If these estimates prove inaccurate, our results of operations could be materially and adversely affected. Our business activities are highly regulated and new laws or regulations or changes in existing laws or regulations or their enforcement or application could materially and adversely affect our business. We are regulated by federal, state and local governments in the United States and other countries where we do business. Our insurance and HMO subsidiaries must be licensed by and are subject to regulation in the jurisdictions in which they conduct business. For example, states require periodic financial reports and enforce minimum capital or restricted cash reserve requirements. Health plans and insurance companies are also regulated under state insurance holding company regulations and some of our activities may be subject to other health care-related regulations and requirements, including those relating to PPOs, MCOs, UR and TPA-related regulations and licensure requirements. Some of our UnitedHealthcare and Optum businesses hold or provide services related to government contracts and are subject to U.S. federal and state and non-U.S. self-referral, anti-kickback, medical necessity, risk adjustment, false claims and other laws and regulations governing government contractors and the use of government funds. In addition, under state guaranty association laws, certain insurance companies can be assessed (up to prescribed limits) for certain obligations to the policyholders and claimants of impaired or insolvent insurance companies that write the same line or similar lines of business. Some states have similar laws relating to HMOs and other payers such as consumer operated and oriented plans (co-ops) established under the ACA. Any such assessment could expose our insurance entities and other insurers to the risk of paying a portion of an impaired or insolvent insurance company’s claims through state guaranty associations. Certain of our businesses provide products or services to various government agencies. Our relationships with these government agencies are subject to the terms of contracts that we hold with the agencies and to laws and regulations regarding government contracts. Among others, certain laws and regulations restrict or prohibit companies from performing work for government agencies that might be viewed as an actual or potential conflict of interest. These laws may limit our ability to pursue and perform certain types of work, thereby materially and adversely affecting our results of operations, financial position and cash flows. Certain of our Optum businesses are also subject to regulations, which are distinct from those faced by our insurance and HMO subsidiaries, including, for example, state telemedicine regulations, debt collection laws, banking regulations, distributor and producer licensing requirements, state corporate practice of medicine doctrines, fee-splitting rules, health care facility licensure and certificate of need requirements, some of which could impact our relationships with physicians, hospitals and customers. These risks and uncertainties may materially and adversely affect our ability to market our products and services, or to do so at targeted margins, or may increase the regulatory burdens under which we operate. The laws and rules governing our business and interpretations of those laws and rules are subject to frequent change, and the integration into our businesses of entities that we acquire may affect the way in which existing 17 DPP - 1070 laws and rules apply to us, including subjecting us to laws and rules that did not previously apply to us. The broad latitude given to the agencies administering, interpreting and enforcing current and future regulations governing our business could force us to change how we do business, restrict revenue and enrollment growth, increase our health care and administrative costs and capital requirements, or expose us to increased liability in courts for coverage determinations, contract interpretation and other actions. We must also obtain and maintain regulatory approvals to market many of our products and services, increase prices for certain regulated products and services and complete certain acquisitions and dispositions or integrate certain acquisitions. For example, premium rates for our health insurance and managed care products are subject to regulatory review or approval in many states and by the federal government. Additionally, we must submit data on all proposed rate increases to HHS for monitoring purposes on many of our products. Geographic and product expansions may be subject to state and federal regulatory approvals. Delays in obtaining necessary approvals or our failure to obtain or maintain adequate approvals could materially and adversely affect our results of operations, financial position and cash flows. Certain of our businesses operate internationally and are subject to regulation in the jurisdictions in which they are organized or conduct business. These regulatory regimes encompass, among other matters, local and crossborder taxation, licensing, tariffs, intellectual property, investment, capital (including minimum solvency margin and reserve requirements), management control, labor, anti-fraud, anti-corruption and privacy and data protection regulations (including requirements for cross-border data transfers) that vary by jurisdiction. We currently operate outside of the United States and in the future may acquire or commence additional businesses based outside of the United States, increasing our exposure to non-U.S. regulatory regimes. For example, our UnitedHealthcare Brazil business subjects us to Brazilian laws and regulations affecting hospitals, managed care and insurance industries and to regulation by Brazilian regulators, including the national regulatory agency for private health insurance and plans, the Agência Nacional de Saúde Suplementar, whose approach to the interpretation, implementation and enforcement of industry regulations could differ from the approach taken by U.S. regulators. In addition, our non-U.S. businesses and operations are subject to U.S. laws that regulate the conduct and activities of U.S.-based businesses operating abroad, such as the FCPA, which prohibits offering, promising, providing or authorizing others to give anything of value to a foreign government official to obtain or retain business or otherwise secure a business advantage. Our failure to comply with U.S. or non-U.S. laws and regulations governing our conduct outside the United States or to establish constructive relations with non-U.S. regulators could adversely affect our ability to market our products and services, or to do so at targeted operating margins, which may have a material adverse effect on our business, financial condition and results of operations. The health care industry is also regularly subject to negative publicity, including as a result of governmental investigations, adverse media coverage and political debate surrounding industry regulation. Negative publicity may adversely affect our stock price and damage our reputation in various markets. The ACA could materially and adversely affect the manner in which we conduct business and our results of operations, financial position and cash flows. Due to its complexity and continued uncertainty, the ACA’s impact remains difficult to predict and could adversely affect us. The ACA includes specific reforms for the individual and small group marketplace, including guaranteed availability of coverage, adjusted community rating requirements (which include elimination of health status and gender rating factors), essential health benefit requirements (resulting in benefit changes for many members) and actuarial value requirements resulting in expanded benefits or reduced member cost sharing (or a combination of both) for many policyholders. In addition, if we do not maintain certain MLRs, we are required to rebate ratable portions of our premiums to our customers. These requirements can cause significant disruptions in local health care markets and adjustments to our business, all of which could materially and adversely affect our results of operations, financial position and cash flows. 18 DPP - 1071 Our results of operations, financial position and cash flows could be materially and adversely affected if the number of individuals who gain coverage under the ACA varies from our expectations, if the demand for the ACA related products and capabilities offered by our Optum businesses is less than anticipated or if our costs are greater than anticipated. The Trump Administration and Congressional Leaders have expressed their intentions to repeal and replace the ACA. We cannot predict if the ACA will be modified, repealed or replaced, but changes to this law could materially impact our operating results, require us to revise the ways in which we conduct business or put us at risk for loss of business. As a result of our participation in various government health care programs, both as a payer and as a service provider to payers, we are exposed to additional risks associated with program funding, enrollments, payment adjustments, audits and government investigations that could materially and adversely affect our business, results of operations, financial position and cash flows. We participate in various federal, state and local government health care benefit programs, including as a payer in Medicare Advantage, Medicare Part D, various Medicaid programs, CHIP and our TRICARE contract with the DoD, and receive substantial revenues from these programs. Certain of our Optum businesses also provide services to payers participating in government health care programs. A reduction or less than expected increase, or a protracted delay, in government funding for these programs or change in allocation methodologies, or, as is a typical feature of many government contracts, termination of the contract at the option of the government, may materially and adversely affect our results of operations, financial position and cash flows. The government health care programs in which we participate generally are subject to frequent changes, including changes that may reduce the number of persons enrolled or eligible for coverage, reduce the amount of reimbursement or payment levels, reduce our participation in certain service areas or markets, or increase our administrative or medical costs under such programs. Revenues for these programs depend on periodic funding from the federal government or applicable state governments and allocation of the funding through various payment mechanisms. Funding for these government programs depends on many factors outside of our control, including general economic conditions and budgetary constraints at the federal or applicable state level. For example CMS has in the past reduced or frozen Medicare Advantage benchmarks, and additional cuts to Medicare Advantage benchmarks are possible. In addition, from time to time, CMS makes changes to the way it calculates Medicare Advantage risk adjustment payments. Although we have adjusted members’ benefits and premiums on a selective basis, ceased to offer benefit plans in certain counties, and intensified both our medical and operating cost management in response to the benchmark reductions and other funding pressures, these or other strategies may not fully address the funding pressures in the Medicare Advantage program. In addition, payers in the Medicare Advantage program may be subject to reductions in payments from CMS as a result of decreased funding or recoupment pursuant to government audit. Under the Medicaid managed care program, state Medicaid agencies seek bids from eligible health plans to continue their participation in the acute care Medicaid health programs. If we are not successful in obtaining renewals of state Medicaid managed care contracts, we risk losing the members that were enrolled in those Medicaid plans. Under the Medicare Part D program, to qualify for automatic enrollment of low income members, our bids must result in an enrollee premium below a regional benchmark, which is calculated by the government after all regional bids are submitted. If the enrollee premium is not below the government benchmark, we risk losing the members who were auto-assigned to us and will not have additional members auto-assigned to us. In general, our bids are based upon certain assumptions regarding enrollment, utilization, medical costs and other factors. In the event any of these assumptions is materially incorrect, either as a result of unforeseen changes to the programs on which we bid, or submission by our competitors at lower rates than our bids, our results of operations, financial position and cash flows could be materially and adversely affected. Many of the government health care coverage programs in which we participate are subject to the prior satisfaction of certain conditions or performance standards or benchmarks. For example, as part of the ACA, 19 DPP - 1072 CMS has a system that provides various quality bonus payments to Medicare Advantage plans that meet certain quality star ratings at the local plan level. The star rating system considers various measures adopted by CMS, including, among other things, quality of care, preventative services, chronic illness management and customer satisfaction. Plans must have a rating of four stars or higher to qualify for bonus payments. If we do not maintain or continue to improve our star ratings, our plans may not be eligible for quality bonuses and we may experience a negative impact on our revenues and the benefits that our plans can offer, which could materially and adversely affect our membership levels, results of operations, financial position and cash flows. In addition, under the ACA, Congress authorized CMS and the states to implement MMP managed care demonstration programs to serve dually eligible beneficiaries to improve the coordination of their care. Health plan participation in these demonstration programs is subject to CMS approval of specified care delivery models and the satisfaction of conditions to participation, including meeting certain performance requirements. Any changes in standards or care delivery models that apply to government health care programs, including Medicare, Medicaid and the MMP demonstration programs for dually eligible beneficiaries, or our inability to improve our quality scores and star ratings to meet government performance requirements or to match the performance of our competitors could result in limitations to our participation in or exclusion from these or other government programs, which in turn could materially and adversely affect our results of operations, financial position and cash flows. CMS uses various payment mechanisms to allocate funding for Medicare programs, including adjusting monthly capitation payments to Medicare Advantage plans and Medicare Part D plans according to the predicted health status of each beneficiary as supported by data from health care providers for Medicare Advantage plans, as well as, for Medicare Part D plans, risk-sharing provisions based on a comparison of costs predicted in our annual bids to actual prescription drug costs. Some state Medicaid programs utilize a similar process. For example, our UnitedHealthcare Medicare & Retirement and UnitedHealthcare Community & State businesses submit information relating to the health status of enrollees to CMS or state agencies for purposes of determining the amount of certain payments to us. CMS and the Office of Inspector General for HHS periodically perform risk adjustment data validation (RADV) audits of selected Medicare health plans to validate the coding practices of and supporting documentation maintained by health care providers, and certain of our local plans have been selected for audit. Such audits have in the past resulted and could in the future result in retrospective adjustments to payments made to our health plans, fines, corrective action plans or other adverse action by CMS. We have been and may in the future become involved in routine, regular and special governmental investigations, audits, reviews and assessments. Certain of our businesses have been reviewed or are currently under review, including for compliance with coding and other requirements under the Medicare risk-adjustment model, our chart review programs and related processes. Such investigations, audits or reviews sometimes arise out of or prompt claims by private litigants or whistleblowers that, among other allegations, we failed to disclose certain business practices or, as a government contractor, submitted false claims to the government. Governmental investigations, audits, reviews and assessments could lead to government actions, which could result in adverse publicity, the assessment of damages, civil or criminal fines or penalties, or other sanctions, including restrictions or changes in the way we conduct business, loss of licensure or exclusion from participation in government programs, any of which could have a material adverse effect on our business, results of operations, financial position and cash flows. If we fail to comply with applicable privacy, security and data laws, regulations and standards, including with respect to third-party service providers that utilize sensitive personal information on our behalf, our business, reputation, results of operations, financial position and cash flows could be materially and adversely affected. The collection, maintenance, protection, use, transmission, disclosure and disposal of sensitive personal information are regulated at the federal, state, international and industry levels and requirements are imposed on us by contracts with customers. These laws, rules and requirements are subject to change. Compliance with new privacy and security laws, regulations and requirements may result in increased operating costs, and may constrain or require us to alter our business model or operations. For example, the HITECH amendments to 20 DPP - 1073 HIPAA imposed further restrictions on our ability to collect, disclose and use sensitive personal information and imposed additional compliance requirements on our business. In addition, the General Data Protection Regulation of the European Union imposes higher potential penalties and more stringent compliance and data security requirements on our ability to collect, process and transfer personal data relating to our European businesses. Many of our businesses are also subject to the Payment Card Industry Data Security Standard, which is a multifaceted security standard that is designed to protect credit card account data as mandated by payment card industry entities. HIPAA requires business associates as well as covered entities to comply with certain privacy and security requirements. While we provide for appropriate protections through our contracts with our third-party service providers and in certain cases assess their security controls, we have limited oversight or control over their actions and practices. Several of our businesses act as business associates to their covered entity customers and, as a result, collect, use, disclose and maintain sensitive personal information in order to provide services to these customers. HHS has announced that it will continue its audit program to assess HIPAA compliance efforts by covered entities and expand it to include business associates. An audit resulting in findings or allegations of noncompliance could have a material adverse effect on our results of operations, financial position and cash flows. Through our Optum businesses, including our Optum Labs business, we maintain a database of administrative and clinical data that is statistically de-identified in accordance with HIPAA standards. Noncompliance or findings of noncompliance with applicable laws, regulations or requirements, or the occurrence of any privacy or security breach involving the misappropriation, loss or other unauthorized disclosure of sensitive personal information, whether by us or by one of our third-party service providers, could have a material adverse effect on our reputation and business, including mandatory disclosure to the media, loss of existing or new customers, significant increases in the cost of managing and remediating privacy or security incidents and material fines, penalties and litigation awards, among other consequences, any of which could have a material and adverse effect on our results of operations, financial position and cash flows. Our businesses providing pharmacy care services face regulatory and operational risks and uncertainties that may differ from the risks of our other businesses. We provide pharmacy care services through our OptumRx and UnitedHealthcare businesses. Each business is subject to federal and state anti-kickback and other laws that govern the relationships of the business with pharmaceutical manufacturers, physicians, pharmacies, customers and consumers. OptumRx also conducts business through home delivery and specialty pharmacies, which subjects it to extensive federal, state and local laws and regulations, including those of the DEA and individual state controlled substance authorities. In addition, federal and state legislatures regularly consider new regulations for the industry that could materially and adversely affect current industry practices, including potential new regulations regarding the receipt or disclosure of rebates from pharmaceutical companies, the development and use of formularies, the use of average wholesale prices or other pricing benchmarks, pricing for specialty pharmaceuticals and pharmacy network reimbursement methodologies. Our pharmacy care services businesses would be materially and adversely affected by our inability to contract on favorable terms with pharmaceutical manufacturers and other suppliers, and could face potential claims in connection with purported errors by our home delivery or specialty pharmacies, including in connection with the risks inherent in the packaging and distribution of pharmaceuticals and other health care products. Disruptions at any of our home delivery or specialty pharmacies due to an accident or an event that is beyond our control could affect our ability to process and dispense prescriptions in a timely manner and could materially and adversely affect our results of operations, financial position and cash flows. In addition, our pharmacy care services businesses provide services to sponsors of health benefit plans that are subject to ERISA. A private party or the DOL, which is the agency that enforces ERISA, could assert that the 21 DPP - 1074 fiduciary obligations imposed by the statute apply to some or all of the services provided by our pharmacy care services businesses even where our pharmacy care services businesses are not contractually obligated to assume fiduciary obligations. In the event a court were to determine that fiduciary obligations apply to our pharmacy care services businesses in connection with services for which our pharmacy care services businesses are not contractually obligated to assume fiduciary obligations, we could be subject to claims for breaches of fiduciary obligations or claims that we entered into certain prohibited transactions. If we fail to compete effectively to maintain or increase our market share, including maintaining or increasing enrollments in businesses providing health benefits, our results of operations, financial position and cash flows could be materially and adversely affected. Our businesses compete throughout the United States, Brazil and other foreign markets and face significant competition in all of the geographic markets in which we operate. In particular markets, our competitors, compared to us, may have greater capabilities, resources or market share; a more established reputation; superior supplier or health care professional arrangements; better existing business relationships; lower profit margin or financial return expectations; or other factors that give such competitors a competitive advantage. In addition, our competitive position may be adversely affected by significant merger and acquisition activity that has occurred in the industries in which we operate, both among our competitors and suppliers (including hospitals, physician groups and other care professionals). Consolidation may make it more difficult for us to retain or increase our customer base, improve the terms on which we do business with our suppliers, or maintain or increase profitability. Additionally, new direct-to-consumer business models from competing businesses may make it more difficult for us to directly engage consumers in the selection and management of their health care benefits, health care usage, and in the effective navigation of the health care system we may be challenged by new technologies and market entrants that could disrupt our existing relationship with health plan enrollees in these areas. Our business, results of operations, financial position and cash flows could be materially and adversely affected if we do not compete effectively in our markets, if we set rates too high or too low in highly competitive markets, if we do not design and price our products properly and competitively, if we are unable to innovate and deliver products and services that demonstrate value to our customers, if we do not provide a satisfactory level of services, if membership or demand for other services does not increase as we expect or declines, or if we lose accounts with more profitable products while retaining or increasing membership in accounts with less profitable products. If we fail to develop and maintain satisfactory relationships with physicians, hospitals and other service providers, our business could be materially and adversely affected. Our results of operations and prospects are substantially dependent on our continued ability to contract with physicians, hospitals, pharmaceutical benefit service providers, pharmaceutical manufacturers and other service providers at competitive prices. Any failure to develop and maintain satisfactory relationships with health care providers, whether in-network or out-of-network, could materially and adversely affect our business, results of operations, financial position and cash flows. In addition, certain activities related to network design, provider participation in networks and provider payments could result in disputes that may be costly, distract managements’ attention and result in negative publicity. In any particular market, physicians and health care providers could refuse to contract, demand higher payments, or take other actions that could result in higher medical costs, less desirable products for customers or difficulty meeting regulatory or accreditation requirements. In some markets, certain health care providers, particularly hospitals, physician/hospital organizations or multi-specialty physician groups, may have significant market positions or near monopolies that could result in diminished bargaining power on our part. In addition, accountable care organizations; practice management companies (which aggregate physician practices for administrative efficiency); and other organizational structures that physicians, hospitals and other care providers choose may change the way in which these providers interact with us and may change the competitive landscape. Such organizations or groups of physicians may compete directly with us, which could adversely affect our 22 DPP - 1075 operations, and our results of operations, financial position and cash flows by impacting our relationships with these providers or affecting the way that we price our products and estimate our costs, which might require us to incur costs to change our operations. In addition, if these providers refuse to contract with us, use their market position to negotiate favorable contracts or place us at a competitive disadvantage, our ability to market products or to be profitable in those areas could be materially and adversely affected. We have capitation arrangements with some physicians, hospitals and other health care providers. Capitation arrangements limit our exposure to the risk of increasing medical costs, but expose us to risk related to the adequacy of the financial and medical care resources of the health care provider. To the extent that a capitated health care provider organization faces financial difficulties or otherwise is unable to perform its obligations under the capitation arrangement, we may be held responsible for unpaid health care claims that should have been the responsibility of the capitated health care provider and for which we have already paid the provider, under the capitation arrangement. Further, payment or other disputes between a primary care provider and specialists with whom the primary care provider contracts could result in a disruption in the provision of services to our members or a reduction in the services available to our members. Health care providers with whom we contract may not properly manage the costs of services, maintain financial solvency or avoid disputes with other providers. Any of these events could have a material adverse effect on the provision of services to our members and our operations. Some providers that render services to our members do not have contracts with us. In those cases, we do not have a pre-established understanding about the amount of compensation that is due to the provider for services rendered to our members. In some states, the amount of compensation due to these out-of-network providers is defined by law or regulation, but in most instances, the amount is either not defined or is established by a standard that does not clearly specify dollar terms. In some instances, providers may believe that they are underpaid for their services and may either litigate or arbitrate their dispute with us or try to recover from our members the difference between what we have paid them and the amount they charged us. The success of certain businesses, including OptumHealth and UnitedHealthcare Brazil, depend on maintaining satisfactory physician employment relationships. The physicians that practice medicine or contract with our affiliated physician organizations could terminate their provider contracts or otherwise become unable or unwilling to continue practicing medicine or contracting with us. There is and will likely be heightened competition in the markets where we operate to acquire or manage physician practices or to employ or contract with individual physicians. If we are unable to maintain or grow satisfactory relationships with physicians, or to acquire, recruit or, in some instances, employ physicians, or to retain enrollees following the departure of a physician, our revenues could be materially and adversely affected. In addition, our affiliated physician organizations contract with health insurance and HMO competitors of UnitedHealthcare. Our business could suffer if our affiliated physician organizations fail to maintain relationships with these health insurance or HMO companies, or adequately price their contracts with these third-party payers. In addition, physicians, hospitals, pharmaceutical benefit service providers, pharmaceutical manufacturers and certain health care providers are customers of our Optum businesses. Given the importance of health care providers and other constituents to our businesses, failure to maintain satisfactory relationships with them could materially and adversely affect our results of operations, financial position and cash flows. We are routinely subject to various litigation actions due to the nature of our business, which could damage our reputation and, if resolved unfavorably, could result in substantial penalties or monetary damages and materially and adversely affect our results of operations, financial position and cash flows. We are routinely made party to a variety of legal actions related to, among other matters, the design, management and delivery of our product and service offerings. These matters have included or could in the future include matters related to health care benefits coverage and payment claims (including disputes with enrollees, customers and contracted and non-contracted physicians, hospitals and other health care professionals), tort claims 23 DPP - 1076 (including claims related to the delivery of health care services, such as medical malpractice by health care practitioners who are employed by us, have contractual relationships with us, or serve as providers to our managed care networks), whistleblower claims (including claims under the False Claims Act or similar statutes), contract and labor disputes, tax claims and claims related to disclosure of certain business practices. We are also party to certain class action lawsuits brought by health care professional groups and consumers. In addition, we operate in jurisdictions outside of the United States, where contractual rights, tax positions and applicable regulations may be subject to interpretation or uncertainty to a greater degree than in the United States, and therefore subject to dispute by customers, government authorities or others. We are largely self-insured with regard to litigation risks. Although we maintain excess liability insurance with outside insurance carriers for claims in excess of our self-insurance, certain types of damages, such as punitive damages in some circumstances, are not covered by insurance. Although we record liabilities for our estimates of the probable costs resulting from self-insured matters, it is possible that the level of actual losses will significantly exceed the liabilities recorded. We cannot predict the outcome of significant legal actions in which we are involved and are incurring expenses in resolving these matters. The legal actions we face or may face in the future could further increase our cost of doing business and materially and adversely affect our results of operations, financial position and cash flows. In addition, certain legal actions could result in adverse publicity, which could damage our reputation and materially and adversely affect our ability to retain our current business or grow our market share in some markets and businesses. Any failure by us to manage successfully our strategic alliances or complete, manage or integrate acquisitions and other significant strategic transactions or relationships could materially and adversely affect our business, prospects, results of operations, financial position and cash flows. As part of our business strategy, we frequently engage in discussions with third parties regarding possible investments, acquisitions, divestitures, strategic alliances, joint ventures and outsourcing transactions and often enter into agreements relating to such transactions. For example, we have a strategic alliance with AARP under which we provide AARP-branded Medicare Supplement insurance to AARP members and other AARP-branded products and services to Medicare beneficiaries. If we fail to meet the needs of our alliance or joint venture partners, including by developing additional products and services, providing high levels of service, pricing our products and services competitively or responding effectively to applicable federal and state regulatory changes, our alliances and joint ventures could be damaged or terminated, which in turn could adversely impact our reputation, business and results of operations. Further, if we fail to identify and successfully complete transactions that further our strategic objectives, we may be required to expend resources to develop products and technology internally, we may be placed at a competitive disadvantage or we may be adversely affected by negative market perceptions, any of which may have a material adverse effect on our results of operations, financial position or cash flows. Success in completing acquisitions is also dependent upon efficiently integrating the acquired business into our existing operations, including our internal control environment, or otherwise leveraging its operations, which may present challenges that are different from those presented by organic growth and that may be difficult for us to manage. If we cannot successfully integrate these acquisitions and realize contemplated revenue growth opportunities and cost savings, our business, prospects, results of operations, financial position and cash flows could be materially and adversely affected. As we expand and operate our business outside of the United States, we are presented with challenges that differ from those presented by acquisitions of domestic businesses, including challenges in adapting to new markets, business, labor and cultural practices and regulatory environments. Adapting to these challenges could require us to devote significant senior management and other resources to the acquired businesses before we realize anticipated synergies or other benefits from the acquired businesses. These challenges vary widely by country and may include political instability, government intervention, discriminatory regulation and currency exchange controls or other restrictions that could prevent us from transferring funds from these operations out of the countries in which our acquired businesses operate or converting local currencies that we hold into U.S. dollars 24 DPP - 1077 or other currencies. If we are unable to manage successfully our non-U.S. acquisitions, our business, prospects, results of operations and financial position could be materially and adversely affected. Foreign currency exchange rates and fluctuations may have an impact on our equity from period to period, which could adversely affect our debt to debt-plus-equity ratio, and our future revenues, costs and cash flows from international operations. Any measures we may implement to reduce the effect of volatile currencies may be costly or ineffective. Our sales performance will suffer if we do not adequately attract, retain and provide support to a network of independent producers and consultants. Our products and services are sold in part through independent producers and consultants with whom we do not have exclusive contracts and for whose services and allegiance we must compete intensely. Our sales would be materially and adversely affected if we were unable to attract, retain and support such independent producers and consultants or if our sales strategy is not appropriately aligned across distribution channels. Our relationships with producers could be materially and adversely impacted by changes in our business practices and the nature of our relationships to address these pressures, including potential reductions in commissions. A number of investigations have been conducted regarding the marketing practices of producers selling health care products and the payments they receive and have resulted in enforcement actions against companies in our industry and producers marketing and selling those companies’ products. If we were subjected to similar investigations and enforcement actions, they could result in penalties and the imposition of corrective action plans, which could materially and adversely impact our ability to market our products. Unfavorable economic conditions could materially and adversely affect our revenues and our results of operations. Unfavorable economic conditions may impact demand for certain of our products and services. For example, high unemployment can cause lower enrollment or lower rates of renewal in our employer group plans. Unfavorable economic conditions have also caused and could continue to cause employers to stop offering certain health care coverage as an employee benefit or elect to offer this coverage on a voluntary, employeefunded basis as a means to reduce their operating costs. In addition, unfavorable economic conditions could adversely impact our ability to increase premiums or result in the cancellation by certain customers of our products and services. These conditions could lead to a decrease in our membership levels and premium and fee revenues and could materially and adversely affect our results of operations, financial position and cash flows. During a prolonged unfavorable economic environment, state and federal budgets could be materially and adversely affected, resulting in reduced reimbursements or payments in our federal and state government health care coverage programs, including Medicare, Medicaid and CHIP. A reduction in state Medicaid reimbursement rates could be implemented retrospectively to apply to payments already negotiated or received from the government and could materially and adversely affect our results of operations, financial position and cash flows. In addition, state and federal budgetary pressures could cause the affected governments to impose new or a higher level of taxes or assessments for our commercial programs, such as premium taxes on insurance companies and HMOs and surcharges or fees on select fee-for-service and capitated medical claims. Any of these developments or actions could materially and adversely affect our results of operations, financial position and cash flows. A prolonged unfavorable economic environment also could adversely impact the financial position of hospitals and other care providers, which could materially and adversely affect our contracted rates with these parties and increase our medical costs or materially and adversely affect their ability to purchase our service offerings. Further, unfavorable economic conditions could adversely impact the customers of our Optum businesses, including health plans, HMOs, hospitals, care providers, employers and others, which could, in turn, materially and adversely affect Optum’s financial results. 25 DPP - 1078 Our investment portfolio may suffer losses, which could materially and adversely affect our results of operations, financial position and cash flows. Market fluctuations could impair our profitability and capital position. Volatility in interest rates affects our interest income and the market value of our investments in debt securities of varying maturities, which constitute the vast majority of the fair value of our investments as of December 31, 2016. Relatively low interest rates on investments, such as those experienced during recent years, have adversely impacted our investment income, and the continuation of the current low interest rate environment could further adversely affect our investment income. In addition, a delay in payment of principal or interest by issuers, or defaults by issuers (primarily from investments in corporate and municipal bonds), could reduce our investment income and require us to write down the value of our investments, which could materially and adversely affect our profitability and equity. There can be no assurance that our investments will produce total positive returns or that we will not sell investments at prices that are less than their carrying values. Changes in the value of our investment assets, as a result of interest rate fluctuations, changes in issuer financial conditions, illiquidity or otherwise, could have an adverse effect on our equity. In addition, if it became necessary for us to liquidate our investment portfolio on an accelerated basis, such an action could have a material adverse effect on our results of operations and the capital position of regulated subsidiaries. If the value of our intangible assets is materially impaired, our results of operations, equity and credit ratings could be materially and adversely affected. As of December 31, 2016, goodwill and other intangible assets had a carrying value of $56 billion, representing 46% of our total consolidated assets. We periodically evaluate our goodwill and other intangible assets to determine whether all or a portion of their carrying values may be impaired, in which case a charge to earnings may be necessary. The value of our goodwill may be materially and adversely impacted if businesses that we acquire perform in a manner that is inconsistent with our assumptions. In addition, from time to time we divest businesses, and any such divestiture could result in significant asset impairment and disposition charges, including those related to goodwill and other intangible assets. Any future evaluations requiring an impairment of our goodwill and other intangible assets could materially and adversely affect our results of operations and equity in the period in which the impairment occurs. A material decrease in equity could, in turn, adversely impact our credit ratings and potentially impact our compliance with the covenants in our bank credit facilities. If we fail to maintain properly the integrity or availability of our data or successfully consolidate, integrate, upgrade or expand our existing information systems, or if our technology products do not operate as intended, our business could be materially and adversely affected. Our ability to price adequately our products and services, to provide effective service to our customers in an efficient and uninterrupted fashion, and to report accurately our results of operations depends on the integrity of the data in our information systems. We periodically consolidate, integrate, upgrade and expand our information systems capabilities as a result of technology initiatives and recently enacted regulations, changes in our system platforms and integration of new business acquisitions. In addition, recent trends toward greater consumer engagement in health care require new and enhanced technologies, including more sophisticated applications for mobile devices. Our information systems require an ongoing commitment of significant resources to maintain, protect and enhance existing systems and develop new systems to keep pace with continuing changes in information processing technology, evolving systems and regulatory standards and changing customer preferences. If the information we rely upon to run our businesses is found to be inaccurate or unreliable or if we fail to maintain or protect our information systems and data integrity effectively, we could lose existing customers, have difficulty attracting new customers, experience problems in determining medical cost estimates and establishing appropriate pricing, have difficulty preventing, detecting and controlling fraud, have disputes with customers, physicians and other health care professionals, become subject to regulatory sanctions or penalties, incur increases in operating expenses or suffer other adverse consequences. Our process of 26 DPP - 1079 consolidating the number of systems we operate, upgrading and expanding our information systems capabilities, enhancing our systems and developing new systems to keep pace with continuing changes in information processing technology may not be successful. Failure to protect, consolidate and integrate our systems successfully could result in higher than expected costs and diversion of management’s time and energy, which could materially and adversely affect our results of operations, financial position and cash flows. Certain of our businesses sell and install software products that may contain unexpected design defects or may encounter unexpected complications during installation or when used with other technologies utilized by the customer. Connectivity among competing technologies is becoming increasingly important in the health care industry. A failure of our technology products to operate as intended and in a seamless fashion with other products could materially and adversely affect our results of operations, financial position and cash flows. Uncertain and rapidly evolving U.S. federal and state, non-U.S. and international laws and regulations related to the health information technology market may present compliance challenges and could materially and adversely affect the configuration of our information systems and platforms, and our ability to compete in this market. If we sustain cyber-attacks or other privacy or data security incidents, that result in security breaches that disrupt our operations or result in the unintended dissemination of sensitive personal information or proprietary or confidential information, we could suffer a loss of revenue and increased costs, exposure to significant liability, reputational harm and other serious negative consequences. We routinely process, store and transmit large amounts of data in our operations, including sensitive personal information as well as proprietary or confidential information relating to our business or third-parties. Some of the data we process, store and transmit may be outside of the United States due to our information technology systems and international business operations. We may be subject to breaches of the information technology systems we use. Experienced computer programmers and hackers may be able to penetrate our layered security controls and misappropriate or compromise sensitive personal information or proprietary or confidential information or that of third-parties, create system disruptions or cause shutdowns. They also may be able to develop and deploy viruses, worms and other malicious software programs that attack our systems or otherwise exploit any security vulnerabilities. Our facilities may also be vulnerable to security incidents or security attacks; acts of vandalism or theft; coordinated attacks by activist entities; misplaced or lost data; human errors; or other similar events that could negatively affect our systems and our and our customer’s data. The costs to eliminate or address the foregoing security threats and vulnerabilities before or after a cyber-incident could be significant. Our remediation efforts may not be successful and could result in interruptions, delays, or cessation of service and loss of existing or potential customers. In addition, breaches of our security measures and the unauthorized dissemination of sensitive personal information or proprietary information or confidential information about us or our customers or other third-parties, could expose our customers’ private information and our customers to the risk of financial or medical identity theft, or expose us or other third-parties to a risk of loss or misuse of this information, result in litigation and potential liability for us, damage our brand and reputation, or otherwise harm our business. If we are not able to protect our proprietary rights to our databases, software and related products, our ability to market our knowledge and information-related businesses could be hindered and our results of operations, financial position and cash flows could be materially and adversely affected. We rely on our agreements with customers, confidentiality agreements with employees and third parties, and our trademarks, trade secrets, copyrights and patents to protect our proprietary rights. These legal protections and precautions may not prevent misappropriation of our proprietary information. In addition, substantial litigation regarding intellectual property rights exists in the software industry, and we expect software products to be increasingly subject to third-party infringement claims as the number of products and competitors in this industry 27 DPP - 1080 segment grows. Such litigation and misappropriation of our proprietary information could hinder our ability to market and sell products and services and our results of operations, financial position and cash flows could be materially and adversely affected. Restrictions on our ability to obtain funds from our regulated subsidiaries could materially and adversely affect our results of operations, financial position and cash flows. Because we operate as a holding company, we are dependent upon dividends and administrative expense reimbursements from our subsidiaries to fund our obligations. Many of these subsidiaries are regulated by departments of insurance or similar regulatory authorities. We are also required by law or regulation to maintain specific prescribed minimum amounts of capital in these subsidiaries. The levels of capitalization required depend primarily upon the volume of premium revenues generated by the applicable subsidiary. In most states, we are required to seek prior approval by state regulatory authorities before we transfer money or pay dividends from our regulated subsidiaries that exceed specified amounts. An inability of our regulated subsidiaries to pay dividends to their parent companies in the desired amounts or at the time of our choosing could adversely affect our ability to reinvest in our business through capital expenditures or business acquisitions, as well as our ability to maintain our corporate quarterly dividend payment, repurchase shares of our common stock and repay our debt. If we are unable to obtain sufficient funds from our subsidiaries to fund our obligations, our results of operations, financial position and cash flows could be materially and adversely affected. Any downgrades in our credit ratings could adversely affect our business, financial condition and results of operations. Claims paying ability, financial strength and debt ratings by Nationally Recognized Statistical Rating Organizations are important factors in establishing the competitive position of insurance companies. Ratings information is broadly disseminated and generally used by customers and creditors. We believe our claims paying ability and financial strength ratings are important factors in marketing our products to certain of our customers. Our credit ratings impact both the cost and availability of future borrowings. Each of the credit rating agencies reviews its ratings periodically. Our ratings reflect each credit rating agency’s opinion of our financial strength, operating performance and ability to meet our debt obligations or obligations to policyholders. There can be no assurance that our current credit ratings will be maintained in the future. Downgrades in our credit ratings, should they occur, could materially increase our costs of or ability to access funds in the debt and capital markets and otherwise materially increase our operating costs. ITEM 1B. UNRESOLVED STAFF COMMENTS None. ITEM 2. PROPERTIES To support our business operations in the United States and other countries we own and lease real properties. Our various reportable segments use these facilities for their respective business purposes, and we believe these current facilities are suitable for their respective uses and are adequate for our anticipated future needs. ITEM 3. LEGAL PROCEEDINGS The information required by this Item 3 is incorporated herein by reference to the information set forth under the captions “Litigation Matters” and “Governmental Investigations, Audits and Reviews” in Note 12 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements.” ITEM 4. MINE SAFETY DISCLOSURES Not Applicable. 28 DPP - 1081 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES MARKET PRICES AND HOLDERS Our common stock is traded on the New York Stock Exchange (NYSE) under the symbol UNH. On January 31, 2017, there were 13,035 registered holders of record of our common stock. The high and low per share common stock sales prices reported by the NYSE and cash dividends declared for our last two fiscal years were as follows: Cash Dividends Declared High Low 2016 First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $131.10 $141.31 $144.48 $164.00 $107.51 $125.26 $132.39 $133.03 $ $ $ $ 0.500 0.625 0.625 0.625 2015 First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $123.76 $124.11 $126.21 $125.99 $ 98.46 $111.12 $ 95.00 $109.61 $ $ $ $ 0.375 0.500 0.500 0.500 DIVIDEND POLICY In June 2016, our Board of Directors increased the Company’s quarterly cash dividend to shareholders to an annual dividend rate of $2.50 per share compared to the annual dividend rate of $2.00 per share, which the Company had paid since June 2015. Declaration and payment of future quarterly dividends is at the discretion of the Board and may be adjusted as business needs or market conditions change. ISSUER PURCHASES OF EQUITY SECURITIES In November 1997, our Board of Directors adopted a share repurchase program, which the Board evaluates periodically. There is no established expiration date for the program. During the fourth quarter 2016, we repurchased approximately 1 million shares at an average price of $141.54 per share. As of December 31, 2016, we had Board authorization to purchase up to 51 million shares of our common stock. PERFORMANCE GRAPHS The following two performance graphs compare our total return to shareholders with the returns of indexes of other specified companies and the S&P 500 Index. The first graph compares the cumulative five-year total return to shareholders on our common stock relative to the cumulative total returns of the S&P 500 index and a customized peer group of certain Fortune 50 companies (the “Fortune 50 Group”) for the five-year period ended December 31, 2016. The second graph compares our cumulative total return to shareholders with the S&P 500 Index and an index of a group of peer companies selected by us for the five-year period ended December 31, 2016. We are not included in either the Fortune 50 Group index in the first graph or the peer group index in the second graph. In calculating the cumulative total shareholder return of the indexes, the shareholder returns of the Fortune 50 Group companies in the first graph and the peer group companies in the second graph are weighted according to the stock market capitalizations of the companies at January 1 of each year. The comparisons assume the investment of $100 on December 31, 2011 in our common stock and in each index, and that dividends were reinvested when paid. 29 DPP - 1082 Fortune 50 Group The Fortune 50 Group consists of the following companies: American International Group, Inc., Berkshire Hathaway Inc., Cardinal Health, Inc., Citigroup Inc., General Electric Company, International Business Machines Corporation and Johnson & Johnson. Although there are differences among the companies in terms of size and industry, like UnitedHealth Group, all of these companies are large multi-segment companies using a well-defined operating model in one or more broad sectors of the economy. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN Among UnitedHealth Group, the S&P 500 Index, and Fortune 50 Group $400 $350 $300 $250 $200 $150 $100 $50 $0 12/11 12/12 12/13 UnitedHealth Group UnitedHealth Group . . . . . . . . . . . . . . . . . . . . . . S&P 500 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . Fortune 50 Group . . . . . . . . . . . . . . . . . . . . . . . . 12/14 12/15 S&P 500 12/16 Fortune 50 Group 12/11 12/12 12/13 12/14 12/15 12/16 $100.00 100.00 100.00 $108.59 116.00 118.48 $153.15 153.58 151.44 $208.98 174.60 159.51 $247.13 177.01 164.70 $342.05 198.18 186.76 The stock price performance included in this graph is not necessarily indicative of future stock price performance. 30 DPP - 1083 Peer Group The companies included in our peer group are Aetna Inc., Anthem Inc., Cigna Corporation and Humana Inc. We believe that this peer group reflects publicly traded peers to our UnitedHealthcare businesses. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN Among UnitedHealth Group, the S&P 500 Index, and a Peer Group $400 $350 $300 $250 $200 $150 $100 $50 $0 12/11 12/12 12/13 12/14 UnitedHealth Group UnitedHealth Group . . . . . . . . . . . . . . . . . . . . . . S&P 500 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . Peer Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12/15 S&P 500 12/16 Peer Group 12/11 12/12 12/13 12/14 12/15 12/16 $100.00 100.00 100.00 $108.59 116.00 101.01 $153.15 153.58 156.96 $208.98 174.60 206.09 $247.13 177.01 257.48 $342.05 198.18 273.12 The stock price performance included in this graph is not necessarily indicative of future stock price performance. 31 DPP - 1084 ITEM 6. SELECTED FINANCIAL DATA (in millions, except percentages and per share data) For the Year Ended December 31, 2015 (a) 2014 2013 2016 Consolidated operating results Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings from operations . . . . . . . . . . . . . . . . . . . . . . . Net earnings attributable to UnitedHealth Group common shareholders . . . . . . . . . . . . . . . . . . . . . . . . Return on equity (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . Basic earnings per share attributable to UnitedHealth Group common shareholders . . . . . . . . . . . . . . . . . . Diluted earnings per share attributable to UnitedHealth Group common shareholders . . . . . . . Cash dividends declared per common share . . . . . . . . Consolidated cash flows from (used for) Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated financial condition (as of December 31) Cash and investments . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total commercial paper and long-term debt (c) . . . . . . Redeemable noncontrolling interests . . . . . . . . . . . . . . Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $184,840 12,930 $157,107 11,021 7,017 19.4% $ 7.37 7.25 2.3750 $ $130,474 10,274 5,813 17.7% $ 6.10 6.01 1.8750 $122,489 9,623 5,619 17.3% $ 5.78 5.70 1.4050 2012 $110,618 9,254 5,625 17.7% $ 5.59 5.50 1.0525 5,526 18.7% $ 5.38 5.28 0.8000 9,795 $ 9,740 $ 8,051 $ 6,991 $ 7,155 (9,355) (18,395) (2,534) (3,089) (8,649) (1,011) 12,239 (5,293) (4,946) 471 $ 37,143 122,810 32,970 2,012 38,177 $ 31,703 111,254 31,965 1,736 33,725 $ 28,063 86,300 17,324 1,388 32,454 $ 28,818 81,800 16,778 1,175 32,149 $ 29,148 80,811 16,680 2,121 31,178 (a) Includes the effects of the July 2015 acquisition of Catamaran Corporation (Catamaran) and related debt issuances. (b) Return on equity is calculated as net earnings divided by average equity. Average equity is calculated using the equity balance at the end of the preceding year and the equity balances at the end of each of the four quarters of the year presented. (c) In the first quarter of 2016, the Company adopted Financial Accounting Standards Board (FASB) Accounting Standard Update (ASU) No. 2015-03 (ASU 2015-03), retrospectively as required. See Note 2 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements” for more information on the adoption of ASU 2015-03. Financial Highlights should be read with the accompanying “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 and the Consolidated Financial Statements and Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements.” 32 DPP - 1085 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read together with the accompanying Consolidated Financial Statements and Notes to the Consolidated Financial Statements thereto included in Item 8, “Financial Statements.” Readers are cautioned that the statements, estimates, projections or outlook contained in this report, including discussions regarding financial prospects, economic conditions, trends and uncertainties contained in this Item 7, may constitute forward-looking statements within the meaning of the PSLRA. These forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the expectations expressed or implied in the forward-looking statements. A description of some of the risks and uncertainties can be found further below in this Item 7 and in Part I, Item 1A, “Risk Factors.” EXECUTIVE OVERVIEW General UnitedHealth Group is a diversified health and well-being company dedicated to helping people live healthier lives and helping to make the health system work better for everyone. Through our diversified family of businesses, we leverage core competencies in advanced, enabling technology; health care data; information and intelligence; and clinical care management and coordination to help meet the demands of the health system. These core competencies are deployed within our two distinct, but strategically aligned, business platforms: health benefits operating under UnitedHealthcare and health services operating under Optum. We have four reportable segments across our two business platforms, UnitedHealthcare and Optum: • UnitedHealthcare, which includes UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare & Retirement, UnitedHealthcare Community & State and UnitedHealthcare Global; • OptumHealth; • OptumInsight; and • OptumRx. Further information on our business and reportable segments is presented in Part I, Item 1, “Business” and in Note 13 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements.” Recent Developments We have recognized in our financial results for the fourth quarter 2016 and the year ended December 31, 2016 the previously disclosed $350 million impact of our estimated share of guaranty association assessments resulting from the liquidation of Penn Treaty Network America Insurance Company and its subsidiary (Penn Treaty), following accounting, legal and regulatory consultations in connection with our 10-K filing. This charge will be funded over several years and affected by premium tax credits over time. For more detail related to the Penn Treaty liquidation, see Note 12 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements.” Business Trends Our businesses participate in the United States, Brazilian and certain other international health markets. In the United States, health care spending has grown consistently for many years and comprises approximately 18% of gross domestic product. We expect overall spending on health care to continue to grow in the future, due to inflation, medical technology and pharmaceutical advancement, regulatory requirements, demographic trends in the population and national interest in health and well-being. The rate of market growth may be affected by a variety of factors, including macro-economic conditions and regulatory changes, which have impacted and could further impact our results of operations. 33 DPP - 1086 Pricing Trends. To price our health care benefit products, we start with our view of expected future costs. We frequently evaluate and adjust our approach in each of the local markets we serve, considering all relevant factors, such as product positioning, price competitiveness and environmental, competitive, legislative and regulatory considerations. Our review of regulatory considerations involves a focus on minimum MLR thresholds and the risk adjustment that impacts the small group and individual markets. We will continue seeking to balance growth and profitability across all of these dimensions. The commercial risk market remains highly competitive in both the small group and large group segments. We expect broad-based competition to continue as the industry adapts to individual and employer needs amid reform changes. The ACA included an annual, nondeductible insurance industry tax (Health Insurance Industry Tax) to be levied proportionally across the insurance industry for risk-based health insurance products. A provision in the 2016 Federal Budget imposes a one year moratorium for 2017 on the collection of the Health Insurance Industry Tax. Pricing for contracts that cover some portion of calendar year 2017 will reflect the impact of the moratorium. Additionally, the industry has continued to experience favorable medical cost trends due to moderated utilization, which has impacted the competitive pricing environment. Medicare Advantage funding continues to be pressured, as discussed below in “Regulatory Trends and Uncertainties.” We expect continued Medicaid revenue growth due to anticipated increases in the number of people we serve; we also believe that the payment rate environment creates the risk of downward pressure on Medicaid net margin percentages. We continue to take a prudent, market-sustainable posture for both new business and maintenance of existing relationships. We advocate for actuarially sound rates that are commensurate with our medical cost trends and we remain dedicated to partnering with those states that are committed to the long-term viability of their programs. Medical Cost Trends. Our medical cost trends primarily relate to changes in unit costs, health system utilization and prescription drug costs. We endeavor to mitigate those increases with medical management. Our 2017 management activities include managing costs across all health care categories, including specialty pharmacy spending, as new therapies are introduced at high costs and older drugs experience price increases. Delivery System and Payment Modernization. The health care market continues to change based on demographic shifts, new regulations, political forces and both payer and patient expectations. Health plans and care providers are being called upon to work together to close gaps in care and improve overall care quality, improve the health of populations and reduce costs. We continue to see a greater number of people enrolled in plans with underlying incentive-based care provider payment models that reward high-quality, affordable care and foster collaboration. We work together with clinicians to leverage our data and analytics to provide the necessary information to close gaps in care and improve overall health outcomes for patients. We are increasingly rewarding care providers for delivering improvements in quality and cost-efficiency. As of December 31, 2016, we served more than 15 million people through some form of aligned contractual arrangement, including full-risk, shared-risk and bundled episode-of-care and performance incentive payment approaches. As of December 31, 2016, our contracts with value-based elements total nearly $53 billion in annual spending. This trend is creating needs for health management services that can coordinate care around the primary care physician, including new primary care channels, and for investments in new clinical and administrative information and management systems, which we believe provide growth opportunities for our Optum business platform. Regulatory Trends and Uncertainties Following is a summary of management’s view of the trends and uncertainties related to some of the key provisions of the ACA and other regulatory matters. For additional information regarding the ACA and regulatory trends and uncertainties, see Part I, Item 1 “Business — Government Regulation” and Item 1A, “Risk Factors.” 34 DPP - 1087 Medicare Advantage Rates. Final 2017 Medicare Advantage rates resulted in an increase in industry base rates of approximately 0.85%, well short of the industry forward medical cost trend of 3%, which creates continued pressure in the Medicare Advantage program. The impact of this funding shortfall in Medicare Advantage is partially mitigated by reductions in provider payments for those care providers with rates indexed to Medicare Advantage revenues or Medicare fee-for-service payment rates. These factors can affect our plan benefit designs, pricing, growth prospects and earnings expectations for our Medicare Advantage plans. The ongoing pressure on Medicare Advantage funding places continued importance on effective medical management and ongoing improvements in administrative efficiency. There are a number of adjustments we have made to partially offset these rate pressures and reductions. In some years, these adjustments will impact the majority of the seniors we serve through Medicare Advantage. For example, we seek to intensify our medical and operating cost management, make changes to the size and composition of our care provider networks, adjust members’ benefits, implement or increase the member premiums that supplement the monthly payments we receive from the government and decide on a county-by-county basis where we will offer Medicare Advantage plans. As Medicare Advantage payments change, other products may become relatively more attractive to Medicare beneficiaries and increase the demand for other senior health benefits products such as our market-leading Medicare Supplement and stand-alone Medicare Part D insurance offerings. As provided in the ACA, our Medicare Advantage rates are currently enhanced by CMS quality bonuses in certain counties based on our local plans’ Star ratings. The level of Star ratings from CMS, based upon specified clinical and operational performance standards, will impact future quality bonuses. In addition, Star ratings affect the amount of savings a plan can use to offer supplemental benefits, which ultimately may affect the plan’s membership and revenue. For the 2016 payment year, approximately 57% of our Medicare Advantage members were in plans rated four stars or higher. We expect that at least 80% of our Medicare Advantage members will be in plans rated four stars or higher for payment year 2017. We continue to dedicate substantial resources to advance our quality scores and Star ratings to strengthen our local market programs and further improve our performance. Health Insurance Industry Tax and Premium Stabilization Programs. The industry-wide amount of the Health Insurance Industry Tax was $11.3 billion in 2016 and we paid our portion of the tax, which was $1.8 billion, in September 2016. A provision in the 2016 Federal Budget imposes a one year moratorium for 2017 on the collection of the Health Insurance Industry Tax. The Health Insurance Industry Tax is scheduled to be imposed for 2018 and beyond. In 2018, the industry-wide amount of the Health Insurance Industry Tax is expected to be $14.3 billion. The ACA also included three programs designed to stabilize the health insurance markets. These programs encompassed: a transitional reinsurance program; a temporary risk corridors program; and a permanent risk adjustment program. The transitional reinsurance and temporary risk corridors programs expired at the end of 2016. Individual Public Exchanges. In 2016, we participated in individual public exchanges in 34 states and offered individual ACA compliant products. We recorded a premium deficiency reserve for a portion of our estimated 2016 losses in our 2015 results for in-force contracts as of January 1, 2016. During 2016, we incurred additional losses in our individual ACA compliant products and, for 2017, reduced our participation to three individual public exchanges. We expect to reduce the number of consumers we serve through individual insurance plans by nearly 1 million people in 2017, which will reduce our premium revenues by more than $4 billion. 35 DPP - 1088 RESULTS SUMMARY The following table summarizes our consolidated results of operations and other financial information: (in millions, except percentages and per share data) For the Years Ended December 31, 2016 2015 2014 Change 2016 vs. 2015 Revenues: Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $144,118 $127,163 $115,302 $16,955 Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,658 17,312 4,242 9,346 Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,236 11,922 10,151 1,314 Investment and other income . . . . . . . . . . . . . . . 828 710 779 118 Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184,840 157,107 130,474 27,733 Operating costs: Medical costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,038 103,875 93,633 13,163 Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . 28,401 24,312 21,263 4,089 Cost of products sold . . . . . . . . . . . . . . . . . . . . . 24,416 16,206 3,826 8,210 Depreciation and amortization . . . . . . . . . . . . . . 2,055 1,693 1,478 362 Total operating costs . . . . . . . . . . . . . . . . . . . . . . . 171,910 146,086 120,200 25,824 Earnings from operations . . . . . . . . . . . . . . . . . . . . 12,930 11,021 10,274 1,909 Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,067) (790) (618) (277) Earnings before income taxes . . . . . . . . . . . . . . . . 11,863 10,231 9,656 1,632 Provision for income taxes . . . . . . . . . . . . . . . . . . . (4,790) (4,363) (4,037) (427) Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,073 5,868 5,619 1,205 Earnings attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (56) (55) — (1) Net earnings attributable to UnitedHealth Group common shareholders . . . . . . . . . . . . . . . . . . . . $ 7,017 $ 5,813 $ 5,619 $ 1,204 Diluted earnings per share attributable to UnitedHealth Group common shareholders . . . . $ Medical care ratio (a) . . . . . . . . . . . . . . . . . . . . . . . Operating cost ratio . . . . . . . . . . . . . . . . . . . . . . . . Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . Tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net earnings margin (b) . . . . . . . . . . . . . . . . . . . . . Return on equity (c) . . . . . . . . . . . . . . . . . . . . . . . . 7.25 $ 81.2% 15.4 7.0 40.4 3.8 19.4% 6.01 $ 81.7% 15.5 7.0 42.6 3.7 17.7% 5.70 $ 81.2% 16.3 7.9 41.8 4.3 17.3% Change 2015 vs. 2014 13% $11,861 10% 54 13,070 308 11 1,771 17 17 (69) (9) 18 26,633 20 13 17 51 21 18 17 35 16 10 21 10,242 11 3,049 14 12,380 324 215 15 25,886 22 747 7 (172) 28 575 6 (326) 8 249 4 2 (55) nm 21% $ 1.24 21% $ (0.5)% (0.1) — (2.2) 0.1 1.7% 194 3% 0.31 0.5% (0.8) (0.9) 0.8 (0.6) 0.4% 5% nm = not meaningful (a) Medical care ratio is calculated as medical costs divided by premium revenue. (b) Net earnings margin attributable to UnitedHealth Group shareholders. (c) Return on equity is calculated as annualized net earnings divided by average equity. Average equity is calculated using the equity balance at the end of the preceding year and the equity balances at the end of each of the four quarters in the year presented. SELECTED OPERATING PERFORMANCE AND OTHER SIGNIFICANT ITEMS The following represents a summary of select 2016 year-over-year operating comparisons to 2015 and other 2016 significant items. • Consolidated revenues increased by 18%, UnitedHealthcare revenues increased 13% and Optum revenues grew 24%. • UnitedHealthcare grew to serve an additional 2.1 million people domestically. • Earnings from operations increased by 17%, including increases of 8% at UnitedHealthcare and 32% at Optum. • Diluted earnings per common share increased 21% to $7.25. • Cash flows from operations were $9.8 billion. 36 DPP - 1089 2016 RESULTS OF OPERATIONS COMPARED TO 2015 RESULTS Our results of operations were affected by our acquisition of Catamaran in the third quarter of 2015. Consolidated Financial Results Revenues The increases in revenues were primarily driven by organic growth in the number of individuals served across our UnitedHealthcare benefits businesses and growth across all of our Optum services businesses. Medical Costs Medical costs increased due to risk-based membership growth and medical cost trends, partially offset by medical management initiatives. Income Tax Rate Our effective tax rate decreased primarily due to the adoption of the ASU 2016-09, which we adopted in the first quarter of 2016. See Note 2 of Notes to the Consolidated Financial Statements included in Part II, Item 8, of this report for more information about the adoption of ASU 2016-09. Reportable Segments See Note 13 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements” for more information on our segments. The following table presents a summary of the reportable segment financial information: (in millions, except percentages) Revenues UnitedHealthcare . . . . . . . . . . . . . . . . . . . . . . . . . . For the Years Ended December 31, 2016 2015 2014 $148,581 $131,343 $119,798 OptumHealth . . . . . . . . . . . . . . . . . . . . . . . . . . . OptumInsight . . . . . . . . . . . . . . . . . . . . . . . . . . . OptumRx . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Optum eliminations . . . . . . . . . . . . . . . . . . . . . . 16,908 7,333 60,440 (1,088) 13,927 6,196 48,272 (791) 11,032 5,227 31,976 (489) Optum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Eliminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,593 (47,334) 67,604 (41,840) 47,746 (37,070) Change 2016 vs. 2015 $17,238 2,981 1,137 12,168 (297) Change 2015 vs. 2014 13% $11,545 10% 21 18 25 38 26 19 51 62 2,895 969 16,296 (302) 15,989 24 (5,494) 13 19,858 42 (4,770) 13 Consolidated revenues . . . . . . . . . . . . . . . . . . . . . . $184,840 $157,107 $130,474 $27,733 Earnings from operations UnitedHealthcare . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,307 $ $ $ OptumHealth . . . . . . . . . . . . . . . . . . . . . . . . . . . OptumInsight . . . . . . . . . . . . . . . . . . . . . . . . . . . OptumRx . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,428 1,513 2,682 1,240 1,278 1,749 1,090 1,002 1,190 188 235 933 15 18 53 150 276 559 14 28 47 Optum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,623 4,267 3,282 1,356 32 985 30 Consolidated earnings from operations . . . . . . . . . $ 12,930 $ 11,021 $ 10,274 $ 1,909 17% $ 747 Operating margin UnitedHealthcare . . . . . . . . . . . . . . . . . . . . . . . . . . OptumHealth . . . . . . . . . . . . . . . . . . . . . . . . . . . OptumInsight . . . . . . . . . . . . . . . . . . . . . . . . . . . OptumRx . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Optum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated operating margin . . . . . . . . . . . . . . . 4.9% 8.4 20.6 4.4 6.7 7.0% 37 DPP - 1090 6,754 5.1% 8.9 20.6 3.6 6.3 7.0% 6,992 5.8% 9.9 19.2 3.7 6.9 7.9% 18% $26,633 553 20% 8% $ (238) (3)% (0.2)% (0.5) — 0.8 0.4 —% (0.7)% (1.0) 1.4 (0.1) (0.6) (0.9)% 7% UnitedHealthcare The following table summarizes UnitedHealthcare revenues by business: (in millions, except percentages) For the Years Ended December 31, 2016 2015 2014 Change 2016 vs. 2015 Change 2015 vs. 2014 UnitedHealthcare Employer & Individual . . . UnitedHealthcare Medicare & Retirement . . UnitedHealthcare Community & State . . . . . UnitedHealthcare Global . . . . . . . . . . . . . . . . $ 53,084 56,329 32,945 6,223 $ 47,194 49,735 28,911 5,503 $ 43,017 46,258 23,586 6,937 $ 5,890 6,594 4,034 720 12% $ 4,177 10% 13 3,477 8 14 5,325 23 13 (1,434) (21) Total UnitedHealthcare revenues . . . . . . . $148,581 $131,343 $119,798 $17,238 13% $11,545 10% The following table summarizes the number of individuals served by our UnitedHealthcare businesses, by major market segment and funding arrangement: (in thousands, except percentages) 2016 December 31, 2015 2014 Commercial risk-based — group . . . . . . . . . . . . . . . . . 7,470 7,095 6,765 Commercial risk-based — individual . . . . . . . . . . . . . . 1,350 1,190 740 Commercial fee-based . . . . . . . . . . . . . . . . . . . . . . . . . . 18,900 18,565 18,350 Fee-based TRICARE . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,860 2,880 2,895 Change 2016 vs. 2015 Change 2015 vs. 2014 375 160 335 (20) 5% 13 2 (1) 850 3 980 3 3,005 5,055 3,750 395 585 230 12 11 6 230 250 285 8 5 8 Total public and senior . . . . . . . . . . . . . . . . . . . . . . . 13,785 12,575 11,810 1,210 10 765 6 Total UnitedHealthcare — domestic medical . . . . . . 44,365 42,305 40,560 International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,220 4,090 4,425 2,060 130 5 3 1,745 (335) 4 (8) Total UnitedHealthcare — medical . . . . . . . . . . . . . . 48,585 46,395 44,985 2,190 5% 1,410 3% (3)% (105) (2)% Total commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,580 29,730 28,750 Medicare Advantage . . . . . . . . . . . . . . . . . . . . . . . . . . . Medicaid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Medicare Supplement (Standardized) . . . . . . . . . . . . . . 3,630 5,890 4,265 Supplemental Data: Medicare Part D stand-alone . . . . . . . . . . . . . . . . . . . 4,930 3,235 5,305 4,035 5,060 5,165 (130) 330 5% 450 61 215 1 (15) (1) Growth in services to the public sector, mid-sized employers, small groups and individuals led the overall increase in people served through risk-based benefit plans in the commercial market. Medicare Advantage increased year-over-year due to growth in people served through individual and employer-sponsored group Medicare Advantage plans. Medicaid growth was driven by the combination of new state-based awards and growth in established programs. Medicare Supplement growth reflected strong customer retention and new sales. UnitedHealthcare’s revenue increase was due to growth in the number of individuals served across its businesses and price increases for underlying medical cost trends. The increase in UnitedHealthcare’s operating earnings was due to diversified growth, offset by guaranty fund assessments recorded in the fourth quarter of 2016. For more information on these assessments, see Note 12 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements.” Operating earnings in 2015 included the establishment of premium deficiency reserves for 2016, primarily for individual ACA compliant business. 38 DPP - 1091 Optum Total revenues and operating earnings increased as each segment reported increased revenues and earnings from operations as a result of the factors discussed below. The results by segment were as follows: OptumHealth Revenue increased at OptumHealth primarily due to growth in its health care delivery businesses as well as expansion of behavioral services into new Medicaid markets. Strong performance in business supporting UnitedHealthcare partially offset by investments in the health care delivery business drove the increase in earnings from operations. OptumInsight Revenue and earnings from operations at OptumInsight increased primarily due to growth in revenue management, business process outsourcing and technology services. OptumRx Revenue and earnings from operations at OptumRx increased primarily due to the full-year impact of Catamaran and organic growth. In 2016, OptumRx fulfilled 1.24 billion adjusted scripts compared to 932 million in 2015. 2015 RESULTS OF OPERATIONS COMPARED TO 2014 RESULTS Consolidated Financial Results Revenues The increase in revenues was primarily driven by the effect of the Catamaran acquisition and organic growth in the number of individuals served across our benefits businesses and across all of Optum’s businesses. Medical Costs Medical costs increased primarily due to risk-based membership growth in our benefits businesses. Medical costs also included losses on individual ACA compliant products related to 2015, and the establishment of premium deficiency reserves related to the 2016 policy year for anticipated future losses for in-force individual ACA compliant contracts and a new state Medicaid contract. Operating Cost Ratio The decrease in our operating cost ratio was due to the inclusion of Catamaran and growth in government benefits programs, both of which have lower operating cost ratios and Company wide productivity gains. Reportable Segments UnitedHealthcare UnitedHealthcare’s revenue growth during the year ended December 31, 2015 was due to growth in the number of individuals served across its businesses and price increases reflecting underlying medical cost trends. UnitedHealthcare’s operating earnings for the year ended December 31, 2015 decreased as the combined individual ACA compliant losses and premium deficiency reserves totaling $815 million more than offset strong growth across the business, improved medical cost management and increased productivity. 39 DPP - 1092 Optum Total revenues and operating earnings increased for the year ended December 31, 2015 as each reporting segment increased revenues and earnings from operations by double-digit percentages as a result of the factors discussed below. The results by segment were as follows: OptumHealth Revenue and earnings from operations increased at OptumHealth during the year ended December 31, 2015 primarily due to growth in its care delivery businesses and the impact of acquisitions in patient care centers and population health management services. The operating margins for the year ended December 31, 2015 decreased from the prior year primarily due to investments made to develop future growth opportunities. OptumInsight Revenue, earnings from operations and operating margins at OptumInsight for the year ended December 31, 2015 increased primarily due to expansion and growth in care provider revenue management services and payer services. OptumRx Revenue and earnings from operations for the year ended December 31, 2015 increased due to the mid-year acquisition of Catamaran as well as strong organic growth. Operating margins for the year ended December 31, 2015 decreased slightly due to the inclusion of lower margin Catamaran business. LIQUIDITY, FINANCIAL CONDITION AND CAPITAL RESOURCES Liquidity Introduction We manage our liquidity and financial position in the context of our overall business strategy. We continually forecast and manage our cash, investments, working capital balances and capital structure to meet the short-term and long-term obligations of our businesses while seeking to maintain liquidity and financial flexibility. Cash flows generated from operating activities are principally from earnings before noncash expenses. Our regulated subsidiaries generate significant cash flows from operations and are subject to financial regulations and standards in their respective jurisdictions. These standards, among other things, require these subsidiaries to maintain specified levels of statutory capital, as defined by each jurisdiction, and restrict the timing and amount of dividends and other distributions that may be paid to their parent companies. In 2016, our U.S. regulated subsidiaries paid their parent companies dividends of $3.9 billion. For the year ended December 31, 2015, our U.S. regulated subsidiaries paid their parent companies dividends of $4.4 billion. See Note 10 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements” for further detail concerning our regulated subsidiary dividends. Our nonregulated businesses also generate cash flows from operations that are available for general corporate use. Cash flows generated by these entities, combined with dividends from our regulated entities and financing through the issuance of long-term debt as well as issuance of commercial paper or the ability to draw under our committed credit facilities, further strengthen our operating and financial flexibility. We use these cash flows to expand our businesses through acquisitions, reinvest in our businesses through capital expenditures, repay debt and return capital to our shareholders through shareholder dividends and/or repurchases of our common stock, depending on market conditions. 40 DPP - 1093 Summary of our Major Sources and Uses of Cash and Cash Equivalents (in millions) Sources of cash: Cash provided by operating activities . . . . . . . . . Issuances of long-term debt and commercial paper, net of repayments . . . . . . . . . . . . . . . . . Proceeds from common share issuances . . . . . . . Sales and maturities of investments, net of purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customer funds administered . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total sources of cash . . . . . . . . . . . . . . . . . . . . . . . . . . For the Years Ended December 31, 2016 2015 2014 Change 2016 vs. 2015 Change 2015 vs. 2014 $ 9,795 $ 9,740 $ 8,051 $ $ 990 429 14,607 402 391 462 — 1,692 37 — 768 — 799 — 115 12,943 25,517 9,818 Uses of cash: Cash paid for acquisitions and noncontrolling interest shares, net of cash assumed . . . . . . . . Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . Common share repurchases . . . . . . . . . . . . . . . . . Purchases of property, equipment and capitalized software . . . . . . . . . . . . . . . . . . . . . Purchases of investments, net of sales and maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customer funds administered . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total uses of cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net (decrease) increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 1,689 (13,617) 27 14,216 (60) — 924 37 (799) 768 (115) (2,017) (16,282) (2,261) (1,786) (1,280) (1,200) (1,923) (1,362) (4,008) 14,265 (475) (80) (14,359) (424) 2,808 (1,705) (1,556) (1,525) (149) (31) (5,927) — (324) (531) — (578) — (638) (138) (5,396) — 254 (531) 638 (440) (13,514) (21,933) (9,594) 78 (156) $ (493) $ 3,428 (5) $ 219 234 $ (3,921) $ (151) 3,209 2016 Cash Flows Compared to 2015 Cash Flows Cash flows provided by operating activities increased slightly as higher net earnings were mostly offset by increased CMS receivables and other operating items. Other significant changes in sources or uses of cash year-over-year included increased net purchases of investments in 2016 and the decreases in cash paid for acquisitions and proceeds from debt issuances due to the 2015 acquisition of Catamaran. 2015 Cash Flows Compared to 2014 Cash Flows Cash flows provided by operating activities in 2015 increased primarily due to growth in risk-based products, which increased medical costs payable and an increase in CMS risk share payables, which increased other liabilities. These increases were partially offset by an increase in pharmacy rebates, which increased other receivables, the increase in the payment of the 2015 Health Insurance Industry Tax and the payment of Reinsurance Program fees in 2015. Other significant changes in sources or uses of cash year-over-year included increased cash paid for acquisitions and net debt issuances and decreased share repurchases, all due to the Catamaran acquisition. 41 DPP - 1094 Financial Condition As of December 31, 2016, our cash, cash equivalent and available-for-sale investment balances of $36.7 billion included $10.4 billion of cash and cash equivalents (of which approximately $700 million was available for general corporate use), $24.2 billion of debt securities and $2.0 billion of investments in equity securities consisting of investments in non-U.S. dollar fixed-income funds; employee savings plan related investments; venture capital funds; and dividend paying stocks. Given the significant portion of our portfolio held in cash equivalents, we do not anticipate fluctuations in the aggregate fair value of our financial assets to have a material impact on our liquidity or capital position. Other sources of liquidity, primarily from operating cash flows and our commercial paper program, which is supported by our bank credit facilities, reduce the need to sell investments during adverse market conditions. See Note 4 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements” for further detail concerning our fair value measurements. Our available-for-sale debt portfolio had a weighted-average duration of 3.3 years and a weighted-average credit rating of “AA” as of December 31, 2016. When multiple credit ratings are available for an individual security, the average of the available ratings is used to determine the weighted-average credit rating. Capital Resources and Uses of Liquidity In addition to cash flows from operations and cash and cash equivalent balances available for general corporate use, our capital resources and uses of liquidity are as follows: Commercial Paper and Bank Credit Facilities. Our revolving bank credit facilities provide liquidity support for our commercial paper borrowing program, which facilitates the private placement of senior unsecured debt through third-party broker-dealers, and are available for general corporate purposes. For more information on our commercial paper and bank credit facilities, see Note 8 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements.” Our revolving bank credit facilities contain various covenants, including covenants requiring us to maintain a defined debt to debt-plus-shareholders’ equity ratio of not more than 55%. As of December 31, 2016, our debt to debt-plus-shareholders’ equity ratio, as defined and calculated under the credit facilities was approximately 44%. Long-Term Debt. Periodically, we access capital markets to issue long-term debt for general corporate purposes, such as, to meet our working capital requirements, to refinance debt, to finance acquisitions or for share repurchases. In February 2016, we issued debt to repay commercial paper borrowings, which were incurred for general corporate and working capital purposes, and to repay our 5.375% notes that were due March 15, 2016. In December 2016, we issued debt to repay commercial paper borrowings, which were incurred for general corporate and working capital purposes. For more information on these debt issuances, see Note 8 of Notes to the Consolidated Financial Statements included in Part II, Item 8 “Financial Statements.” Credit Ratings. Our credit ratings as of December 31, 2016 were as follows: Moody’s Ratings Outlook Senior unsecured debt . . . . . . . . Commercial paper . . . . . . . . . . . A3 P-2 Negative n/a Standard & Poor’s Ratings Outlook A+ A-1 Negative n/a Ratings AF1 Fitch Outlook Negative n/a A.M. Best Ratings Outlook bbb+ AMB-2 Stable n/a The availability of financing in the form of debt or equity is influenced by many factors, including our profitability, operating cash flows, debt levels, credit ratings, debt covenants and other contractual restrictions, regulatory requirements and economic and market conditions. For example, a significant downgrade in our credit ratings or adverse conditions in the capital markets may increase the cost of borrowing for us or limit our access to capital. 42 DPP - 1095 Share Repurchase Program. As of December 31, 2016, we had Board authorization to purchase up to an additional 51 million shares of our common stock. For more information on our share repurchase program, see Note 10 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements.” Dividends. In June 2016, our Board increased our quarterly cash dividend to shareholders to an annual dividend rate of $2.50 per share. For more information on our dividend, see Note 10 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements.” CONTRACTUAL OBLIGATIONS AND COMMITMENTS The following table summarizes future obligations due by period as of December 31, 2016, under our various contractual obligations and commitments: (in millions) 2017 Debt (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase and other obligations (b) . . . . . . . . . . . . . . . . Future policy benefits (c) . . . . . . . . . . . . . . . . . . . . . . . Unrecognized tax benefits (d) . . . . . . . . . . . . . . . . . . . Other liabilities recorded on the Consolidated Balance Sheet (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Redeemable noncontrolling interests (f) . . . . . . . . . . . $ 8,262 453 623 133 19 Total contractual obligations . . . . . . . . . . . . . . . . . . . . $10,717 2018 to 2019 2020 to 2021 Thereafter Total $ $ 6,059 587 297 273 — $ 27,899 499 170 1,980 234 $48,502 2,310 1,707 2,657 253 5 — 2,288 — 2,576 2,012 7,221 $ 33,070 $60,017 269 958 6,282 771 617 271 — 14 1,054 $ 9,009 $ (a) Includes interest coupon payments and maturities at par or put values. The table also assumes amounts are outstanding through their contractual term. See Note 8 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements” for more detail. (b) Includes fixed or minimum commitments under existing purchase obligations for goods and services, including agreements that are cancelable with the payment of an early termination penalty and remaining capital commitments for venture capital funds and other funding commitments. Excludes agreements that are cancelable without penalty and excludes liabilities to the extent recorded in our Consolidated Balance Sheets as of December 31, 2016. (c) 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 Part II, Item 8, “Financial Statements” for more detail. (d) As the timing of future settlements is uncertain, the long-term portion has been classified as “Thereafter.” (e) Includes obligations associated with contingent consideration and other payments related to business acquisitions, certain employee benefit programs, amounts accrued for guaranty fund assessments 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.” (f) Includes commitments for redeemable shares of our subsidiaries. We do not have other significant contractual obligations or commitments that require cash resources. However, we continually evaluate opportunities to expand our operations, which include internal development of new products, programs and technology applications and may include acquisitions. OFF-BALANCE SHEET ARRANGEMENTS As of December 31, 2016, we were not involved in any off-balance sheet arrangements, which have or are reasonably likely to have a material effect on our financial condition, results of operations or liquidity. 43 DPP - 1096 RECENTLY ISSUED ACCOUNTING STANDARDS See Note 2 of Notes to the Consolidated Financial Statements in Part II, Item 8 “Financial Statements” for a discussion of new accounting pronouncements that affect us. CRITICAL ACCOUNTING ESTIMATES Critical accounting estimates are those estimates that require management to make challenging, subjective or complex judgments, often because they must estimate the effects of matters that are inherently uncertain and may change in subsequent periods. Critical accounting estimates involve judgments and uncertainties that are sufficiently sensitive and may result in materially different results under different assumptions and conditions. Medical Costs Payable Medical costs and medical costs payable include estimates of our obligations for medical care services that have been rendered on behalf of insured consumers, but for which claims have either not yet been received or processed. Depending on the health care professional and type of service, the typical billing lag for services can be up to 90 days from the date of service. Approximately 90% of claims related to medical care services are known and settled within 90 days from the date of service and substantially all within twelve months. As of December 31, 2016, our days outstanding in medical payables was 51 days, calculated as total medical payables divided by total medical costs times the number of days in the period. In each reporting period, our operating results include the effects of more completely developed medical costs payable estimates associated with previously reported periods. If the revised estimate of prior period medical costs is less than the previous estimate, we will decrease reported medical costs in the current period (favorable development). If the revised estimate of prior period medical costs is more than the previous estimate, we will increase reported medical costs in the current period (unfavorable development). Medical costs in 2016, 2015 and 2014 included favorable medical cost development related to prior years of $220 million, $320 million and $420 million, respectively. In developing our medical costs payable estimates, we apply different estimation methods depending on the month for which incurred claims are being estimated. For example, for the most recent two months, we estimate claim costs incurred by applying observed medical cost trend factors to the average per member per month (PMPM) medical costs incurred in prior months for which more complete claim data is available, supplemented by a review of near-term completion factors. Completion Factors. A completion factor is an actuarial estimate, based upon historical experience and analysis of current trends, of the percentage of incurred claims during a given period that have been adjudicated by us at the date of estimation. Completion factors are the most significant factors we use in developing our medical costs payable estimates for periods prior to the most recent two months. Completion factors include judgments in relation to claim submissions such as the time from date of service to claim receipt, claim inventory levels and claim processing backlogs, as well as other factors. If actual claims submission rates from providers (which can be influenced by a number of factors, including provider mix and electronic versus manual submissions) or our claim processing patterns are different than estimated, our reserves may be significantly impacted. The following table illustrates the sensitivity of these factors and the estimated potential impact on our medical costs payable estimates for those periods as of December 31, 2016: Completion Factors (Decrease) Increase in Factors (0.75)% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.50) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.25) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 DPP - 1097 Increase (Decrease) In Medical Costs Payable (in millions) $ 437 291 145 (144) (288) (430) Medical Cost Per Member Per Month Trend Factors. Medical cost PMPM trend factors are significant factors we use in developing our medical costs payable estimates for the most recent two months. Medical cost trend factors are developed through a comprehensive analysis of claims incurred in prior months, provider contracting and expected unit costs, benefit design and by reviewing a broad set of health care utilization indicators, including but not limited to, pharmacy utilization trends, inpatient hospital census data and incidence data from the National Centers for Disease Control. We also consider macroeconomic variables such as gross-domestic product growth, employment and disposable income. A large number of factors can cause the medical cost trend to vary from our estimates, including: our ability and practices to manage medical and pharmaceutical costs, changes in level and mix of services utilized, mix of benefits offered, including the impact of co-pays and deductibles, changes in medical practices, catastrophes and epidemics. The following table illustrates the sensitivity of these factors and the estimated potential impact on our medical costs payable estimates for the most recent two months as of December 31, 2016: Medical Cost PMPM Trend Increase (Decrease) in Factors Increase (Decrease) In Medical Costs Payable (in millions) 3% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ...................................................................... 1 ...................................................................... (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 557 371 186 (186) (371) (557) The completion factors and medical costs PMPM trend factors analyses above include outcomes that are considered reasonably likely based on our historical experience estimating liabilities for incurred but not reported benefit claims. Management believes the amount of medical costs payable is reasonable and adequate to cover our liability for unpaid claims as of December 31, 2016; however, actual claim payments may differ from established estimates as discussed above. Assuming a hypothetical 1% difference between our December 31, 2016 estimates of medical costs payable and actual medical costs payable, excluding AARP Medicare Supplement Insurance and any potential offsetting impact from premium rebates, 2016 net earnings would have increased or decreased by $90 million. For more detail related to our medical cost estimates, see Note 2 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements.” Revenues We derive a substantial portion of our revenues from health care insurance premiums. We recognize premium revenues in the period eligible individuals are entitled to receive health care services. Customers are typically billed monthly at a contracted rate per eligible person multiplied by the total number of people eligible to receive services. Our Medicare Advantage and Medicare Part D premium revenues are subject to periodic adjustment under the CMS risk adjustment payment methodology. The CMS risk adjustment model provides higher per member payments for enrollees diagnosed with certain conditions and lower payments for enrollees who are healthier. We estimate risk adjustment revenues based upon the data submitted and expected to be submitted to CMS. As a result of the variability of factors that determine such estimations, the actual amount of CMS’ retroactive payments could be materially more or less than our estimates. This may result in favorable or unfavorable adjustments to our Medicare premium revenue and, accordingly, our profitability. For more detail on premium revenues see Note 2 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial 45 DPP - 1098 Statements.” Risk adjustment data for certain of our plans is subject to review by the federal and state governments, including audit by regulators. See Note 12 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements” for additional information regarding these audits. Our estimates of premiums to be recognized are reduced by any expected premium minimum MLR rebates payable by us to CMS. Goodwill and Intangible Assets Goodwill. We evaluate goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value may not be recoverable. When testing goodwill for impairment, we may first assess qualitative factors to determine if it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value. During a qualitative analysis, we consider the impact of changes, if any, to the following factors: macroeconomic, industry and market factors, cost factors, changes in overall financial performance, and any other relevant events and uncertainties impacting a reporting unit. If our qualitative assessment indicates that goodwill impairment is more likely than not, we perform additional quantitative analysis. We may also elect to skip the qualitative testing and proceed directly to the quantitative testing. For reporting units where a quantitative analysis is performed, we perform a multi-step test measuring the fair values of the reporting units and comparing them to their aggregate carrying values, including goodwill. If the fair value is less than the carrying value of the reporting unit, then the implied value of goodwill would be calculated and compared to the carrying amount of goodwill to determine whether goodwill is impaired. We estimate the fair values of our reporting units using discounted cash flows, which include assumptions about a wide variety of internal and external factors. Significant assumptions used in the impairment analysis include financial projections of free cash flow (including significant assumptions about operations, capital requirements and income taxes), long-term growth rates for determining terminal value beyond the discretely forecasted periods and discount rates. For each reporting unit, comparative market multiples are used to corroborate the results of our discounted cash flow test. Forecasts and long-term growth rates used for our reporting units are consistent with, and use inputs from, our internal long-term business plan and strategies. Key assumptions used in these forecasts include: • Revenue trends. Key revenue drivers for each reporting unit are determined and assessed. Significant factors include: membership growth, medical trends and the impact and expectations of regulatory environments. Additional macro-economic assumptions relating to unemployment, GDP growth, interest rates and inflation are also evaluated and incorporated, as appropriate. • Medical cost trends. For further discussion of medical cost trends, see the “Medical Cost Trend” section of Executive Overview-Business Trends above and the discussion in the “Medical Costs Payable” critical accounting estimate above. Similar factors, including historical and expected medical cost trend levels, are considered in estimating our long-term medical trends at the reporting unit level. • Operating productivity. We forecast expected operating cost levels based on historical levels and expectations of future operating cost levels. • Capital levels. The operating and long-term capital requirements for each business are considered. Discount rates are determined for each reporting unit and include consideration of the implied risk inherent in their forecasts. Our most significant estimate in the discount rate determinations involves our adjustments to the peer company weighted average costs of capital that reflect reporting unit-specific factors. We have not made any adjustments to decrease a discount rate below the calculated peer company weighted average cost of capital for any reporting unit. Company-specific adjustments to discount rates are subjective and thus are difficult to measure with certainty. The passage of time and the availability of additional information regarding areas of uncertainty with respect to the reporting units’ operations could cause these assumptions to change in the future. We completed our annual impairment tests for goodwill as of October 1, 2016. All of our reporting units had fair values substantially in excess of their carrying values. 46 DPP - 1099 Intangible Assets. Our finite-lived intangible assets are subject to impairment tests when events or circumstances indicate that an asset’s (or asset group’s) carrying value may exceed its estimated fair value. Consideration is given on a quarterly basis to a number of potential impairment indicators, including: changes in the use of the assets, changes in legal or other business factors that could affect value, experienced or expected operating cashflow deterioration or losses, adverse changes in customer populations, adverse competitive or technological advances that could impact value and other factors. Our indefinite-lived intangible assets are tested for impairment on an annual basis, or more frequently if impairment indicators exist. To determine if an indefinite-lived intangible asset is impaired, we compare its estimated fair value to its carrying value. If the carrying value exceeds its estimated fair value, an impairment would be recorded for the amount by which the carrying value exceeds its estimated fair value. Intangible assets were not impaired in 2016. Investments Our investments are principally classified as available-for-sale and are recorded at fair value. We continually monitor the difference between the cost and fair value of our investments. 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. 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. The judgments and estimates related to other-than-temporary impairment may ultimately prove to be inaccurate due to many factors, including: circumstances may change over time, industry sector and market factors may differ from expectations and estimates or we may ultimately sell a security we previously intended to hold. Our assessment of the financial condition and near-term prospects of the issuer may ultimately prove to be inaccurate as time passes and new information becomes available, including changes to current facts and circumstances, or as unknown or estimated unlikely trends develop. LEGAL MATTERS A description of our legal proceedings is presented in Note 12 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements.” CONCENTRATIONS OF CREDIT RISK Investments in financial instruments such as marketable securities and accounts receivable may subject us to concentrations of credit risk. Our investments in marketable securities are managed under an investment policy authorized by our Board of Directors. This policy limits the amounts that may be invested in any one issuer and generally limits our investments to U.S. government and agency securities, state and municipal securities and corporate debt obligations that are investment grade. Concentrations of credit risk with respect to accounts receivable are limited due to the large number of employer groups and other customers that constitute our client base. As of December 31, 2016, there were no significant concentrations of credit risk. 47 DPP - 1100 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our primary market risks are exposures to changes in interest rates that impact our investment income and interest expense and the fair value of certain of our fixed-rate investments and debt, as well as foreign currency exchange rate risk of the U.S. dollar primarily to the Brazilian real. As of December 31, 2016, we had $13.2 billion of financial assets on which the interest rates received vary with market interest rates, which may materially impact our investment income. Also as of December 31, 2016, $12.4 billion of our financial liabilities, which include commercial paper, debt and deposit liabilities, were at interest rates that vary with market rates, either directly or through the use of related interest rate swap contracts. The fair value of certain of our fixed-rate investments and debt also varies with market interest rates. As of December 31, 2016, $21.9 billion of our investments were fixed-rate debt securities and $25.2 billion of our debt was non-swapped fixed-rate term debt. An increase in market interest rates decreases the market value of fixedrate investments and fixed-rate debt. Conversely, a decrease in market interest rates increases the market value of fixed-rate investments and fixed-rate debt. We manage exposure to market interest rates by diversifying investments across different fixed income market sectors and debt across maturities, as well as by endeavoring to match our floating-rate assets and liabilities over time, either directly or through the use of interest rate swap contracts. Unrealized gains and losses on investments in available-for-sale securities are reported in comprehensive income. The following tables summarize the impact of hypothetical changes in market interest rates across the entire yield curve by 1% point or 2% points as of December 31, 2016 and 2015 on our investment income and interest expense per annum and the fair value of our investments and debt (in millions, except percentages): December 31, 2016 Increase (Decrease) in Market Interest Rate 2% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1...................................... (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment Income Per Annum (a) $ Interest Expense Per Annum (a) 263 $ 132 (105) nm Fair Value of Financial Assets (b) 245 $ 122 (95) nm Fair Value of Financial Liabilities (1,711) $ (873) 855 1,562 (3,470) (1,860) 2,244 4,784 December 31, 2015 Increase (Decrease) in Market Interest Rate 2% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1...................................... (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment Income Per Annum (a) $ Interest Expense Per Annum (a) 258 $ 129 (80) nm Fair Value of Financial Assets (b) 257 $ 128 (55) nm Fair Value of Financial Liabilities (1,388) $ (702) 677 1,132 (3,233) (1,746) 2,085 4,442 nm = not meaningful (a) Given the low absolute level of short-term market rates on our floating-rate assets and liabilities as of December 31, 2016 and 2015, the assumed hypothetical change in interest rates does not reflect the full 100 basis point reduction in interest income or interest expense as the rate cannot fall below zero and thus the 200 basis point reduction is not meaningful. (b) As of December 31, 2016 and 2015, some of our investments had interest rates below 2% so the assumed hypothetical change in the fair value of investments does not reflect the full 200 basis point reduction. We have an exposure to changes in the value of the Brazilian real to the U.S. dollar in translation of UnitedHealthcare Brazil’s operating results at the average exchange rate over the accounting period, and 48 DPP - 1101 UnitedHealthcare Brazil’s assets and liabilities at the spot rate at the end of the accounting period. The gains or losses resulting from translating foreign assets and liabilities into U.S. dollars are included in equity and comprehensive income. An appreciation of the U.S. dollar against the Brazilian real reduces the carrying value of the net assets denominated in Brazilian real. For example, as of December 31, 2016, a hypothetical 10% and 25% increase in the value of the U.S. dollar against the Brazilian real would have caused a reduction in net assets of approximately $400 million and $900 million, respectively. We manage exposure to foreign currency earnings risk by conducting our international business operations primarily in their functional currencies. As of December 31, 2016, we had $2.0 billion of investments in equity securities, consisting of investments in non-U.S. dollar fixed-income funds; employee savings plan related investments; venture capital funds; and dividend paying stocks. Valuations in non-U.S. dollar funds are subject to foreign exchange rates. Valuations in venture capital funds are subject to conditions affecting health care and technology stocks and dividend paying equities are subject to more general market conditions. 49 DPP - 1102 ITEM 8. FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Consolidated Statements of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 1. Description of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 2. Basis of Presentation, Use of Estimates and Significant Accounting Policies . . . . . . . . . . . . . . . . . 57 3. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 4. Fair Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 5. Property, Equipment and Capitalized Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 6. Goodwill and Other Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 7. Medical Costs Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 8. Commercial Paper and Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 9. Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 10. Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 11. Share-Based Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 12. Commitments and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 13. Segment Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 14. Quarterly Financial Data (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 50 DPP - 1103 Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of UnitedHealth Group Incorporated and Subsidiaries: We have audited the accompanying consolidated balance sheets of UnitedHealth Group Incorporated and subsidiaries (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2016. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of UnitedHealth Group Incorporated and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 8, 2017, expressed an unqualified opinion on the Company’s internal control over financial reporting. /s/ DELOITTE & TOUCHE LLP Minneapolis, Minnesota February 8, 2017 51 DPP - 1104 UnitedHealth Group Consolidated Balance Sheets (in millions, except per share data) Assets Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable, net of allowances of $514 and $333 . . . . . . . . . . . . . . . . . . Other current receivables, net of allowances of $409 and $138 . . . . . . . . . . . . . . Assets under management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 31, 2016 December 31, 2015 $ $ 10,430 2,845 8,152 7,499 3,105 1,848 10,923 1,988 6,523 6,801 2,998 2,406 Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property, equipment and capitalized software, net of accumulated depreciation and amortization of $3,749 and $3,173 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other intangible assets, net of accumulated amortization of $3,847 and $3,128 . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,879 23,868 31,639 18,792 5,901 47,584 8,541 3,037 4,861 44,453 8,391 3,118 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 122,810 $ 111,254 $ $ Liabilities, redeemable noncontrolling interests and equity Current liabilities: Medical costs payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial paper and current maturities of long-term debt . . . . . . . . . . . . . . . . . Unearned revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,391 13,361 7,193 1,968 10,339 14,330 11,994 6,634 2,142 7,798 Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt, less current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Future policy benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,252 25,777 2,524 2,761 2,307 42,898 25,331 2,496 3,587 1,481 Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,621 75,793 2,012 1,736 — — Commitments and contingencies (Note 12) Redeemable noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity: Preferred stock, $0.001 par value —10 shares authorized; no shares issued or outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Common stock, $0.01 par value—3,000 shares authorized; 952 and 953 issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nonredeemable noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 — 40,945 (2,681) (97) 10 29 37,125 (3,334) (105) Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,177 33,725 Total liabilities, redeemable noncontrolling interests and equity . . . . . . . . . . . . . . $ 122,810 $ 111,254 See Notes to the Consolidated Financial Statements 52 DPP - 1105 UnitedHealth Group Consolidated Statements of Operations For the Years Ended December 31, 2016 2015 2014 (in millions, except per share data) Revenues: Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $144,118 26,658 13,236 828 $127,163 17,312 11,922 710 $115,302 4,242 10,151 779 Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184,840 157,107 130,474 Operating costs: Medical costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of products sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,038 28,401 24,416 2,055 103,875 24,312 16,206 1,693 93,633 21,263 3,826 1,478 Total operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171,910 146,086 120,200 Earnings from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,930 (1,067) 11,021 (790) 10,274 (618) Earnings before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,863 (4,790) 10,231 (4,363) 9,656 (4,037) Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . 7,073 (56) 5,868 (55) 5,619 — Net earnings attributable to UnitedHealth Group common shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,017 $ 5,813 $ 5,619 Earnings per share attributable to UnitedHealth Group common shareholders: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7.37 $ 6.10 $ 5.78 Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7.25 $ 6.01 $ 5.70 Basic weighted-average number of common shares outstanding . . . . . . . . Dilutive effect of common share equivalents . . . . . . . . . . . . . . . . . . . . . . . . . 952 16 953 14 972 14 Diluted weighted-average number of common shares outstanding . . . . . . 968 967 986 Anti-dilutive shares excluded from the calculation of dilutive effect of common share equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash dividends declared per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . $ See Notes to the Consolidated Financial Statements 53 DPP - 1106 3 2.375 $ 8 1.875 $ 6 1.405 UnitedHealth Group Consolidated Statements of Comprehensive Income (in millions) For the Years Ended December 31, 2016 2015 2014 Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,073 $ 5,868 $ 5,619 Other comprehensive income (loss): Gross unrealized (losses) gains on investment securities during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (73) 26 (123) 44 476 (173) Total unrealized (losses) gains, net of tax . . . . . . . . . . . . . . . . . . . . (47) (79) 303 Gross reclassification adjustment for net realized gains included in net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (166) 60 (141) 53 (211) 77 Total reclassification adjustment, net of tax . . . . . . . . . . . . . . . . . . (106) (88) (134) Total foreign currency translation gains (losses) . . . . . . . . . . . . . . . . . . 806 (1,775) (653) Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 653 (1,942) (484) 7,726 (56) 3,926 (55) Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comprehensive income attributable to noncontrolling interests . . . . . . . . . . . . . . . Comprehensive income attributable to UnitedHealth Group common shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . See Notes to the Consolidated Financial Statements 54 DPP - 1107 $ 7,670 $ 3,871 5,135 — $ 5,135 UnitedHealth Group Consolidated Statements of Changes in Equity Accumulated Other Comprehensive Income (Loss) Net Foreign Unrealized Currency Gains Translation Nonredeemable Common Stock Additional Paid-In Retained (Losses) on (Losses) Noncontrolling Shares Amount Capital Earnings Investments Gains Interest (in millions) Balance at January 1, 2014 . . . . . . . . Net earnings . . . . . . . . . . . . . . . . . . . . Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . Issuances of common stock, and related tax effects . . . . . . . . . . . . . . Share-based compensation, and related tax benefits . . . . . . . . . . . . . Common share repurchases . . . . . . . . Cash dividends paid on common shares . . . . . . . . . . . . . . . . . . . . . . . 988 $ 10 $ — $ 33,047 $ 5,619 54 $ 169 15 — (49) — Balance at December 31, 2014 . . . . . Net earnings . . . . . . . . . . . . . . . . . . . . Other comprehensive loss . . . . . . . . . Issuances of common stock, and related tax effects . . . . . . . . . . . . . . Share-based compensation, and related tax benefits . . . . . . . . . . . . . Common share repurchases . . . . . . . . Cash dividends paid on common shares . . . . . . . . . . . . . . . . . . . . . . . Redeemable noncontrolling interests fair value and other adjustments . . Acquisition of nonredeemable noncontrolling interest . . . . . . . . . . Distributions to nonredeemable noncontrolling interest . . . . . . . . . . 954 10 Balance at December 31, 2015 . . . . . Adjustment to adopt ASU 2016-09 . . . . . . . . . . . . . . . . . . . . . Net earnings . . . . . . . . . . . . . . . . . . . . Other comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . Issuances of common stock, and related tax effects . . . . . . . . . . . . . . Share-based compensation . . . . . . . . Common share repurchases . . . . . . . . Cash dividends paid on common shares . . . . . . . . . . . . . . . . . . . . . . . Acquisition of redeemable noncontrolling interest shares . . . . Redeemable noncontrolling interests fair value and other adjustments . . Distributions to nonredeemable noncontrolling interest . . . . . . . . . . 953 Balance at December 31, 2016 . . . . . 952 $ (962) $ — $32,149 5,619 (653) (484) 146 146 394 (540) (3,468) 394 (4,008) (1,362) — 10 — 127 (11) — 589 (462) 33,836 5,813 (1,362) 223 (1,615) (167) (1,775) — 26 (738) 589 (1,200) (1,786) (1,786) (225) 9 (140) 29 37,125 56 (3,390) 28 7,017 — (10) — 191 455 (316) 806 (140) 28 7,057 653 (964) 191 455 (1,280) (2,261) (2,261) (143) (143) (216) (216) (32) 10 $ 9 (105) 33,725 40 (153) 9 32,454 5,839 (1,942) 127 (225) 10 Total Equity — $ 40,945 $ (97) $ See Notes to the Consolidated Financial Statements 55 DPP - 1108 (2,584) $ (32) (97) $38,177 UnitedHealth Group Consolidated Statements of Cash Flows For the Years Ended December 31, 2016 2015 2014 (in millions) Operating activities Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Noncash items: Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net change in other operating items, net of effects from acquisitions and changes in AARP balances: Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Medical costs payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unearned revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,073 $ 5,868 $ 5,619 2,055 81 485 (82) 1,693 (73) 406 (235) 1,478 (117) 364 (298) (1,357) (1,601) 1,849 1,494 (202) (591) (1,430) 2,585 1,280 237 (911) (590) 484 1,637 385 Cash flows from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,795 9,740 8,051 Investing activities Purchases of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sales of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Maturities of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash paid for acquisitions, net of cash assumed . . . . . . . . . . . . . . . . . . . . . . . . . . Purchases of property, equipment and capitalized software . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17,547) 7,339 4,281 (1,760) (1,705) 37 (9,939) 6,054 3,354 (16,164) (1,556) (144) (9,928) 7,701 3,026 (1,923) (1,525) 115 Cash flows used for investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,355) (18,395) (2,534) Financing activities Acquisition of redeemable noncontrolling interest shares . . . . . . . . . . . . . . . . . . Common share repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from common stock issuances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Repayments of) proceeds from commercial paper, net . . . . . . . . . . . . . . . . . . . . Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customer funds administered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (257) (1,280) (2,261) 429 (2,596) (382) 3,968 1,692 (324) (118) (1,200) (1,786) 402 (1,041) 3,666 11,982 768 (434) — (4,008) (1,362) 462 (812) (794) 1,997 (638) (138) Cash flows (used for) from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . (1,011) 12,239 (5,293) Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . . . . . . (Decrease) increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . 78 (156) (493) 10,923 (5) 3,428 7,495 219 7,276 Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,430 $ 10,923 $ 7,495 Supplemental cash flow disclosures Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,055 4,726 $ $ See Notes to the Consolidated Financial Statements 56 DPP - 1109 639 4,401 644 4,024 UnitedHealth Group Notes to the Consolidated Financial Statements 1. Description of Business UnitedHealth Group Incorporated (individually and together with its subsidiaries, “UnitedHealth Group” and “the Company”) is a diversified health and well-being company dedicated to helping people live healthier lives and helping to make the health system work better for everyone. Through its diversified family of businesses, the Company leverages core competencies in advanced, enabling technology; health care data, information and intelligence; and clinical care management and coordination to help meet the demands of the health system. These core competencies are deployed within the Company’s two distinct, but strategically aligned, business platforms: health benefits operating under UnitedHealthcare and health services operating under Optum. 2. Basis of Presentation, Use of Estimates and Significant Accounting Policies Basis of Presentation The Company has prepared the Consolidated Financial Statements according to U.S. Generally Accepted Accounting Principles (GAAP) and has included the accounts of UnitedHealth Group and its subsidiaries. Use of Estimates These Consolidated Financial Statements include certain amounts based on the Company’s best estimates and judgments. The Company’s most significant estimates relate to estimates and judgments for medical costs payable and revenues, valuation and impairment analysis of goodwill and other intangible assets, estimates of other current liabilities and other current receivables and valuations of certain investments. Certain of these estimates require the application of complex assumptions and judgments, often because they involve matters that are inherently uncertain and will likely change in subsequent periods. The impact of any change in estimates is included in earnings in the period in which the estimate is adjusted. Revenues Premiums Premium revenues are primarily derived from risk-based health insurance arrangements in which the premium is typically at a fixed rate per individual served for a one-year period, and the Company assumes the economic risk of funding its customers’ health care and related administrative costs. Premium revenues are recognized in the period in which eligible individuals are entitled to receive health care benefits. Health care premium payments received from the Company’s customers in advance of the service period are recorded as unearned revenues. Fully insured commercial products of U.S. health plans, Medicare Advantage and Medicare Prescription Drug Benefit (Medicare Part D) plans with medical loss ratios as calculated under the definitions in the Patient Protection and Affordable Care Act (ACA) and related federal and state regulations and implementing regulations, that fall below certain targets are required to rebate ratable portions of their premiums annually. Medicare Advantage premium revenue includes the impact of Centers for Medicare & Medicaid Services (CMS) quality bonuses based on plans’ Star ratings. Premium revenues are recognized based on the estimated premiums earned net of projected rebates because the Company is able to reasonably estimate the ultimate premiums of these contracts. The Company also records premium revenues from capitation arrangements at its OptumHealth businesses. 57 DPP - 1110 The Company’s Medicare Advantage and Medicare Part D premium revenues are subject to periodic adjustment under CMS’ risk adjustment payment methodology. CMS deploys a risk adjustment model that apportions premiums paid to all health plans according to health severity and certain demographic factors. The CMS risk adjustment model provides higher per member payments for enrollees diagnosed with certain conditions and lower payments for enrollees who are healthier. Under this risk adjustment methodology, CMS calculates the risk adjusted premium payment using diagnosis data from hospital inpatient, hospital outpatient and physician treatment settings. The Company and health care providers collect, capture and submit the necessary and available diagnosis data to CMS within prescribed deadlines. The Company estimates risk adjustment revenues based upon the diagnosis data submitted and expected to be submitted to CMS. Risk adjustment data for certain of the Company’s plans are subject to review by the government, including audit by regulators. See Note 12 for additional information regarding these audits. Products and Services For the Company’s OptumRx pharmacy care services business, the majority of revenues are derived from products sold through a contracted network of retail pharmacies or home delivery and specialty pharmacy facilities. Product revenues include ingredient costs (net of rebates), a negotiated dispensing fee and customer co-payments for drugs dispensed through the Company’s mail-service pharmacy. In retail pharmacy transactions, revenues recognized exclude the member’s applicable co-payment. Pharmacy products are billed to customers based on the number of transactions occurring during the billing period. Product revenues are recognized when the prescriptions are dispensed through the retail network or received by consumers through the Company’s mail-service pharmacy. The Company has entered into contracts in which it is primarily obligated to pay its network pharmacy providers for benefits provided to their customers regardless of whether the Company is paid. The Company is also involved in establishing the prices charged by retail pharmacies, determining which drugs will be included in formulary listings and selecting which retail pharmacies will be included in the network offered to plan sponsors’ members. As a result, revenues are reported on a gross basis. Services revenue consists of fees derived from services performed for customers that self-insure the health care costs of their employees and employees’ dependents. Under service fee contracts, the Company receives monthly, a fixed fee per employee, which is recognized as revenue as the Company performs, or makes available the applicable services to the customer. The customers retain the risk of financing health care costs for their employees and employees’ dependents, 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. For these fee-based customer arrangements, the Company provides coordination and facilitation of medical services; transaction processing; customer, consumer and care professional services; and access to contracted networks of physicians, hospitals and other health care professionals. These services are performed throughout the contract period. Revenues are also comprised of a number of services and products sold through Optum. For its financial services offerings, OptumHealth charges fees and earns investment income on managed funds. OptumInsight provides software and information products, advisory consulting arrangements and services outsourcing contracts, which may be delivered over several years. OptumInsight revenues are generally recognized over time on either a time and materials basis, or ratably as services are performed or made available to customers. Medical Costs and Medical Costs Payable The Company’s estimate of medical costs payable represents management’s best estimate of its liability for unpaid medical costs as of December 31, 2016. Each period, the Company re-examines previously established medical costs payable estimates based on actual claim submissions and other changes in facts and circumstances. As more complete claim information becomes 58 DPP - 1111 available, the Company adjusts the amount of the estimates and includes the changes in estimates in medical costs in the period in which the change is identified. Approximately 90% of claims related to medical care services are known and settled within 90 days from the date of service and substantially all within twelve months. Medical costs and medical costs payable include estimates of the Company’s obligations for medical care services that have been rendered on behalf of insured consumers, but for which claims have either not yet been received, processed, or paid. The Company develops estimates for medical care services incurred but not reported (IBNR), which includes estimates for claims that have not been received or fully processed, using an actuarial process that is consistently applied, centrally controlled and automated. The actuarial models consider factors such as time from date of service to claim processing, seasonal variances in medical care consumption, health care professional contract rate changes, medical care utilization and other medical cost trends, membership volume and demographics, the introduction of new technologies, benefit plan changes, and business mix changes related to products, customers and geography. In developing its medical costs payable estimates, the Company applies different estimation methods depending on which incurred claims are being estimated. For the most recent two months, the Company estimates claim costs incurred by applying observed medical cost trend factors to the average per member per month (PMPM) medical costs incurred in prior months for which more complete claim data are available, supplemented by a review of near-term completion factors (actuarial estimates, based upon historical experience and analysis of current trends, of the percentage of incurred claims during a given period that have been adjudicated by the Company at the date of estimation). For months prior to the most recent two months, the Company applies the completion factors to actual claims adjudicated-to-date to estimate the expected amount of ultimate incurred claims for those months. Cost of Products Sold The Company’s cost of products sold includes the cost of pharmaceuticals dispensed to unaffiliated customers either directly at its mail and specialty pharmacy locations, or indirectly through its nationwide network of participating pharmacies. Rebates attributable to non-affiliated clients are accrued as rebates receivable and a reduction of cost of products sold with a corresponding payable for the amounts of the rebates to be remitted to those non-affiliated clients in accordance with their contracts and recorded in the Consolidated Statements of Operations as a reduction of product revenue. Cost of products sold also includes the cost of personnel to support the Company’s transaction processing services, system sales, maintenance and professional services. Cash, Cash Equivalents and Investments Cash and cash equivalents are highly liquid investments that have an original maturity of three months or less. The fair value of cash and cash equivalents approximates their carrying value because of the short maturity of the instruments. Investments with maturities of less than one year are classified as short-term. Because of regulatory requirements, certain investments are included in long-term investments regardless of their maturity date. The Company classifies these investments as held-to-maturity and reports them at amortized cost. Substantially all other investments are classified as available-for-sale and reported at fair value based on quoted market prices, where available. The Company excludes unrealized gains and losses on investments in available-for-sale securities from net earnings and reports them as comprehensive income and, net of income tax effects, as a separate component of equity. To calculate realized gains and losses on the sale of investments, the Company specifically identifies the cost of each investment sold. 59 DPP - 1112 The Company evaluates an investment for impairment by considering the length of time and extent to which market value has been less than cost or amortized cost, the financial condition and near-term prospects of the issuer as well as specific events or circumstances that may influence the operations of the issuer and the Company’s intent to sell the security or the likelihood that it will be required to sell the security before recovery of the entire amortized cost. New information and the passage of time can change these judgments. The Company manages its investment portfolio to limit its exposure to any one issuer or market sector, and largely limits its investments to investment grade quality. Securities downgraded below policy minimums after purchase will be disposed of in accordance with the Company’s investment policy. Assets Under Management The Company provides health insurance products and services to members of AARP under a Supplemental Health Insurance Program (the AARP Program) and to AARP members and non-members under separate Medicare Advantage and Medicare Part D arrangements. The products and services under the AARP Program include supplemental Medicare benefits, hospital indemnity insurance, including insurance for individuals between 50 to 64 years of age and other related products. Pursuant to the Company’s agreement, AARP Program assets are managed separately from the Company’s general investment portfolio and are used to pay costs associated with the AARP Program. These assets are invested at the Company’s discretion, within investment guidelines approved by AARP. The Company does not guarantee any rates of return on these investments and, upon any transfer of the AARP Program contract to another entity, the Company would transfer cash equal in amount to the fair value of these investments at the date of transfer to that entity. Because the purpose of these assets is to fund the medical costs payable, the rate stabilization fund (RSF) liabilities and other related liabilities associated with this AARP contract, assets under management are classified as current assets, consistent with the classification of these liabilities. The effects of changes in other balance sheet amounts associated with the AARP Program also accrue to the overall benefit of the AARP policyholders through the RSF balance. Accordingly, the Company excludes the effect of such changes in its Consolidated Statements of Cash Flows. Other Current Receivables Other current receivables include amounts due from pharmaceutical manufacturers for rebates and Medicare Part D drug discounts and other miscellaneous amounts due to the Company. The Company’s pharmacy care services businesses contract with pharmaceutical manufacturers, some of which provide rebates based on use of the manufacturers’ products by its affiliated and non-affiliated clients. The Company accrues rebates as they are earned by its clients on a monthly basis based on the terms of the applicable contracts, historical data and current estimates. The pharmacy care services businesses bill these rebates to the manufacturers on a monthly or quarterly basis depending on the contractual terms and records rebates attributable to affiliated clients as a reduction to medical costs. The Company generally receives rebates from two to five months after billing. As of December 31, 2016 and 2015, total pharmaceutical manufacturer rebates receivable included in other receivables in the Consolidated Balance Sheets amounted to $3.3 billion and $2.6 billion, respectively. For details on the Company’s Medicare Part D receivables see “Medicare Part D Pharmacy Benefits” below. 60 DPP - 1113 Medicare Part D Pharmacy Benefits The Company serves as a plan sponsor offering Medicare Part D prescription drug insurance coverage under contracts with CMS. Under the Medicare Part D program, there are seven separate elements of payment received by the Company during the plan year. These payment elements are as follows: • CMS Premium. CMS pays a fixed monthly premium per member to the Company for the entire plan year. • Member Premium. Additionally, certain members pay a fixed monthly premium to the Company for the entire plan year. • Low-Income Premium Subsidy. For qualifying low-income members, CMS pays some or all of the member’s monthly premiums to the Company on the member’s behalf. • Catastrophic Reinsurance Subsidy. CMS pays the Company a cost reimbursement estimate monthly to fund the CMS obligation to pay approximately 80% of the costs incurred by individual members in excess of the individual annual out-of-pocket maximum. A settlement is made with CMS based on actual cost experience, after the end of the plan year. • Low-Income Member Cost Sharing Subsidy. For qualifying low-income members, CMS pays on the member’s behalf some or all of a member’s cost sharing amounts, such as deductibles and coinsurance. The cost sharing subsidy is funded by CMS through monthly payments to the Company. The Company administers and pays the subsidized portion of the claims on behalf of CMS, and a settlement payment is made between CMS and the Company based on actual claims and premium experience, after the end of the plan year. • CMS Risk-Share. Premiums from CMS are subject to risk corridor provisions that compare costs targeted in the Company’s annual bids by product and region to actual prescription drug costs, limited to actual costs that would have been incurred under the standard coverage as defined by CMS. Variances of more than 5% above or below the original bid submitted by the Company may result in CMS making additional payments to the Company or require the Company to refund to CMS a portion of the premiums it received. The Company estimates and recognizes an adjustment to premium revenues related to the risk corridor payment settlement based upon pharmacy claims experience to date. The estimate of the settlement associated with these risk corridor provisions requires the Company to consider factors that may not be certain, including estimates of eligible pharmacy costs and member eligibility status differences with CMS. The Company records risk-share adjustments to premium revenues in the Consolidated Statements of Operations and other current liabilities or other current receivables in the Consolidated Balance Sheets. • Drug Discount. The ACA mandated a consumer discount on brand name prescription drugs for Medicare Part D plan participants in the coverage gap. This discount is funded by CMS and pharmaceutical manufacturers while the Company administers the application of these funds. Accordingly, amounts received are not reflected as premium revenues, but rather are accounted for as deposits. The Company records a liability when amounts are received from CMS and a receivable when the Company bills the pharmaceutical manufacturers. Related cash flows are presented as customer funds administered within financing activities in the Consolidated Statements of Cash Flows. The CMS Premium, the Member Premium and the Low-Income Premium Subsidy represent payments for the Company’s insurance risk coverage under the Medicare Part D program and, therefore, are recorded as premium revenues in the Consolidated Statements of Operations. Premium revenues are recognized ratably over the period in which eligible individuals are entitled to receive prescription drug benefits. The Company records premium payments received in advance of the applicable service period in unearned revenues in the Consolidated Balance Sheets. The Catastrophic Reinsurance Subsidy and the Low-Income Member Cost Sharing Subsidy (Subsidies) represent cost reimbursements under the Medicare Part D program. Amounts received for these Subsidies are not reflected as premium revenues, but rather are accounted for as receivables and/or deposits. Related cash flows are presented as customer funds administered within financing activities in the Consolidated Statements of Cash Flows. 61 DPP - 1114 Pharmacy care costs and administrative costs under the contract are expensed as incurred and are recognized in medical costs and operating costs, respectively, in the Consolidated Statements of Operations. The final 2016 risk-share amount is expected to be settled during the second half of 2017, and is subject to the reconciliation process with CMS. The Consolidated Balance Sheets include the following amounts associated with the Medicare Part D program: (in millions) Subsidies Other current receivables . . . . . . . . . . Other current liabilities . . . . . . . . . . . . $ 934 — December 31, 2016 Drug Discount Risk-Share $ 543 267 $ — 471 Subsidies $ 1,703 — December 31, 2015 Drug Discount Risk-Share $ 423 58 $ — 496 Property, Equipment and Capitalized Software Property, equipment and capitalized software are stated at cost, net of accumulated depreciation and amortization. Capitalized software consists of certain costs incurred in the development of internal-use software, including external direct costs of materials and services and applicable payroll costs of employees devoted to specific software development. The Company calculates depreciation and amortization using the straight-line method over the estimated useful lives of the assets. The useful lives for property, equipment and capitalized software are: Furniture, fixtures and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capitalized software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 to 7 years 35 to 40 years 3 to 5 years Leasehold improvements are depreciated over the shorter of the remaining lease term or their estimated useful economic life. Goodwill To determine whether goodwill is impaired, annually or more frequently if needed, the Company performs a multi-step impairment test. The Company may first assess qualitative factors to determine if it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value. The Company may also elect to skip the qualitative testing and proceed directly to the quantitative testing. When performing quantitative testing, the Company first estimates the fair values of its reporting units using discounted cash flows. To determine fair values, the Company must make assumptions about a wide variety of internal and external factors. Significant assumptions used in the impairment analysis include financial projections of free cash flow (including significant assumptions about operations, capital requirements and income taxes), long-term growth rates for determining terminal value and discount rates. Comparative market multiples are used to corroborate the results of the discounted cash flow test. If the fair value is less than the carrying value of the reporting unit, then the implied value of goodwill would be calculated and compared to the carrying amount of goodwill to determine whether goodwill is impaired. There was no impairment of goodwill during the year ended December 31, 2016. Intangible Assets The Company’s intangible assets are subject to impairment tests when events or circumstances indicate that an intangible asset (or asset group) may be impaired. The Company’s indefinite lived intangible assets are also tested for impairment annually. There was no impairment of intangible assets during the year ended December 31, 2016. 62 DPP - 1115 Accounts Payable and Accrued Liabilities The Company had checks outstanding of $1.5 billion and $1.6 billion as of December 31, 2016 and 2015, respectively, which were classified as accounts payable and accrued liabilities and the change in this balance has been reflected within other financing activities in the Consolidated Statements of Cash Flows. Other Current Liabilities Other current liabilities include health savings account deposits ($5.7 billion and $3.6 billion as of December 31, 2016 and 2015, respectively), the RSF associated with the AARP Program, deposits under the Medicare Part D program (see “Medicare Part D Pharmacy Benefits” above), accruals for premium rebate payments under the ACA, the current portion of future policy benefits and customer balances. Future Policy Benefits 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. Policy Acquisition Costs The Company’s short duration health insurance contracts typically have a one-year term and may be canceled by the customer with at least 30 days’ notice. Costs related to the acquisition and renewal of short duration customer contracts are charged to expense as incurred. Redeemable Noncontrolling Interests Redeemable noncontrolling interests in the Company’s subsidiaries whose redemption is outside the control of the Company are classified as temporary equity. The following table provides details of the Company’s redeemable noncontrolling interests’ activity for the years ended December 31, 2016 and 2015: (in millions) 2016 2015 Redeemable noncontrolling interests, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair value and other adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,736 $1,388 16 29 34 196 (123) (116) (11) (19) 360 258 Redeemable noncontrolling interests, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,012 $1,736 Share-Based Compensation The Company recognizes compensation expense for share-based awards, including stock options, stock-settled stock appreciation rights (SARs) and restricted stock and restricted stock units (collectively, restricted shares), on a straight-line basis over the related service period (generally the vesting period) of the award, or to an employee’s eligible retirement date under the award agreement, if earlier. Restricted shares vest ratably; primarily over two to five years and compensation expense related to restricted shares is based on the share price on date of grant. Stock options and SARs vest ratably primarily over four years and may be exercised up to 10 years from the date of grant. Compensation expense related to stock options and SARs is based on the fair value at date of grant, which is estimated on the date of grant using a binomial option-pricing model. Under the Company’s Employee Stock Purchase Plan (ESPP) eligible employees are allowed to purchase the Company’s 63 DPP - 1116 stock at a discounted price, which is 85% of the lower market price of the Company’s common stock at the beginning or at the end of the six-month purchase period. Share-based compensation expense for all programs is recognized in operating costs in the Consolidated Statements of Operations. Net Earnings Per Common Share The Company computes basic earnings per common share attributable to UnitedHealth Group common shareholders by dividing net earnings attributable to UnitedHealth Group common shareholders by the weighted-average number of common shares outstanding during the period. The Company determines diluted net earnings per common share attributable to UnitedHealth Group common shareholders using the weighted-average number of common shares outstanding during the period, adjusted for potentially dilutive shares associated with stock options, SARs, restricted shares and the ESPP, (collectively, common stock equivalents) using the treasury stock method. The treasury stock method assumes a hypothetical issuance of shares to settle the share-based awards, with the assumed proceeds used to purchase common stock at the average market price for the period. Assumed proceeds include the amount the employee must pay upon exercise and any unrecognized compensation cost. The difference between the number of shares assumed issued and number of shares assumed purchased represents the dilutive shares. Health Insurance Industry Tax The ACA includes an annual, nondeductible insurance industry tax (Health Insurance Industry Tax) to be levied proportionally across the insurance industry for risk-based health insurance products. The Company estimates its liability for the Health Insurance Industry Tax based on a ratio of the Company’s applicable net premiums written compared to the U.S. health insurance industry total applicable net premiums, both for the previous calendar year. The Company records in full the estimated liability for the Health Insurance Industry Tax at the beginning of the calendar year with a corresponding deferred cost that is amortized to operating costs on the Consolidated Statements of Operations using a straight-line method of allocation over the calendar year. The liability is recorded in accounts payable and accrued liabilities and the corresponding deferred cost is recorded in prepaid expenses and other current assets on the Consolidated Balance Sheets. A provision in the 2016 Federal Budget imposed a one year moratorium for 2017 on the collection of the Health Insurance Industry Tax. Premium Stabilization Programs The ACA included three programs designed to stabilize health insurance markets (Premium Stabilization Programs): a permanent risk adjustment program; a temporary risk corridors program; and a transitional reinsurance program (Reinsurance Program). The risk-adjustment provisions apply to market reform compliant individual and small group plans in the commercial markets. Under the program, each covered member is assigned a risk score based upon demographic information and applicable diagnostic codes from the current year paid claims, in order to determine an average risk score for each plan in a particular state and market risk pool. Generally, a plan with a risk score that is less than the state’s average risk score will pay into the pool, while a plan with a risk score that is greater than the state’s average will receive money from the pool. The temporary risk corridors provisions are intended to limit the gains and losses of individual and small group qualified health plans. Plans are required to calculate the U.S. Department of Health and Human Services (HHS) risk corridor ratio of allowable costs to the defined target amount. Qualified health plans with ratios below 97% are required to make payments to HHS, while plans with ratios greater than 103% expect to receive funds from HHS. The Reinsurance Program and temporary risk corridors program expired at the end of 2016. For the Premium Stabilization Programs, the Company records a receivable or payable as an adjustment to premium revenue based on year-to-date experience when the amounts are reasonably estimable and collection is reasonably assured. Final adjustments or recoverable amounts to the Premium Stabilization Programs are determined by HHS in the year following the policy year. 64 DPP - 1117 Recently Issued Accounting Standards In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2016-02, “Leases (Topic 842)” (ASU 2016-02). Under ASU 2016-02, an entity will be required to recognize assets and liabilities for the rights and obligations created by leases on the entity’s balance sheet for both finance and operating leases. For leases with a term of 12 months or less, an entity can elect to not recognize lease assets and lease liabilities and expense the lease over a straight-line basis for the term of the lease. ASU 2016-02 will require new disclosures that depict the amount, timing, and uncertainty of cash flows pertaining to an entity’s leases. Companies are required to adopt the new standard using a modified retrospective approach for annual and interim periods beginning after December 15, 2018. Early adoption of ASU 2016-02 is permitted. When adopted, the Company does not expect ASU 2016-02 to have a material impact on its results of operations, equity or cash flows. The impact of ASU 2016-02 on the Company’s consolidated financial position will be based on leases outstanding at the time of adoption. In January 2016, the FASB issued ASU 2016-01, “Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (ASU 2016-01). The new guidance changes the current accounting related to (i) the classification and measurement of certain equity investments, (ii) the presentation of changes in the fair value of financial liabilities measured under the fair value option that are due to instrument-specific credit risk, and (iii) certain disclosures associated with the fair value of financial instruments. Most notably, ASU 2016-01 requires that equity investments, with certain exemptions, be measured at fair value with changes in fair value recognized in net income as opposed to other comprehensive income. The new guidance is effective for annual and interim reporting periods beginning after December 15, 2017. As of December 31, 2016, based on equity securities held, the Company does not expect ASU 2016-01 to have a material impact on its consolidated financial position, results of operations, equity or cash flows. The Company will continue to evaluate any changes in its mix of investments or market conditions and the related impact of ASU 2016-01. In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (ASU 2014-09) as modified by ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,” ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients,” and ASU 2016-20, “Revenue from Contracts with Customers (Topic 606): Technical Corrections and Improvements.” ASU 2014-09 will supersede existing revenue recognition standards with a single model unless those contracts are within the scope of other standards (e.g., an insurance entity’s insurance contracts). The revenue recognition principle in ASU 2014-09 is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, new and enhanced disclosures will be required. Companies may adopt the new standard either using the full retrospective approach, a modified retrospective approach with practical expedients, or a cumulative effect upon adoption approach. The Company early adopted the new standard effective January 1, 2017, as allowed, using the modified retrospective approach. As the majority of the Company’s revenues are not subject to the new guidance, the adoption of ASU 2014-09 did not have a material impact on the Company’s consolidated financial position, results of operations, equity or cash flows. Recently Adopted Accounting Standards In March 2016, the FASB issued ASU No. 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (ASU 2016-09). ASU 2016-09 modifies several aspects of the accounting for share-based payment awards, including income tax consequences, and classification on the statement of cash flows. The Company early adopted ASU 2016-09 in the first quarter of 2016. The provisions of ASU 2016-09 related to the timing of when excess tax benefits are recognized, minimum statutory 65 DPP - 1118 withholding requirements and forfeitures were adopted using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of January 1, 2016. The provisions of ASU 2016-09 related to the recognition of excess tax benefits in the income statement and classification in the statement of cash flows were adopted prospectively and the prior periods were not retrospectively adjusted. The adoption of ASU 2016-09 did not materially impact the Company’s consolidated financial position, results of operations, equity or cash flows. In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” (ASU 2015-17). ASU 2015-17 requires entities to present deferred tax assets and deferred tax liabilities as noncurrent on the balance sheet. Prior to the issuance of ASU 2015-17, deferred taxes were required to be presented as a net current asset or liability and a net noncurrent asset or liability. The Company adopted ASU 2015-17 on a prospective basis in the first quarter of 2016 and the prior period was not retrospectively adjusted. The adoption of ASU 2015-17 did not impact the Company’s consolidated financial position, results of operations, equity or cash flows. In May 2015, the FASB issued ASU No. 2015-09, “Financial Services — Insurance (Topic 944): Disclosures about Short-Duration Contracts” (ASU 2015-09). ASU 2015-09 requires insurance entities to provide additional disclosures about short-duration insurance liabilities, including incurred and paid medical costs information by year. The Company adopted the disclosure requirements of ASU 2015-09 and has included the new disclosures within Notes 2 and 7. In April 2015, the FASB issued ASU No. 2015-03, “Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs” (ASU 2015-03). ASU 2015-03 requires debt issuance costs to be presented as a reduction of the carrying amount of the related debt liability. Prior to the issuance of ASU 2015-03, debt issuance costs were required to be presented as an asset on the balance sheet. The Company adopted ASU 2015-03 on a retrospective basis, as required, in the first quarter of 2016. The Company reclassified $129 million and $82 million in debt issuance costs that were recorded in other assets to long-term debt, less current maturities on the Consolidated Balance Sheet as of December 31, 2015 and 2014, respectively. The Company has determined that there have been no other recently adopted or issued accounting standards that had, or will have, a material impact on its Consolidated Financial Statements. 66 DPP - 1119 3. Investments A summary of short-term and long-term investments by major security type is as follows: Gross Unrealized Gains Gross Unrealized Losses $ $ (in millions) Amortized Cost December 31, 2016 Debt securities — available-for-sale: U.S. government and agency obligations . . . . . . . . . . . . . . . . . State and municipal obligations . . . . . . . . . . . . . . . . . . . . . . . . . Corporate obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S. agency mortgage-backed securities . . . . . . . . . . . . . . . . . . Non-U.S. agency mortgage-backed securities . . . . . . . . . . . . . . $ 2,294 7,120 10,944 2,963 1,009 Total debt securities — available-for-sale . . . . . . . . . . . . . . . . . . . . . 24,330 92 (243) 24,179 Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Debt securities — held-to-maturity: U.S. government and agency obligations . . . . . . . . . . . . . . . . . State and municipal obligations . . . . . . . . . . . . . . . . . . . . . . . . . Corporate obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,036 52 (47) 2,041 250 5 238 1 — — — — — 251 5 238 Total debt securities — held-to-maturity . . . . . . . . . . . . . . . . . . . . . . 493 1 — 494 Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,859 $ 145 $ (290) $26,714 December 31, 2015 Debt securities — available-for-sale: U.S. government and agency obligations . . . . . . . . . . . . . . . . . State and municipal obligations . . . . . . . . . . . . . . . . . . . . . . . . . Corporate obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S. agency mortgage-backed securities . . . . . . . . . . . . . . . . . . Non-U.S. agency mortgage-backed securities . . . . . . . . . . . . . . $ 1,982 6,022 7,446 2,127 962 $ 1 149 41 13 5 $ (6) $ 1,977 (3) 6,168 (81) 7,406 (16) 2,124 (11) 956 Total debt securities — available-for-sale . . . . . . . . . . . . . . . . . . . . . 18,539 209 (117) 18,631 Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Debt securities — held-to-maturity: U.S. government and agency obligations . . . . . . . . . . . . . . . . . State and municipal obligations . . . . . . . . . . . . . . . . . . . . . . . . . Corporate obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,638 58 (57) 1,639 163 8 339 1 — — — — — 164 8 339 Total debt securities — held-to-maturity . . . . . . . . . . . . . . . . . . . . . . 510 1 — 511 Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,687 $ 1 40 41 7 3 268 $ Fair Value (31) $ 2,264 (101) 7,059 (58) 10,927 (43) 2,927 (10) 1,002 (174) $20,781 Nearly all of the Company’s investments in mortgage-backed securities were rated AAA as of December 31, 2016. 67 DPP - 1120 The amortized cost and fair value of debt securities as of December 31, 2016, by contractual maturity, were as follows: (in millions) Available-for-Sale Amortized Fair Cost Value Held-to-Maturity Amortized Fair Cost Value Due in one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due after one year through five years . . . . . . . . . . . . . . . . . . . . . . . . . . . Due after five years through ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . Due after ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S. agency mortgage-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . Non-U.S. agency mortgage-backed securities . . . . . . . . . . . . . . . . . . . . . $ 2,893 9,646 5,706 2,113 2,963 1,009 $ 2,895 9,625 5,645 2,085 2,927 1,002 $ 151 153 124 65 — — $ 151 153 124 66 — — Total debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,330 $24,179 $ 493 $ 494 The fair value of available-for-sale investments with gross unrealized losses by major security type and length of time that individual securities have been in a continuous unrealized loss position were as follows: (in millions) Less Than 12 Months 12 Months or Greater Gross Gross Fair Unrealized Fair Unrealized Value Losses Value Losses December 31, 2016 Debt securities — available-for-sale: U.S. government and agency obligations . . . . . $ 1,794 $ State and municipal obligations . . . . . . . . . . . . 4,376 Corporate obligations . . . . . . . . . . . . . . . . . . . . 5,128 U.S. agency mortgage-backed securities . . . . . 2,247 Non-U.S. agency mortgage-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 544 (31) $ (101) (56) (40) — $ — 137 79 (7) 97 Total debt securities — available-for-sale . . . . . . . . $14,089 $ (235) $ 313 $ Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 93 $ (5) $ 91 $ — $ — (2) (3) (3) Total Fair Value Gross Unrealized Losses 1,794 $ 4,376 5,265 2,326 (31) (101) (58) (43) 641 (10) (8) $14,402 $ (42) $ 184 $ (47) — $ 1,473 $ — 650 (18) 4,968 (4) 1,420 (6) (3) (81) (16) December 31, 2015 Debt securities — available-for-sale: U.S. government and agency obligations . . . . . $ 1,473 $ State and municipal obligations . . . . . . . . . . . . 650 Corporate obligations . . . . . . . . . . . . . . . . . . . . 4,629 U.S. agency mortgage-backed securities . . . . . 1,304 Non-U.S. agency mortgage-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 593 (6) $ (3) (63) (12) Total debt securities — available-for-sale . . . . . . . . $ 8,649 $ (91) $ 582 $ (26) $ 9,231 $ Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (11) $ 89 $ (46) $ 112 $ (7) — $ — 339 116 127 (243) (4) 720 201 $ (11) (117) (57) The Company’s unrealized losses from all securities as of December 31, 2016 were generated from approximately 12,000 positions out of a total of 27,000 positions. The Company believes that it will collect the principal and interest due on its debt securities that have an amortized cost in excess of fair value. The unrealized losses were primarily caused by interest rate increases and not by unfavorable changes in the credit quality associated with these securities. At each reporting period, the Company evaluates securities for impairment when the fair value of the investment is less than its amortized cost. The Company evaluated the underlying credit quality and credit ratings of the issuers, noting no significant deterioration since purchase. As of December 31, 2016, the Company did not have the intent to sell any of the securities in an unrealized loss position. Therefore, the Company believes these losses to be temporary. 68 DPP - 1121 The Company’s investments in equity securities consist of investments in Brazilian real denominated fixedincome funds, employee savings plan related investments, venture capital funds and dividend paying stocks. The Company evaluated its investments in equity securities for severity and duration of unrealized loss, overall market volatility and other market factors. Net realized gains reclassified out of accumulated other comprehensive income were from the following sources: For the Years Ended December 31, 2016 2015 2014 (in millions) Total other-than-temporary impairment recognized in earnings . . . . . . . . . . . . . . Gross realized losses from sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross realized gains from sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Net realized gains (included in investment and other income on the Consolidated Statements of Operations) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax effect (included in provision for income taxes on the Consolidated Statements of Operations) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Realized gains, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. $ (45) $ (44) 255 (22) $ (28) 191 (26) (47) 284 166 141 211 (60) (53) (77) 106 $ 88 $ 134 Fair Value Certain assets and liabilities are measured at fair value in the Consolidated Financial Statements or have fair values disclosed in the Notes to the Consolidated Financial Statements. These assets and liabilities are classified into one of three levels of a hierarchy defined by GAAP. In instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement is categorized in its entirety based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability. The fair value hierarchy is summarized as follows: Level 1 — Quoted prices (unadjusted) for identical assets/liabilities in active markets. Level 2 — Other observable inputs, either directly or indirectly, including: • Quoted prices for similar assets/liabilities in active markets; • Quoted prices for identical or similar assets/liabilities in inactive markets (e.g., few transactions, limited information, noncurrent prices, high variability over time); • Inputs other than quoted prices that are observable for the asset/liability (e.g., interest rates, yield curves, implied volatilities, credit spreads); and • Inputs that are corroborated by other observable market data. Level 3 — Unobservable inputs that cannot be corroborated by observable market data. Transfers between levels, if any, are recorded as of the beginning of the reporting period in which the transfer occurs; there was no transfer between Levels 1, 2 or 3 of any financial assets or liabilities during the years ended December 31, 2016 or 2015. Nonfinancial assets and liabilities or financial assets and liabilities that are measured at fair value on a nonrecurring basis are subject to fair value adjustments only in certain circumstances, such as when the Company records an impairment. There were no significant fair value adjustments for these assets and liabilities recorded during the years ended December 31, 2016 or 2015. 69 DPP - 1122 The following methods and assumptions were used to estimate the fair value and determine the fair value hierarchy classification of each class of financial instrument included in the tables below: Cash and Cash Equivalents. The carrying value of cash and cash equivalents approximates fair value as maturities are less than three months. Fair values of cash equivalent instruments that do not trade on a regular basis in active markets are classified as Level 2. Debt and Equity Securities. Fair values of debt and equity securities are based on quoted market prices, where available. The Company obtains one price for each security primarily from a third-party pricing service (pricing service), which generally uses quoted or other observable inputs for the determination of fair value. The pricing service normally derives the security prices through recently reported trades for identical or similar securities, and, if necessary, makes adjustments through the reporting date based upon available observable market information. For securities not actively traded, the pricing service may use quoted market prices of comparable instruments or discounted cash flow analyses, incorporating inputs that are currently observable in the markets for similar securities. Inputs that are often used in the valuation methodologies include, but are not limited to, benchmark yields, credit spreads, default rates, prepayment speeds and nonbinding broker quotes. As the Company is responsible for the determination of fair value, it performs quarterly analyses on the prices received from the pricing service to determine whether the prices are reasonable estimates of fair value. Specifically, the Company compares the prices received from the pricing service to prices reported by a secondary pricing source, such as its custodian, its investment consultant and third-party investment advisors. Additionally, the Company compares changes in the reported market values and returns to relevant market indices to test the reasonableness of the reported prices. The Company’s internal price verification procedures and reviews of fair value methodology documentation provided by independent pricing services have not historically resulted in adjustment in the prices obtained from the pricing service. Fair values of debt securities that do not trade on a regular basis in active markets but are priced using other observable inputs are classified as Level 2. Fair value estimates for Level 1 and Level 2 equity securities are based on quoted market prices for actively traded equity securities and/or other market data for the same or comparable instruments and transactions in establishing the prices. The fair values of Level 3 investments in venture capital portfolios are estimated using a market valuation technique that relies heavily on management assumptions and qualitative observations. Under the market approach, the fair values of the Company’s various venture capital investments are computed using limited quantitative and qualitative observations of activity for similar companies in the current market. The Company’s market modeling utilizes, as applicable, transactions for comparable companies in similar industries that also have similar revenue and growth characteristics and preferences in their capital structure. Key significant unobservable inputs in the market technique include implied earnings before interest, taxes, depreciation and amortization (EBITDA) multiples and revenue multiples. Additionally, the fair values of certain of the Company’s venture capital securities are based on recent transactions in inactive markets for identical or similar securities. Significant changes in any of these inputs could result in significantly lower or higher fair value measurements. Throughout the procedures discussed above in relation to the Company’s processes for validating third-party pricing information, the Company validates the understanding of assumptions and inputs used in security pricing and determines the proper classification in the hierarchy based on that understanding. Assets Under Management. Assets under management consists of debt securities and other investments held to fund costs associated with the AARP Program and are priced and classified using the same methodologies as the Company’s investments in debt and equity securities. Other Assets. The fair values of the Company’s other assets are estimated and classified using the same methodologies as the Company’s investments in debt securities. 70 DPP - 1123 Interest Rate Swaps. Fair values of the Company’s swaps are estimated using the terms of the swaps and publicly available information, including market yield curves. Because the swaps are unique and not actively traded but are valued using other observable inputs, the fair values are classified as Level 2. Long-Term Debt. The fair values of the Company’s long-term debt are estimated and classified using the same methodologies as the Company’s investments in debt securities. The following table presents a summary of fair value measurements by level and carrying values for items measured at fair value on a recurring basis in the Consolidated Balance Sheets: (in millions) December 31, 2016 Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . Debt securities — available-for-sale: U.S. government and agency obligations . . . . . . . . . . . . . State and municipal obligations . . . . . . . . . . . . . . . . . . . . Corporate obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S. agency mortgage-backed securities . . . . . . . . . . . . . Non-U.S. agency mortgage-backed securities . . . . . . . . . Quoted Prices in Active Markets (Level 1) Other Observable Inputs (Level 2) Unobservable Inputs (Level 3) Total Fair and Carrying Value $ $ $ — $10,430 10,386 44 2,017 — 21 — — 247 7,059 10,804 2,927 1,002 — — 102 — — 2,264 7,059 10,927 2,927 1,002 Total debt securities — available-for-sale . . . . . . . . . . . . . . . . 2,038 22,039 102 24,179 Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets under management . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest rate swap assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,591 1,064 — 13 2,041 55 437 — — 2,041 3,105 55 15,079 $ 24,192 539 $39,810 Total assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Percentage of total assets at fair value . . . . . . . . . . . . . . . . . . . Interest rate swap liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . December 31, 2015 Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . Debt securities — available-for-sale: U.S. government and agency obligations . . . . . . . . . . . . . State and municipal obligations . . . . . . . . . . . . . . . . . . . . Corporate obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S. agency mortgage-backed securities . . . . . . . . . . . . . Non-U.S. agency mortgage-backed securities . . . . . . . . . 38% $ 61% 1% 100% $ — $ 14 $ — $ 14 $ 10,906 $ 17 $ — $10,923 1,779 — 5 — — 198 6,168 7,308 2,124 951 — — 93 — 5 1,977 6,168 7,406 2,124 956 Total debt securities — available-for-sale . . . . . . . . . . . . . . . . 1,784 16,749 98 18,631 Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets under management . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest rate swap assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,223 832 — 14 2,166 93 402 — — 1,639 2,998 93 14,745 $ 19,039 500 $34,284 Total assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Percentage of total assets at fair value . . . . . . . . . . . . . . . . . . . Interest rate swap liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 DPP - 1124 43% $ — $ 56% $ 11 1% $ — 100% $ 11 The following table presents a summary of fair value measurements by level and carrying values for certain financial instruments not measured at fair value on a recurring basis in the Consolidated Balance Sheets: Quoted Prices in Active Markets (Level 1) (in millions) Other Observable Inputs (Level 2) Unobservable Inputs (Level 3) Total Fair Value Total Carrying Value December 31, 2016 Debt securities — held-to-maturity: U.S. government and agency obligations . . . . State and municipal obligations . . . . . . . . . . . . Corporate obligations . . . . . . . . . . . . . . . . . . . $ 251 $ — 20 Total debt securities — held-to-maturity . . . . . . . . $ 271 $ 8 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ Long-term debt and other financing obligations . . . $ — December 31, 2015 Debt securities — held-to-maturity: U.S. government and agency obligations . . . . State and municipal obligations . . . . . . . . . . . . Corporate obligations . . . . . . . . . . . . . . . . . . . $ 164 $ — 91 — $ — 10 — $ 8 238 164 $ 8 339 163 8 339 Total debt securities — held-to-maturity . . . . . . . . $ 255 $ 10 $ 246 $ 511 $ 510 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 493 $ — $ 493 $ 500 Long-term debt and other financing obligations . . . $ — $ 29,455 $ — $29,455 — $ — 8 — $ 5 210 251 $ 5 238 250 5 238 $ 215 $ 494 $ 493 476 $ — $ 476 $ 471 $ 31,295 $ — $31,295 $29,337 $27,978 The carrying amounts reported on the Consolidated Balance Sheets for other current financial assets and liabilities approximate fair value because of their short-term nature. These assets and liabilities are not listed in the table above. A reconciliation of the beginning and ending balances of assets measured at fair value on a recurring basis using Level 3 inputs is as follows: (in millions) December 31, 2016 December 31, 2015 December 31, 2014 Debt Equity Debt Equity Debt Equity Securities Securities Total Securities Securities Total Securities Securities Total Balance at beginning of period . . . . $ Purchases . . . . . . . . . . . . . . . . . . . . . Sales . . . . . . . . . . . . . . . . . . . . . . . . . Net unrealized gains (losses) in accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . Net realized (losses) gains in investment and other income . . . . 98 $ 12 (9) 402 $500 $ 100 112 (29) (38) 74 $ 27 (4) 1 (13) (12) 2 5 7 1 6 7 — (23) (23) (1) 5 4 — 110 110 Balance at end of period . . . . . . . . . . $ 102 $ 437 $539 $ 98 $ 74 $ 310 $ 384 72 DPP - 1125 310 $384 $ 106 133 (24) (28) 402 $500 $ 42 $ 269 $ 311 32 105 137 (1) (180) (181) The following table presents quantitative information regarding unobservable inputs that were significant to the valuation of assets measured at fair value on a recurring basis using Level 3 inputs: (in millions) Fair Value Valuation Technique Range Low High Unobservable Input December 31, 2016 Equity securities: Venture capital portfolios . . . . . . . $ 404 Market approach — comparable companies Revenue multiple 1.0 6.0 EBITDA multiple 8.0 12.0 Inactive market transactions N/A N/A 33 Market approach — recent transactions Total equity securities . . . . . . . . . . . $ 437 Also included in the Company’s assets measured at fair value on a recurring basis using Level 3 inputs were $102 million of available-for-sale debt securities as of December 31, 2016, which were not significant. 5. Property, Equipment and Capitalized Software A summary of property, equipment and capitalized software is as follows: December 31, 2016 (in millions) Land and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Computer equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ December 31, 2015 324 $ 3,148 2,021 999 (2,621) 237 2,420 1,945 790 (2,163) Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,871 3,229 Capitalized software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,158 (1,128) 2,642 (1,010) Capitalized software, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,030 1,632 Total property, equipment and capitalized software, net . . . . . . . . . . . . . . . . . . . . . . . . $ 5,901 $ 4,861 Depreciation expense for property and equipment for the years ended December 31, 2016, 2015 and 2014 was $698 million, $613 million and $532 million, respectively. Amortization expense for capitalized software for the years ended December 31, 2016, 2015 and 2014 was $475 million, $430 million and $422 million, respectively. 6. Goodwill and Other Intangible Assets Changes in the carrying amount of goodwill, by reportable segment, were as follows: (in millions) UnitedHealthcare OptumHealth OptumInsight OptumRx Consolidated Balance at January 1, 2015 . . . . . . . . . . . . . . $ Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency effects and adjustments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,030 $ 128 Balance at December 31, 2015 . . . . . . . . . . . Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency effects and adjustments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,925 526 403 (21) Balance at December 31, 2016 . . . . . . . . . . . $ 23,854 $ 6,322 $ (1,233) 73 DPP - 1126 3,834 $ 1,817 9 5,660 683 4,236 $ 840 $ 89 10,732 (29) — 32,940 12,766 (1,253) 4,296 — 11,572 1,387 44,453 2,596 153 — 535 4,449 $ 12,959 $ 47,584 During the third quarter of 2015, the Company acquired all of the outstanding common shares of Catamaran Corporation and funded Catamaran’s payoff of its outstanding debt and credit facility for a total of $14.3 billion in cash. This combination diversified OptumRx’s customer and business mix and enhanced OptumRx’s technology capabilities and flexible service offerings. The total consideration exceeded the estimated fair value of the net tangible assets acquired by $16.0 billion, of which $5.4 billion has been allocated to finite-lived intangible assets and $10.6 billion to goodwill. The goodwill is not deductible for income tax purposes. The gross carrying value, accumulated amortization and net carrying value of other intangible assets were as follows: December 31, 2016 December 31, 2015 (in millions) Gross Carrying Value Customer-related . . . . . . . . . . . . . . . . . . . . . Trademarks and technology . . . . . . . . . . . . Trademarks — indefinite-lived . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,942 720 468 258 $ (3,416) $ 7,526 (323) 397 — 468 (108) 150 $10,270 682 358 209 $ (2,796) $ 7,474 (249) 433 — 358 (83) 126 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,388 $ (3,847) $ 8,541 $11,519 $ (3,128) $ 8,391 Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value The acquisition date fair values and weighted-average useful lives assigned to finite-lived intangible assets acquired in business combinations consisted of the following by year of acquisition: (in millions, except years) 2016 WeightedFair Average Value Useful Life 2015 WeightedFair Average Value Useful Life Customer-related . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trademarks and technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $785 82 22 17 years 4 years 5 years $5,518 194 — 19 years 4 years Total acquired finite-lived intangible assets . . . . . . . . . . . . . . . . . . . . . . . $889 16 years $5,712 19 years Estimated full year amortization expense relating to intangible assets for each of the next five years ending December 31 is as follows: (in millions) 2017 2018 2019 2020 2021 ................................................................................. ................................................................................. ................................................................................. ................................................................................. ................................................................................. $865 755 679 596 536 Amortization expense relating to intangible assets for the years ended December 31, 2016, 2015 and 2014 was $882 million, $650 million and $524 million, respectively. 74 DPP - 1127 7. Medical Costs Payable The following table shows the components of the change in medical costs payable for the years ended December 31: (in millions) 2016 2015 2014 Medical costs payable, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . Reported medical costs: Current year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,330 $ 12,040 $ 11,575 117,258 (220) 104,195 (320) 94,053 (420) Total reported medical costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,038 103,875 93,633 Medical payments: Payments for current year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments for prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (101,696) (13,281) (90,630) (10,955) (82,750) (10,418) Total medical payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (114,977) (101,585) (93,168) Medical costs payable, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,391 $ 14,330 $ 12,040 For the years ended December 31, 2016, 2015 and 2014 the medical cost reserve development included no individual factors that were material. Medical costs payable included IBNR of $11.6 billion and $9.8 billion at December 31, 2016 and 2015, respectively. Substantially all of the IBNR balance as of December 31, 2016 relates to the current year. The following is information about incurred and paid medical cost development as of December 31, 2016: Net Incurred Medical Costs For the Years ended December 31, 2015 2016 (in millions) Year 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,195 $ 103,973 117,258 $ 221,231 Net Cumulative Medical Payments For the Years ended December 31, 2015 2016 (in millions) Year 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (90,630) $ Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (205,581) Net remaining outstanding liabilities prior to 2015 . . . . . . . . . . . . . . . . . . . . . . Total medical costs payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 DPP - 1128 (103,885) (101,696) 741 $ 16,391 8. Commercial Paper and Long-Term Debt Commercial paper, term loan and senior unsecured long-term debt consisted of the following: December 31, 2016 Par Carrying Fair Value Value Value (in millions, except percentages) December 31, 2015 Par Carrying Fair Value Value (a) Value Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Floating rate term loan due July 2016 . . . . . . . . . . . . . . 5.375% notes due March 2016 . . . . . . . . . . . . . . . . . . . 1.875% notes due November 2016 . . . . . . . . . . . . . . . . 5.360% notes due November 2016 . . . . . . . . . . . . . . . . Floating rate notes due January 2017 . . . . . . . . . . . . . . 6.000% notes due June 2017 . . . . . . . . . . . . . . . . . . . . . 1.450% notes due July 2017 . . . . . . . . . . . . . . . . . . . . . 1.400% notes due October 2017 . . . . . . . . . . . . . . . . . . 6.000% notes due November 2017 . . . . . . . . . . . . . . . . 1.400% notes due December 2017 . . . . . . . . . . . . . . . . 6.000% notes due February 2018 . . . . . . . . . . . . . . . . . 1.900% notes due July 2018 . . . . . . . . . . . . . . . . . . . . . 1.700% notes due February 2019 . . . . . . . . . . . . . . . . . 1.625% notes due March 2019 . . . . . . . . . . . . . . . . . . . 2.300% notes due December 2019 . . . . . . . . . . . . . . . . 2.700% notes due July 2020 . . . . . . . . . . . . . . . . . . . . . 3.875% notes due October 2020 . . . . . . . . . . . . . . . . . . 4.700% notes due February 2021 . . . . . . . . . . . . . . . . . 2.125% notes due March 2021 . . . . . . . . . . . . . . . . . . . 3.375% notes due November 2021 . . . . . . . . . . . . . . . . 2.875% notes due December 2021 . . . . . . . . . . . . . . . . 2.875% notes due March 2022 . . . . . . . . . . . . . . . . . . . 3.350% notes due July 2022 . . . . . . . . . . . . . . . . . . . . . 0.000% notes due November 2022 . . . . . . . . . . . . . . . . 2.750% notes due February 2023 . . . . . . . . . . . . . . . . . 2.875% notes due March 2023 . . . . . . . . . . . . . . . . . . . 3.750% notes due July 2025 . . . . . . . . . . . . . . . . . . . . . 3.100% notes due March 2026 . . . . . . . . . . . . . . . . . . . 3.450% notes due January 2027 . . . . . . . . . . . . . . . . . . 4.625% notes due July 2035 . . . . . . . . . . . . . . . . . . . . . 5.800% notes due March 2036 . . . . . . . . . . . . . . . . . . . 6.500% notes due June 2037 . . . . . . . . . . . . . . . . . . . . . 6.625% notes due November 2037 . . . . . . . . . . . . . . . . 6.875% notes due February 2038 . . . . . . . . . . . . . . . . . 5.700% notes due October 2040 . . . . . . . . . . . . . . . . . . 5.950% notes due February 2041 . . . . . . . . . . . . . . . . . 4.625% notes due November 2041 . . . . . . . . . . . . . . . . 4.375% notes due March 2042 . . . . . . . . . . . . . . . . . . . 3.950% notes due October 2042 . . . . . . . . . . . . . . . . . . 4.250% notes due March 2043 . . . . . . . . . . . . . . . . . . . 4.750% notes due July 2045 . . . . . . . . . . . . . . . . . . . . . 4.200% notes due January 2047 . . . . . . . . . . . . . . . . . . $ 3,633 — — — — 750 441 750 625 156 750 1,100 1,500 750 500 500 1,500 450 400 750 500 750 1,100 1,000 15 625 750 2,000 1,000 750 1,000 850 500 650 1,100 300 350 600 502 625 750 2,000 750 $ 3,633 — — — — 750 446 750 624 159 751 1,107 1,496 748 501 498 1,495 450 409 745 497 748 1,057 995 11 609 771 1,986 994 745 991 837 491 640 1,075 296 345 588 483 606 734 1,972 737 $ 3,633 — — — — 750 450 751 626 163 750 1,153 1,507 748 498 504 1,523 474 433 741 519 760 1,114 1,030 12 622 753 2,070 986 762 1,090 1,034 643 850 1,497 366 437 634 509 609 765 2,203 759 $ 3,987 1,500 601 400 95 750 441 750 625 156 750 1,100 1,500 — 500 500 1,500 450 400 — 500 750 1,100 1,000 15 625 750 2,000 — — 1,000 850 500 650 1,100 300 350 600 502 625 750 2,000 — $ 3,987 1,500 605 400 95 749 458 749 624 162 751 1,114 1,494 — 502 499 1,493 452 413 — 500 753 1,059 994 10 611 781 1,985 — — 991 838 492 641 1,076 296 345 588 483 606 734 1,971 — $ 3,987 1,500 606 403 98 751 469 750 624 168 748 1,196 1,505 — 494 502 1,516 476 438 — 517 760 1,099 1,023 11 613 742 2,062 — — 1,038 1,003 628 829 1,439 348 416 609 493 582 728 2,107 — Total commercial paper, term loan and long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $33,022 $32,770 $34,728 $31,972 $31,801 $33,278 (a) In the first quarter of 2016, the Company adopted ASU 2015-03, retrospectively as required. See Note 2 for more information on the adoption of ASU 2015-03. 76 DPP - 1129 The Company’s long-term debt obligations also included $200 million and $164 million of other financing obligations, of which $80 million and $47 million were current as of December 31, 2016 and 2015, respectively. Maturities of commercial paper and long-term debt for the years ending December 31 are as follows: (in millions) 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,185 2,622 1,769 1,955 2,407 17,284 Commercial Paper and Revolving Bank Credit Facilities Commercial paper consists of short-duration, senior unsecured debt privately placed on a discount basis through broker-dealers. As of December 31, 2016, the Company’s outstanding commercial paper had a weighted-average annual interest rate of 0.9%. The Company has $3.0 billion five-year, $2.0 billion three-year and $1.0 billion 364-day revolving bank credit facilities with 23 banks, which mature in December 2021, December 2019, and December 2017, respectively. These facilities provide liquidity support for the Company’s commercial paper program and are available for general corporate purposes. As of December 31, 2016, no amounts had been drawn on any of the bank credit facilities. The annual interest rates, which are variable based on term, are calculated based on the London Interbank Offered Rate (LIBOR) plus a credit spread based on the Company’s senior unsecured credit ratings. If amounts had been drawn on the bank credit facilities as of December 31, 2016, annual interest rates would have ranged from 1.6% to 2.2%. Debt Covenants The Company’s bank credit facilities contain various covenants, including requiring the Company to maintain a debt to debt-plus-shareholders’ equity ratio of not more than 55%. The Company was in compliance with its debt covenants as of December 31, 2016. 9. Income Taxes The current income tax provision reflects the tax consequences of revenues and expenses currently taxable or deductible on various income tax returns for the year reported. The deferred income tax provision or benefit generally reflects the net change in deferred income tax assets and liabilities during the year, excluding any deferred income tax assets and liabilities of acquired businesses. The components of the provision for income taxes for the years ended December 31 are as follows: (in millions) 2016 2015 2014 Current Provision: Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,397 312 $4,155 281 $3,883 271 Total current provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred provision (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,709 81 Total provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,790 77 DPP - 1130 4,436 (73) $4,363 4,154 (117) $4,037 The reconciliation of the tax provision at the U.S. federal statutory rate to the provision for income taxes and the effective tax rate for the years ended December 31 is as follows: (in millions, except percentages) 2016 2015 2014 Tax provision at the U.S. federal statutory rate . . . . . . . . . . Health insurance industry tax . . . . . . . . . . . . . . . . . . . . . . . . State income taxes, net of federal benefit . . . . . . . . . . . . . . . Share-based awards — excess tax benefit . . . . . . . . . . . . . . Non-deductible compensation . . . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,152 645 205 (158) 128 (182) 35.0% $3,581 5.4 627 1.7 145 (1.3) — 1.1 103 (1.5) (93) 35.0% $3,380 6.1 469 1.4 154 — — 1.0 96 (0.9) (62) 35.0% 4.8 1.6 — 1.0 (0.6) Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . $4,790 40.4% $4,363 42.6% $4,037 41.8% Deferred income tax assets and liabilities are recognized for the differences between the financial and income tax reporting bases of assets and liabilities based on enacted tax rates and laws. The components of deferred income tax assets and liabilities as of December 31 are as follows: (in millions) 2016 Deferred income tax assets: Accrued expenses and allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S. federal and state net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nondeductible liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Medical costs payable and other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-U.S. tax loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net unrealized losses on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other-domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other-non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 820 147 126 236 95 434 55 194 175 2015 $ 739 139 124 205 71 244 — 214 130 Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,282 (55) 1,866 (44) Total deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,227 1,822 Deferred income tax liabilities: U.S. federal and state intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-U.S. goodwill and intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capitalized software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net unrealized gains on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other-non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,055) (584) (707) — (332) (228) (82) (2,951) (397) (574) (34) (312) (205) (76) Total deferred income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,988) (4,549) Net deferred income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(2,761) $(2,727) Valuation allowances are provided when it is considered more likely than not that deferred tax assets will not be realized. The valuation allowances primarily relate to future tax benefits on certain federal, state and non-U.S. net operating loss carryforwards. Federal net operating loss carryforwards of $74 million expire beginning in 2021 through 2036; state net operating loss carryforwards expire beginning in 2017 through 2036. Substantially all of the non-U.S. tax loss carryforwards have indefinite carryforward periods. As of December 31, 2016, the Company had $717 million of undistributed earnings from non-U.S. subsidiaries that are intended to be reinvested in non-U.S. operations. Because these earnings are considered permanently reinvested, no U.S. tax provision has been accrued related to the repatriation of these earnings. It is not practicable to estimate the amount of U.S. tax that might be payable on the eventual remittance of such earnings. 78 DPP - 1131 A reconciliation of the beginning and ending amount of unrecognized tax benefits as of December 31 is as follows: (in millions) 2016 2015 2014 Gross unrecognized tax benefits, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross increases: Current year tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prior year tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquired reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross decreases: Prior year tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statute of limitations lapses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $224 $ 92 $89 37 24 — — 55 89 — 4 — (4) (6) (12) (2) (1) (9) — — (1) Gross unrecognized tax benefits, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $263 $224 $92 The Company believes it is reasonably possible that its liability for unrecognized tax benefits will decrease in the next twelve months by $197 million as a result of audit settlements and the expiration of statutes of limitations. The Company classifies interest and penalties associated with uncertain income tax positions as income taxes within its Consolidated Statement of Operations. During the years ended December 31, 2016, 2015 and 2014 the Company recognized $11 million, $11 million and $6 million of interest and penalties, respectively. The Company had $70 million and $59 million of accrued interest and penalties for uncertain tax positions as of December 31, 2016 and 2015, respectively. These amounts are not included in the reconciliation above. The Company currently files income tax returns in the United States, various states and non-U.S. jurisdictions. The U.S. Internal Revenue Service (IRS) has completed exams on the consolidated income tax returns for fiscal years 2015 and prior. The Company’s 2016 tax year is under advance review by the IRS under its Compliance Assurance Program. With the exception of a few states, the Company is no longer subject to income tax examinations prior to the 2010 tax year. The Brazilian federal revenue service — Secretaria da Receita Federal (SRF) may audit the Company’s Brazilian subsidiaries for a period of five years from the date on which corporate income taxes should have been paid and/or the date when the tax return was filed. 10. Shareholders’ Equity Regulatory Capital and Dividend Restrictions The Company’s regulated subsidiaries are subject to regulations and standards in their respective jurisdictions. These standards, among other things, require these subsidiaries to maintain specified levels of statutory capital, as defined by each jurisdiction, and restrict the timing and amount of dividends and other distributions that may be paid to their parent companies. In the United States, most of these regulations and standards are generally consistent with model regulations established by the National Association of Insurance Commissioners. These standards generally permit dividends to be paid from statutory unassigned surplus of the regulated subsidiary and are limited based on the regulated subsidiary’s level of statutory net income and statutory capital and surplus. These dividends are referred to as “ordinary dividends” and generally can be paid without prior regulatory approval. If the dividend, together with other dividends paid within the preceding twelve months, exceeds a specified statutory limit or is paid from sources other than earned surplus, it is generally considered an “extraordinary dividend” and must receive prior regulatory approval. For the year ended December 31, 2016, the Company’s regulated subsidiaries paid their parent companies dividends of $3.9 billion, including $3.3 billion of extraordinary dividends. For the year ended December 31, 2015, the Company’s regulated subsidiaries paid their parent companies dividends of $4.4 billion, including $1.5 billion of extraordinary dividends. As of December 31, 2016, approximately $700 million of the Company’s $10.4 billion of cash and cash equivalents was available for general corporate use. 79 DPP - 1132 The Company’s regulated subsidiaries had estimated aggregate statutory capital and surplus of approximately $17.9 billion as of December 31, 2016. The estimated statutory capital and surplus necessary to satisfy regulatory requirements of the Company’s regulated subsidiaries was approximately $10.5 billion as of December 31, 2016. Optum Bank must meet minimum requirements for Tier 1 leverage capital, Tier 1 risk-based capital, common equity Tier1 risk-based capital and total risk-based capital of the Federal Deposit Insurance Corporation (FDIC) to be considered “Well Capitalized” under the capital adequacy rules to which it is subject. At December 31, 2016, the Company believes that Optum Bank met the FDIC requirements to be considered “Well Capitalized.” Share Repurchase Program Under its Board of Directors’ authorization, the Company maintains a share repurchase program. The objectives of the share repurchase program are to optimize the Company’s capital structure and cost of capital, thereby improving returns to shareholders, as well as to offset the dilutive impact of share-based awards. Repurchases may be made from time to time in open market purchases or other types of transactions (including prepaid or structured share repurchase programs), subject to certain Board restrictions. In June 2014, the Board renewed the Company’s share repurchase program with an authorization to repurchase up to 100 million shares of its common stock. A summary of common share repurchases for the years ended December 31, 2016 and 2015 is as follows: Years Ended December 31, 2016 2015 (in millions, except per share data) Common share repurchases, shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Common share repurchases, average price per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Common share repurchases, aggregate cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Board authorized shares remaining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 10 128.97 1,280 51 $ $ 11 112.45 1,200 61 Dividends In June 2016, the Company’s Board of Directors increased the Company’s quarterly cash dividend to shareholders to equal an annual dividend rate of $2.50 per share compared to the annual dividend rate of $2.00 per share, which the Company had paid since June 2015. Declaration and payment of future quarterly dividends is at the discretion of the Board and may be adjusted as business needs or market conditions change. 11. Share-Based Compensation The Company’s outstanding share-based awards consist mainly of non-qualified stock options, SARs and restricted shares. As of December 31, 2016, the Company had 68 million shares available for future grants of share-based awards under the Plan. As of December 31, 2016, there were also 10 million shares of common stock available for issuance under the ESPP. Stock Options and SARs Stock option and SAR activity for the year ended December 31, 2016 is summarized in the table below: Shares (in millions) WeightedAverage Exercise Price WeightedAverage Remaining Contractual Life (in years) Outstanding at beginning of period . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 $ 11 (8) (1) Outstanding at end of period . . . . . . . . . . . . . . . . . . . . . . . . . 36 84 6.6 Exercisable at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . Vested and expected to vest, end of period . . . . . . . . . . . . . . 14 35 56 83 4.0 6.6 80 DPP - 1133 Aggregate Intrinsic Value (in millions) 68 113 57 103 $ 2,758 1,458 2,704 Restricted Shares Restricted share activity for the year ended December 31, 2016 is summarized in the table below: (shares in millions) Shares Nonvested at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nonvested at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted-Average Grant Date Fair Value per Share 7 $ 3 (3) 82 115 76 7 96 Other Share-Based Compensation Data For the Years Ended December 31, 2016 2015 2014 (in millions, except per share amounts) Stock Options and SARs Weighted-average grant date fair value of shares granted, per share . . . . . . . . . . . . . . . . . . . Total intrinsic value of stock options and SARs exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . Restricted Shares Weighted-average grant date fair value of shares granted, per share . . . . . . . . . . . . . . . . . . . Total fair value of restricted shares vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employee Stock Purchase Plan Number of shares purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-Based Compensation Items Share-based compensation expense, before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-based compensation expense, net of tax effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax benefit realized from share-based award exercises . . . . . . . . . . . . . . . . . . . . . . . $ 20 595 $ 22 482 $ 22 526 115 $274 110 $460 71 $437 2 2 2 $485 417 236 $406 348 247 $364 314 231 (in millions, except years) December 31, 2016 Unrecognized compensation expense related to share awards . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted-average years to recognize compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 516 1.3 Share-Based Compensation Recognition and Estimates The principal assumptions the Company used in calculating grant-date fair value for stock options and SARs were as follows: 2016 For the Years Ended December 31, 2015 2014 Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2% - 1.4% Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.8% - 22.5% Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.8% Forfeiture rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.0% Expected life in years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6 - 5.9 1.6% - 1.7% 22.3% - 24.1% 1.4% - 1.7% 5.0% 5.5 - 6.1 1.7% -1.8% 24.1% - 39.6% 1.6% - 1.9% 5.0% 5.4 Risk-free interest rates are based on U.S. Treasury yields in effect at the time of grant. Expected volatilities are based on the historical volatility of the Company’s common stock and the implied volatility from exchangetraded options on the Company’s common stock. Expected dividend yields are based on the per share cash dividend paid by the Company. The Company uses historical data to estimate option and SAR exercises and forfeitures within the valuation model. The expected lives of options and SARs granted represents the period of time that the awards granted are expected to be outstanding based on historical exercise patterns. 81 DPP - 1134 Other Employee Benefit Plans The Company also offers a 401(k) plan for its employees. Compensation expense related to this plan was not material for 2016, 2015 and 2014. In addition, the Company maintains non-qualified, deferred compensation plans, which allow certain members of senior management and executives to defer portions of their salary or bonus and receive certain Company contributions on such deferrals, subject to plan limitations. The deferrals are recorded within long-term investments with an approximately equal amount in other liabilities in the Consolidated Balance Sheets. The total deferrals are distributable based upon termination of employment or other periods, as elected under each plan and were $672 million and $553 million as of December 31, 2016 and 2015, respectively. 12. Commitments and Contingencies The Company leases facilities and equipment under long-term operating leases that are non-cancelable and expire on various dates. Rent expense under all operating leases for the years ended December 31, 2016, 2015 and 2014 was $608 million, $555 million and $449 million, respectively. As of December 31, 2016, future minimum annual lease payments, net of sublease income, under all non-cancelable operating leases were as follows: Future Minimum Lease Payments (in millions) 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 453 416 355 314 273 499 The Company provides guarantees related to its service level under certain contracts. If minimum standards are not met, the Company may be financially at risk up to a stated percentage of the contracted fee or a stated dollar amount. None of the amounts accrued, paid or charged to income for service level guarantees were material as of December 31, 2016, 2015 or 2014. As of December 31, 2016, the Company had outstanding, undrawn letters of credit with financial institutions of $28 million and surety bonds outstanding with insurance companies of $1.2 billion, primarily to bond contractual performance. Legal Matters Because of the nature of its businesses, the Company is frequently made party to a variety of legal actions and regulatory inquiries, including class actions and suits brought by members, care providers, consumer advocacy organizations, customers and regulators, relating to the Company’s businesses, including management and administration of health benefit plans and other services. These matters include medical malpractice, employment, intellectual property, antitrust, privacy and contract claims and claims related to health care benefits coverage and other business practices. The Company records liabilities for its estimates of probable costs resulting from these matters where appropriate. Estimates of costs resulting from legal and regulatory matters involving the Company are inherently difficult to predict, particularly where the matters: involve indeterminate claims for monetary damages or may involve fines, penalties or punitive damages; present novel legal theories or represent a shift in regulatory policy; involve a large number of claimants or regulatory bodies; are in the early stages of the proceedings; or could 82 DPP - 1135 result in a change in business practices. Accordingly, the Company is often unable to estimate the losses or ranges of losses for those matters where there is a reasonable possibility or it is probable that a loss may be incurred. Litigation Matters California Claims Processing Matter. On January 25, 2008, the California Department of Insurance (CDI) issued an Order to Show Cause to PacifiCare Life and Health Insurance Company, a subsidiary of the Company, alleging violations of certain insurance statutes and regulations related to an alleged failure to include certain language in standard claims correspondence, timeliness and accuracy of claims processing, interest payments, care provider contract implementation, care provider dispute resolution and other related matters. Although the Company believes that CDI had never before issued a fine in excess of $8 million, CDI advocated a fine of approximately $325 million in this matter. The matter was the subject of an administrative hearing before a California administrative law judge beginning in December 2009, and in August 2013, the administrative law judge issued a nonbinding proposed decision recommending a fine of $11.5 million. The California Insurance Commissioner rejected the administrative law judge’s recommendation and on June 9, 2014, issued his own decision imposing a fine of approximately $174 million. On July 10, 2014, the Company filed a lawsuit in California state court challenging the Commissioner’s decision. On September 8, 2015, in the first phase of that lawsuit, the California state court issued an order invalidating certain of the regulations the Commissioner had relied upon in issuing his decision and penalty. The Company cannot reasonably estimate the range of loss, if any, that may result from this matter given the procedural status of the dispute, the wide range of possible outcomes, the legal issues presented (including the legal basis for the majority of the alleged violations), the inherent difficulty in predicting a regulatory fine in the event of a remand, and the various remedies and levels of judicial review that remain available to the Company. Government Investigations, Audits and Reviews The Company has been involved or is currently involved in various governmental investigations, audits and reviews. These include routine, regular and special investigations, audits and reviews by the CMS, state insurance and health and welfare departments, the Brazilian national regulatory agency for private health insurance and plans (the Agência Nacional de Saúde Suplementar), state attorneys general, the Office of the Inspector General, the Office of Personnel Management, the Office of Civil Rights, the Government Accountability Office, the Federal Trade Commission, U.S. Congressional committees, the U.S. Department of Justice, the SEC, the Internal Revenue Service, the U.S. Drug Enforcement Administration, the Brazilian federal revenue service (the Secretaria da Receita Federal), the U.S. Department of Labor, the Federal Deposit Insurance Corporation, the Defense Contract Audit Agency and other governmental authorities. Certain of the Company’s businesses have been reviewed or are currently under review, including for, among other matters, compliance with coding and other requirements under the Medicare risk-adjustment model. The Company has produced documents, information and witnesses to the Department of Justice in cooperation with a current review of the Company’s risk-adjustment processes, including the Company’s patient chart review and related programs. CMS has selected certain of the Company’s local plans for risk adjustment data validation (RADV) audits to validate the coding practices of and supporting documentation maintained by health care providers and such audits may result in retrospective adjustments to payments made to the Company’s health plans. The Company cannot reasonably estimate the range of loss, if any, that may result from any material government investigations, audits and reviews in which it is currently involved given the status of the reviews, the wide range of possible outcomes and the inherent difficulty in predicting regulatory action, fines and penalties, if any, the Company’s legal and factual defenses and the various remedies and levels of judicial review available to the Company in the event of an adverse finding. 83 DPP - 1136 Guaranty Fund Assessments Under state guaranty association laws, certain insurance companies can be assessed (up to prescribed limits) for certain obligations to the policyholders and claimants of impaired or insolvent insurance companies that write the same line or similar lines of business. Some states have similar laws relating to HMOs and other payers such as consumer operated and oriented plans (co-ops) established under the ACA. In 2009, the Pennsylvania Insurance Commissioner placed long term care insurer Penn Treaty Network America Insurance Company and its subsidiary (Penn Treaty), neither of which is affiliated with the Company, in rehabilitation and petitioned a state court for approval to liquidate Penn Treaty. In 2012, the court denied the liquidation petition and ordered the Insurance Commissioner to submit a rehabilitation plan. A second amended plan of rehabilitation was later withdrawn and, as of November 2016, Penn Treaty will be liquidated. As of December 31, 2016, the Company recorded the $350 million impact of its estimated share of guaranty association assessments resulting from the Penn Treaty liquidation. 13. Segment Financial Information Factors used to determine the Company’s reportable segments include the nature of operating activities, economic characteristics, existence of separate senior management teams and the type of information used by the Company’s chief operating decision maker to evaluate its results of operations. Reportable segments with similar economic characteristics, products and services, customers, distribution methods and operational processes that operate in a similar regulatory environment are combined. The following is a description of the types of products and services from which each of the Company’s four reportable segments derives its revenues: • UnitedHealthcare includes the combined results of operations of UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare & Retirement, UnitedHealthcare Community & State and UnitedHealthcare Global. The U.S. businesses share significant common assets, including a contracted network of physicians, health care professionals, hospitals and other facilities, information technology infrastructure and other resources. UnitedHealthcare Employer & Individual offers an array of consumer-oriented health benefit plans and services for large national employers, public sector employers, mid-sized employers, small businesses and individuals nationwide and active and retired military and their families through the TRICARE program. UnitedHealthcare Medicare & Retirement provides health care coverage and health and well-being services to individuals age 50 and older, addressing their unique needs for preventive and acute health care services as well as services dealing with chronic disease and other specialized issues for older individuals. UnitedHealthcare Community & State’s primary customers oversee Medicaid plans, the Children’s Health Insurance Program and other federal, state and community health care programs. UnitedHealthcare Global is a diversified global health services business with a variety of offerings, including international commercial health and dental benefits. • OptumHealth serves the physical, emotional and health-related financial needs of individuals, enabling population health management through programs offered by employers, payers, government entities and directly with the care delivery system. OptumHealth offers access to networks of care provider specialists, health management services, care delivery, consumer engagement and financial services. • OptumInsight provides services, technology and health care expertise to major participants in the health care industry. Hospital systems, physicians, health plans, governments, life sciences companies and other organizations that comprise the health care industry depend on OptumInsight to help them improve performance, achieve efficiency, reduce costs, meet compliance mandates and modernize their core operating systems to meet the changing needs of the health system. • OptumRx offers pharmacy care services and programs, including retail network contracting, home delivery and specialty pharmacy services, purchasing and clinical capabilities, and develops programs in areas such as step therapy, formulary management, drug adherence and disease/drug therapy management. 84 DPP - 1137 The Company’s accounting policies for reportable segment operations are consistent with those described in the Summary of Significant Accounting Policies (see Note 2). Transactions between reportable segments principally consist of sales of pharmacy care products and services to UnitedHealthcare customers by OptumRx, certain product offerings and care management and local care delivery services sold to UnitedHealthcare by OptumHealth, and health information and technology solutions, consulting and other services sold to UnitedHealthcare by OptumInsight. These transactions are recorded at management’s estimate of fair value. Intersegment transactions are eliminated in consolidation. Assets and liabilities that are jointly used are assigned to each reportable segment using estimates of pro-rata usage. Cash and investments are assigned such that each reportable segment has working capital and/or at least minimum specified levels of regulatory capital. As a percentage of the Company’s total consolidated revenues, premium revenues from CMS were 25% for 2016, 26% for 2015 and 29% for 2014, most of which were generated by UnitedHealthcare Medicare & Retirement and included in the UnitedHealthcare segment. U.S. customer revenue represented approximately 97%, 96% and 95% of consolidated total revenues for 2016, 2015 and 2014, respectively. Long-lived fixed assets located in the United States represented approximately 75% and 81% of the total long-lived fixed assets as of December 31, 2016 and 2015, respectively. The non-U.S. revenues and fixed assets are primarily related to UnitedHealthcare Global. 85 DPP - 1138 The following table presents the reportable segment financial information: Optum (in millions) Optum Corporate and UnitedHealthcare OptumHealth OptumInsight OptumRx Eliminations Optum Eliminations Consolidated 2016 Revenues — external customers: Premiums . . . . . . . . . . . . . . . . . $ Products . . . . . . . . . . . . . . . . . . . Services . . . . . . . . . . . . . . . . . . . 140,455 $ 1 7,514 Total revenues — external customers . . . . . . . . . . . . . . . . . . . 147,970 6,209 2,773 27,060 Total revenues — intersegment . . . . Investment and other income . . . . . . — 611 10,491 208 4,559 1 33,372 8 (1,088) 47,334 — 217 (47,334) — 3,663 $ 48 2,498 — $ 103 2,670 — $ 26,506 554 — $ 3,663 $ — 26,657 — 5,722 — 36,042 — $ — — 144,118 26,658 13,236 — 184,012 — 828 Total revenues . . . . . . . . . . . . . . . . . . $ 148,581 $ 16,908 $ 7,333 $ 60,440 $ (1,088) $83,593 $ (47,334) $ Earnings from operations . . . . . . . . . $ Interest expense . . . . . . . . . . . . . . . . . 7,307 $ — 1,428 $ — 1,513 $ — 2,682 $ — — $ 5,623 $ — — — $ (1,067) 12,930 (1,067) Earnings before income taxes . . . . . . $ 7,307 $ 1,428 $ 1,513 $ 2,682 $ — $ 5,623 $ (1,067) $ 11,863 Total assets . . . . . . . . . . . . . . . . . . . . $ Purchases of property, equipment and capitalized software . . . . . . . . Depreciation and amortization . . . . . 70,505 $ 18,656 $ 9,017 $ 29,066 $ — $56,739 $ (4,434) $ 122,810 640 724 345 297 571 559 149 475 3,152 $ 31 2,375 — $ 108 2,390 — $ 17,171 381 — — 1,065 1,331 — — 2015 Revenues — external customers: Premiums . . . . . . . . . . . . . . . . . $ Products . . . . . . . . . . . . . . . . . . . Services . . . . . . . . . . . . . . . . . . . 124,011 $ 2 6,776 Total revenues — external customers . . . . . . . . . . . . . . . . . . . 130,789 5,558 2,498 17,552 Total revenues — intersegment . . . . Investment and other income . . . . . . — 554 8,216 153 3,697 1 30,718 2 (791) 41,840 — 156 (41,840) — — $ 3,152 $ — 17,310 — 5,146 — 25,608 184,840 1,705 2,055 — $ — — 127,163 17,312 11,922 — 156,397 Total revenues . . . . . . . . . . . . . . . . . . $ 131,343 $ 13,927 $ 6,196 $ 48,272 $ (791) $67,604 $ (41,840) $ Earnings from operations . . . . . . . . . $ Interest expense . . . . . . . . . . . . . . . . . 6,754 $ — 1,240 $ — 1,278 $ — 1,749 $ — — $ 4,267 $ — — — $ (790) — 710 157,107 11,021 (790) Earnings before income taxes . . . . . . $ 6,754 $ 1,240 $ 1,278 $ 1,749 $ — $ 4,267 $ (790) $ 10,231 Total assets (a) . . . . . . . . . . . . . . . . . . $ Purchases of property, equipment and capitalized software . . . . . . . . Depreciation and amortization . . . . . 64,212 $ 14,600 $ 8,335 $ 26,844 $ — $49,779 $ (2,737) $ 111,254 653 718 252 251 572 492 79 232 2,657 $ 18 1,300 — $ 96 2,224 — $ 4,125 111 — — 903 975 — — 2014 Revenues — external customers: Premiums . . . . . . . . . . . . . . . . . $ Products . . . . . . . . . . . . . . . . . . . Services . . . . . . . . . . . . . . . . . . . 112,645 $ 3 6,516 Total revenues — external customers . . . . . . . . . . . . . . . . . . . 119,164 3,975 2,320 4,236 Total revenues — intersegment . . . . Investment and other income . . . . . . — 634 6,913 144 2,906 1 27,740 — (489) 37,070 — 145 (37,070) — — $ 2,657 $ — 4,239 — 3,635 — 10,531 1,556 1,693 — $ — — 115,302 4,242 10,151 — 129,695 Total revenues . . . . . . . . . . . . . . . . . . $ 119,798 $ 11,032 $ 5,227 $ 31,976 $ (489) $47,746 $ (37,070) $ Earnings from operations . . . . . . . . . $ Interest expense . . . . . . . . . . . . . . . . . 6,992 $ — 1,090 $ — 1,002 $ — 1,190 $ — — $ 3,282 $ — — — $ (618) — 779 130,474 10,274 (618) Earnings before income taxes . . . . . . $ 6,992 $ 1,090 $ 1,002 $ 1,190 $ — $ 3,282 $ (618) $ 9,656 Total assets (a) . . . . . . . . . . . . . . . . . . $ Purchases of property, equipment and capitalized software . . . . . . . . Depreciation and amortization . . . . . 62,405 $ 11,148 $ 8,112 $ 5,474 $ — $24,734 $ (839) $ 86,300 773 772 212 179 484 433 56 94 — — 1,525 1,478 — — 752 706 (a) In the first quarter of 2016, the Company adopted ASU 2015-03, retrospectively as required. See Note 2 for more information on the adoption of ASU 2015-03. 86 DPP - 1139 14. Quarterly Financial Data (Unaudited) Selected quarterly financial information for all quarters of 2016 and 2015 is as follows: (in millions, except per share data) March 31 2016 Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings from operations . . . . . . . . . . . . . . . . . . . . . . . . . . Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net earnings attributable to UnitedHealth Group common shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net earnings per share attributable to UnitedHealth Group common shareholders: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings from operations . . . . . . . . . . . . . . . . . . . . . . . . . . Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net earnings attributable to UnitedHealth Group common shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net earnings per share attributable to UnitedHealth Group common shareholders: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 9. For the Quarter Ended June 30 September 30 44,527 $ 41,567 2,960 1,627 46,485 $ 43,282 3,203 1,760 December 31 46,293 $ 42,713 3,580 1,978 47,535 44,348 3,187 1,708 1,611 1,754 1,968 1,684 1.69 1.67 1.84 1.81 2.07 2.03 1.77 1.74 35,756 $ 33,116 2,640 1,413 36,263 $ 33,368 2,895 1,585 41,489 $ 38,471 3,018 1,618 43,599 41,131 2,468 1,252 1,413 1,585 1,597 1,218 1.48 1.46 1.66 1.64 1.68 1.65 1.28 1.26 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms; and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In connection with the filing of this Annual Report on Form 10-K, management evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2016. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2016. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 87 DPP - 1140 Report of Management on Internal Control Over Financial Reporting as of December 31, 2016 UnitedHealth Group Incorporated and Subsidiaries’ (the “Company”) management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company’s internal control system is designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on our assessment and the COSO criteria, we believe that, as of December 31, 2016, the Company maintained effective internal control over financial reporting. The Company’s independent registered public accounting firm has audited the Company’s internal control over financial reporting as of December 31, 2016, as stated in the Report of Independent Registered Public Accounting Firm, appearing under Item 9A. 88 DPP - 1141 Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of UnitedHealth Group Incorporated and Subsidiaries: We have audited the internal control over financial reporting of UnitedHealth Group Incorporated and subsidiaries (the “Company”) as of December 31, 2016, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control Over Financial Reporting as of December 31, 2016. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2016 of the Company and our report dated February 8, 2017 expressed an unqualified opinion on those consolidated financial statements. /s/ DELOITTE & TOUCHE LLP Minneapolis, Minnesota February 8, 2017 89 DPP - 1142 ITEM 9B. OTHER INFORMATION None. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE DIRECTORS OF THE REGISTRANT The following sets forth certain information regarding our directors as of February 8, 2017, including their name and principal occupation or employment: William C. Ballard, Jr. Former Of Counsel Bingham Greenebaum Doll LLP Michele J. Hooper President and Chief Executive Officer The Directors’ Council, a company focused on improving the governance processes of corporate boards Edson Bueno, M.D. Founder Amil and Chairman UnitedHealth Group Latin America Rodger A. Lawson Executive Chair E*TRADE Financial Corporation and Retired President and Chief Executive Officer Fidelity Investments — Financial Services Richard T. Burke Non-Executive Chair UnitedHealth Group Glenn M. Renwick Executive Chair The Progressive Corporation Robert J. Darretta Retired Vice-Chair and Chief Financial Officer Johnson & Johnson Kenneth I. Shine, M.D. Professor of Medicine at the Dell Medical School University of Texas Timothy P. Flynn Retired Chair KPMG International Gail R. Wilensky, Ph.D. Senior Fellow Project HOPE, an international health foundation Stephen J. Hemsley Chief Executive Officer UnitedHealth Group Pursuant to General Instruction G(3) to Form 10-K and Instruction 3 to Item 401(b) of Regulation S-K, information regarding our executive officers is provided in Item 1 of Part I of this Annual Report on Form 10-K under the caption “Executive Officers of the Registrant.” We have adopted a code of ethics applicable to our principal executive officer and other senior financial officers, who include our principal financial officer, principal accounting officer, controller and persons performing similar functions. The code of ethics, entitled Code of Conduct: Our Principles of Ethics and Integrity, is posted on our website at www.unitedhealthgroup.com. For information about how to obtain the Code of Conduct, see Part I, Item 1, “Business.” We intend to satisfy the SEC’s disclosure requirements regarding amendments to, or waivers of, the code of ethics for our senior financial officers by posting such information on our website indicated above. The remaining information required by Items 401, 405, 406 and 407(c)(3), (d)(4) and (d)(5) of Regulation S-K will be included under the headings “Corporate Governance,” “Proposal 1-Election of Directors” and “Section 90 DPP - 1143 16(a) Beneficial Ownership Reporting Compliance” in our definitive proxy statement for our 2017 Annual Meeting of Shareholders, and such required information is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information required by Items 402, 407(e)(4) and (e)(5) of Regulation S-K will be included under the headings “Executive Compensation,” “Director Compensation,” “Corporate Governance — Risk Oversight” and “Compensation Committee Interlocks and Insider Participation” in our definitive proxy statement for our 2017 Annual Meeting of Shareholders, and such required information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS Equity Compensation Plan Information The following table sets forth certain information, as of December 31, 2016, concerning shares of common stock authorized for issuance under all of our equity compensation plans: (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights (in millions) Plan category Equity compensation plans approved by shareholders (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity compensation plans not approved by shareholders (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 (b) Weighted-average exercise price of outstanding options, warrants and rights $ — Total (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 $ (c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (in millions) 84 78 (3) — — 84 78 (1) Consists of the UnitedHealth Group Incorporated 2011 Stock Incentive Plan, as amended and the UnitedHealth Group 1993 ESPP, as amended. (2) Excludes 184,000 shares underlying stock options assumed by us in connection with an acquisition. These options have a weighted-average exercise price of $95 and an average remaining term of approximately 7 years. The options are administered pursuant to the terms of the plan under which the options originally were granted. No future awards will be granted under this acquired plan. (3) Includes 10 million shares of common stock available for future issuance under the Employee Stock Purchase Plan as of December 31, 2016, and 68 million shares available under the 2011 Stock Incentive Plan as of December 31, 2016. Shares available under the 2011 Stock Incentive Plan may become the subject of future awards in the form of stock options, SARs, restricted stock, restricted stock units, performance awards and other stock-based awards. The information required by Item 403 of Regulation S-K will be included under the heading “Security Ownership of Certain Beneficial Owners and Management” in our definitive proxy statement for our 2017 Annual Meeting of Shareholders, and such required information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by Items 404 and 407(a) of Regulation S-K will be included under the headings “Certain Relationships and Transactions” and “Corporate Governance” in our definitive proxy statement for our 2017 Annual Meeting of Shareholders, and such required information is incorporated herein by reference. 91 DPP - 1144 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by Item 9(e) of Schedule 14A will be included under the heading “Disclosure of Fees Paid to Independent Registered Public Accounting Firm” in our definitive proxy statement for our 2017 Annual Meeting of Shareholders, and such required information is incorporated herein by reference. PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) 1. Financial Statements The financial statements are included under Item 8 of this report: • Reports of Independent Registered Public Accounting Firm. • Consolidated Balance Sheets as of December 31, 2016 and 2015. • Consolidated Statements of Operations for the years ended December 31, 2016, 2015, and 2014. • Consolidated Statements of Comprehensive Income for the years ended December 31, 2016, 2015, and 2014. • Consolidated Statements of Changes in Equity for the years ended December 31, 2016, 2015, and 2014. • Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015, and 2014. • Notes to the Consolidated Financial Statements. 2. Financial Statement Schedules The following financial statement schedule of the Company is included in Item 15(c): • Schedule I—Condensed Financial Information of Registrant (Parent Company Only). All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions, are inapplicable, or the required information is included in the consolidated financial statements, and therefore have been omitted. (b) The following exhibits are filed or incorporated by reference herein in response to Item 601 of Regulation S-K. The Company files Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K pursuant to the Securities Exchange Act of 1934 under Commission File No. 1-10864. EXHIBIT INDEX** 3.1 Certificate of Incorporation of UnitedHealth Group Incorporated (incorporated by reference to Exhibit 3.1 to UnitedHealth Group Incorporated’s Registration Statement on Form 8-A/A, Commission File No. 1-10864, filed on July 1, 2015) 3.2 Bylaws of UnitedHealth Group Incorporated (incorporated by reference to Exhibit 3.1 to UnitedHealth Group Incorporated’s Current Report on Form 8-K filed on February 12, 2016) 4.1 Senior Indenture, dated as of November 15, 1998, between United HealthCare Corporation and The Bank of New York (incorporated by reference to Exhibit 4.1 to UnitedHealth Group Incorporated’s Registration Statement on Form S-3/A, SEC File Number 333-66013, filed on January 11, 1999) Amendment, dated as of November 6, 2000, to Senior Indenture, dated as of November 15, 1998, between the UnitedHealth Group Incorporated and The Bank of New York (incorporated by reference to Exhibit 4.1 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001) 4.2 92 DPP - 1145 4.3 Instrument of Resignation, Appointment and Acceptance of Trustee, dated January 8, 2007, pursuant to the Senior Indenture, dated as of November 15, 1988, amended as of November 6, 2000, among UnitedHealth Group Incorporated, The Bank of New York and Wilmington Trust Company (incorporated by reference to Exhibit 4.3 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007) 4.4 Indenture, dated as of February 4, 2008, between UnitedHealth Group Incorporated and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 to UnitedHealth Group Incorporated’s Registration Statement on Form S-3, SEC File Number 333-149031, filed on February 4, 2008) *10.1 UnitedHealth Group Incorporated 2011 Stock Incentive Plan, as amended and restated in 2015 (incorporated by reference to Exhibit 10.1 to UnitedHealth Group Incorporated’s Current Report on Form 8-K filed on June 5, 2015) *10.2 Amendment to UnitedHealth Group Incorporated’s Stock Option and Stock Appreciation Right Awards, effective November 6, 2014 (incorporated by reference to Exhibit 10.2 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2014) *10.3 Form of Agreement for Non-Qualified Stock Option Award to Executives under UnitedHealth Group Incorporated’s 2011 Stock Incentive Plan, as amended and restated in 2015, for awards made after January 1, 2016 (incorporated by reference to Exhibit 10.4 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015) *10.4 Form of Agreement for Non-Qualified Stock Option Award for International Participants under UnitedHealth Group Incorporated’s 2011 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2013) *10.5 Form of Addendum for Non-Qualified Stock Option Award Agreement for International Participants under UnitedHealth Group Incorporated’s 2011 Stock Incentive Plan (incorporated by reference to Exhibit 10.37 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2012) *10.6 Form of Agreement for Restricted Stock Unit Award to Executives under UnitedHealth Group Incorporated’s 2011 Stock Incentive Plan, as amended and restated in 2015, for awards made after January 1, 2016 (incorporated by reference to Exhibit 10.5 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015) *10.7 Form of Agreement for Restricted Stock Award to Executives under UnitedHealth Group Incorporated’s 2011 Stock Incentive Plan (incorporated by reference to Exhibit 10.5 to UnitedHealth Group Incorporated’s Current Report on Form 8-K filed on May 27, 2011) *10.8 Form of Agreement for Stock Appreciation Rights Award to Executives under UnitedHealth Group Incorporated’s 2011 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to UnitedHealth Group Incorporated’s Current Report on Form 8-K filed on May 27, 2011) *10.9 Form of Agreement for Performance-based Restricted Stock Unit Award to Executives under UnitedHealth Group Incorporated’s 2011 Stock Incentive Plan, as amended and restated in 2015, for awards made after January 1, 2016 (incorporated by reference to Exhibit 10.6 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015) *10.10 Form of Agreement for Initial Deferred Stock Unit Award to Non-Employee Directors under UnitedHealth Group Incorporated’s 2011 Stock Incentive Plan (incorporated by reference to Exhibit 10.7 to UnitedHealth Group Incorporated’s Current Report on Form 8-K filed on May 27, 2011) *10.11 Form of Agreement for Deferred Stock Unit Award to Non-Employee Directors under UnitedHealth Group Incorporated’s 2011 Stock Incentive Plan (incorporated by reference to Exhibit 10.6 to UnitedHealth Group Incorporated’s Current Report on Form 8-K filed on May 27, 2011) 93 DPP - 1146 10.12 Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 to UnitedHealth Group Incorporated’s Current Report on Form 8-K filed on July 1, 2015) *10.13 Amended and Restated UnitedHealth Group Incorporated Executive Incentive Plan (2009 Statement), effective as of December 31, 2008 (incorporated by reference to Exhibit 10.12 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2008) *10.14 Amended and Restated UnitedHealth Group Incorporated 2008 Executive Incentive Plan, effective as of December 31, 2008 (incorporated by reference to Exhibit 10.13 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2008) *10.15 Amendment, dated as of December 21, 2012, of Amended and Restated UnitedHealth Group Incorporated 2008 Executive Incentive Plan (incorporated by reference to Exhibit 10.11 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2012) *10.16 Second Amendment, dated as of November 5, 2015, of Amended and Restated UnitedHealth Group Incorporated 2008 Executive Incentive Plan (incorporated by reference to Exhibit 10.3 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015) *10.17 UnitedHealth Group Executive Savings Plan (2004 Statement) (incorporated by reference to Exhibit 10(e) of UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2003) *10.18 First Amendment to UnitedHealth Group Executive Savings Plan (2004 Statement) (incorporated by reference to Exhibit 10.3 to UnitedHealth Group Incorporated’s Current Report on Form 8-K filed on November 3, 2006) *10.19 Second Amendment to UnitedHealth Group Executive Savings Plan (2004 Statement) (incorporated by reference to Exhibit 10.13 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2007) *10.20 Third Amendment to UnitedHealth Group Executive Savings Plan (2004 Statement) (incorporated by reference to Exhibit 10.17 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2008) *10.21 Fourth Amendment to UnitedHealth Group Executive Savings Plan (2004 Statement) (incorporated by reference to Exhibit 10.1 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010) *10.22 Fifth Amendment to UnitedHealth Group Executive Savings Plan (2004 Statement) (incorporated by reference to Exhibit 10.2 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014) *10.23 Sixth Amendment to UnitedHealth Group Executive Savings Plan (2004 Statement) (incorporated by reference to Exhibit 10.2 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015) *10.24 Seventh Amendment to UnitedHealth Group Executive Savings Plan (2004 Statement) *10.25 Summary of Non-Management Director Compensation, effective as of October 1, 2016 (incorporated by reference to Exhibit 10.1 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016) *10.26 UnitedHealth Group Directors’ Compensation Deferral Plan (2009 Statement) (incorporated by reference to Exhibit 10.18 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2008) 94 DPP - 1147 *10.27 Amendment to the UnitedHealth Group Directors’ Compensation Deferral Plan, effective as of January 1, 2010 (incorporated by reference to Exhibit 10.20 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2009) *10.28 First Amendment to UnitedHealth Group Directors’ Compensation Deferral Plan (incorporated by reference to Exhibit 10.2 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010) *10.29 Catamaran Corporation Third Amended and Restated Long-Term Incentive Plan, as amended (incorporated by reference to Exhibit 4.3 to UnitedHealth Group Incorporated’s Registration Statement on Form S-8, SEC File Number 333-205824, filed on July 23, 2015) *10.30 Catalyst Health Solutions, Inc. 2006 Stock Incentive Plan, as amended (incorporated by reference to Exhibit 4.4 to UnitedHealth Group Incorporated’s Registration Statement on Form S-8, SEC File Number 333-205824, filed on July 23, 2015) *10.31 Employment Agreement, dated as of November 7, 2006, between UnitedHealth Group Incorporated and Stephen J. Hemsley (incorporated by reference to Exhibit 10.1 to UnitedHealth Group Incorporated’s Current Report on Form 8-K filed on November 8, 2006) *10.32 Agreement for Supplemental Executive Retirement Pay, effective April 1, 2004, between UnitedHealth Group Incorporated and Stephen J. Hemsley (incorporated by reference to Exhibit 10(b) to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004) *10.33 Amendment to Agreement for Supplemental Executive Retirement Pay, dated as of November 7, 2006, between UnitedHealth Group Incorporated and Stephen J. Hemsley (incorporated by reference to Exhibit A to Exhibit 10.1 to UnitedHealth Group Incorporated’s Current Report on Form 8-K filed on November 8, 2006) *10.34 Amendment to Employment Agreement and Agreement for Supplemental Executive Retirement Pay, effective as of December 31, 2008, between United HealthCare Services, Inc. and Stephen J. Hemsley (incorporated by reference to Exhibit 10.22 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2008) *10.35 Amendment to Agreement for Supplemental Executive Retirement Pay, dated as of June 7, 2016, between UnitedHealth Group Incorporated and Stephen J. Hemsley (incorporated by reference to Exhibit 10.2 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016) *10.36 Letter Agreement, effective as of February 19, 2008, by and between UnitedHealth Group Incorporated and Stephen J. Hemsley (incorporated by reference to Exhibit 10.22 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2007) *10.37 Amendment to Employment Agreement, dated as of December 14, 2010, between UnitedHealth Group Incorporated and Stephen J. Hemsley (incorporated by reference to Exhibit 10.1 to UnitedHealth Group Incorporated’s Current Report on Form 8-K filed on December 15, 2010) *10.38 Amended and Restated Employment Agreement, effective as of December 1, 2014, between United HealthCare Services, Inc. and David Wichmann (incorporated by reference to Exhibit 10.1 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015) *10.39 Amended and Restated Employment Agreement, effective December 1, 2014, between United HealthCare Services, Inc. and Larry Renfro (incorporated by reference to Exhibit 10.2 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015) 95 DPP - 1148 *10.40 Amended Employment Agreement, effective as of November 1, 2012, between Amil Assistência Médica Internacional S.A. and Dr. Edson de Godoy Bueno (incorporated by reference to Exhibit 10.32 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2012) *10.41 Employment Agreement, effective as of January 1, 2013, between United HealthCare Services, Inc. and Marianne D. Short (incorporated by reference to Exhibit 10.34 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2013) *10.42 Amended and Restated Employment Agreement, dated as of February 3, 2014, between United HealthCare Services, Inc. and D. Ellen Wilson (incorporated by reference to Exhibit 10.40 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2015) *10.43 Amended and Restated Employment Agreement, dated as of June 7, 2016, between United HealthCare Services, Inc. and John Rex (incorporated by reference to Exhibit 10.1 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016) 11.1 Statement regarding computation of per share earnings (incorporated by reference to the information contained under the heading “Net Earnings Per Common Share” in Note 2 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements”) 12.1 Computation of Ratio of Earnings to Fixed Charges 21.1 Subsidiaries of UnitedHealth Group Incorporated 23.1 Consent of Independent Registered Public Accounting Firm 24.1 Power of Attorney 31.1 Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101 The following materials from UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2016, filed on February 8, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to the Consolidated Financial Statements. * Denotes management contracts and 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. ** Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of instruments defining the rights of certain holders of long-term debt are not filed. The Company will furnish copies thereof to the SEC upon request. (c) Financial Statement Schedule Schedule I — Condensed Financial Information of Registrant (Parent Company Only). 96 DPP - 1149 Schedule I Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of UnitedHealth Group Incorporated and Subsidiaries: We have audited the consolidated financial statements of UnitedHealth Group Incorporated and subsidiaries (the “Company”) as of December 31, 2016 and 2015, and for each of the three years in the period ended December 31, 2016, and the Company’s internal control over financial reporting as of December 31, 2016, and have issued our reports thereon dated February 8, 2017; such consolidated financial statements and reports are included elsewhere in this Form 10-K. Our audits also included the consolidated financial statement schedule of the Company listed in Item 15. This consolidated financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits. In our opinion, the consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. /s/ DELOITTE & TOUCHE LLP Minneapolis, Minnesota February 8, 2017 97 DPP - 1150 Schedule I Condensed Financial Information of Registrant (Parent Company Only) UnitedHealth Group Condensed Balance Sheets (in millions, except per share data) December 31, 2016 December 31, 2015 Assets Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Short-term notes receivable from subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity in net assets of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term notes receivable from subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 755 140 1,075 60,593 9,912 248 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Liabilities and shareholders’ equity Current liabilities: Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note payable to subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial paper and current maturities of long-term debt . . . . . . . . . . . . . . . . . $ 71,828 29 — 313 342 56,316 9,679 199 $ 66,536 452 $ 280 7,113 449 310 6,587 Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt, less current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,845 25,657 52 7,346 25,215 145 Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,554 32,706 — — Commitments and contingencies (Note 4) Shareholders’ equity: Preferred stock, $0.001 par value — 10 shares authorized; no shares issued or outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Common stock, $0.01 par value — 3,000 shares authorized; 952 and 953 issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total UnitedHealth Group shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ See Notes to the Condensed Financial Statements of Registrant 98 DPP - 1151 10 — 40,945 (2,681) 10 29 37,125 (3,334) 38,274 33,830 71,828 $ 66,536 Schedule I Condensed Financial Information of Registrant (Parent Company Only) UnitedHealth Group Condensed Statements of Comprehensive Income (in millions) For the Years Ended December 31, 2016 2015 2014 Revenues: Investment and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 522 $ 396 $ 293 Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 522 396 293 Operating costs: Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22) 995 (17) 717 1 554 Total operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 973 700 555 Loss before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Benefit for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (451) 165 (304) 111 (262) 96 Loss of parent company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity in undistributed income of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . (286) 7,303 (193) 6,006 (166) 5,785 Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,017 653 5,813 (1,942) 5,619 (484) Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,670 See Notes to the Condensed Financial Statements of Registrant 99 DPP - 1152 $ 3,871 $ 5,135 Schedule I Condensed Financial Information of Registrant (Parent Company Only) UnitedHealth Group Condensed Statements of Cash Flows (in millions) For the Years Ended December 31, 2016 2015 2014 Operating activities Cash flows from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,294 $ 1,727 $ 7,445 Investing activities Issuance of notes to subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash paid for acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Return of capital to parent company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital contributions to subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (824) (2,292) 2,143 (765) 168 (5,064) (12,270) 4,375 (1,109) 140 (436) (1,852) — (704) (9) Cash flows used for investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,570) (13,928) (3,001) Financing activities Common stock repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from common stock issuances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Repayments of) proceeds from commercial paper, net . . . . . . . . . . . . . . . . . . . . . Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,280) 429 (2,261) (382) 3,968 (2,596) (451) (1,200) 402 (1,786) 3,666 11,982 (1,041) (352) (4,008) 462 (1,362) (794) 1,997 (812) (190) Cash flows (used for) from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,573) 11,671 (4,707) Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . 151 29 (530) 559 (263) 822 Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 180 $ 29 $ 559 Supplemental cash flow disclosures Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 974 4,557 $ 573 4,294 $ 578 4,028 See Notes to the Condensed Financial Statements of Registrant 100 DPP - 1153 Schedule I Condensed Financial Information of Registrant (Parent Company Only) UnitedHealth Group Notes to Condensed Financial Statements 1. Basis of Presentation UnitedHealth Group’s parent company financial information has been derived from its consolidated financial statements and should be read in conjunction with the consolidated financial statements included in this Form 10-K. The accounting policies for the registrant are the same as those described in Note 2 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements.” 2. Subsidiary Transactions Investment in Subsidiaries. UnitedHealth Group’s investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries. Intercompany Notes. In July 2015, the parent company issued $4.8 billion in intercompany notes that were used to partially fund the acquisition of Catamaran. See Note 6 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements” for more information about Catamaran. Dividends and Capital Distributions. Cash dividends received from subsidiaries and included in Cash Flows from Operating Activities in the Condensed Statements of Cash Flows were $3.7 billion, $4.8 billion and $5.5 billion in 2016, 2015 and 2014, respectively. Additionally, $2.1 billion and $4.4 billion in cash were received as a return of capital to the parent company during 2016 and 2015, respectively. 3. Commercial Paper and Long-Term Debt Discussion of commercial paper and long-term debt can be found in Note 8 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements.” Long-term debt obligations of the parent company do not include other financing obligations at subsidiaries that totaled $200 million and $164 million at December 31, 2016 and 2015, respectively. Maturities of commercial paper and long-term debt for the years ending December 31 are as follows: (in millions) 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Commitments and Contingencies For a summary of commitments and contingencies, see Note 12 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements.” 101 DPP - 1154 $ 7,105 2,600 1,750 1,950 2,400 17,217 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: February 8, 2017 UNITEDHEALTH GROUP INCORPORATED By /s/ STEPHEN J. HEMSLEY Stephen J. Hemsley 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 /s/ STEPHEN J. HEMSLEY Stephen J. Hemsley Director and Chief Executive Officer (principal executive officer) Executive Vice President and Chief Financial Officer (principal financial officer) Senior Vice President and Chief Accounting Officer (principal accounting officer) Director February 8, 2017 Director February 8, 2017 Director February 8, 2017 /s/ JOHN F. REX John F. Rex /s/ THOMAS E. ROOS Thomas E. Roos * William C. Ballard, Jr. * Edson Bueno * Richard T. Burke Date February 8, 2017 February 8, 2017 February 8, 2017 Director Robert J. Darretta * Timothy P. Flynn * Michele J. Hooper * Rodger A. Lawson * Glenn M. Renwick * Kenneth I. Shine * Gail R. Wilensky *By /s/ MARIANNE D. SHORT Marianne D. Short, As Attorney-in-Fact 102 DPP - 1155 Director February 8, 2017 Director February 8, 2017 Director February 8, 2017 Director February 8, 2017 Director February 8, 2017 Director February 8, 2017 EXHIBIT INDEX** 3.1 Certificate of Incorporation of UnitedHealth Group Incorporated (incorporated by reference to Exhibit 3.1 to UnitedHealth Group Incorporated’s Registration Statement on Form 8-A/A, Commission File No. 1-10864, filed on July 1, 2015) 3.2 Bylaws of UnitedHealth Group Incorporated (incorporated by reference to Exhibit 3.1 to UnitedHealth Group Incorporated’s Current Report on Form 8-K filed on February 12, 2016) 4.1 Senior Indenture, dated as of November 15, 1998, between United HealthCare Corporation and The Bank of New York (incorporated by reference to Exhibit 4.1 to UnitedHealth Group Incorporated’s Registration Statement on Form S-3/A, SEC File Number 333-66013, filed on January 11, 1999) 4.2 Amendment, dated as of November 6, 2000, to Senior Indenture, dated as of November 15, 1998, between the UnitedHealth Group Incorporated and The Bank of New York (incorporated by reference to Exhibit 4.1 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001) 4.3 Instrument of Resignation, Appointment and Acceptance of Trustee, dated January 8, 2007, pursuant to the Senior Indenture, dated as of November 15, 1988, amended as of November 6, 2000, among UnitedHealth Group Incorporated, The Bank of New York and Wilmington Trust Company (incorporated by reference to Exhibit 4.3 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007) 4.4 Indenture, dated as of February 4, 2008, between UnitedHealth Group Incorporated and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 to UnitedHealth Group Incorporated’s Registration Statement on Form S-3, SEC File Number 333-149031, filed on February 4, 2008) *10.1 UnitedHealth Group Incorporated 2011 Stock Incentive Plan, as amended and restated in 2015 (incorporated by reference to Exhibit 10.1 to UnitedHealth Group Incorporated’s Current Report on Form 8-K filed on June 5, 2015) *10.2 Amendment to UnitedHealth Group Incorporated’s Stock Option and Stock Appreciation Right Awards, effective November 6, 2014 (incorporated by reference to Exhibit 10.2 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2014) *10.3 Form of Agreement for Non-Qualified Stock Option Award to Executives under UnitedHealth Group Incorporated’s 2011 Stock Incentive Plan, as amended and restated in 2015, for awards made after January 1, 2016 (incorporated by reference to Exhibit 10.4 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015) *10.4 Form of Agreement for Non-Qualified Stock Option Award for International Participants under UnitedHealth Group Incorporated’s 2011 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2013) *10.5 Form of Addendum for Non-Qualified Stock Option Award Agreement for International Participants under UnitedHealth Group Incorporated’s 2011 Stock Incentive Plan (incorporated by reference to Exhibit 10.37 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2012) *10.6 Form of Agreement for Restricted Stock Unit Award to Executives under UnitedHealth Group Incorporated’s 2011 Stock Incentive Plan, as amended and restated in 2015, for awards made after January 1, 2016 (incorporated by reference to Exhibit 10.5 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015) *10.7 Form of Agreement for Restricted Stock Award to Executives under UnitedHealth Group Incorporated’s 2011 Stock Incentive Plan (incorporated by reference to Exhibit 10.5 to UnitedHealth Group Incorporated’s Current Report on Form 8-K filed on May 27, 2011) 103 DPP - 1156 *10.8 Form of Agreement for Stock Appreciation Rights Award to Executives under UnitedHealth Group Incorporated’s 2011 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to UnitedHealth Group Incorporated’s Current Report on Form 8-K filed on May 27, 2011) *10.9 Form of Agreement for Performance-based Restricted Stock Unit Award to Executives under UnitedHealth Group Incorporated’s 2011 Stock Incentive Plan, as amended and restated in 2015, for awards made after January 1, 2016 (incorporated by reference to Exhibit 10.6 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015) *10.10 Form of Agreement for Initial Deferred Stock Unit Award to Non-Employee Directors under UnitedHealth Group Incorporated’s 2011 Stock Incentive Plan (incorporated by reference to Exhibit 10.7 to UnitedHealth Group Incorporated’s Current Report on Form 8-K filed on May 27, 2011) *10.11 Form of Agreement for Deferred Stock Unit Award to Non-Employee Directors under UnitedHealth Group Incorporated’s 2011 Stock Incentive Plan (incorporated by reference to Exhibit 10.6 to UnitedHealth Group Incorporated’s Current Report on Form 8-K filed on May 27, 2011) 10.12 Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 to UnitedHealth Group Incorporated’s Current Report on Form 8-K filed on July 1, 2015) *10.13 Amended and Restated UnitedHealth Group Incorporated Executive Incentive Plan (2009 Statement), effective as of December 31, 2008 (incorporated by reference to Exhibit 10.12 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2008) *10.14 Amended and Restated UnitedHealth Group Incorporated 2008 Executive Incentive Plan, effective as of December 31, 2008 (incorporated by reference to Exhibit 10.13 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2008) *10.15 Amendment, dated as of December 21, 2012, of Amended and Restated UnitedHealth Group Incorporated 2008 Executive Incentive Plan (incorporated by reference to Exhibit 10.11 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2012) *10.16 Second Amendment, dated as of November 5, 2015, of Amended and Restated UnitedHealth Group Incorporated 2008 Executive Incentive Plan (incorporated by reference to Exhibit 10.3 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015) *10.17 UnitedHealth Group Executive Savings Plan (2004 Statement) (incorporated by reference to Exhibit 10(e) of UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2003) *10.18 First Amendment to UnitedHealth Group Executive Savings Plan (2004 Statement) (incorporated by reference to Exhibit 10.3 to UnitedHealth Group Incorporated’s Current Report on Form 8-K filed on November 3, 2006) *10.19 Second Amendment to UnitedHealth Group Executive Savings Plan (2004 Statement) (incorporated by reference to Exhibit 10.13 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2007) *10.20 Third Amendment to UnitedHealth Group Executive Savings Plan (2004 Statement) (incorporated by reference to Exhibit 10.17 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2008) *10.21 Fourth Amendment to UnitedHealth Group Executive Savings Plan (2004 Statement) (incorporated by reference to Exhibit 10.1 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010) 104 DPP - 1157 *10.22 Fifth Amendment to UnitedHealth Group Executive Savings Plan (2004 Statement) (incorporated by reference to Exhibit 10.2 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014) *10.23 Sixth Amendment to UnitedHealth Group Executive Savings Plan (2004 Statement) (incorporated by reference to Exhibit 10.2 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015) *10.24 Seventh Amendment to UnitedHealth Group Executive Savings Plan (2004 Statement) *10.25 Summary of Non-Management Director Compensation, effective as of October 1, 2016 (incorporated by reference to Exhibit 10.1 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016) *10.26 UnitedHealth Group Directors’ Compensation Deferral Plan (2009 Statement) (incorporated by reference to Exhibit 10.18 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2008) *10.27 Amendment to the UnitedHealth Group Directors’ Compensation Deferral Plan, effective as of January 1, 2010 (incorporated by reference to Exhibit 10.20 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2009) *10.28 First Amendment to UnitedHealth Group Directors’ Compensation Deferral Plan (incorporated by reference to Exhibit 10.2 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010) *10.29 Catamaran Corporation Third Amended and Restated Long-Term Incentive Plan, as amended (incorporated by reference to Exhibit 4.3 to UnitedHealth Group Incorporated’s Registration Statement on Form S-8, SEC File Number 333-205824, filed on July 23, 2015) *10.30 Catalyst Health Solutions, Inc. 2006 Stock Incentive Plan, as amended (incorporated by reference to Exhibit 4.4 to UnitedHealth Group Incorporated’s Registration Statement on Form S-8, SEC File Number 333-205824, filed on July 23, 2015) *10.31 Employment Agreement, dated as of November 7, 2006, between UnitedHealth Group Incorporated and Stephen J. Hemsley (incorporated by reference to Exhibit 10.1 to UnitedHealth Group Incorporated’s Current Report on Form 8-K filed on November 8, 2006) *10.32 Agreement for Supplemental Executive Retirement Pay, effective April 1, 2004, between UnitedHealth Group Incorporated and Stephen J. Hemsley (incorporated by reference to Exhibit 10(b) to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004) *10.33 Amendment to Agreement for Supplemental Executive Retirement Pay, dated as of November 7, 2006, between UnitedHealth Group Incorporated and Stephen J. Hemsley (incorporated by reference to Exhibit A to Exhibit 10.1 to UnitedHealth Group Incorporated’s Current Report on Form 8-K filed on November 8, 2006) *10.34 Amendment to Employment Agreement and Agreement for Supplemental Executive Retirement Pay, effective as of December 31, 2008, between United HealthCare Services, Inc. and Stephen J. Hemsley (incorporated by reference to Exhibit 10.22 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2008) *10.35 Amendment to Agreement for Supplemental Executive Retirement Pay, dated as of June 7, 2016, between UnitedHealth Group Incorporated and Stephen J. Hemsley (incorporated by reference to Exhibit 10.2 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016) 105 DPP - 1158 *10.36 Letter Agreement, effective as of February 19, 2008, by and between UnitedHealth Group Incorporated and Stephen J. Hemsley (incorporated by reference to Exhibit 10.22 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2007) *10.37 Amendment to Employment Agreement, dated as of December 14, 2010, between UnitedHealth Group Incorporated and Stephen J. Hemsley (incorporated by reference to Exhibit 10.1 to UnitedHealth Group Incorporated’s Current Report on Form 8-K filed on December 15, 2010) *10.38 Amended and Restated Employment Agreement, effective as of December 1, 2014, between United HealthCare Services, Inc. and David Wichmann (incorporated by reference to Exhibit 10.1 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015) *10.39 Amended and Restated Employment Agreement, effective December 1, 2014, between United HealthCare Services, Inc. and Larry Renfro (incorporated by reference to Exhibit 10.2 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015) *10.40 Amended Employment Agreement, effective as of November 1, 2012, between Amil Assistência Médica Internacional S.A. and Dr. Edson de Godoy Bueno (incorporated by reference to Exhibit 10.32 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2012) *10.41 Employment Agreement, effective as of January 1, 2013, between United HealthCare Services, Inc. and Marianne D. Short (incorporated by reference to Exhibit 10.34 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2013) *10.42 Amended and Restated Employment Agreement, dated as of February 3, 2014, between United HealthCare Services, Inc. and D. Ellen Wilson (incorporated by reference to Exhibit 10.40 to UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2015) *10.43 Amended and Restated Employment Agreement, dated as of June 7, 2016, between United HealthCare Services, Inc. and John Rex (incorporated by reference to Exhibit 10.1 to UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016) 11.1 Statement regarding computation of per share earnings (incorporated by reference to the information contained under the heading “Net Earnings Per Common Share” in Note 2 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements”) 12.1 Computation of Ratio of Earnings to Fixed Charges 21.1 Subsidiaries of UnitedHealth Group Incorporated 23.1 Consent of Independent Registered Public Accounting Firm 24.1 Power of Attorney 31.1 Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101 The following materials from UnitedHealth Group Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2016, filed on February 8, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to the Consolidated Financial Statements. * Denotes management contracts and 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. ** Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of instruments defining the rights of certain holders of long-term debt are not filed. The Company will furnish copies thereof to the SEC upon request. 106 DPP - 1159 Michael Maguire Area Vice President Sales-Public Sector 48 Waterman Avenue Rumson, NJ 07760 732-758-8948 michael.maguire@optum.com optumrx.com June 12, 2017 Proposal Receiving Room – 9th Floor Division of Purchase and Property Department of the Treasury 33 West State Street P.O. Box 230 Trenton, NJ 08625-0230 Subject: OptumRx, Inc.’s Response to the State of New Jersey Department of the Treasury, Division of Pensions and Benefits (DPB’s) Request for Proposal for Employee Benefits: Pharmacy Benefit Management (Bid # 17DPP00144) To Whom It May Concern: On behalf of OptumRx, I am pleased to submit our proposal to the State of New Jersey Department of the Treasury, Division of Pensions and Benefits (DPB) for pharmacy benefit management services. The responses outlined in our proposal describe pharmacy care services that will be provided by OptumRx. The new OptumRx is the combination of Catamaran and OptumRx. Together, our company will process over one billion prescriptions per year for more than 65 million members. We offer: ● The scale to deliver greater economic value ● The flexibility to align to customer goals ● The technology platform to deliver holistic care for better results Modern health care brings with it many pressing challenges. The traditional ways of managing the system in silos have created a fragmented delivery system that drives inefficiencies in cost and, more importantly, inadequate consumer care. DPB ultimately pays the price through higher costs, less-than-optimal member health and shrinking profitability. OptumRx solves for these challenges by driving smarter connections to fuse all facets of care in pursuit of healthier consumers and lower overall costs. Our commitment to DPB is to: ● Proactively understand you and your members and offer a solution that keeps you ahead of market trends ● Bring new levels of accountability to our relationship with DPB for the results you desire ● Engage DPB in consistent, open and transparent dialogue that fosters flexible solutions to achieve your goals and deliver on our commitments We have reviewed all of the original proposal documents and requirements and can provide the services requested. Our proposal is tailored to your objectives and is founded on: DPP - 1160 June 12, 2017 Superior customer service. We provide award winning support to DPB’s members around the clock. Our team is empowered to resolve issues quickly and create a positive member experience. Competitive, aggressive pricing. As the third largest PBM in the industry, our purchasing power with manufacturers enables us to provide DPB with a financial proposal that drives lower overall costs while maintaining its desired pharmacy benefit program. Clearly articulated pricing offer. Our pricing philosophy is focused on full-disclosure and no optics in our pricing or terms. We are providing a Pass-through proposal that is clear with regard to rates, guarantees and fees. This approach provides DPB with the information and resources it needs to make informed plan decisions. Comprehensive Specialty Pharmacy Program. Our program model provides demonstrated savings through improved adherence rates leading to reduced overall health care costs. Flexibility. We do not take a one-size-fits-all approach when designing pharmacy benefit plans. We understand that a solution that was effective for one customer may not be the best approach for DPB. We have the capabilities and infrastructure to administer highly customized plan designs. As a result, we tailor our programs to meet DPB’s goals and offer the flexibility needed to accommodate changing organizational needs. Generic strategy programs. We have one of the highest generic dispensing rates in the industry -- nearly 83 percent. Through strategies such as tier placement, prior authorization, step therapy, and customized generic incentives, we drive lower pharmacy plan costs while maintaining effective and proven treatment options. Listed below, is the data and/or materials we assert to be exempt from public disclosure under OPRA and/or the common law: ● Section 4.4.3.2 – Contract Management ● Section 4.4.3.3.2 – Mobilization Plan ● Section 4.4.3.3.3 – Technology Plan ● Section 4.4.3.3.4 – Plans Required by Bid Solicitation ● Section 4.4.4.2 – Organization Charts ● Section 4.4.4.3 – Resumes ● Section 4.4.4.4 – Backup Staff ● Section 4.4.4.5 – Experience with Contracts of Similar Size and Scope As detailed in section 5.8, Ownership of Material, pre-existing intellectual property that OptumRx will bring into the project will include our robust and proprietary operating systems and software, including but not limited to RxClaim, RxTrack, and our operating processes, including any enhancements to any of these systems. optumrx.com Page 2 of 3 DPP - 1161 June 12, 2017 We look forward to discussing our proposal in detail with you and to have the opportunity to collaborate with you to customize our approach. Should you have any questions or need additional information, please contact me at 732-758-8948, or email me at michael.maguire@optum.com. Sincerely, Michael Maguire Area Vice President, Sales - Public Sector optumrx.com Page 3 of 3 DPP - 1162