1997
Management
Incentive Plan
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UNITEDhealthcare -SM-
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1997
Management Incentive Plan
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As a national leader in health care management, United HealthCare is
committed to rewarding - and keeping - the professionals who have helped us
accomplish our successes. In 1997 we again will be challenged to attain even
higher levels of performance to maintain our leadership position. Overall, we
believe our company will continue to provide tremendous opportunities for all of
us who work to make United HealthCare successful.
In our endeavors in this year and beyond, we will stress tightly managed
operational execution and excellence in service. Specific goals include
excellent growth and strong financial performance; enhanced responsiveness
through better organizational structures and processes; continued leadership
gains in each of our business units; improved products and services for all of
our customers; and successful integration of business through merger and
acquisition activity. As always, we must remain focused on continued
improvements in appropriate health care delivery, SG&A, and medical cost trends.
The information presented in this brochure describes United HealthCare's
Management Incentive Plan. Incentive programs and performance management are
inherent to our corporate culture, a culture that rewards leaders who strive for
excellence and continuous improvement. This plan also represents a significant
step toward unifying all United HealthCare leaders under a single system to
recognize our accomplishments as we work toward common goals.
As leaders at United HealthCare, we all are responsible and accountable for
maintaining the standards of excellence that will move our company forward
successfully as we work to improve the health and well-being of the people we
serve.
/s/ William W. McGuire, M.D.
William W. McGuire, M.D.
Chief Executive Officer,
President and Chairman
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1997
Management Incentive Plan
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OVERVIEW
Annual management incentive plan funding and payout amounts are determined
by the following performance factors:
1) The OVERALL PERFORMANCE OF UNITED HEALTHCARE, measured by accomplishment of
strategic initiatives, deployment of capital and resources, market
valuation, merger and acquisition activity, public image and recognition,
as well as financial goals in the following categories: earnings, revenue,
SG&A, medical cost ratio, growth and membership. United HealthCare's
performance, by design, affects every manager's incentive to some degree.
2) The OVERALL PERFORMANCE OF YOUR BUSINESS UNIT, SUPPORT UNIT OR CORPORATE
DIVISION. If you're part of a United HealthCare business unit, your goals
will be developed jointly by your Senior Executive, CEO or Senior Manager
and the person to whom he or she reports. If you're part of a United
HealthCare business support or corporate division, your goals will be
established by the appropriate Senior Executive and the person to whom he
or she reports.
3) YOUR INDIVIDUAL PERFORMANCE, based on your overall performance in your
position and accomplishment of established goals and objectives.
All three performance measures are used to determine the incentive pool and
incentive awards. We believe that our collective success must grow out of a
synergy of effort. This blend of performance measurement helps ensure all
of United HealthCare works together toward common goals - and therefore
allows us the greatest opportunities for success, both professionally and
personally.
INCENTIVE TARGETS
Incentive targets are defined as a percent of eligible base earnings paid
during the current fiscal year. The incentive target percents are based on grade
level and overall position responsibility.
Your senior executive will communicate this year's corporate and business
unit or corporate division goals.
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PAYMENT DETERMINATION
STEP 1 - ESTABLISHMENT OF TOTAL INCENTIVE POOL
At the end of United HealthCare's fiscal year, the Compensation
and Stock Option Committee of the Board of Directors will determine
overall United HealthCare company performance and the total amount
available in the company incentive pool. The total company
incentive pool reflects United HealthCare's total performance on
its strategic initiatives, merger and acquisition activity, and the
collective results of all United HealthCare operations. It is NOT
the average result of United HealthCare operations but the
overarching performance of the entire company.
The Compensation and Stock Option Committee will approve an incentive
pool amount based on an assessment ranging from 50% of total incentive
targets to 200% of total incentive targets. Generally, no pool amount of less
than 50% will be established.
STEP 2 - ESTABLISHMENT OF BUSINESS UNIT, SUPPORT UNIT AND CORPORATE DIVISION
POOLS
Following a determination of the total amount available in the United
HealthCare incentive pool, United HealthCare Senior Management determines the
performance and incentive pools specific to the business units, business unit
support areas and United HealthCare corporate divisions. Business support areas
will be evaluated based on the primary business areas they support and their
specific unit performance. The business unit, business support division or
corporate division pool is established by creating a pool of available dollars
from 50% of target to 200% of targets. Generally, no pool amount of less than
50% will be established for any business unit, support area, or corporate
division.
STEP 3 - ESTABLISHMENT OF INDIVIDUAL INCENTIVE PAYMENTS
After business unit, support division and United HealthCare corporate
division incentive pools are established, the respective Health Plan CEOs,
Subsidiary Business Presidents and Corporate Senior Managers determine
individual incentive payments for their eligible managers. Health Plan CEOs,
Corporate Executives or Specialty Business Presidents' incentives are determined
by their management.
For those receiving an award, payments generally range from 50% of
incentive target to 200% of incentive target.
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Management Incentive Plan
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ELIGIBILITY
Generally, full-time regular employees grade 28 and above are eligible for
MIP awards. It is at this level that positions are directly accountable for
meeting key division or business unit objectives and generally also manage
staff, and determine and manage financial resources and budgets. Certain
positions are not eligible for MIP due to participation in other incentive
plans, even if they meet the eligibility criteria.
- If you were hired or promoted during the year to an MIP-eligible position,
your participation will be prorated for the time you serve as an eligible
employee. New hires or promotions in the fourth quarter of 1997 are not
eligible to participate in the 1997 plan. Employees who were eligible for
the performance incentive plan or business incentive plan prior to
promotion in the fourth quarter may still be eligible for a year-end PIP or
BIP award in lieu of an MIP award for that year.
- If you are promoted to a position that carries a higher management
incentive potential, any incentive paid to you would be based on a
combination of your existing and new incentive targets. The targets would
be weighted according to the time you held each position.
- If you are on leave for part of the year, pay that you receive while on
leave (except vacation and sick leave) will not be included as base
earnings in the calculation of the management incentive payment.
- TO BE ELIGIBLE FOR A MANAGEMENT INCENTIVE PAYMENT, YOU MUST BE AN ACTIVE
EMPLOYEE AT THE TIME SUCH PAYMENTS ARE MADE. EMPLOYEES WHO TERMINATE
EMPLOYMENT PRIOR TO THE DATE INCENTIVE AWARDS ARE MADE ARE NOT ELIGIBLE FOR
ANY INCENTIVE AWARDS. IF YOU ARE ON A LEAVE OF ABSENCE AT THE TIME OF
PAYMENT, YOU WILL BECOME ELIGIBLE FOR AN INCENTIVE PAYMENT AT THE TIME OF
YOUR RETURN TO WORK. EMPLOYEES WHO DO NOT RETURN TO WORK FROM LEAVE ARE NOT
ELIGIBLE FOR AN INCENTIVE AWARD.
- EMPLOYEES ON FORMAL DISCIPLINARY ACTION ARE NOT ELIGIBLE FOR AN INCENTIVE
PAYMENT.
The senior vice president of Human Resources will determine any exceptions
to eligibility guidelines.
401(k) PLAN AND ESOP CONTRIBUTIONS
Management Incentive Plan payments are considered compensation under the
401(k) and Employee Stock Ownership (ESOP) Plans. Management incentive payments
are not eligible for the Employee Stock Purchase Plan (ESPP).
PAYMENTS
Management Incentive Plan payments generally are made following the close
of the corporate and operating unit books for the 1997 operating year, generally
occurring during the first quarter of the following year.
If you have any questions about the Management Incentive Plan, contact your
supervisor or the head of your operating unit.
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EXAMPLES
EXAMPLE 1 - BUSINESS UNIT (E.G., HEALTH PLAN)
STEP 1: United HealthCare Compensation & Stock Option Committee determines
overall MIP pool.
STEP 2: Senior Management determines each unit's pool.
As an example, assume this unit is:
Business Unit Pool = 130% of target for that business
POOL IS
CALCULATED: 130% (Unit Pool) x $36,000 (Incentive Target) = Incentive Pool of
$46,800
STEP 3: Business Unit Senior Manager evaluates individual performance of
each eligible employee and determines incentive payments. Management
incentive payments are either 0% or from 50% to 200% of targets.
The amount of the pool for this Senior Manager to distribute is
$46,800; total payments cannot exceed the pool total.
EXAMPLE 2 - CORPORATE DIVISION (E.G., CORPORATE FINANCE DEPARTMENT)
STEP 1: United HealthCare Compensation & Stock Option Committee determines
overall MIP pool.
STEP 2: Senior Management determines each unit's pool.
As an example, assume this unit is:
Corporate Division Rating = 90% of target
POOL IS
CALCULATED: 90% (Overall Rating) x $38,000 (Incentive Target) = Incentive Pool
of $34,200
STEP 3: Corporate Division Head evaluates individual performance of each
eligible employee and determines incentive payments. Management
incentive payments are either 0% or can range from 50% to 200% of
targets. The amount of the pool for this Division Head is $34,200;
total payments cannot exceed the pool total.
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EXAMPLE 3 - BUSINESS SUPPORT UNIT (E.G., SPECIALTY BUSINESS AREA)
STEP 1: United HealthCare Compensation & Stock Option Committee determines
over all MIP pool.
STEP 2: Senior Management determines each unit's pool.
As an example, assume this unit is:
Support Unit Pool = 100%
POOL IS
CALCULATED: 100% (Overall Rating) x $22,000 (Incentive Target) =
Incentive Pool of $22,000
STEP 3: Business Support Unit Senior Manager evaluates individual
performance of each eligible employee and determines incentive
payments. Management incentive payments are either 0% or can range
from 50% to 200% of targets. The amount of the pool for this Senior
Manager to distribute is $22,000; total payments cannot exceed the
pool total.
THERE IS NO GUARANTEE THAT ANY MANAGEMENT INCENTIVE PLAN PAYOUTS WILL BE
MADE. UNITED HEALTHCARE HAS THE EXCLUSIVE AND BINDING DISCRETION TO AMEND,
TERMINATE OR INTERPRET THE TERMS OR CONDITIONS OF THIS MANAGEMENT INCENTIVE PLAN
AT ANY TIME AND WITHOUT NOTICE. CHANGES TO THIS PLAN MUST BE IN WRITING MADE BY
THE SENIOR VICE PRESIDENT OF HUMAN RESOURCES OR THE CHIEF EXECUTIVE OFFICER OF
THE COMPANY. UNITED HEALTHCARE ALSO HAS DISCRETION TO UNILATERALLY MAKE LEGAL
AND FACTUAL DETERMINATIONS REGARDING THE PLAN. THIS MANAGEMENT INCENTIVE PLAN IS
NOT AND SHALL NOT BE DEEMED TO BE AN ENFORCEABLE CONTRACT OR AN EMPLOYEE BENEFIT
PLAN WITHIN THE MEANING OF ERISA.
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