UnitedHealth Group (UNH)

15.    Commitments and Contingencies

The Company leases facilities, computer hardware and other equipment under long-term operating leases that are noncancelable and expire on various dates through 2028. Rent expense under all operating leases for 2008, 2007 and 2006 was $264 million, $223 million and $209 million, respectively. At December 31, 2008, future minimum annual lease payments, net of sublease income, under all noncancelable operating leases were as follows:

In conjunction with the PacifiCare acquisition the Company committed to make $50 million in charitable contributions for the benefit of California health care consumers, which has been accrued in its Consolidated Balance Sheets. The Company has committed to specific projects totaling approximately $30 million of the $50 million charitable commitment at December 31, 2008, of which $21 million was paid. Additionally, the Company agreed to invest $200 million in California’s health care infrastructure to further health care services to the underserved populations of the California marketplace, of which $87 million was invested at December 31, 2008. The timing and amount of individual contributions and investments are at the Company’s discretion subject to the advice and oversight of the local regulatory authorities; however, the Company’s goal is to have the investment commitment fully funded by the end of 2010. The investment commitment remains in place for 20 years after funding.

The Company contracts on an administrative services only (ASO) basis with customers who fund their own claims. The Company charges these customers administrative fees based on the expected cost of administering their self-funded programs. In some cases, the Company provides performance guarantees related to its administrative function. If these 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. Amounts accrued for performance guarantees were not material at December 31, 2008 and 2007.

At December 31, 2008, the Company has outstanding, undrawn letters of credit with financial institutions of approximately $60 million and surety bonds outstanding with insurance companies of approximately $300 million, primarily to bond contractual performance.

4.    Commitments and Contingencies

Operating costs for 2008 include $882 million for the proposed settlements of two class action lawsuits related to the Company’s historical stock option practices and related legal costs, net of expected insurance proceeds, and $350 million for the settlement of class action litigation related to reimbursement for out-of-network medical services. For detail on the proposed settlements and other commitments and contingencies, see Note 15 of Notes to the Consolidated Financial Statements.