UnitedHealthcare will spend $7 million to make way for up to 125 new employees at its customer service contact center in Roanoke.

City officials hailed Friday's announcement as another indication of Roanoke's growing strength in the health care business.

"It continues making this region a place for health care, insurance and life science research," Roanoke City Manager Chris Morrill said. "Job clusters like this in insurance attract good folks. Adding another 125 jobs just increases the momentum even more."

UnitedHealthcare, which is part of Minneapolis-based UnitedHealth Group, already employs 300 people in Roanoke. Other insurers also have a significant presence in the city, including Anthem Blue Cross Blue Shield, which employes about 800, and Delta Dental of Virginia, which is headquartered in Roanoke.

Phone calls and other contacts from Medicare policy holders and prospective clients are handled at UnitedHealthcare's Roanoke office. Employees also support sales representatives for the insurer's Medicare and retirement business.

UnitedHealthcare, which serves 20 percent of the nation's Medicare beneficiaries, has filed a building permit application with the city to remodel and expand its leased office space inside a commercial building on Thirlane Road near the airport. That application is under review, and the renovations likely will be finished by the fall.

Both the state and the city offered financial incentives to encourage UnitedHealthcare to expand its operations in Roanoke.

Through the Virginia Jobs Investment Program, the Virginia Department of Business Assistance will provide up to $100,000 in job training grants as employees are hired for the 125 positions.

Additionally the state will pay UnitedHealthcare for each employee hired through the Virginia Enterprise Zone job creation grant program. For most positions, UnitedHealthcare will receive $500 per employee per year. For management-level positions, the company will get $800 per employee per year.

The city has a similar enterprise zone program. The city council is set to vote Tuesday on an agreement that would offer UnitedHealthcare $500 for each city resident hired between August 2010 and December 2011. That money would go through the Economic Development Authority and would be designated for employee training.

To qualify for both incentives, the jobs, most of which are entry-level, must pay a minimum of $12.69 an hour. Employees also must be offered a benefits package. UnitedHealthcare spokesman Matt Burns said some positions also will be management-level.

Rob Ledger, manager of economic development for the city, said the incentives were important to maintaining UnitedHealthcare's presence in Roanoke. There was "a very good possibility" that the jobs could have gone to another state and the Roanoke center could have closed entirely, he said.

As part of the deal with the city, UnitedHealthcare also must maintain its work force.

Hiring should be in full swing by summer, Burns said.

Roanoke's unemployment rate in December was 8.3 percent, according to the Virginia Employment Commission, and 6.8 percent in the Roanoke metro area, which also includes Salem and Roanoke, Botetourt, Franklin and Craig counties.

UnitedHealthcare plans to spend $3 million on the renovations, which include creating an employee cafeteria inside the space that used to house the Noel C. Taylor Learning Academy. The space has been empty since the students moved to the academy's current location on Williamson Road, Roanoke Building Commissioner Jeff Shawver said.

The other $4 million will be for equipment costs and other expenses associated with the growing staff.

This is not the first time the state has offered UnitedHealthcare an incentive to increase its Roanoke workforce. In October 2005 the insurer invested $5 million and created 250 new jobs.

Staff writer Brian Kelley contributed to this report.