Aetna 2009 Annual Report Download - page 28

Annual Report – Page 22
future retroactivity each period and adjust the recorded revenue accordingly. We also estimate the amount of
uncollectable receivables each period and establish an allowance for uncollectable amounts. We base such estimates
on historical trends, premiums billed, the amount of contract renewal activity during the period and other relevant
information. As information regarding actual retroactivity and uncollectable amounts becomes known, we refine our
estimates and record any required adjustments to revenues in the period they arise. A significant difference in the
actual level of retroactivity or uncollectable amounts when compared to our estimated levels would have a significant
effect on Health Care’ s results of operations.
NEW ACCOUNTING STANDARDS
Refer to Note 2 of Notes to Consolidated Financial Statements, beginning on page 48, for a discussion of recently
issued accounting standards.
REGULATORY ENVIRONMENT
General
Our operations are subject to comprehensive federal, state, local and international regulation in the jurisdictions in
which we do business. The laws and rules governing our business and interpretations of those laws and rules continue
to become more restrictive each year and are subject to frequent change. Further, we must obtain and maintain
regulatory approvals to market many of our products. Supervisory agencies, including state health, insurance and
managed care departments and state boards of pharmacy and CMS have broad authority to:
 Grant, suspend and revoke our licenses to transact business;
 Regulate many aspects of the products and services we offer;
 Assess fines, penalties and/or sanctions;
 Monitor our solvency and reserve adequacy; and/or
 Regulate our investment activities on the basis of quality, diversification and other quantitative criteria.
Our operations and accounts and other books and records are subject to examination at regular intervals by these
agencies. In addition, our current and past business practices are subject to review by, and from time to time we
receive subpoenas and other requests for information from, various state insurance and health care regulatory
authorities and attorneys general, the Office of the Inspector General, and other state and federal authorities, including
inquiries by, and testimony before, certain members, committees and subcommittees of the U.S. Congress regarding
certain of our business practices. These reviews, subpoenas and requests may result, and have resulted, in changes to
or clarifications of our business practices, as well as fines, penalties or other sanctions.
The federal and state governments continue to enact and seriously consider many broad-based legislative and
regulatory proposals that have or could materially impact various aspects of the health care system. For example:
 During 2009, the federal government became increasingly focused on broad-based health care reform, and
both the U.S. House of Representatives and Senate passed extensive health reform measures in November and
December of 2009, respectively. On February 22, 2010, President Obama published an alternative proposal
for broad-based health care reform legislation. If enacted, this proposal, which is similar to the legislation
passed by the U.S. Senate, would significantly affect our business and results of operations. Some of the
proposed changes in this legislation include a provision for guaranteed issue of coverage in the individual and
small group market with a weak mandate that requires coverage. It would also specify required benefit
designs, limit rating and pricing practices, and impose minimum requirements for medical benefit ratios, create
new ways in which health insurance is distributed (for example, state-based health insurance exchanges),
encourage additional competition (including potential incentives for new market entrants) and expand
eligibility for Medicaid programs. In addition, President Obama’ s proposal would create a new federal Health
Insurance Rate Authority that would significantly increase federal oversight of health plan premium rates and
could adversely affect our ability to appropriately increase health plan premiums. Financing for these reforms
was expected to come, in part, from material additional fees and taxes on us and other health insurers and
health plans, as well as reductions in certain levels of reimbursement under Medicare. Given recent political
developments in Washington, D.C., the fate of this legislation and the nature and extent of any other new
health care reform is uncertain, though it is reasonably possible that federal health care reform in some form