Aetna 2009 Annual Report Download - page 40

Annual Report – Page 34
insurance industries, such as health information technology companies. If we are unable to anticipate, detect and
deploy meaningful responses to these external factors, our business and operating results may be adversely affected.
Adverse economic conditions in the U.S. and abroad can significantly and adversely affect our businesses and
profitability, and we do not expect these conditions to improve in the near future.
Serious concerns over inflation, energy costs, geopolitical issues, the availability and cost of credit and other capital,
the U.S. mortgage market, consumer spending, a declining U.S. real estate market, higher unemployment rates and
other factors have contributed to a slow global economy and significantly diminished expectations for the global
economy, particularly the U.S. economy, going forward. Our customers, medical providers and the other companies
with which we do business are generally headquartered in the U.S.; however many of our largest customers are global
companies with operations around the world. As a result, adverse economic conditions in the U.S. and abroad can
significantly and adversely affect our businesses and profitability by:
 Leading to reductions in force by our customers, which would reduce both our revenues and the number of
members we serve.
 Leading our customers and potential customers, particularly those with the most members, and state and local
governments, to force us to compete more vigorously on factors such as price and service to retain or obtain
their business.
 Leading our customers and potential customers to purchase fewer products and/or products that generate less
profit for us than the ones they currently purchase or otherwise would have purchased.
 Leading our customers and potential customers, particularly smaller employers and individuals, to forego
obtaining or renewing their health and other coverage with us.
 Causing unanticipated increases and volatility in utilization of medical and other covered services by our
members and/or increases in medical unit costs, each of which would increase our costs and limit our ability to
accurately detect, forecast, manage and reserve for our and our self-insured customers’ medical cost trends and
future health care costs.
 Increasing our medical unit costs as hospitals and other providers attempt to maintain revenue levels in their
efforts to adjust to their own economic challenges.
 Causing, over time, inflation that could cause interest rates to increase and thereby increase our interest
expense and reduce our operating results, as well as decrease the value of the debt securities we hold in our
investment portfolio, which would reduce our operating results and/or financial position.
 Weakening the ability or perceived ability of the issuers and/or guarantors of the debt or other securities we
hold in our investment portfolio to perform on their obligations to us, which could result in defaults in those
securities or reduce the value of those securities and create net realized capital losses for us that reduce our
operating results.
 Weakening the ability of our customers, medical providers and the other companies with which we do
business to perform their obligations to us or causing them not to perform those obligations, either of which
could reduce our operating results.
Furthermore, reductions in workforce by our customers in excess of, or at a faster rate than those we project could
reduce both our revenue and membership below our projected levels and cause unanticipated increases in our health
care costs. For example, our business associated with members who have elected to receive benefits under COBRA
typically has an MBR that is significantly higher than our Commercial average. In addition, the operating results
associated with our COBRA membership may be subject to a high degree of variability until we are able to gain more
experience with the expected increase in COBRA membership resulting from the ARRA subsidy described in
Regulatory Environment – General beginning on page 22. There can be no assurance that our health care costs,
business and profitability will not be adversely affected by these economy-related conditions or other factors.
We are subject to funding and other risks with respect to revenue received from our participation in Medicare
and Medicaid programs and subject to retroactive adjustments to certain premiums.
We continue to increase our focus on the non-Commercial part of our Health Care segment as part of our business
diversification efforts. In government-funded health programs such as Medicare and Medicaid, our revenues are
dependent on annual funding from the federal government and/or applicable state governments, and state governments
have the right to cancel their contracts with us on short notice if funds are not available. Funding for these programs is
dependent on many factors outside our control, including general economic conditions at the federal or applicable state
level and general political issues and priorities. For example, in 2008, the U.S. Congress reduced funding for
Medicare Advantage plans beginning in 2010 and imposed new marketing requirements on Medicare Advantage and