Aetna 2009 Annual Report Download - page 41

Annual Report – Page 35
PDP plans beginning in 2009. The health reform legislation pending in Congress contemplates both a further
reduction in funding for Medicare Advantage plans beginning in 2011 and the introduction of a competitive bidding
approach to service members of Medicare Advantage plans by 2015. Our government customers also determine the
premium levels and other aspects of these programs that affect the number of persons eligible or enrolled in these
programs and our administrative and health care costs under these programs. In the past, determinations of this type
have adversely affected our financial results from and willingness to participate in such programs, and similar
conditions may exist in the future. For example, if a government customer reduces the premium levels or increases
premiums by less than the increase in our costs and we cannot offset the impact of these actions with supplemental
premiums and/or changes in benefit plans, then our business and operating results could be adversely affected. In
addition, premiums for certain federal government employee groups, Medicare members and Medicaid beneficiaries
are subject to retroactive adjustments by the federal and applicable state governments. Any such adjustments could
materially adversely affect our business and operating results.
Our business success and profitability depend in part on effective information technology systems and on
continuing to develop and implement improvements in technology; we have several significant multiyear
strategic information technology projects in process.
Our businesses depend in large part on our information and other technology systems to adequately price our products
and services, process claims and interact with providers, employer plan sponsors and members in an efficient and
uninterrupted fashion, and we have many different information systems supporting our businesses. Our business
strategy involves providing customers with easy to use products that leverage information to meet the needs of those
customers. Our success therefore is dependent in large part on maintaining the effectiveness of existing technology
systems and on continuing to develop, redesign and enhance technology systems that support our business processes in
a cost and resource efficient manner, including through technology outsourcing, within the context of our existing
business partnership relationships, a limited budget of human resources and capital. Certain of our technology systems
(including software) are older, legacy systems that are less efficient and require an ongoing commitment of significant
capital and human resources to maintain. We also need to develop new systems to meet current and expected
standards and keep pace with continuing changes in information processing technology, evolving industry and
regulatory standards and customer demands. For example, the federal government has mandated that by 2013 the
health care industry, including health insurers, providers and laboratories, upgrade to an updated and expanded set of
standardized diagnosis and procedure codes used for describing health conditions. Implementing this new set of
standardized codes, known as ICD-10, will require a substantial investment of resources by us and the health care
industry in general over the next several years, including significant information technology investments, changes in
business processes and documentation and extensive employee education and training. If we and/or the health care
industry fail to adequately implement ICD-10, we may suffer a significant loss in the resources invested and in
productivity, and/or fluctuations in our cash flows. We also have several significant multiyear strategic information
technology projects in process in addition to preparing for ICD-10. System development and other information
technology projects are long-term in nature and may take longer and cost more than we expect to complete and may
not deliver the benefits we project once they are complete. If we do not effectively and efficiently manage and
upgrade our technology portfolio, we could, among other things, have problems determining health care cost estimates
and/or establishing appropriate pricing, meeting the needs of providers, employer plan sponsors and members, or
keeping pace with industry and regulatory standards, and our operating results may be adversely affected.
In order to remain competitive, we must further integrate our businesses and processes; significant acquisitions
and/or our ability to manage multiple multi-year strategic projects could make this integration more
challenging; we expect to continue to pursue acquisitions.
Ineffective integration of our businesses and processes may adversely affect our ability to compete by, among other
things, increasing our costs relative to competitors. This integration task may be made more complex by significant
acquisitions, multi-year strategic projects, our existing business partnership relationships and a limited budget of
human resources and capital. For example, as a result of our acquisition activities, we have acquired a number of
information technology systems that we must effectively and efficiently consolidate with our own systems. Our
strategy includes effectively investing our capital in appropriate acquisitions, strategic projects and current operations
in addition to share repurchases. If we are unable to successfully integrate acquired businesses and other processes to
realize anticipated economic and other benefits on a timely basis, it could result in substantial costs or delays or other
operational or financial problems.