Aetna 2009 Annual Report Download - page 43

Annual Report – Page 37
Our business activities are highly regulated; new laws or regulations or changes in existing laws or regulations
or their enforcement could also materially adversely affect our business and profitability.
Our business is subject to extensive regulation and oversight by state, federal and international governmental
authorities. The laws and regulations governing our operations change frequently and generally are designed to benefit
and protect members and providers rather than our investors. The federal and many state governments have enacted
and continue to consider legislative and regulatory changes related to health products and changes in the interpretation
and/or enforcement of existing laws and regulations, and the likelihood of adverse changes is increasing due to state
and federal budgetary pressures. We must monitor these changes and promptly implement any revisions to our
business processes that these changes require. At this time, we are unable to predict the impact of future changes,
although we anticipate that some of these measures, if enacted, could materially affect our health operations and/or
operating results including:
 Reducing our ability to obtain adequate premium rates (including regulatory approval for and
implementation of those rates),
 Restricting our ability to price for the risk we assume and/or reflect reasonable costs or profits in our pricing,
including mandating minimum medical benefit ratios,
 Reducing our ability to manage health care costs,
 Increasing health care costs and operating expenses,
 Increasing our exposure to lawsuits and other adverse legal proceedings,
 Regulating levels and permitted lines of business,
 Restricting our ability to underwrite and operate our individual health business,
 Imposing new or increasing taxes and financial assessments, and/or
 Regulating business practices.
For example, decisions by health plans to rescind coverage and decline payment to treating providers after a member
has received medical services have generated public attention, particularly in California. As a result, there has been
both legislative and regulatory action in connection with this issue. On September 30, 2008, the state of California
enacted legislation requiring health care service plans and health insurers that have rescinded an individual policy to
reinstate coverage, on a guarantee issue basis, for the individual(s) whose information in the application for coverage
and related communications did not lead to the rescission. In 2009, California enacted legislation that limits the time
period in which health plans and health insurers can rescind an individual policy to two years. In addition, in 2009
Illinois issued a bulletin requiring a health carrier who is seeking to rescind an individual policy to provide the state
with a complete copy of its underwriting guidelines so the state can determine whether the false information provided
in the individual policy application materially affected the acceptance of the risk assumed by the health carrier.
In addition, our Medicare, Medicaid and specialty and mail order pharmacy products are more highly regulated than
our Commercial products.
There continues to be a heightened review by federal and state regulators of the health care insurance industry’ s
business and reporting practices, including utilization management, payment of providers with whom the payor does
not have contracts and other claim payment practices, as well as heightened review of the general insurance industry’ s
brokerage practices. As one of the largest national health and related benefits providers, we are regularly the subject of
regulatory market conduct and other reviews, audits and investigations by state insurance and health and welfare
departments and attorneys general, CMS, the Office of the Inspector General, the Office of Personnel Management, the
U.S. Department of Justice and U.S. Attorneys. Several such reviews, audits and investigations currently are pending,
some of which may be resolved during 2010. These regulatory reviews, audits and investigations could result in
changes to or clarifications of our business practices, and also could result in significant or material fines, penalties,
civil liabilities, criminal liabilities or other sanctions, including exclusion from participation in government programs.
For example, in January 2009, Aetna and the New York Attorney General announced an agreement relating to an
industry-wide investigation into certain payment practices with respect to out-of-network providers. As a result of that
agreement, Aetna contributed $20 million towards the establishment of an independent database system to provide fee
information regarding out-of-network reimbursement rates. Our business also may be adversely impacted by judicial
and regulatory decisions that change and/or expand the interpretations of existing statutes and regulations, impose
medical or bad faith liability, increase our responsibilities under ERISA, or reduce the scope of ERISA pre-emption of
state law claims.