Aetna 2011 Annual Report Download - page 40

Annual Report- Page 34
U.S. Congress to restrict the pre-emptive effect of ERISA and state legislative activity in several states that, if
enacted by legislation that is not itself pre-empted by ERISA, could increase our liability exposure and could result
in greater state regulation of our operations.
The Employee Retirement Income Security Act of 1974
The provision of services to certain employee benefit plans, including certain Health Care, Group Insurance and
Large Case Pensions benefit plans, is subject to ERISA, a complex set of laws and regulations subject to
interpretation and enforcement by the Internal Revenue Service and the Department of Labor (the “DOL”). ERISA
regulates certain aspects of the relationships between us and employers who maintain employee benefit plans
subject to ERISA. Some of our administrative services and other activities may also be subject to regulation under
ERISA. ERISA generally preempts all state and local laws that relate to employee benefit plans, but the extent of
the pre-emption continues to be reviewed by courts.
DOL regulations under ERISA set standards for claim payment and member appeals along with associated notice
and disclosure requirements. We have invested significant resources to comply with these standards.
Certain Large Case Pensions and Group Insurance products and services are also subject to potential issues raised
by certain judicial interpretations relating to ERISA. Under those interpretations, together with DOL regulations,
we may have ERISA fiduciary duties with respect to certain general account assets held under contracts that are not
guaranteed benefit policies. As a result, certain transactions related to those assets are subject to conflict of interest
and other restrictions, and we must provide certain disclosures to policyholders annually. We must comply with
these restrictions or face substantial penalties.
Federal Employees Health Benefits (“FEHB”) Program
Our subsidiaries contract with the OPM to provide managed health care services under the FEHB program in their
service areas. These contracts with the OPM and applicable government regulations establish premium rating
arrangements for this program, and generally also require that FEHB plans receive pricing that is at least as
favorable as similarly sized subscriber groups (“SSSG”) in the applicable market. Compliance with the SSSG
requirements complicates pricing of our Commercial business and can result in the payment of an unanticipated
premium rebate to the OPM. The OPM has issued new pricing regulations for 2012, which eliminate the SSSG
requirements and move to a FEHB program-specific MLR by plan code and market. In 2012, carriers may elect the
SSSG rules or the MLR regulations. Aetna has elected the MLR regulations in all plan code and markets except our
Washington D.C. area and New York HMO's. For 2013 and beyond, the new MLR regulations will be mandatory
for all carriers in all plan codes and markets with the exception of non-traditionally rated plan codes (including our
New York HMO) in which case the MLR regulations do not apply. Managing to these rules is further complicated
by the simultaneous application of the minimum MLR standards and associated premium rebate requirements of
Health Care Reform. The OPM conducts periodic audits of its contractors to, among other things, verify that the
premiums established under its contracts are in compliance with the SSSG/MLR and other requirements under
FEHB program. The OPM may seek premium refunds or institute other sanctions against us if we fail to comply
with the FEHB program requirements.
Medicare
Our Medicare products, including Medicare Advantage and Part D products, are regulated by CMS. The
regulations and contractual requirements applicable to us and other participants in Medicare programs are complex,
expensive to comply with and subject to change. We have invested significant resources to comply with Medicare
standards, and our Medicare compliance efforts will continue to require significant resources. CMS may seek
premium refunds, prohibit us from continuing to market and/or enroll members in one or more Medicare products,
exclude us from participating in one or more Medicare programs and/or institute other sanctions against us if we fail
to comply with CMS regulations or our Medicare contractual requirements.
For example, effective April 21, 2010, CMS imposed intermediate sanctions on us suspending the enrollment of and
marketing to new members of all Aetna Medicare Advantage and Standalone PDP contracts. As a result of these
sanctions, our 2011 Medicare membership and operating results were adversely affected because we did not
participate in the annual enrollment process for 2011. CMS lifted those sanctions on June 13, 2011.