Aetna 2011 Annual Report Download - page 56

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Annual Report- Page 50
greater tolerance for risk, to acquire attractive companies; and
• We may not have the expertise to manage and profitably grow the businesses we acquire, and we may need to
rely on the retention of key personnel and other suppliers of companies we acquire, which may be difficult to
accomplish.
Managing executive succession and key talent retention, recruitment and development is critical to our
success given the current environment.
We would be adversely affected if we fail to adequately plan for succession of our executives and senior
management and the retention, recruitment and development of key talent particularly given the current
environment. While we have succession plans in place and we have employment arrangements with a limited
number of key executives, these do not guarantee that the services of these or suitable successor executives will
continue to be available to us.
Our business activities are highly regulated; Health Care Reform as well as new laws or regulations or
changes in existing laws or regulations or their enforcement or application could 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 and interpretations of those laws and regulations
change frequently (as evidenced by Health Care Reform as well as other new laws and regulations) and generally
are designed to benefit and protect members and providers rather than our investors. In addition, the governmental
authorities that administer our business have broad latitude to make, interpret and enforce the regulations that
govern us and are interpreting and enforcing those laws and regulations more strictly and more aggressively.
The federal and many state governments have enacted and continue to consider legislative and regulatory changes
related to health and related benefits products, and changes in the interpretation, enforcement and/or application of
existing laws and regulations, and the likelihood of adverse changes is increasing due to state and federal budgetary
pressures. We must implement Health Care Reform and monitor these and other changes and promptly implement
any revisions to our business processes that these changes require. At this time, we are unable to predict the full
impact of Health Care Reform or the impact of future changes, although we anticipate that some aspects of Health
Care Reform and other existing measures and new measures, if enacted, could materially adversely affect our health
care operations and/or operating results including:
• Reducing our ability to obtain adequate premium rates for the risk we assume (including denial or delays in
approval 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 loss ratios and/or pricing prospectively to minimum
medical loss ratios,
• Reducing our ability to manage health care or other benefit costs,
• Increasing health care or other benefit costs and operating expenses (including duplicate expenses resulting
from changes in regulations during implementation),
• 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 Care business,
• Imposing new or increasing taxes and financial assessments, and/or
• Regulating business practices.
For example, premium rates generally must be filed with state insurance regulators and are subject to their approval,
either before or after rates take effect. Health Care Reform generally requires a review of premium rate increases of
10% or more by HHS in conjunction with state regulators. Regulators or legislatures in a number of states have
implemented or are considering limits on premium rate increases, either enforcing existing legal requirements more
stringently or proposing different regulatory standards. Premium rate review legislation (ranging from new or
enhanced rate filing requirements to prior approval requirements) was introduced or passed in more than half the
states in 2011. Regulators or legislatures in a number of states also are considering conducting hearings on