Aetna 2011 Annual Report Download - page 58

Annual Report- Page 52
There continues to be a heightened review by federal and state regulators of the health and related benefits
industry's business and reporting practices, including payment of providers with whom the payor does not have a
contract and other claim payment practices, and utilization management, as well as heightened review of the general
insurance industry's brokerage, sales and marketing practices. As one of the largest national health and related
benefits providers, we are regularly the subject of routine, regular and special governmental market conduct and
other audits, investigations and reviews by, and we receive subpoenas and other requests for information from,
CMS, HHS, various state insurance and health care regulatory authorities, state attorneys general and offices of
inspector general, the CCIIO, the OIG, the OPM, committees, subcommittees and members of the U.S. Congress,
the U.S. Department of Justice, the Federal Trade Commission, U.S. Attorneys and other state and federal
governmental authorities. Several such audits, investigations and reviews currently are pending, some of which
may be resolved during 2012. These routine, regular and special governmental audits, investigations and reviews
could result in changes to or clarifications of our business practices, and also could result in significant or material
premium refunds, fines, penalties, civil liabilities, criminal liabilities or other sanctions, including suspension or
exclusion from participation in government programs, changes in the way we conduct business and loss of
licensure. CMS has instituted RADV audits of certain of our 2007 Medicare Advantage contracts. For additional
information on these Medicare matters, refer to “Regulatory Environment” beginning on page 25 and “We are
subject to funding and other risks with respect to revenue received from our participation in Medicare and Medicaid
Programs. We are also subject to retroactive adjustments to certain premiums, including as a result of CMS risk
adjustment data validation (“RADV”) audits,” beginning on page 46. 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 2009 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.
Our business also may be adversely affected by other legislation and regulations. There can be no assurance that
the Financial Reform Act and the related rules will not impact our business. For instance, we believe we likely
would be adversely affected if the Council designated us a “systemically important” nonbank financial company for
purposes of the Financial Reform Act. In addition, in July 2011, New York notified insurers that it expects insurers
to, and will be amending its regulations to require insurers to, regularly consult the U.S. Social Security
Administration's Death Master File or a similar database to determine if unclaimed death benefits may be payable
under life insurance and similar products, to pay any such benefits and to make certain other business process
changes. Legislation mandating the use of such databases has been introduced in at least four other states. New
York is one of over 35 states that are investigating life insurers' claims payment and related escheat practices, and
these investigations have resulted in significant charges to earnings by other life insurers in connection with related
settlement agreements. We have received requests for information from New York, Connecticut and Minnesota
with respect to our life insurance claim payment and related escheat practices.
For more information regarding these matters, refer to “Regulatory Environment” beginning on page 25 and
“Litigation and Regulatory Proceedings” in Note 18 of Notes to Consolidated Financial Statements beginning on
page 105.
We would be adversely affected if our prevention, detection or control systems fail to detect and implement
required changes to maintain regulatory compliance.
Failure of our prevention, detection or control systems related to regulatory compliance and/or compliance with our
internal policies, including data systems security issues and/or unethical conduct by managers and/or employees,
could adversely affect our reputation and also expose us to litigation and other proceedings, fines, temporary or
permanent suspension from participating in government health care programs and/or other penalties, any of which
could adversely affect our business, cash flows, operating results or financial condition. For example, effective
April 21, 2010, CMS imposed intermediate sanctions on us, suspending the enrollment of and marketing to new