Aetna 2012 Annual Report Download - page 38

Annual Report- Page 32
In addition, certain provisions of Health Care Reform tie Medicare Advantage premiums to the achievement of
certain CMS quality performance measures (“star ratings”). Beginning in 2012, Medicare Advantage plans with an
overall star rating of three or more stars (out of five stars) are eligible for a quality bonus in their basic premium
rates. As a result, our Medicare Advantage plans' operating results from 2012 forward are likely to be significantly
determined by their star ratings. For additional information on CMS's stars program and our related performance,
see “Medicare” beginning on page 39.
For additional discussion of certain risk factors that may cause our actual results to differ from currently anticipated
results in connection with federal and state health care reform, refer to “Forward-Looking Information/Risk
Factors” beginning on page 47.
Health Care Reform significantly alters the federal structure that shapes the state regulation of health insurance, and
requires states to significantly amend numerous existing statutes and regulations. In 2012, state legislatures focused
on the impact of Health Care Reform and state budget deficits as well as preliminary Insurance Exchange design
and implementation. In addition, premium rate review legislation (ranging from new or enhanced filing
requirements to prior approval requirements) has been introduced or enacted in more than half of the states as of the
date of this Annual Report. A limited number of states have passed Insurance Exchange laws, and a number of
states have passed Insurance Exchange planning laws.
At the state level, all 50 states and the District of Columbia will hold regular legislative sessions in 2013. We
expect additional state level legislation and regulatory activity that impacts our business to be enacted in 2013,
including additional Insurance Exchange laws and Insurance Exchange planning and other Health Care Reform-
related activity. We also expect state legislatures to continue to focus on the impact of Health Care Reform and
state budget deficits in 2013. In addition, independent of federal efforts, we expect many states to continue to
consider legislation to extend coverage to the uninsured through Insurance Exchanges and Medicaid expansion,
mandate minimum MLRs, expand the maximum size of “small group” business to larger groups, implement rating
reforms and mandate specific benefit coverages. For example, 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 or procedures for reviewing proposed premium rate changes;
requiring us and other health plans to price prospectively to specified minimum medical loss ratios and demonstrate
that pricing in rate filings; and imposing taxes on insurers and other health plans to finance the Insurance
Exchanges. In addition, we expect to request significant increases in our premium rates in our individual and small
group Health Care businesses for 2014 and beyond in order to adequately price for projected medical cost trends,
the expanded coverages and rating limits required by Health Care Reform and the significant assessments, fees and
taxes imposed by Health Care Reform. These significant increases heighten the risk of adverse public and
regulatory action and the likelihood that our requested premium rate increases will be denied, reduced or delayed.
We cannot predict what provisions legislation or regulation will contain in any state or what effect legislation or
regulation will have on our business operations or financial results, but the effect could be materially adverse.
Health Care Regulation
General
Federal, state, local and foreign governments have adopted laws and regulations that govern our business activities
in various ways. These laws and regulations, including Health Care Reform, restrict how we conduct our business
and result in additional burdens and costs to us.
In addition to the expanded regulation created by Health Care Reform discussed above, areas of governmental
regulation include:
• Licensure;
• Premium rates and rating methodologies;