Aetna 2012 Annual Report Download - page 50

Annual Report- Page 44
Fraud, Waste and Abuse Laws
Federal and state governments have made investigating and prosecuting health care fraud, waste and abuse a
priority. Fraud, waste and abuse prohibitions encompass a wide range of activities, including kickbacks or other
inducements for referral of members or for the coverage of products (such as prescription drugs) by a plan, billing
for unnecessary medical services by a health care provider, improper marketing, and violations of patient privacy
rights. Companies involved in public health care programs such as Medicare, Medicaid and dual eligible programs
are required to maintain compliance programs to detect and deter fraud, waste and abuse, and are often the subject
of fraud, waste and abuse investigations and audits. The regulations and contractual requirements applicable to us
and other participants in these public-sector programs are complex and subject to change. Although our compliance
program is designed to meet all statutory and regulatory requirements, our policies and procedures are frequently
under review and subject to updates, and our training and education programs continue to evolve. We have invested
significant resources to comply with Medicare, Medicaid and dual eligible program standards. Ongoing vigorous
law enforcement and the highly technical regulatory scheme mean that our compliance efforts in this area will
continue to require significant resources.
Federal and State Laws and Regulations Governing Submission of Information and Claims to Agencies
We are subject to federal and state laws and regulations that apply to the submission of information and claims to
various government agencies. For example, the False Claims Act provides, in part, that the federal government may
bring a lawsuit against any person or entity who the government believes has knowingly presented, or caused to be
presented, a false or fraudulent request for payment from the federal government, or who has made a false statement
or used a false record to get a claim approved. There also is False Claims Act liability for knowingly or improperly
avoiding repayment of an overpayment received from the government. The federal government, whistleblowers
and some courts have taken the position that claims presented in violation of other statutes, such as the federal anti-
kickback statute, may be considered a violation of the False Claims Act. In addition, Health Care Reform expanded
the jurisdiction of, and our exposure to, the False Claims Act to Insurance Exchanges, which will begin to operate in
2014. Violations of the False Claims Act are punishable by treble damages and penalties of up to a specified dollar
amount per false claim. In addition, a special provision under the False Claims Act allows a private person (for
example, a “whistleblower” such as a disgruntled current or former competitor, member or employee) to bring an
action under the False Claims Act on behalf of the government alleging that the entity has defrauded the federal
government and permits the private person to share in any settlement of, or judgment entered in, the lawsuit.
A number of states, including states in which we operate, have adopted their own false claims acts and
whistleblower provisions that are similar to the False Claims Act. From time to time, companies in the health and
related benefits industry, including ours, may be subject to actions under the False Claims Act or similar state laws.
Product Design and Administration and Sales Practices
State and/or federal regulatory scrutiny of life and health insurance company and HMO product design and
administration and marketing and advertising practices, including the filing of policy forms and the adequacy of
disclosure regarding products and their administration, is increasing as are the penalties being imposed for
inappropriate practices. Medicare, Medicaid and dual eligible products and products offering more limited benefits,
such as those we issue and sell through Strategic Resource Company and some of our student health plans, in
particular continue to attract increased regulatory scrutiny.
Guaranty Fund Assessments/Solvency Protection
Under guaranty fund laws existing in all states, insurers doing business in those states can be assessed (up to
prescribed limits) for certain obligations of insolvent insurance companies to policyholders and claimants. The
health insurance guaranty associations in which we participate that operate under these laws respond to insolvencies
of long-term care insurers as well as health insurers. Our assessments generally are based on a formula relating to
our premiums in the state compared to the premiums of other insurers. Certain states allow assessments to be
recovered as offsets to premium taxes. Some states have similar laws relating to HMOs. The Pennsylvania
Insurance Commissioner (the “Commissioner”) has placed long-term care insurer Penn Treaty Network America
Insurance Company and one of its subsidiaries (collectively, “Penn Treaty”) in rehabilitation, an intermediate action
before insolvency, and subsequently petitioned a state court to convert the rehabilitation into a liquidation. In May
2012, the state court denied the request and ordered the Commissioner to propose a rehabilitation plan. In