Aetna 2012 Annual Report Download - page 66

Annual Report- Page 60
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, from April
2010 through June 2011, we were subject to immediate sanctions that CMS imposed on us that required us to
suspend 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. We were not again eligible to
receive assignments of low income subsidy PDP members from CMS until September 2012.
Federal and state governments have made investigating and prosecuting health care and other insurance fraud,
waste and abuse a priority. Fraud, waste and abuse prohibitions encompass a wide range of activities, including
kickbacks for referral of members, billing for unnecessary medical and/or other covered services, improper
marketing and violations of patient privacy rights. The regulations and contractual requirements applicable to us
and other participants are complex and subject to change. We have invested significant resources to comply with
our regulatory and contractual requirements. Ongoing vigorous law enforcement and the highly technical
regulatory scheme mean that our compliance efforts in this area will continue to require significant resources.
We face increasing risks related to litigation, regulatory audits and investigations and other regulatory
proceedings. In addition, as a government contractor, we are exposed to additional risks that may adversely
affect our business or our willingness to participate in government health care programs. If these matters
are resolved adversely to us or these risks materialize, our financial position, operating results and cash flows
could be adversely affected.
We are growing by expanding into certain segments and subsegments of the health care marketplace. Some of the
segments and subsegments we have targeted for growth include Medicare, Medicaid, dual eligible, individual,
public sector and certain labor customers who are not subject to ERISA's limits on state law remedies. In addition,
over the last several years we have entered product lines in which we previously did not participate, including
support services for ACO's, dual eligible programs, HIT (such as Accountable Care Solutions, Medicity and
ActiveHealth) and Insured Medicaid. We also significantly expanded our Medicare Supplement, HSA and FSA and
low cost claims administration businesses through acquisitions in 2011; expect to expand our Medicare, Medicaid
Commercial individual and Workers Compensation businesses in 2013 as a result of the completion of the proposed
Coventry acquisition; and are seeking to substantially grow our Medicare, Medicaid and dual eligibles business
over the next several years. These products subject us to litigation, regulatory and other risks that are different from
the risks of providing Commercial managed care and health insurance products and increase the risks we face from
intellectual property and other litigation, regulatory reviews, audits and investigations and other adverse legal
proceedings. For example, certain of our HIT products and/or solutions are subject to patent litigation and certain
of our HIT products and/or solutions may be subject to regulation by the U.S. Food and Drug Administration
(“FDA”); our Medicare, Medicaid and dual eligible products are more highly regulated than our Commercial
products; and our mail order and specialty pharmacies dispense medications directly to members. There is the
possibility of significant damages or injunction in patent litigation, and our products are not currently regulated by
the FDA. There is the possibility of temporary or permanent suspension from participating in government health
care programs, including Medicare, Medicaid and dual eligible programs, including if we do not comply with
program rules or are convicted of fraud or other criminal conduct in the performance of a health care program or if
there is an adverse decision against us under the False Claims Act. For example, from April 2010 through June
2011, we were subject to immediate sanctions that CMS imposed on us that required us to suspend 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. We were not again eligible to receive assignments of low
income subsidy PDP members from CMS until September 2012. Any similar suspensions could adversely affect
our other businesses, including by harming our reputation. Our pharmacy subsidiaries are subject to the risks of