Aetna 2013 Annual Report Download - page 38

Annual Report- Page 32
wide reinsurance assessments of $12 billion, $8 billion and $5 billion in 2014, 2015 and 2016, respectively.
We project that our share of the 2014 Health Care Reform fees, assessments and taxes will be
approximately $1 billion, and that our expense for the health insurer fee in 2014 will range from $575
million to $625 million. The health insurer fee will be first paid and expensed in 2014 and the reinsurance
assessment will first be expensed in 2014 and paid in 2015; however because our insurance policies are
annual, related premium increases resulting from this fee and this assessment for 2013 policies that have
coverage into 2014 increased the amount of premium recognized in 2013. We may not be able to recover
these fees, assessments and taxes in our pricing or otherwise solve for them. In addition, our effective
income tax rate will increase significantly in 2014 as a result of the non-deductibility of the health insurer
fee.
• Multiple insurance reforms beginning in 2014, including rating limits and minimum benefit requirements,
guaranteed issue and renewability of coverage in the individual and group markets, elimination of pre-
existing conditions exclusions for all enrollees, elimination of annual limits on the dollar value of coverage,
and a prohibition on eligibility waiting periods beyond 90 days. For example, beginning in 2014, Health
Care Reform prohibits health insurers from using health status and gender in the determination of
appropriate small group and individual premiums and limits the impact of age and tobacco use on that
determination. These changes will likely have a significant impact on many individual and small group
customers and could lead to adverse selection in the marketplace.
• Public Exchanges for the individual and small group markets, which became operational in 2014, with
enrollment processes that commenced in October 2013. In 2013, HHS and other federal agencies issued
several major proposed and certain final regulations governing Public Exchanges, including the
implementation of state and federal reinsurance, risk adjustment and risk corridor programs designed to
mitigate adverse selection and provide premium rate stability in individual and small group Public
Exchanges. These regulations are likely to be supplemented or amended over time, based in part on
implementation experience in 2014 and beyond. For 2014 for the individual market, 26 states permitted
HHS to manage federally-facilitated Public Exchanges in their states, 16 states established state-run Public
Exchanges, and 6 states undertook hybrid federal/state “partnership” Public Exchanges. We have elected to
participate in certain Public Exchanges for 2014. Our future participation in Public Exchanges will depend
on a variety of factors that cannot be predicted with certainty, including the ability of Public Exchanges to
attract and maintain a viable risk pool and our ability to price or otherwise be compensated for the risk we
assume.
• Expansion of eligibility for state-based Medicaid coverage beginning in 2014, subject to each state's ability
to opt out.
• Establishment of an individual mandate and federal assistance to purchase health coverage for individuals
beginning in 2014.
• Establishment of employer penalties for certain large employers whose plans do not provide “minimum
value” or are “unaffordable” and detailed public reporting and disclosure requirements for health plans,
with enforcement of each of these penalties beginning in 2015.
• A non-deductible 40% excise tax on employer-sponsored health care benefits above a certain threshold
beginning in 2018.
Health Care Reform also specifies minimum MLRs for our Commercial Insured products, specifies required benefit
designs, limits individual and small group rating practices, encourages additional competition (including potential
incentives for new market entrants) and significantly increases federal oversight of health plans, including
regulations and processes that could delay or limit our ability to appropriately increase our health plan premium
rates. This in turn could adversely affect our ability to continue to participate in certain product lines and/or
geographies we serve today. Health Care Reform will require us to phase out many of our current limited benefit
product offerings no later than 2014, and the application of minimum MLR standards to both our limited benefit
and student health products may have an adverse effect on our ability to sell these products in the future.
In addition, certain provisions of Health Care Reform tie Medicare Advantage plans' premiums to the achievement
of favorable CMS quality performance measures (“star ratings”). In 2013 and 2014, 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