Aetna 2013 Annual Report Download - page 55

Annual Report- Page 49
beginning in 2014, growing to $14.3 billion by 2018 and increasing annually thereafter. This health insurer fee is
not deductible for income tax purposes and will be allocated pro rata among us and other industry participants based
on net premiums written. Health Care Reform also imposes industry-wide reinsurance assessments of $12 billion,
$8 billion and $5 billion in 2014, 2015 and 2016, respectively, which will be allocated pro rata among us and other
industry participants based on net premiums written for insured business plus the fees received and cost of coverage
administered for self-insured business. As we are one of the nation's largest health care benefits companies, we
project that our share of the 2014 Health Care Reform assessments, fees and taxes will be approximately $1 billion.
There is some uncertainty whether we will be able to include all or a portion of these assessments, fees and taxes in
our premium rates. For example, our ability to reflect Health Care Reform assessments, fees and taxes in our
Medicare rates is limited; and our ability to reflect them in our Medicaid and SCHIP rates is likely to be limited
due, among other things, to the budgetary pressures currently facing many state governments. If we are unable to
include the Health Care Reform assessments, fees and taxes in our premiums and fees or otherwise adjust our
business model to solve for them, these assessments, fees and taxes could have a material adverse effect on our
operating results, financial position and/or cash flows. The increases in our prices caused by including of all or a
portion of these assessments, fees and taxes in our premiums and fees also could adversely affect our ability to
profitably grow and/or maintain our medical membership if, for example, our competitors do not seek to include all
or a significant portion of these assessments, fees and taxes in their premiums or fees.
We may be subject to regulatory actions or suffer reputational harm if we do not or cannot adequately implement
Health Care Reform and related legislation, which may have a material adverse effect on our business.
In March 2010, Health Care Reform was enacted, legislating broad-based changes to the U.S. health care system,
and to date its constitutionality has been upheld. We have dedicated, and will continue to dedicate, material
resources and incur material expenses to implement and comply with Health Care Reform and any future changes
in Health Care Reform at both the state and federal level, including implementing and complying with the future
regulations that will provide guidance on and clarification of and changes to significant parts of the legislation. If
we fail to effectively implement Health Care Reform and our related operational and strategic initiatives, or do not
do so as effectively as our competitors, our business, operating results and reputation may be materially adversely
affected, we may lose customers and we may be subject to penalties, sanctions or other regulatory actions.
Many aspects of Health Care Reform have yet to take full effect, are unclear, or are subject to change, making
their practical effects difficult to predict. Our business and operating results may be materially and adversely
affected by Health Care Reform even if we correctly predict its effects.
Although Health Care Reform was enacted in March 2010, key components will continue to be phased in over the
next several years. Federal budget negotiations, the technical problems with the federal health insurance exchange
website, ongoing regulatory changes to Health Care Reform (such as the November 2013 action permitting renewal
through 2014 of individual insurance policies that do not comply with Health Care Reform), pending efforts in the
U.S Congress to amend or restrict funding for various aspects of Health Care Reform and litigation challenging
aspects of the law continue to create uncertainty about the ultimate impact of the legislation. While key components
of Health Care Reform will continue to be phased in through 2018, the most significant changes will occur in 2014,
including Public Exchanges, Medicare minimum MLRs, the individual coverage mandate, guaranteed issue, rating
limits in the individual and small group markets, and significant new industry-wide assessments, fees and taxes. In
addition, while the federal government has issued a number of regulations implementing Health Care Reform, many
significant parts of the legislation, including aspects of Public Exchanges, Medicaid expansion, enforcement related
reporting for the individual and employer mandates, assessments, taxes and fees, reinsurance, risk corridor, risk
adjustment, and the implementation of Medicare Advantage and Part D minimum MLRs, have not been fully
implemented and require further guidance and clarification at the federal level and/or in the form of regulations and
actions by state legislatures to implement the law. The federal government also has announced significant changes
to and/or delays in the effective dates of various aspects of Health Care Reform, and it is likely that further changes
will be made to Health Care Reform as issues arise and its practical effects become clearer. Growing state and
federal budgetary pressures are making it more likely that any changes will be adverse to us.