Aetna 2013 Annual Report Download - page 64

Annual Report- Page 58
Programs funded by the United States federal government account for a substantial portion of our revenue and
operating earnings. A delay by Congress in raising the federal government’s debt ceiling could lead to a delay,
reduction, suspension or cancellation of federal government spending and a significant increase in interest rates
that could, in turn, have a material adverse effect on our businesses, operating results and cash flows.
The federal government’s “debt ceiling”, or the amount of debt the federal government is permitted to borrow to
meet its legal obligations (including, among other things, interest on the national debt, Medicare and Medicaid
premiums, Social Security benefits and contributions to the Federal Employees Health Benefits Program), is limited
by statute and can only be raised by an act of Congress.
If Congress does not raise the debt ceiling before the federal government’s current obligations approach or exceed
its cash on hand and incoming receipts, federal government spending may be subject to delay, reduction, suspension
or cancellation, including a federal government shutdown, which may be prolonged. A significant portion of our
revenues are derived from health care coverage programs that are funded in whole or in part by the federal
government, including the Medicare, Medicaid, and dual eligible programs, SCHIP and the Federal Employees
Health Benefits Program and subsidies for qualified individuals and families purchasing health insurance through
Public Exchanges. If federal spending is delayed, suspended or curtailed, we would continue to receive claims from
providers providing services to beneficiaries of these programs, and we could be liable for, and be required to fund,
such claims. Furthermore, the terms of our disability products often provide that the benefits due to beneficiaries are
reduced by the amount of certain federal benefits they receive, most notably Social Security Disability Insurance
payments. If such payments are suspended due to a failure to timely raise the debt ceiling, our disability payment
obligations would be increased accordingly. If beneficiaries subsequently receive such payments from the federal
government, we would seek reimbursement or attempt to offset a portion of such payments against future disability
benefit payments. We may not be successful in recovering the amount sought. A failure to timely raise the debt
ceiling could have a material adverse effect on our businesses, operating results, cash flows and reputation and, in
the case of a prolonged failure to raise the debt ceiling, our financial condition.
If the United States defaults on its obligations due to a failure to timely raise the debt ceiling or otherwise, or its
credit rating is downgraded by any of the credit rating agencies, interest rates could rise, financial markets could
become volatile and/or the availability of credit (and short-term credit in particular) could be adversely affected,
thereby increasing our borrowing costs, negatively impacting the value of our investment portfolio, and/or
adversely affecting our ability to access the capital markets, which could have a material adverse effect on our
operating results, financial condition and cash flows and could adversely affect our liquidity.
If our service providers fail to meet their contractual obligations to us or to comply with applicable laws or
regulations, we may be exposed to reputational harm, litigation or regulatory action. This risk is particularly
high in our Medicare, Medicaid and dual eligible programs.
We contract with various third parties to perform certain functions and services and provide us with certain
information technology systems. Our arrangements with these third parties may expose us to public scrutiny,
adversely affect our reputation, expose us to litigation or regulatory action, and otherwise make our operations
vulnerable if we fail to adequately monitor and regulate their performance or if they fail to meet their contractual
obligations to us or to comply with applicable laws or regulations. For example, certain of our vendors have been
responsible for releases of sensitive information of our members and employees, which has caused us to incur
additional expenses and given rise to litigation against us.
These risks are particularly high in our Medicare, Medicaid and dual eligible programs, where third parties perform
pharmacy benefit management, medical management and other member related services for us. Any failure of our
or these third parties' prevention, detection or control systems related to regulatory compliance and/or compliance
with our internal policies could adversely affect our reputation and also expose us to whistleblower, class action and
other litigation, other proceedings, prohibitions on marketing or active or passive enrollment of members, corrective
actions, fines, sanctions and/or penalties, any of which could adversely affect our business, cash flows, operating
results or financial condition. For more information on these matters, see “Our business activities are highly
regulated. Our Medicare, Medicaid, mail order pharmacy and certain other products are subject to particularly