Aetna 2014 Annual Report Download - page 34

Annual Report- Page 28
law. The federal government also has announced significant changes to and/or delays in effective dates of various
aspects of Health Care Reform, and it is likely that further changes will be made at the federal and/or state level
based on implementation experience. As a result, key aspects and impacts of Health Care Reform will not be known
for several years, and given the inherent difficulty of foreseeing how individuals and businesses will respond to the
choices afforded them by Health Care Reform, we cannot predict the full effect Health Care Reform will have on
us. It is reasonably possible that Health Care Reform, in the aggregate, could have a material adverse effect on our
business operations and financial results.
Federal budget negotiations, ongoing regulatory changes to Health Care Reform (such as the November 2013 action
permitting renewal through 2014 of individual and small group insurance policies that do not comply with Health
Care Reform and the March 2014 action permitting such renewal through 2017), 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 Health Care Reform. An example of this
uncertainty is the litigation pending before the U.S. Supreme Court concerning whether the Internal Revenue
Service may make tax credits available as a form of subsidy to individuals who purchase health insurance through
Public Exchanges established by the federal government (“Federal Exchanges”). We will continue to enroll and
insure members through the Federal Exchanges pending the resolution of this and other pending cases. If the
payment of subsidies with respect to members who enroll through the Federal Exchanges ultimately is invalidated,
it could result in a significant reduction in Aetna’s Public Exchange membership because almost all of Aetna’s
Public Exchange membership is through Federal Exchanges, and most of those members benefit from a tax subsidy.
The availability of funding for the ACA’s risk corridor program is a second example of this uncertainty. In May
2014, CMS published a final rule on Public Exchanges. The final rule provides that payments to health plans under
the risk corridor program required by Health Care Reform will no longer be limited to the aggregate amount of the
risk corridor collections received by HHS over the duration of the risk corridor program. However, it is possible
that payments to health plans under the risk corridor program will require additional appropriation legislation to be
passed by the U.S. Congress. Additionally, in December 2014, the Consolidated and Further Continuing
Appropriations Act was enacted, which among other things, prohibits HHS’s use of certain funds to pay HHS’s
potential obligation under the ACA’s risk corridor program. As a result, we did not record any receivable under the
ACA’s risk corridor program at December 31, 2014.
In addition, the federal and state governments continue to enact and seriously consider many other broad-based
legislative and regulatory proposals that have impacted or could materially impact various aspects of the health care
system. We cannot predict whether pending or future federal or state legislation or court proceedings, including
future U.S. Congressional appropriations and the proceedings relating to tax credits for Federal Exchange members
described above, will change various aspects of the health care system or Health Care Reform or the impact those
changes will have on our business operations or financial results, but the effects could be materially adverse.
The expansion of health care coverage contemplated by Health Care Reform is being funded in part by significant
fees, assessments and taxes on us and other health insurers, health plans and other market participants and
individuals which began in 2014, as well as reductions to the reimbursements we and other health plans are paid by
the federal government for our Medicare members, among other sources. Most of the significant provisions of
Health Care Reform became effective prior to December 31, 2014. While not all-inclusive, the following are some
of the key provisions of Health Care Reform (assuming it continues to be implemented in its current form) that
become effective on or after January 1, 2015. We continue to evaluate these provisions and the related regulations
and regulatory guidance to determine the impact that they will have on our business operations and financial results:
• Closure of the gap in coverage for Medicare Part D prescription drug coverage (the so-called “donut hole”)
which began to close in 2010 and will incrementally close until the coverage gap is eliminated in 2020.
• Freezing 2011 Medicare Advantage payment rates for payments to us at 2010 levels, with additional
reductions (we and other plans will ultimately receive a range of 95% of Medicare fee-for-service rates in
high cost areas to 115% of Medicare fee-for-service rates in low cost areas) over a two- to six-year period
which began in 2012 based on regionally-adjusted benchmarks and the linking of Medicare Advantage