Aetna 2014 Annual Report Download - page 35

Annual Report- Page 29
payments to a plan’s CMS quality performance ratings or “star ratings.” These payment reductions and/or if
we are unable to achieve and maintain acceptable star ratings could have a material adverse effect on our
Medicare business and/or the geographies in which our Medicare products are available.
• The imposition on us and other health insurers, health plans and other market participants of significant
fees, assessments and taxes, including an annual non-deductible industry-wide $11.3 billion health insurer
fee in 2015 and growing to $14.3 billion by 2018 and increasing annually thereafter, and industry-wide
reinsurance assessments of $8 billion and $5 billion in 2015 and 2016, respectively. We project that our
share of the 2015 Health Care Reform fees, assessments and taxes will be approximately $1.1 billion,
which includes our share of the ACA’s health insurer fee, which we project will be approximately $900
million. We may not be able to recover all of these fees, assessments and taxes in our pricing or otherwise
solve for them. In addition, our effective income tax rate is expected to increase in 2015 as a result of the
increase over 2014 in the non-tax deductible health insurer fee.
• 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 and Medicare Insured products, specifies
required benefit designs, limits individual and small group rating and pricing practices, encourages additional
competition (including potential incentives for new market entrants) and significantly increases federal and state
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. The application of Health Care Reform’s minimum MLR
and rating standards to our 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
premium rates. Beginning in 2015, only Medicare Advantage plans with an overall star rating of four or more stars
will be eligible for a quality bonus. As a result, our Medicare Advantage plans’ operating results in 2015 and going
forward are likely to be significantly determined by their star ratings. For additional information on CMS’s stars
program and our related performance, see “Medicare” beginning on page 35.
For additional discussion of certain risk factors that may cause our actual results to differ from currently anticipated
results in connection with federal and state health care reform, refer to “Forward-Looking Information/Risk
Factors” beginning on page 42.
In 2014, state legislatures focused on Health Care Reform (including Public Exchange implementation and
premium rate review), state budget issues (including Medicaid funding) and tax legislation. At the state level, all
U.S. states and the District of Columbia will hold regular legislative sessions in 2015. We expect additional state
level legislation and regulatory activity that impacts our businesses to be enacted in 2015, including additional
Health Care Reform-related and budget-related activity. In addition, independent of federal efforts, we expect many
states to continue to consider legislation or regulations that affect privately-financed health insurance arrangements
and/or public programs, including imposing requirements on the composition of our provider networks, requiring
changes to health benefit product structure, requiring changes to pharmacy benefit product structure, mandating
specific benefit coverages, requiring changes to stop loss insurance products, extending coverage to the uninsured
through Medicaid expansion, mandating minimum MLRs, expanding the maximum size of “small group” business
to larger groups, implementing rating reforms for groups and enhancing consumer transparency on cost and quality
of care. For example, regulators or legislatures in a number of states have implemented or are considering limits on
premium rate increases, either enforcing existing legal requirements more stringently or proposing different
regulatory standards or procedures for reviewing proposed premium rate changes; requiring us and other health