Aetna 2014 Annual Report Download - page 42

Annual Report- Page 36
average 2015 star rating is 4.00. Based on our membership at December 31, 2014, 79.4% of our Medicare
Advantage members were in plans with 2015 star ratings of at least 4.0 stars. CMS will release updated stars ratings
in October 2015 that will be used to determine the portion of our Medicare Advantage membership that will reside
in plans with ratings of four stars or higher and qualify for bonus payments in 2017. In 2015 and going forward,
our Medicare Advantage plans’ operating results are likely to continue to be significantly determined by their star
ratings. Despite our success in improving our star ratings and other quality measures for 2015 and the continuation
of our improvement efforts, there can be no assurances that we will be successful in maintaining or improving our
star ratings in future years. Accordingly, our plans may not be eligible for full level quality bonuses, which could
adversely affect the benefits such plans can offer, reduce membership and/or reduce profit margins.
We cannot predict future Medicare funding levels or the impact that future federal budget actions or entitlement
program reform, if it occurs, will have on our business, operations or operating results, but the effects could be
materially adverse, particularly on our Medicare and/or Medicaid revenues and operating results. For example, the
Federal government may seek to impose restrictions on the configuration of pharmacy or other provider networks
for Medicare Advantage and/or PDP plans, or otherwise restrict the ability of these plans to alter benefits, negotiate
prices or establish other terms to improve affordability or maintain viability of products. We currently believe that
the payments we receive and will receive in the near term are adequate to justify our continued participation in the
Medicare program, although there are economic and political pressures to continue to reduce spending on the
program, and this outlook could change.
Going forward, we expect CMS and the U.S. Congress to continue to closely scrutinize each component of the
Medicare program (including Medicare Part D drug benefits), modify the terms and requirements of the program
and possibly seek to limit private insurers’ role. It is not possible to predict the outcome of this Congressional or
regulatory activity, either of which could adversely affect us.
Medicaid
We are seeking to substantially grow our Medicaid and dual eligible businesses over the next several years. As a
result, we also are increasing our exposure to changes in government policy with respect to and/or regulation of the
various Medicaid and dual eligible programs in which we participate, including changes in the amounts payable to
us under those programs.
The impact of Medicaid expansion under Health Care Reform is uncertain. States may opt out of the elements of
Health Care Reform requiring expansion of Medicaid coverage without losing their current federal Medicaid
funding, and governors and/or legislatures in over a dozen states have indicated that they may not support the
implementation of Medicaid expansion under Health Care Reform. At least 26 states have expanded Medicaid
coverage, and some governors are supporting alternative Medicaid expansion plans that are subject to further CMS
approval. In addition, the election of new governors and/or state legislatures may impact states’ previous decisions
regarding Medicaid expansion.
The economic aspects of the Medicaid and dual eligible business vary from state to state and are subject to frequent
change. Medicaid premiums are paid by each state and differ from state to state. The federal government and
certain states are also considering proposals and legislation for Medicaid and dual eligible program reforms or
redesigns, including further program, population and/or geographic expansions of risk-based managed care,
changes to benefits, reimbursement, or payment levels, eligibility criteria, provider network adequacy requirements
(including requiring the inclusion of specified high cost providers in our networks) and program structure. In some
states, current Medicaid and dual eligible funding and premium revenue may not be adequate for us to continue
program participation due to state and federal budgetary constraints and continuing efforts to reduce health care
costs. In addition, our Medicaid and dual eligible contracts with states (or sponsors of Medicaid managed care
plans) are subject to cancellation by the state (or the sponsors of the managed care plans) after a short notice period
without cause (for example, when a state discontinues a managed care program) or in the event of insufficient state
funding.