Aetna 2014 Annual Report Download - page 50

Annual Report- Page 44
• “Recent legislative changes and Medicare Advantage and PDP rates for 2015 and proposed rates for 2016
create significant challenges to our Medicare Advantage and PDP revenues and operating results, and
proposed changes to these programs could create significant additional challenges. Entitlement program
reform, if it occurs, could have a material adverse effect on our business, operations or operating results”,
beginning on page 46; and
• “Programs funded by the U.S. 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”, beginning on page 55.
While we consider the foregoing to be the overarching risks we face in 2015, they are not the only material risks we
face. We face numerous other challenges, as described elsewhere in this Annual Report, including below in this
“Forward-Looking Information and Risk Factors” discussion, and other unanticipated risks may develop.
Our strategy may not be an effective response to the changing dynamics in the health and related benefits
industry, or we may not be able to implement our strategy and related strategic projects effectively.
Our strategy includes effectively investing our capital and human resources in appropriate strategic projects, current
operations and acquisitions to respond to changing dynamics in the health and related benefits industry, including
the shift toward the direct-to-consumer marketing and operating model contemplated by Public Exchanges and
Private Exchanges (collectively, “Insurance Exchanges”), the declining number of commercially insured people and
the potential shift to a defined contribution model for health benefits. Our strategic projects include, among other
things: significant investments in human and technology resources to grow our Healthagen® business, create a
consumer business and compete effectively in a direct-to-consumer marketplace; transforming our business model
through consumer engagement, ACOs and collaborative provider networks; participating in Insurance Exchanges;
optimizing our business platforms; managing certain significant technology projects; further improving relations
with health care providers; negotiating contract changes with customers and providers; and implementing other
business process improvements. Implementing our strategic initiatives will require significant investments of capital
and human resources. Among other things, we will need to simultaneously acquire and develop new personnel,
products and systems to serve existing and new markets, particularly the consumer business we are creating, and
enhance our existing customer service, information technology, control and compliance processes and systems. The
future performance of our businesses will depend in large part on our ability to design and implement our strategic
initiatives, some of which will occur over several years. If these initiatives do not achieve their objectives, our
operating results could be adversely affected.
Our strategy may not be an effective response to the changing dynamics in the health and related benefits industry,
and we may fail to recognize and position ourselves to capitalize upon market opportunities. We may not have
sufficient advance notice and resources to develop and effectively implement an alternative strategy. Competitors
who develop a superior strategy, or more effectively implement their strategy, may develop capabilities, competitive
advantages and competitive positions that are difficult to match or overcome.
Health Care Reform and Other Legal and Regulatory Risks
We are subject to potential changes in public policy (in respect of Health Care Reform or otherwise) that can
adversely affect the markets for our products and services and our business, operations and financial results.
The political environment in which we operate remains uncertain. It is reasonably possible that our business
operations and financial results could be materially adversely affected by public policy changes at the state or
federal level, which include Health Care Reform but also extend to many other public policy initiatives. Such
changes may present us with new financial and other challenges and may, for example, cause membership in our
health plans to decrease or make doing business in particular states less attractive. If we fail to adequately respond
to such changes, including by implementing effective operational and strategic initiatives, or do not do so as
effectively as our competitors, our business, operations and financial results may be materially adversely affected.