Aetna 2014 Annual Report Download - page 54

Annual Report- Page 48
rebates by federal and state regulators and private litigants are reasonably possible. The outcome of these challenges
could adversely affect our operating results.
Additionally, we are required to pay minimum MLR rebates in a limited number of states in which we offer
Medicaid coverage. These rebates are not required by Health Care Reform; they are mandated by the our Medicaid
contracts.
We may be subject to regulatory actions or suffer reputational harm if we do not or cannot adequately implement
Health Care Reform and related legislation, which may have a material adverse effect on our business.
Health Care Reform enacted in 2010, legislated broad-based changes to the U.S. health care system. To date the
constitutionality of Health Care Reform has been upheld, although significant portions of the law are subject to
pending litigation. We have dedicated, and will continue to dedicate, material resources and incur material expenses
to implement and comply with Health Care Reform and any future changes in Health Care Reform at both the state
and federal level, including complying with the implementation timeframe set by the government each year for
developing and pricing our Public Exchange products for the following year (which is significantly shorter for 2016
than for 2015) and implementing and complying with future regulations that will provide guidance on and
clarification of and changes to significant parts of the legislation. If we fail to effectively implement Health Care
Reform and our related operational and strategic initiatives, or do not do so as effectively as our competitors, our
business, operating results and reputation may be materially adversely affected, we may lose customers and we may
be subject to penalties, sanctions or other regulatory actions.
If we are unable to include the significant assessments, fees and taxes imposed on us by Health Care Reform in
our premiums and fees or otherwise solve for them, our operating results, financial condition and/or cash flows
would be materially and adversely affected. The inclusion of these assessments, fees and taxes in our premiums
also could adversely affect our ability to grow and/or maintain our medical membership.
Health Care Reform imposes significant assessments, fees and taxes on us and other health insurers, health plans
and other industry participants. We project that our share of the 2015 Health Care Reform assessments, fees and
taxes will be approximately $1.1 billion. As we are one of the nation’s largest health care benefits companies, we
expect our share of the Health Care Reform fees, assessments and taxes to continue to be significant. There is some
uncertainty whether we will be able to include all of these assessments, fees and taxes in our premium rates. For
example, our ability to reflect Health Care Reform assessments, fees and taxes in our Medicare rates is limited; and
our ability to reflect them in our Medicaid and CHIP rates is likely to be limited due, among other things, to the
budgetary pressures currently facing many state governments. If we are unable to include the Health Care Reform
assessments, fees and taxes in our premiums and fees or otherwise adjust our business model to solve for them,
these assessments, fees and taxes could have a material adverse effect on our operating results, financial condition
and/or cash flows. The increases in our prices caused by including all of these assessments, fees and taxes in our
premiums and fees also could adversely affect our ability to profitably grow and/or maintain our medical
membership if, for example, our competitors do not seek to include all or a significant portion of these assessments,
fees and taxes in their premiums or fees.
Our business activities are highly regulated. Our Medicare, Medicaid, mail order pharmacy, Public Exchange
and certain other products are subject to particularly extensive and complex regulations. If we fail to comply
with applicable laws and regulations, we could be subject to significant adverse regulatory actions or suffer
reputational harm which may have a material adverse effect on our business. Compliance with future laws,
regulations and/or judicial decisions may reduce our profitability and limit our growth.
Our business is subject to extensive regulation and oversight by state, federal and international governmental
authorities. The laws and regulations governing our operations and interpretations of those laws and regulations are
increasing in number and complexity, change frequently (as evidenced by Health Care Reform and administrative
changes in, and pending litigation regarding, the implementation of Health Care Reform as well as other new
federal and state laws and regulations), can be inconsistent or conflicting and generally are designed to benefit and
protect members and providers rather than us or our investors. In addition, the governmental authorities that