Aetna 2014 Annual Report Download - page 57

Annual Report- Page 51
For more information regarding these matters, refer to “Regulatory Environment” beginning on page 26 and
“Litigation and Regulatory Proceedings” in Note 18 of Notes to Consolidated Financial Statements beginning on
page 127.
If our compliance systems and processes fail or are deemed inadequate, we may suffer reputational harm and
become subject to regulatory actions or litigation which could adversely affect our business, cash flows,
operating results or financial condition.
Our businesses are subject to extensive and complex regulations, and many of our contracts with customers include
detailed requirements. In order to be eligible to offer certain products or bid on certain contracts, we must
demonstrate that we have robust systems in place to ensure that we comply with all applicable legal, regulatory and
contractual requirements. These systems are frequently reviewed and audited by our customers and regulators. If
our systems and processes designed to maintain compliance with applicable requirements, and to prevent and detect
instances of, or the potential for, non-compliance fail or are deemed inadequate, we may suffer reputational harm
and be subject to regulatory actions, litigation and other proceedings which may result in fines, suspension or loss
of licensure, suspension or exclusion from participation in government programs and/or other penalties, any of
which could adversely affect our business, cash flows, operating results or financial condition.
Our litigation and regulatory risk profile is changing as we offer new products and expand in business areas
beyond our historical core business of providing Commercial managed care and health insurance products in
the United States.
Historically, we focused primarily on providing Commercial managed care and health insurance products in the
United States. In comparison, our Medicare and Medicaid businesses were significantly smaller. In 2014, our
Medicare and Medicaid businesses accounted for approximately 42% of total health care premiums. Our business is
now changing due to the following:
• Expansion within the health care marketplace: We are expanding our presence in various sectors of the
health care marketplace, including Medicare, Medicaid, dual eligibles, Commercial individual,
international, and certain customers who are not subject to ERISA’s limits on state law remedies and
working to deliver innovative products in those sectors.
• Entry into new business and new product lines: We are in the process of creating a consumer business. Over
the last several years we have entered into new product lines, including Insurance Exchanges, dual eligible
programs, support services for ACOs, recruitment for clinical trials and HIT.
• Acquisitions: Our 2013 acquisition of Coventry significantly expanded our Medicare, Medicaid,
Commercial individual, network access and Workers Compensation businesses. Our 2014 acquisition of the
InterGlobal group expanded our international business.
These new products and the increased volume of business in areas beyond our historical core business subject us to
litigation and regulatory risks that are different from the risks of providing Commercial managed care and health
insurance products and significantly increase our exposure to other risks.
For additional information about these risks, see:
• “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”,
beginning on page 48;
• “We may not be able to compete effectively in the HIT business and earn a profit. Our HIT business
increases our risk of patent infringement and other intellectual property litigation and may become subject
to significant regulation in the future”, beginning on page 66; and
• “As we expand our international operations, we will increasingly face political, legal and compliance,
operational, regulatory, economic and other risks that we do not face or are more significant than in our
domestic operations. Our exposure to these risks is expected to increase”, beginning on page 70.