Aetna 2014 Annual Report Download - page 59

Annual Report- Page 53
involving the theft, misappropriation, loss or other unauthorized disclosure of, or access to, sensitive or confidential
member information, whether by us, by one of our vendors or by another third party, could require us to expend
significant resources to remediate any damage, interrupt our operations and damage our reputation, and could also
result in investigations, regulatory enforcement actions, material fines and penalties, loss of customers, litigation or
other actions which could have a material adverse effect on our business, brand, reputation, cash flows and
operating results.
In addition, while we have prepared for the transition to ICD-10, if unforeseen circumstances arise, it is possible
that we could be exposed to investigations and allegations of noncompliance, which could have a material adverse
effect on our results of operations, financial condition and cash flows. In addition, if some providers continue to use
ICD-9 codes on claims after the final implementation date (currently October 1, 2015), we will have to reject such
claims, which may lead to claim resubmissions, increased call volume and provider and customer dissatisfaction.
Further, providers may use ICD-10 codes differently than they used ICD-9 codes in the past, which could result in
lost revenues under risk adjustment. During the transition to ICD-10, certain claims processing and payment
information we have historically used to establish our reserves may not be reliable or available in a timely manner.
If we do not adequately implement the new ICD-10 coding set, or if providers do not adequately transition to the
new ICD-10 coding set, our results of operations, financial condition and cash flows may be materially adversely
affected.
Our business depends on our members’ and customers’ willingness to entrust us with their health related and other
sensitive personal information. Events that negatively affect that trust, including failing to keep our information
technology systems and our members’ and customers’ sensitive information secure from significant attack, theft,
damage, loss or unauthorized disclosure or access, whether as a result of our action or inaction or that of our
business associates, vendors or other third parties, including our PBM services suppliers, could adversely affect our
reputation, membership and revenues and also expose us to mandatory disclosure to the media, litigation (including
class action litigation) and other enforcement proceedings, material fines, penalties and/or remediation costs, and
compensatory, special, punitive and statutory damages, consent orders, adverse actions against our licenses to do
business and/or injunctive relief, any of which could adversely affect our business, cash flows, operating results or
financial condition. There can be no assurance that any such failure will not occur, or if any does occur, that we will
detect it or that it can be sufficiently remediated.
We are subject to retroactive adjustments to and/or withholding of certain premiums and fees, including as a
result of CMS RADV audits. We generally rely on health care providers to appropriately code claim submissions
and document their medical records. If these records do not appropriately support our risk adjusted premiums,
CMS may require us to refund premium payments.
Premiums and/or fees for Medicare members, certain federal government employee groups and Medicaid
beneficiaries are subject to retroactive adjustments and/or withholding by the federal and applicable state
governments. Our Public Exchange business, including amounts payable to us or payable by us under the Health
Care Reform premium stabilization programs and our risk adjustment and reinsurance data, also is subject to audit
by governmental authorities. CMS regularly audits our performance to determine our compliance with CMS’s
regulations and our contracts with CMS and to assess the quality of the services we provide to our Medicare
members.
CMS uses various payment mechanisms to allocate and adjust premium payments to our and other companies’
Medicare plans by considering the applicable health status of Medicare members as supported by information
prepared, maintained and provided by health care providers. We collect claim and encounter data from providers
and generally rely on providers to appropriately code their submissions to us and document their medical records,
including the diagnosis data submitted to us with claims. CMS pays increased premiums to Medicare Advantage
plans and PDPs for members who have certain medical conditions identified with specific diagnosis codes. Federal
regulators review and audit the providers’ medical records to determine whether those records support the related
diagnosis codes that determine the members’ health status and the resulting risk-adjusted premium payments to
us. In that regard, CMS has instituted risk adjustment data validation (“RADV”) audits of various Medicare
Advantage plans, including certain of the Company’s plans, to validate coding practices and supporting medical