Aetna 2014 Annual Report Download - page 63

Annual Report- Page 57
Competitive and economic pressures may limit our ability to increase pricing to reflect higher costs or may force
us to accept lower margins. If customers elect to self-insure, reduce benefits or adversely renegotiate or amend
their agreements with us, our revenues and operating results will be negatively affected.
Our customer contracts are generally for a period of one year, and our customers have considerable flexibility in
moving between us and our competitors. One of the key factors on which we compete for customers, especially in
light of the current adverse and uncertain economic environment, is overall cost. We are therefore under pressure to
contain premium price increases despite being faced with increasing health care and other benefit costs and
increasing operating costs. If we are unable to increase our prices to reflect increasing costs, our profitability will be
adversely affected. If we are unable to limit our price increases, we may lose members to competitors with more
favorable pricing, adversely affecting our revenues and operating results.
In response to rising prices, our customers may elect to self-insure or to reduce benefits in order to limit increases in
their benefit costs. Alternatively, our customers may purchase different types of products from us that are less
profitable. Such elections may result in reduced membership in our more profitable Insured products and/or lower
premiums for our Insured products, which may adversely affect our revenues and operating results, although such
elections also may reduce our health care and other benefit costs.
In addition, our Medicare, Medicaid and CHIP products are subject to termination without cause, periodic re-bid,
rate adjustment and program redesign, as customers seek to contain their benefit costs, particularly in a slow
economy. These actions may adversely affect our membership, revenues and operating results.
If we fail to compete effectively in the geographies and product areas in which we operate, including
maintaining or increasing membership in our Health Care business, our operating results, financial condition
and cash flows could be materially and adversely affected.
Our businesses face significant competition in all of the geographies and product areas in which we operate. In our
Health Care business, we compete on the basis of many factors, including perceived overall quality, quality of
service, comprehensiveness of coverage, cost (including premium, provider discounts and member out-of-pocket
costs), product design, financial stability and ratings, breadth and quality of provider networks, providers available
in such networks, and quality of member support and care management programs. Our competitors in our Health
Care business include, among others, United HealthGroup, Inc., Anthem, Inc., Humana Inc., Cigna Corporation,
WellCare Health Plans, Inc., Centene Corporation, Health Net, Inc., Kaiser Permanente, health system owned health
plans, and numerous for-profit and not-for-profit organizations operating under licenses from the Blue Cross and
Blue Shield Association. Additional competitors in our businesses include other types of medical and dental
provider organizations, various specialty service providers (including pharmacy benefit management services
providers), health care consultants, integrated health care delivery organizations, third-party administrators, HIT
companies and, for certain plans, programs sponsored by the federal or state governments. In particular
geographies, competitors may have greater capabilities, resources or membership; a more established reputation;
superior supplier or health care professional arrangements; better business relationships; or other factors that give
such competitors a competitive advantage. We have begun to compete for sales on Insurance Exchanges and to
build a consumer business, where we face additional risks from existing and new competitors (including our
vendors) who have lower cost structures, greater experience marketing to consumers and/or who target the higher
margin portions of our business. Among our international and HIT competitors, many have longer operating
histories, better brand recognition and greater market presence in many of the areas in which we are seeking to
expand and more experience at rapidly innovating products. If we do not compete effectively in the geographies and
product areas in which we operate, our business, operating results, financial condition and cash flows could be
materially and adversely affected.
For more information on these risks, see:
• “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”,
beginning on page 44;