Aetna 2015 Annual Report Download - page 148

Annual Report- Page 142
investigations by, and subpoenas and requests from, attorneys general and others described above under “Out-of-
Network Benefit Proceedings.”
A significant number of states are investigating life insurers’ claims payment and related escheat practices, and
these investigations have resulted in significant charges to earnings by other life insurers in connection with related
settlements. We have received requests for information from a number of states, and certain of our subsidiaries are
being audited, with respect to our life insurance claim payment and related escheat practices. In the fourth quarter
of 2013, we made changes to our life insurance claim payment practices (including related escheatment practices)
based on evolving industry practices and regulatory expectations and interpretations, including expanding our
existing use of the Social Security Administration’s Death Master File to identify additional potentially unclaimed
death benefits and locate applicable beneficiaries. As a result of these changes, in the fourth quarter of 2013, we
increased our estimated liability for unpaid life insurance claims with respect to insureds who passed away on or
before December 31, 2013, and recorded in current and future benefits a charge of $35.7 million ($55.0 million
pretax). Given the judicial, legislative and regulatory uncertainty with respect to life insurance claim payment and
related escheat practices, it is reasonably possible that we may incur additional liability related to those practices,
whether as a result of further changes in our business practices, litigation, government actions or otherwise, which
could adversely affect our operating results and cash flows.
There also continues to be a heightened level of review and/or audit by regulatory authorities of, and increased
litigation regarding, our and the rest of the health care and related benefits industry’s business and reporting
practices, including premium rate increases, utilization management, development and application of medical
policies, complaint, grievance and appeal processing, information privacy, provider network structure (including
provider network adequacy, the use of performance-based networks and termination of provider contracts), provider
directory accuracy, calculation of minimum medical loss ratios, delegated arrangements, rescission of insurance
coverage, limited benefit health products, student health products, pharmacy benefit management practices
(including the use of narrow networks and the placement of drugs in formulary tiers), sales practices, customer
service practices, vendor oversight and claim payment practices (including payments to out-of-network providers
and payments on life insurance policies).
As a leading national health and related benefits company, we regularly are the subject of government actions of the
types described above. These government actions may prevent or delay us from implementing planned premium
rate increases and may result, and have resulted, in restrictions on our business, changes to or clarifications of our
business practices, retroactive adjustments to premiums, refunds or other payments to members, beneficiaries, states
or the federal government, withholding of premium payments to us by government agencies, assessments of
damages, civil or criminal fines or penalties, or other sanctions, including the possible suspension or loss of
licensure and/or suspension or exclusion from participation in government programs.
Estimating the probable losses or a range of probable losses resulting from litigation, government actions and other
legal proceedings is inherently difficult and requires an extensive degree of judgment, particularly where the
matters involve indeterminate claims for monetary damages, may involve fines, penalties or punitive damages that
are discretionary in amount, involve a large number of claimants or regulatory authorities, represent a change in
regulatory policy, present novel legal theories, are in the early stages of the proceedings, are subject to appeal or
could result in a change in business practices. In addition, because most legal proceedings are resolved over long
periods of time, potential losses are subject to change due to, among other things, new developments, changes in
litigation strategy, the outcome of intermediate procedural and substantive rulings and other parties’ settlement
posture and their evaluation of the strength or weakness of their case against us. Except as specifically noted above
under “Other Litigation and Regulatory Proceedings,” we are currently unable to predict the ultimate outcome of, or
reasonably estimate the losses or a range of losses resulting from, the matters described above, and it is reasonably
possible that their outcome could be material to us.