Aetna 2015 Annual Report Download - page 34

Annual Report- Page 28
Ongoing legislative and regulatory changes to Health Care Reform, other pending efforts in the U.S. Congress to
amend or restrict funding for various aspects of Health Care Reform (including risk corridors), the 2016 presidential
election, pending litigation challenging aspects of the law and federal budget negotiations continue to create
uncertainty about the ultimate impact of Health Care Reform. Examples of these legislative and regulatory changes
include: the December 2015 suspension of the HIF for 2017 and two year delay of the “Cadillac” tax on high-cost
employer-sponsored health coverage; the October 2015 PACE, which leaves groups with 51 to 100 employees
within the large group category for each state unless the state exercises its option to include these groups within the
small group category; and the October 2015 HHS announcement that Health Care Reform risk corridor receivables
for the 2014 program year would only be funded at 12.6%. The pending litigation includes the House of
Representatives’ challenge to HHS’s ability to make payments under the ACA’s Cost Sharing Subsidy program
without an explicit appropriation.
As described above, the availability of funding for the ACA’s temporary risk corridor program is an example of this
uncertainty. In May 2014, CMS published a final rule on Public Exchanges. The final rule provides that payments
to health plans under the ACA’s risk corridor program will no longer be limited to the aggregate amount of the risk
corridor collections received by HHS over the duration of the risk corridor program. However, it is possible that
payments to health plans under the risk corridor program will require additional appropriation legislation to be
passed by the U.S. Congress. In each of December 2014 and December 2015, legislation was enacted that prohibits
HHS’s use of certain funds to pay HHS’s potential obligation under the ACA’s risk corridor program. In October
2015, HHS announced that 2014 Health Care Reform risk corridor receivables would be funded at 12.6% to the
extent HHS fully collects risk corridor payables. As a result, we continue to believe that receipt of any risk corridor
payment from HHS for the 2015 program year and receipt of such payments in excess of the 12.6% prorated
amount for the 2014 program year are uncertain. At December 31, 2015, we had a $2 million receivable for the
remaining 2014 program year prorated amount that had not been collected from HHS and no receivable for the
2015 program year. In addition, these limited risk corridor payments may create instability in the marketplace for
individual Commercial products in 2016 and going forward by, among other things, causing health plans to change
or stop offering their Public Exchange products. 2016 is the last program year for the ACA’s risk corridor program.
The federal and state governments also continue to enact and seriously consider many other broad-based legislative
and regulatory proposals that have had a material impact on or could materially impact various aspects of the health
care and related benefits system. We cannot predict whether pending or future federal or state legislation or court
proceedings, including future U.S. Congressional appropriations, will change various aspects of the health care and
related benefits system or Health Care Reform or the impact those changes will have on our business operations or
financial results, but the effects could be materially adverse.
The expansion of health care coverage contemplated by Health Care Reform is being funded in part by significant
fees, assessments and taxes on us and other health insurers, health plans and other market participants and
individuals which began in 2014, as well as reductions to the reimbursements we and other health plans are paid by
the federal government for our Medicare members, among other sources. Most of the significant provisions of
Health Care Reform became effective prior to December 31, 2014. While not all-inclusive, the following are some
of the key provisions of Health Care Reform (assuming it continues to be implemented in its current form) that
become effective on or after January 1, 2016. We continue to evaluate these provisions and the related regulations
and regulatory guidance to determine the impact that they will have on our business operations and financial results:
• Closure of the gap in coverage for Medicare Part D prescription drug coverage (the so-called “donut hole”)
which began to close in 2010 and will incrementally close until the coverage gap is eliminated in 2020.
• Continuing reductions to Medicare Advantage payment rates for payments to us (we and other plans will
ultimately receive a range of 95% of Medicare fee-for-service rates in high cost areas to 115% of Medicare
fee-for-service rates in low cost areas) over a two- to six-year period which began in 2012 based on
regionally-adjusted benchmarks and the linking of Medicare Advantage payments to a plan’s CMS quality
performance ratings or “star ratings.” These payment reductions and/or any inability on our part to achieve
and maintain acceptable star ratings could have a material adverse effect on our Medicare business and/or
the geographies in which our Medicare products are available.