Aetna 2015 Annual Report Download - page 45

Annual Report- Page 39
Federal and State Laws and Regulations Governing Submission of Information and Claims to Agencies
We are subject to federal and state laws and regulations that apply to the submission of information and claims to
various government agencies. For example, the False Claims Act provides, in part, that the federal government may
bring a lawsuit against any person or entity who the government believes has knowingly presented, or caused to be
presented, a false or fraudulent request for payment from the federal government, or who has made a false statement
or used a false record to get a claim approved. There also is False Claims Act liability for knowingly or improperly
avoiding repayment of an overpayment received from the government and/or failing to promptly report and return
any such overpayment. The federal government, whistleblowers and some courts have taken the position that claims
presented in violation of other statutes, such as the federal anti-kickback statute, may be considered a violation of
the False Claims Act. In addition, Health Care Reform may have expanded the jurisdiction of, and our exposure to,
the False Claims Act to products sold on Public Exchanges. Violations of the False Claims Act are punishable by
treble damages and penalties of up to a specified dollar amount per false claim. In addition, a special provision
under the False Claims Act allows a private person (for example, a “whistleblower” such as a disgruntled current or
former competitor, member or employee) to bring an action under the False Claims Act on behalf of the government
alleging that a company has defrauded the federal government and permits the private person to share in any
settlement of, or judgment entered in, the lawsuit.
A number of states, including states in which we operate, have adopted their own false claims acts and
whistleblower provisions that are similar to the False Claims Act. From time to time, companies in the health and
related benefits industry, including ours, may be subject to actions under the False Claims Act or similar state laws.
Product Design and Administration and Sales Practices
State and/or federal regulatory scrutiny of health care benefit and life insurance product design and administration
and marketing and advertising practices, including the filing of insurance policy forms, the adequacy of provider
networks, the accuracy of provider directories, and the adequacy of disclosure regarding products and their
administration, is increasing as are the penalties being imposed for inappropriate practices. Medicare, Medicaid and
dual eligible products and products offering more limited benefits, such as some of our student health plans, in
particular continue to attract increased regulatory scrutiny.
Guaranty Fund Assessments/Solvency Protection
Under guaranty fund laws existing in all states, insurers doing business in those states can be assessed (up to
prescribed limits) for certain obligations of insolvent insurance companies to policyholders and claimants. The
health insurance guaranty associations in which we participate that operate under these laws respond to insolvencies
of long-term care insurers as well as health insurers. Our assessments generally are based on a formula relating to
our premiums in the state compared to the premiums of other insurers. Certain states allow assessments to be
recovered as offsets to premium taxes. Some states have similar laws relating to HMOs and/or other payors such as
not-for-profit consumer governed health plans established under Health Care Reform. Refer to “Guaranty Fund
Assessments, Market Stabilization and Other Non-Voluntary Risk Sharing Pools” in Note 19 of Notes to
Consolidated Financial Statements beginning on page 138 for more information on the pending rehabilitation of
Penn Treaty Network America Insurance Company and one of its subsidiaries (collectively, “Penn Treaty”) and
certain assessments to which our HMOs are subject. It is reasonably possible that during 2016 we may record a
liability and expense relating to Penn Treaty and/or other insolvencies which could have a material adverse effect
on our operating results, financial position and cash flows. While we have historically recovered more than half of
guaranty fund assessments through statutorily permitted premium tax offsets, significant increases in assessments
could lead to legislative and/or regulatory actions that may limit future offsets.
Regulation of Pharmacy Operations
CVS has provided certain PBM services to us and certain of our customers and members since January 1, 2011. As
amended, our PBM agreement with CVS has a term ending in December 2022, although we have certain
termination rights beginning in January 2020. Express Scripts also provides certain PBM services to certain of our
customers and members under an agreement with a term ending in 2016 for a portion of our Commercial and
Medicaid members. Express Scripts also provided PBM services to a portion of our Medicare members in 2015.