Aetna 2015 Annual Report Download - page 63

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Our business, profitability and growth also may be adversely affected by (i) judicial and regulatory decisions that
change and/or expand the interpretations of existing statutes and regulations, impose medical or bad faith liability,
increase our responsibilities under ERISA or the remedies available under ERISA, or reduce the scope of ERISA
pre-emption of state law claims or (ii) other legislation and regulations, including new legislation or regulations that
apply to Private Exchanges. For more information regarding these matters, refer to “Regulatory Environment”
beginning on page 26 and “Litigation and Regulatory Proceedings” in Note 19 of Notes to Consolidated Financial
Statements beginning on page 139.
We frequently are subject to regular and special governmental audits, investigations and reviews that could
result in changes to our business practices, and also could result in material refunds, fines, penalties, civil
liabilities, criminal liabilities and other sanctions.
As one of the largest national health and related benefits providers, we frequently are subject to regular and special
governmental market conduct and other audits, investigations and reviews by, and we receive subpoenas and other
requests for information from, various federal and state agencies, regulatory authorities, attorneys general,
committees, subcommittees and members of the U.S. Congress and other state, federal and international
governmental authorities. Several such audit, investigations and reviews currently are pending, some of which may
be resolved in 2016, and the results of which may be adverse to us.
There continues to be a heightened level of review and/or audit by federal, state and international regulators of the
health and related benefits industry’s business and reporting practices, including premium rate increases, provider
network adequacy, provider network directories, pharmacy formulary tiering, pharmacy network structures,
utilization management and payment of providers with whom the payor does not have a contract and other health
and life insurance claim payment practices. In addition, 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 settlement agreements. 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 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 pre-tax). 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. For additional information on these life insurance matters, refer to “Life and Disability
Insurance” beginning on page 40.
Federal and state governments have made investigating and prosecuting health care and other insurance fraud,
waste and abuse a priority. Fraud, waste and abuse prohibitions encompass a wide range of activities, including
kickbacks for referral of members, billing for unnecessary medical and/or other covered services, improper
marketing and violations of patient privacy rights. The regulations and contractual requirements applicable to us
and other market participants are complex and subject to change, making it necessary for us to invest significant
resources in complying with our regulatory and contractual requirements. Ongoing vigorous law enforcement and
the highly technical regulatory scheme mean that our compliance efforts in this area will continue to require
significant resources.
Regular and special governmental audits, investigations and reviews could result in changes to our business
practices, and also could result in significant or material premium refunds, fines, penalties, civil liabilities, criminal
liabilities or other sanctions, including suspension or exclusion from participation in government programs and
suspension or loss of licensure. For example, in 2015 CMS assessed a civil monetary penalty of $1 million against