Aetna 2015 Annual Report Download - page 64

Annual Report- Page 58
us in 2015. Any of these audits, investigations or reviews could have a material adverse effect on our financial
position, operating results or business or result in significant liabilities and negative publicity for our company. Our
Commercial business is currently under audit by both state and federal regulators related to Health Care Reform’s
minimum MLR requirements and is subject to audits related to Health Care Reform’s risk adjustment and
reinsurance data since those programs were implemented in 2014. For more information on certain CMS and other
audits, see “We are subject to retroactive adjustments to and/or withholding of certain premiums and fees, including
as a result of CMS RADV audits. We generally rely on health care providers to appropriately code claim
submissions and document their medical records. If these records do not appropriately support our risk adjusted
premiums, we may be required to refund premium payments to CMS”, beginning on page 60.
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.
If our compliance systems and processes fail or are deemed inadequate, we may suffer reputational harm and
become subject to regulatory actions or litigation which could adversely affect our business, cash flows,
operating results or financial position.
Our businesses are subject to extensive and complex regulations, and many of our contracts with customers include
detailed requirements. In order to be eligible to offer certain products or bid on certain contracts, we must
demonstrate that we have robust systems in place to ensure that we comply with all applicable legal, regulatory and
contractual requirements. These systems are frequently reviewed and audited by our customers and regulators. If
our systems and processes designed to maintain compliance with applicable requirements, and to prevent and detect
instances of, or the potential for, non-compliance fail or are deemed inadequate, we may suffer reputational harm
and be subject to regulatory actions, litigation and other proceedings which may result in fines, suspension or loss
of licensure, suspension or exclusion from participation in government programs and/or other penalties, any of
which could adversely affect our business, cash flows, operating results or financial position.
Our litigation and regulatory risk profile is changing as we offer new products and expand in business areas
beyond our historical core business of providing Commercial managed care and health insurance products in
the United States. Completion of the Proposed Acquisition would accelerate that change.
Historically, we focused primarily on providing Commercial managed care and health insurance products in the
United States. In comparison, our Medicare and Medicaid businesses were significantly smaller. In 2015, our
Medicare and Medicaid businesses accounted for 44% of total Health Care premiums. Our business is now
changing due to the following:
• Acquisitions: We project that the Proposed Acquisition will increase our Medicare and Medicaid revenues
to 56% of total revenue. Our 2014 acquisition of InterGlobal expanded our international business.
• Expansion within the health care marketplace: We are expanding our presence in various sectors of the
health care marketplace, including Medicare, Medicaid, dual eligibles, Commercial individual,
international, and certain customers who are not subject to ERISA’s limits on state law remedies and
working to deliver innovative products in those sectors.
• Entry into new business and new product lines: We are in the process of developing and seeking to expand
our consumer business. Over the last several years we have entered into new product lines, including
Insurance Exchanges, dual eligible programs, support services for ACOs, data analytics, recruitment for
clinical trials and HIT.
The increased volume of business in areas beyond our historical core business and new products subject us to
litigation and regulatory risks that are different from the risks of providing Commercial managed care and health
insurance products and increase significantly our exposure to other risks.
For additional information about these risks, see:
• “Our business activities are highly regulated. Our Medicare, Medicaid, specialty and mail order pharmacy,
Public Exchange and certain other products are subject to particularly extensive and complex regulations.
If we fail to comply with applicable laws and regulations, we could be subject to significant adverse