Aetna 2015 Annual Report Download - page 68

Annual Report- Page 62
including audits of our minimum medical loss ratio rebates, methodology and/or reports, could be material and
could adversely affect our operating results, financial position and cash flows. For more information see
“Regulatory Environment” beginning on page 26.
If our service providers fail to meet their contractual obligations to us or to comply with applicable laws or
regulations, we may be exposed to reputational harm, litigation or regulatory action. This risk is particularly
high in our Medicare, Medicaid and dual eligible programs.
We contract with various third parties to perform certain functions and services and provide us with certain
information technology systems. Our arrangements with these third parties may expose us to public scrutiny,
adversely affect our reputation, expose us to litigation or regulatory action, and otherwise make our operations
vulnerable if we fail to adequately monitor and regulate their performance or if they fail to meet their contractual
obligations to us or to comply with applicable laws or regulations. For example, certain of our vendors have been
responsible for releases of sensitive information of our members and employees, which has caused us to incur
additional expenses and given rise to litigation against us.
These risks are particularly high in our Medicare, Medicaid and dual eligible programs, where third parties perform
pharmacy benefit management, medical management and other member related services for us. Any failure of our
or these third parties’ prevention, detection or control systems related to regulatory compliance, compliance with
our internal policies, data security and/or cybersecurity or any incident involving the theft, misappropriation, loss or
other unauthorized disclosure of, or access to, members’, customers’ or other constituents’ sensitive information
could require us to expend significant resources to remediate any damage, interrupt our operations and adversely
affect our reputation and also expose us to whistleblower, class action and other litigation, other proceedings,
prohibitions on marketing or active or passive enrollment of members, corrective actions, fines, sanctions and/or
penalties, any of which could adversely affect our business, cash flows, operating results or financial position. For
more information on these matters, 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 regulatory actions or suffer reputational harm which may have a material adverse effect on our
business. Upon completion of the Proposed Acquisition, our exposure to these risks will increase significantly.
Compliance with future laws, regulations and/or judicial decisions may reduce our profitability and limit our
growth”, beginning on page 55.
Programs funded by the U.S. federal government account for a substantial portion of our revenue and operating
earnings. Upon completion of the Proposed Acquisition, the portion of our revenues that is funded by the U.S.
federal government will increase significantly. A delay by Congress in raising the federal government’s debt
ceiling could lead to a delay, reduction, suspension or cancellation of federal government spending and a
significant increase in interest rates that could, in turn, have a material adverse effect on our businesses,
operating results and cash flows.
The federal government’s “debt ceiling”, or the amount of debt the federal government is permitted to borrow to
meet its legal obligations (including, among other things, interest on the national debt, Medicare and Medicaid
premiums, Social Security benefits and contributions to the Federal Employees Health Benefits Program), is limited
by statute and can only be raised by an act of Congress.
If Congress does not raise the debt ceiling before the federal government’s current obligations approach or exceed
its cash on hand and incoming receipts, federal government spending may be subject to delay, reduction, suspension
or cancellation, including a federal government shutdown, which may be prolonged. A significant portion of our
revenues are derived from health care coverage programs that are funded in whole or in part by the federal
government, including the Medicare, Medicaid, and dual eligible programs, CHIP and the Federal Employees
Health Benefits Program and subsidies for qualified individuals and families purchasing health insurance through
Public Exchanges. Completion of the Proposed Acquisition will increase significantly the portion of our revenues
that is funded in whole or in part by the federal government. If federal spending is delayed, suspended or curtailed,
we would continue to receive claims from providers providing services to beneficiaries of these programs, and we