Aetna 2015 Annual Report Download - page 70

Annual Report- Page 64
We have implemented price increases for 2016. If health care and other benefit costs are higher than the levels
reflected in our pricing or if we are not able to obtain appropriate pricing on new or renewal business, our prices
will not reflect the risk we assume, and our operating results will be adversely affected. If health care and other
benefit costs are lower than we predict, our prices may be higher than those of our competitors, which may cause us
to lose membership. For more information, see “Critical Accounting Estimates - Health Care Costs Payable”
beginning on page 20.
Competitive and economic pressures may limit our ability to increase pricing to reflect higher costs or may force
us to accept lower margins. If customers elect to self-insure, reduce benefits or adversely renegotiate or amend
their agreements with us, our revenues and operating results will be negatively affected.
Our customer contracts are generally for a period of one year, and our customers have considerable flexibility in
moving between us and our competitors. One of the key factors on which we compete for customers, especially in
light of the current adverse and uncertain economic environment, is overall cost. We are therefore under pressure to
contain premium price increases despite being faced with increasing health care and other benefit costs and
increasing operating costs. If we are unable to increase our prices to reflect increasing costs, our profitability will be
adversely affected. If we are unable to limit our price increases, we may lose members to competitors with more
favorable pricing, adversely affecting our revenues and operating results.
In response to rising prices, our customers may elect to self-insure or to reduce benefits in order to limit increases in
their benefit costs. Alternatively, our customers may purchase different types of products from us that are less
profitable. Such elections may result in reduced membership in our more profitable Insured products and/or lower
premiums for our Insured products, which may adversely affect our revenues and operating results, although such
elections also may reduce our health care and other benefit costs.
In addition, our Medicare, Medicaid and CHIP products are subject to termination without cause, periodic re-bid,
rate adjustment and program redesign, as customers seek to contain their benefit costs, particularly in an adverse
and/or uncertain economy. These actions may adversely affect our membership, revenues and operating results.
If we fail to compete effectively in the geographies and product areas in which we operate, including
maintaining or increasing membership in our Health Care business, our operating results, financial position
and cash flows could be materially and adversely affected.
The health care benefits industry is highly competitive, primarily due to a large number of for-profit and not-for-
profit competitors, our competitors' marketing and pricing, and a proliferation of competing products, including
new products that are continually being introduced into the marketplace. Our businesses face significant
competition in all of the geographies and product areas in which we operate. New entrants into the marketplace, as
well as consolidation within the industry, have contributed to and are expected to intensify the competitive
environment. In addition, the rapid pace of change as the industry evolves towards a consumer-focused retail
marketplace, including Public and Private Exchanges, and the increased use of technology to interact with
members, providers and customers, increase the risks we currently face from new entrants and disruptive actions by
existing competitors compared to prior periods.
In our Health Care business, we compete on the basis of many factors, including perceived overall quality, quality
of service, comprehensiveness of coverage, cost (including premium, provider discounts and member out-of-pocket
costs), product design, financial stability and ratings, breadth and quality of provider networks, providers available
in such networks, and quality of member support and care management programs. Our competitors in our Health
Care business include, among others, United HealthGroup, Inc., Anthem, Inc., Humana Inc., Cigna Corporation,
WellCare Health Plans, Inc., Centene Corporation, Health Net, Inc., Kaiser Permanente, health system owned health
plans, Oscar Health and other new entrants into the marketplace, and numerous for-profit and not-for-profit
organizations operating under licenses from the Blue Cross and Blue Shield Association. Additional competitors in
our businesses include other types of medical and dental provider organizations, various specialty service providers
(including pharmacy benefit management services providers), health care consultants, financial services companies