Cigna 2012 Annual Report Download - page 41

PART I
ITEM 1A Risk Factors
Risk Factors
As a large company operating in a complex industry, Cigna risks and uncertainties that could have a material adverse effect on
encounters a variety of risks and uncertainties including those Cigna’s business, liquidity, results of operations or financial condition.
identified in this Risk Factor discussion and elsewhere in this report. These risks and uncertainties are not the only ones Cigna faces.
Cigna has implemented and maintains enterprise-wide risk Additional risks and uncertainties not presently known to the
management processes, in addition to the risk management processes Company or that it currently believes to be immaterial may also
within its businesses. The factors discussed below represent significant adversely affect Cigna.
Regulatory and Litigation Risks
causing employers to drop health care coverage for their employees;
Health Care Reform legislation, as well as potential
additional changes in federal or state regulations,
driving potential cost shifting in the health care delivery system to
could have a material adverse effect on Cigna’s
health insurance companies and HMOs;
business, results of operations, financial condition
regulating business practices;
and liquidity.
imposing new or increasing taxes and financial assessments;
In 2010, Health Care Reform was signed into law, and it is resulting in
limiting the ability to increase premiums to meet costs (including
significant changes to the current U.S. health care system. Health
denial or delays in approval and implementation of those rates); and
Care Reform mandates broad changes in the delivery of health care
benefits that may impact the Company’s current business model, significantly reducing the growth of Medicare program payments.
including its relationship with current and future customers,
Accordingly, Health Care Reform, other regulatory reform initiatives
producers and health care providers, products, services, processes and
or additional changes in existing laws or regulations, or their
technology. Health Care Reform includes, among other requirements,
interpretations, could have a material adverse effect on the Company’s
provisions for guaranteed coverage and renewal requirements,
business, results of operations, financial condition and liquidity.
prohibitions on annual and lifetime limits on the dollar amount of
benefits for essential health services, increased restrictions on The Medicare business acquired with HealthSpring presents
rescinding coverage, minimum medical loss ratio and customer rebate additional risks for Cigna, as the Medicare program has been the
requirements, a requirement to cover preventive services on a first subject of recent regulatory reform initiatives, including Health Care
dollar basis, and greater controls on premium rate increases for Reform. Because Medicare program premiums account for
individual and small employer health insurance. It also reduces the substantially all of the acquired business’s revenue, reductions or less
Medicare Part D coverage gap and reduces payments to private plans than expected increases in funding for Medicare programs (including
offering Medicare Advantage, as well as provides for state insurance the potential effect of sequestration) could significantly reduce the
exchanges through which insurers and HMOs will, if qualified, be Company’s profitability, and non-renewal or termination of Medicare
able to offer insured plans to individuals and small employers. In contracts would substantially impair the acquired business.
addition, the legislation imposes an excise tax on high-cost employer-
In June 2012, the U.S. Supreme Court upheld the constitutionality of
sponsored coverage and annual fees on insurance companies and
most parts of Health Care Reform, but considerable uncertainty
HMOs that will generally not be deductible for income tax purposes
remains and it is difficult to predict the impact of Health Care Reform
and therefore may adversely impact the Company’s effective tax rate.
on the business due to the law’s complexity, continuing development
It also limits the amount of compensation for executives of insurers
of implementing regulations and interpretive guidance. Cigna is
that is tax deductible.
unable to predict how these events will develop and what impact they
Certain of the law’s provisions became effective between 2010 and will have on Health Care Reform, and in turn, on Cigna.
2012 and other provisions will take effect from 2013 to 2018. Health
For additional information on Health Care Reform, see ‘‘Business –
Care Reform left many of the details of the new law to be set forth
Regulation’’ in Section H beginning on page 14 of this Form 10-K
through regulations. While federal agencies have published interim
and the ‘‘Introduction’’ section of MD&A beginning on page 32 of
final regulations with respect to certain requirements, many issues
this Form 10-K. See also the description of minimum medical loss
remain uncertain, thus the full impact on the Company is not yet
ratio and customer rebate requirements in the ‘‘Business – B. Global
known. This legislation could impact the Company significantly by:
Health Care’’ section beginning on page 2 of this Form 10-K.
disrupting the employer-based market, which is currently the
primary business model for the Company’s Global Health Care
segment;
CIGNA CORPORATION - 2012 Form 10-K 19
ITEM 1A
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