Cigna 2013 Annual Report Download - page 144

PART II
ITEM 8. Financial Statements and Supplementary Data
Due to the uncertainties surrounding this matter, the Company is amount accrued represents the Company’s best estimate of the
unable to estimate the amount of potential guaranty fund assessments. probable loss at the time. If only a range of estimated losses can be
The Company will continue to monitor this situation. determined, the Company accrues an amount within the range that,
in the Company’s judgment, reflects the most likely outcome; if none
of the estimates within that range is a better estimate than any other
E. Legal and Regulatory Matters
amount, the Company accrues the minimum amount of the range. In
The Company is routinely involved in numerous claims, lawsuits, cases when the Company has accrued an estimated loss, the accrued
regulatory and IRS audits, investigations and other legal matters amount may differ materially from the ultimate amount of the loss. In
arising, for the most part, in the ordinary course of managing a health many proceedings, it is inherently difficult to determine whether any
services business, including payments to providers and benefit level loss is probable or even possible or to estimate the amount or range of
disputes. These legal actions may include benefit claims, breach of any loss. The Company provides disclosure in the aggregate for
contract claims, tort claims, provider disputes, disputes regarding material pending litigation and legal or regulatory matters, including
reinsurance arrangements, employment and employment accruals, range of loss, or a statement that such information cannot be
discrimination-related suits, employee benefit claims, wage and hour estimated. As a litigation or regulatory matter develops, the Company
claims, tax matters, privacy, intellectual property claims and real estate monitors the matter for further developments that could affect the
related disputes. Litigation of income tax matters is accounted for amount previously accrued, if any, and updates such amount accrued
under FASB’s accounting guidance for uncertain income tax or disclosures previously provided as appropriate.
positions. Further information on income tax matters can be found in The outcome of litigation and other legal or regulatory matters is
Note 19. Also, there are currently, and may be in the future, attempts always uncertain, and unfavorable outcomes that are not justified by
to bring class action lawsuits against the industry. the evidence or existing law can occur. The Company believes that it
The business of administering and insuring health services programs, has valid defenses to the matters pending against it and is defending
particularly health care and group insurance programs, is heavily itself vigorously. Except as otherwise noted, the Company believes
regulated by federal and state laws and administrative agencies, such as that the legal actions, regulatory matters, proceedings and
state departments of insurance and the U.S. Departments of Labor investigations currently pending against it should not have a material
and Justice, as well as the courts. Health care regulation and legislation adverse effect on the Company’s results of operation, financial
in its various forms, including the implementation of the Patient condition or liquidity based upon current knowledge and taking into
Protection and Affordable Care Act, other regulatory reform consideration current accruals. The Company had pre-tax reserves as
initiatives, such as those relating to Medicare programs, or additional of December 31, 2013 of $189 million ($123 million after-tax) for
changes in existing laws or regulations or their interpretations, could the matters discussed below. Due to numerous uncertain factors
have a material adverse effect on the Company’s business, results of presented in these cases, it is not possible to estimate an aggregate
operations and financial condition. range of loss (if any) for these matters at this time. In light of the
uncertainties involved in these matters, there is no assurance that their
In addition, there is heightened review by federal and state regulators ultimate resolution will not exceed the amounts currently accrued by
of the health care, disability and life insurance industry business and the Company. An adverse outcome in one or more of these matters
related reporting practices. Cigna is frequently the subject of could be material to the Company’s results of operations, financial
regulatory market conduct reviews and other examinations of its condition or liquidity for any particular period.
business and reporting practices, audits and investigations by state
insurance and health and welfare departments, state attorneys general,
the Centers for Medicare and Medicaid Services (‘‘CMS’’) and the
Office of Inspector General (‘‘OIG’’). With respect to Cigna’s Amara cash balance pension plan litigation. On December 18,
Medicare Advantage business, CMS and OIG perform audits to 2001, Janice Amara filed a class action lawsuit, captioned Janice C.
determine a health plan’s compliance with federal regulations and Amara, Gisela R. Broderick, Annette S. Glanz, individually and on
contractual obligations, including compliance with proper coding behalf of all others similarly situated v. Cigna Corporation and Cigna
practices (sometimes referred to as Risk Adjustment Data Validation Pension Plan, in the United States District Court for the District of
Audits or RADV audits), that may result in retrospective adjustments Connecticut against Cigna Corporation and the Cigna Pension Plan
to payments made to health plans. Regulatory actions can result in on behalf of herself and other similarly situated participants in the
assessments, civil or criminal fines or penalties or other sanctions, Cigna Pension Plan affected by the 1998 conversion to a cash balance
including loss of licensing or exclusion from participation in formula. The plaintiffs allege various ERISA violations including,
government programs. among other things, that the Plan’s cash balance formula discriminates
Regulation, legislation and judicial decisions have resulted in changes against older employees; that the conversion resulted in a wear-away
to industry and the Company’s business practices, financial liability or period (when the pre-conversion accrued benefit exceeded the
other sanctions and will continue to do so in the future. post-conversion benefit); and that these conditions are not adequately
disclosed in the Plan.
When the Company (in the course of its regular review of pending
litigation and legal or regulatory matters) has determined that a In 2008, the court issued a decision finding in favor of Cigna
material loss is reasonably possible, the matter is disclosed. In Corporation and the Cigna Pension Plan on the age discrimination
accordance with GAAP, when litigation and regulatory matters and wear-away claims. However, the court found in favor of the
present loss contingencies that are both probable and estimable, the plaintiffs on many aspects of the disclosure claims and ordered an
Company accrues the estimated loss by a charge to income. The
112 CIGNA CORPORATION - 2013 Form 10-K
Litigation Matters