Cigna 2015 Annual Report Download - page 51

PART I
ITEM 1A. Risk Factors
transition health care providers from volume-based fee for service degree than in the U.S., and therefore subject us to disputes by
arrangements to a value-based system; customers, governmental authorities or others.
improve medical cost competitiveness in targeted markets; Court decisions and legislative activity may increase our exposure for
any of these types of claims. In some cases, substantial non-economic
manage our medical and administrative costs effectively; or punitive damages may be sought. We seek to procure insurance
coverage to cover some of these potential liabilities. However, certain
manage our balance sheet exposures effectively, including our
potential liabilities may not be covered by insurance, insurers may
pension funding obligations; and
dispute coverage or the amount of insurance may be insufficient to
reduce our Global Health Care operating expenses to achieve cover the entire damages awarded. In addition, certain types of
sustainable benefits. damages, such as punitive damages, may not be covered by insurance,
and insurance coverage for all or certain forms of liability may become
If these initiatives fail or are not executed effectively, it could harm our
unavailable or prohibitively expensive in the future. It is possible that
consolidated financial position and results of operations. For example,
the resolution of current or future legal matters and claims could
efforts to reduce operating expenses while maintaining the necessary
result in losses material to our results of operations, financial
resources and talent pool are important and, if not managed
condition and liquidity.
effectively, could have long-term effects on our business by negatively
impacting our ability to drive improvements in the quality of our We are frequently the subject of regulatory market conduct and other
products and/or services. For our strategic initiatives to succeed, we reviews, audits and investigations by state insurance and health and
must effectively integrate our operations, including our acquired welfare departments, attorneys general, CMS and the OIG and
businesses, actively work to ensure consistency throughout the comparable authorities in foreign jurisdictions. With respect to our
organization, and promote a global mind-set and a focus on Medicare Advantage business, CMS and OIG perform audits to
individual customers. If we fail to do so, our business may be unable determine a health plan’s compliance with federal regulations and
to grow as planned, or the result of expansion may be unsatisfactory. contractual obligations, including compliance with proper coding
In addition, the current competitive, economic and regulatory practices and fraud and abuse enforcement practices through audits
environment requires our organization to adapt rapidly and nimbly to designed to detect and correct improper payments. There also
new opportunities and challenges. We will be unable to do so if we do continues to be heightened review by federal and state regulators of
not make important decisions quickly, define our appetite for risk business and reporting practices within the health care and disability
specifically, implement new governance, managerial and insurance industry and increased scrutiny by other state and federal
organizational processes smoothly and communicate roles and governmental agencies (such as state attornies general) empowered to
responsibilities clearly. bring criminal actions in circumstances that could have previously
given rise only to civil or administrative proceedings. These regulatory
We face risks related to litigation, regulatory audits
audits or reviews or actions by other governmental agencies could
and investigations.
result in changes to our business practices, retroactive adjustments to
certain premiums, significant fines, penalties, civil liabilities, criminal
We are routinely involved in numerous claims, lawsuits, regulatory liabilities or other sanctions, including restrictions on our ability to
audits, investigations and other legal matters arising in the ordinary market certain products or engage in business-related activities, that
course of business, including that of administering and insuring could have a material adverse effect on our business, results of
employee benefit programs. These could include benefit claims, operation, financial condition and liquidity.
breach of contract actions, tort claims, claims disputes under federal
or state laws and disputes regarding reinsurance arrangements, In January 2016, CMS issued to the Company a Notice of Imposition
employment and employment discrimination-related suits, antitrust of Immediate Intermediate Sanctions (‘‘the Notice’’). The Notice
claims, employee benefit claims, wage and hour claims, tax, privacy, requires the Company to suspend certain enrollment and marketing
intellectual property and whistle blower claims and real estate activities for its Medicare Advantage-Prescription Drug and Medicare
disputes. In addition, we have incurred and likely will continue to Part D Plans. The Company is working to resolve these matters as
incur liability for practices and claims related to our health care quickly as possible. If, however, the Company is not able to address
business, such as marketing misconduct, failure to timely or matters arising from the Notice in a timely and satisfactory manner, or
appropriately pay for or provide health care, provider network if there are any changes in eligibility for government payments for our
structure, poor outcomes for care delivered or arranged, provider programs that are not resolved in a timely and satisfactory manner, the
disputes including disputes over compensation or contractual impact to our 2017 Medicare customer base and consolidated
provisions, and claims related to our administration of self-funded revenues, results of operations and cash flows could be material.
business. There are currently, and may be in the future, attempts to A description of material pending legal actions and other legal and
bring class action lawsuits against the industry or, absent a class action, regulatory matters is included in Note 23 to our Consolidated
individual plaintiffs may bring multiple claims regarding the same Financial Statements included in this Form 10-K. The outcome of
subject matter against us and other companies in our industry. litigation and other legal or regulatory matters is always uncertain, and
With respect to our global operations, contractual rights, laws and outcomes that are not justified by the evidence or existing law can
regulations may be subject to interpretation or uncertainty to a greater occur.
CIGNA CORPORATION - 2015 Form 10-K 21
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