Aetna 2006 Annual Report Download - page 31

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Page 29
Health Care Regulation
General
The federal and state governments have adopted laws and regulations that govern our business activities in various
ways. These laws and regulations restrict how we conduct our business and result in additional burdens and costs
to us. Areas of governmental regulation include:
• Licensure
• Policy forms, including plan design and disclosures
• Premium rates and rating methodologies
• Medical cost ratios
• Underwriting rules and procedures
• Benefit mandates
• Eligibility requirements
• Service areas
• Market conduct
• Utilization review activities
• Payment of claims, including timeliness and accuracy of payment
• Member rights and responsibilities
• Sales and marketing activities
• Quality assurance procedures
• Disclosure of medical and other information
• Provider rates of payment
• Surcharges on provider payments
• General assessments
• Provider contract forms
• Pharmacy operations
• Required participation in coverage arrangements for high-risk insureds, either directly or through an
assessment or other risk pooling mechanism
• Delegation of risk and other financial arrangements
• Producer licensing and compensation
• Financial condition (including reserves) and
• Corporate governance.
These laws and regulations are different in each jurisdiction.
States generally require health insurers and HMOs to obtain a certificate of authority prior to commencing
operations. To establish a new insurance company or an HMO in a state, we generally would have to obtain such a
certificate. The time necessary to obtain such a certificate varies from state to state. Each health insurer and HMO
must file periodic financial and operating reports with the states in which it does business. In addition, health
insurers and HMOs are subject to state examination and periodic license renewal.
Group Pricing and Underwriting Restrictions
Pricing and underwriting regulation by states limits the underwriting and rating practices of Aetna and other health
insurers, particularly for small employer groups. These laws and regulations vary by state. In general they apply to
certain business segments and limit our ability to set prices or renew business, or both, based on specific
characteristics of the group or the group’ s prior claim experience.
Many of these laws and regulations limit the differentials in rates insurers and other carriers may charge between
new and renewal business, and/or between groups based on differing characteristics. They may also require that
carriers disclose to customers the basis on which the carrier establishes new business and renewal rates, restrict the
application of pre-existing condition exclusions and limit the ability of a carrier to terminate coverage of an
employer group.