Aetna 2013 Annual Report Download - page 11

Annual Report- Page 5
In addition, because we included a portion of the 2014 Health Care Reform fees, assessments and taxes in the
pricing for our 2013 contract renewals with member months in 2014, we experienced a temporary operating
earnings benefit in 2013. We expect this benefit to be greatly diminished in 2014. The non tax-deductible health
insurer fee will be recorded within operating expenses, and we project that our expense for this fee in 2014 will
range from $575 million to $625 million. In aggregate, we expect our portion of the total fees, taxes and
assessments imposed by Health Care Reform to be approximately $1.0 billion in 2014.
On June 28, 2012, the U.S. Supreme Court issued a decision that generally upheld the constitutionality of Health
Care Reform. However, federal budget negotiations, the technical problems with the federal health
insurance exchange website, ongoing regulatory changes to Health Care Reform (such as the November
2013 action permitting renewal through 2014 of individual insurance policies that do not comply with
Health Care Reform), pending efforts in the U.S. Congress to amend or restrict funding for various aspects of
Health Care Reform and litigation challenging aspects of the law continue to create uncertainty about the ultimate
impact of Health Care Reform.
States may opt out of the elements of Health Care Reform requiring expansion of Medicaid coverage in January
2014 without losing their current federal Medicaid funding, and governors in over a dozen states have indicated that
they may not support Medicaid expansion. If states choose to opt out of Medicaid expansion, we could experience
reduced Medicaid enrollment or reduced Medicaid enrollment growth. We cannot predict whether pending or
future federal or state legislation or court proceedings will change various aspects of Health Care Reform or state
level health care reform, nor can we predict the impact those changes will have on our business operations or
financial results, but the effects could be materially adverse.
For additional information on Health Care Reform, refer to “Regulatory Environment” beginning on page 29, and
for a discussion of certain factors that may cause our actual results to differ from currently anticipated results in
connection with Health Care Reform, refer to “Forward-Looking Information/Risk Factors” beginning on page 46.
Outlook for 2014
We expect to face significant business challenges and uncertainties in 2014, many of which are occurring for the
first time in our industry. These challenges and uncertainties include collecting in our premiums and fees or solving
for the impact of a full year of the significant fees, taxes and assessments imposed by Health Care Reform this year;
meaningful rate pressures this year in our Medicare Advantage business (which we expect to continue in 2015);
imposition this year of Health Care Reform’s guaranteed issue requirements which do not allow us to medically
underwrite our small group and individual members; and the first year of implementation of and participation on
Health Care Reform’s Public Exchanges, where membership is less than expected by the federal government and
our Public Exchange members' utilization of medical services may exceed our projections. We also project year-
over-year operating results comparisons to be pressured by the 2014 pricing of our experience-rated products,
which takes into account our favorable 2013 medical cost experience, and the absence of the benefit we experienced
in 2013 from the collection in 2013 of a portion of the Health Care Reform fees, taxes and assessments that are
payable in 2014. In addition, Health Care Reform fees, taxes and assessments will be reported as, and significantly
increase, our general and administrative expenses, and the non-deductibility of the health insurer fee will
significantly increase our reported income tax rate. We expect to incur up to approximately $65 million pretax of
expenses for payments to a supplier in connection with the integration of the Coventry acquisition. Finally, the
current uncertain economic environment and a continued low interest rate environment also are expected to
continue to pressure our operating results.
On the other hand, we also believe there are opportunities for operating results growth in 2014, primarily the
inclusion of the former Coventry business in our results for a full year and the projected impact of Coventry-related
synergies and improved performance in our underlying businesses.
Our primary business goals for 2014 are to continue to integrate the Coventry acquisition, solve for the financial
impacts of the significant fees, taxes and assessments imposed on us by Health Care Reform as well as for the rate
pressures in our Medicare Advantage business, change the provider business model through provider collaboration