Aetna 2013 Annual Report Download - page 137

Annual Report- Page 131
• Minimum Volume Commitments - In connection with the Coventry acquisition we assumed certain supplier
agreements with minimum volume commitments which require us to make payments to the suppliers if the
level of medical membership subject to the agreements falls below specified levels. The maximum potential
amount of future payments we could be required to make over the remaining terms of the agreements,
assuming the medical membership subject to the agreements is zero, is $233 million. Refer to Note 21
beginning on page 140 for additional information.
Guaranty Fund Assessments, Market Stabilization and Other Non-Voluntary Risk Sharing Pools
Under guaranty fund laws existing in all states, insurers doing business in those states can be assessed (up to
prescribed limits) for certain obligations of insolvent insurance companies to policyholders and claimants. The
health insurance guaranty associations in which we participate that operate under these laws respond to insolvencies
of long-term care insurers as well as health insurers. Our assessments generally are based on a formula relating to
our premiums in the state compared to the premiums of other insurers. Certain states allow assessments to be
recovered as offsets to premium taxes. Some states have similar laws relating to HMOs. The Pennsylvania
Insurance Commissioner (the “Commissioner”) has placed long-term care insurer Penn Treaty Network America
Insurance Company and one of its subsidiaries (collectively, “Penn Treaty”) in rehabilitation, an intermediate action
before insolvency, and subsequently petitioned a state court to convert the rehabilitation into a liquidation. In May
2012, the state court denied the request and ordered the Commissioner to propose a rehabilitation plan. In
September 2012, the state court finalized its opinion that Penn Treaty is not insolvent and remains in rehabilitation.
The Commissioner has appealed the state court's decision and has filed a proposed rehabilitation plan with the state
court. If the rehabilitation is not successful and Penn Treaty ultimately is placed in liquidation, we and other
insurers likely would be assessed over a period of years by guaranty associations for the payments the guaranty
associations are required to make to Penn Treaty policyholders. We are currently unable to predict the ultimate
outcome of, or reasonably estimate the loss or range of losses resulting from, this potential insolvency because we
cannot predict whether rehabilitation efforts will succeed, the amount of the insolvency, if any, the amount and
timing of associated guaranty association assessments or the amount or availability of potential offsets, such as
premium tax offsets. It is reasonably possible that in future reporting periods we may record a liability and expense
relating to Penn Treaty or other insolvencies which could have a material adverse effect on our operating results,
financial position and cash flows. While we have historically recovered more than half of guaranty fund
assessments through statutorily permitted premium tax offsets, significant increases in assessments could lead to
legislative and/or regulatory actions that may limit future offsets.
HMOs in certain states in which we do business are subject to assessments, including market stabilization and other
risk-sharing pools, for which we are assessed charges based on incurred claims, demographic membership mix and
other factors. We establish liabilities for these assessments based on applicable laws and regulations. In certain
states, the ultimate assessments we pay are dependent upon our experience relative to other entities subject to the
assessment and the ultimate liability is not known at the balance sheet date. While the ultimate amount of the
assessment is dependent upon the experience of all pool participants, we believe we have adequate reserves to cover
such assessments.
Litigation and Regulatory Proceedings
Out-of-Network Benefit Proceedings
We are named as a defendant in several purported class actions and individual lawsuits arising out of our practices
related to the payment of claims for services rendered to our members by health care providers with whom we do
not have a contract (“out-of-network providers”). Among other things, these lawsuits allege that we paid too little
to our health plan members and/or providers for these services, among other reasons, because of our use of data
provided by Ingenix, Inc., a subsidiary of one of our competitors (“Ingenix”). Other major health insurers are the
subject of similar litigation or have settled similar litigation.
Various plaintiffs who are health care providers or medical associations seek to represent nationwide classes of out-
of-network providers who provided services to our members during the period from 2001 to the present. Various
plaintiffs who are members in our health plans seek to represent nationwide classes of our members who received
services from out-of-network providers during the period from 2001 to the present. Taken together, these lawsuits