Aetna 2013 Annual Report Download - page 39

Annual Report- Page 33
premium rates. Beginning in 2015, only Medicare Advantage plans with an overall star rating of four or more stars
will be eligible for a quality bonus. As a result, our Medicare Advantage plans' operating results from 2013 forward
are likely to be significantly determined by their star ratings. For additional information on CMS's stars program
and our related performance, see “Medicare” beginning on page 38.
For additional discussion of certain risk factors that may cause our actual results to differ from currently anticipated
results in connection with federal and state health care reform, refer to “Forward-Looking Information/Risk
Factors” beginning on page 46.
Health Care Reform significantly alters the federal structure that shapes the state regulation of health insurance, and
requires states to significantly amend numerous existing statutes and regulations. Under Health Care Reform, most
states have adopted premium rate review requirements (ranging from new or enhanced filing requirements to prior
approval requirements).
In 2013, state legislatures focused on the impact of Health Care Reform and state budget deficits as well as Public
Exchange design and implementation, and premium rate review laws were expanded in a number of states. At the
state level, over three-quarters of U.S. states and the District of Columbia will hold regular legislative sessions in
2014. We expect additional state level legislation and regulatory activity that impacts our businesses to be enacted
in 2014, including additional Health Care Reform-related and premium rate review activity. We also expect state
legislatures to continue to focus on the impact of Health Care Reform and state budget deficits in 2014. In addition,
independent of federal efforts, we expect many states to continue to consider legislation or regulations to impose
requirements on the composition of our provider networks, extend coverage to the uninsured through Medicaid
expansion, mandate minimum MLRs, expand the maximum size of “small group” business to larger groups,
implement rating reforms, enhance consumer transparency on cost and quality of care and mandate specific benefit
coverages. For example, regulators or legislatures in a number of states have implemented or are considering limits
on premium rate increases, either enforcing existing legal requirements more stringently or proposing different
regulatory standards or procedures for reviewing proposed premium rate changes; requiring us and other health
plans to price prospectively to specified minimum medical loss ratios and demonstrate that pricing in rate filings;
and imposing taxes on insurers and other health plans to finance Public Exchanges, Medicaid and other state
programs. In addition, we requested significant increases in our premium rates in our individual and small group
Health Care businesses for 2014 and expect to continue to request significant increases in those rates for 2015 and
beyond in order to adequately price for projected medical cost trends, the expanded coverages and rating limits
required by Health Care Reform and the significant assessments, fees and taxes imposed by Health Care Reform.
These significant increases heighten the risks of adverse public and regulatory action and adverse selection and the
likelihood that our requested premium rate increases will be denied, reduced or delayed.
We cannot predict what provisions legislation or regulation will contain in any state or what effect legislation or
regulation will have on our business operations or financial results, but the effect could be materially adverse.
Health Care Regulation
General
Federal, state, local and foreign governments have adopted comprehensive laws and regulations that govern our
business activities in various ways. These laws and regulations, including Health Care Reform, restrict how we
conduct our business and result in additional burdens and costs to us.
In addition to the expanded regulation created by Health Care Reform discussed above, significant areas of
governmental regulation include premium rates and rating methodologies, underwriting rules and procedures,
required benefits, sales and marketing activities, health care provider rates of payment, restrictions on health plans'
ability to limit providers' participation in their networks and/or remove providers from their networks, pharmacy
and pharmacy benefit management operations and financial condition (including reserves and minimum capital or
risk based capital requirements). These laws and regulations are different in each jurisdiction.