Aetna 2013 Annual Report Download - page 44

Annual Report- Page 38
compliance programs, reduces the burden of proof under the Foreign Corrupt Practices Act of 1977 (the “FCPA”)
and creates a Federal Insurance Office (“FIO”) within the Treasury, with powers that include information-gathering
and subpoena authority. Although the FIO does not have authority over health insurance, it may have authority over
other parts of our business, primarily life insurance. In December 2013, the FIO released a Financial Reform Act
mandated report to Congress on how to modernize and improve the system of insurance regulation in the United
States. The report includes recommendations for reforms to the existing state-based regulatory regime as well as
proposed elements of additional federal involvement in insurance regulation. We cannot predict whether future
legislative or regulatory action will result from this report.
Health savings accounts, health reimbursement arrangements and flexible spending accounts are also regulated by
the Treasury and the Internal Revenue Service (the “IRS”).
We also may be adversely impacted by court and regulatory decisions that expand the interpretations of existing
statutes and regulations or impose medical malpractice or bad faith liability. Among other issues, federal and state
courts continue to consider cases addressing group and individual life insurance payment practices and the pre-
emptive effect of ERISA on state laws. In general, changes to our life insurance payment practices have the effect
of reducing our Group Insurance operating earnings and limitations to ERISA pre-emption have the effect of
limiting product flexibility and increasing our costs and/or liability exposures. The legislative and regulatory
initiatives discussed above include federal proposals to restrict the pre-emptive effect of ERISA and state legislative
activity in several states that, if enacted by legislation that is not itself pre-empted by ERISA, could increase our
liability exposure and could result in greater state regulation of our operations.
The Employee Retirement Income Security Act of 1974
The provision of services to certain employee benefit plans, including certain Health Care, Group Insurance and
Large Case Pensions benefit plans, is subject to ERISA, a complex set of laws and regulations subject to
interpretation and enforcement by the IRS and the DOL. ERISA regulates certain aspects of the relationships
between us and employers who maintain employee benefit plans subject to ERISA. Some of our administrative
services and other activities may also be subject to regulation under ERISA. ERISA generally preempts all state
and local laws that relate to employee benefit plans, but the extent of the pre-emption continues to be reviewed by
courts.
Certain Large Case Pensions and Group Insurance products and services are also subject to potential issues raised
by certain judicial interpretations relating to ERISA. Under those interpretations, together with DOL regulations,
we may have ERISA fiduciary duties with respect to certain general account assets held under contracts that are not
guaranteed benefit policies. As a result, certain transactions related to those assets are subject to conflict of interest
and other restrictions, and we must provide certain disclosures to policyholders annually. We must comply with
these restrictions or face substantial penalties.
Federal Employees Health Benefits (“FEHB”) Program
Our subsidiaries contract with the OPM to provide managed health care services under the FEHB program in their
service areas. These contracts with the OPM and applicable government regulations establish premium rating
arrangements for this program. OPM regulations require that FEHB plans meet a FEHB program-specific MLR by
plan code and market. Managing to these rules is complicated by the simultaneous application of the minimum
MLR standards and associated premium rebate requirements of Health Care Reform. As a result of the Coventry
acquisition, we also manage certain FEHB plans on a “cost-plus” basis. The OPM conducts periodic audits of its
contractors to, among other things, verify that the premiums established under its insured contracts and costs
allocated pursuant to its cost-based contracts are in compliance with the requirements of the applicable FEHB
program. The OPM may seek premium refunds or institute other sanctions against us if we fail to comply with the
FEHB program requirements.
Medicare
We continue to expand the Medicare markets we serve and Medicare products we offer, including by acquiring
Coventry in 2013 and the Medicare Supplement business of Genworth Financial in 2011. The Genworth