Aetna 2013 Annual Report Download - page 60

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Annual Report- Page 54
existing use of the Social Security Administration's Death Master File to identify additional potentially unclaimed
death benefits and locate applicable beneficiaries. As a result of these changes, in the fourth quarter of 2013, we
increased our estimated liability for life insurance claims with respect to insureds who passed away on or before
December 31, 2013, and recorded in current and future benefits a charge of $35.7 million ($55.0 million pre-tax).
Given the legal and regulatory uncertainty with respect to life insurance claim payment and related escheat
practices, it is reasonably possible that we may incur additional liability related to those practices, whether as a
result of further changes in our business practices, litigation, government actions or otherwise, which could
adversely affect our operating results and cash flows. For additional information on these life insurance matters,
refer to “Life and Disability Insurance” beginning on page 45.
Federal and state governments have made investigating and prosecuting health care and other insurance fraud,
waste and abuse a priority. Fraud, waste and abuse prohibitions encompass a wide range of activities, including
kickbacks for referral of members, billing for unnecessary medical and/or other covered services, improper
marketing and violations of patient privacy rights. The regulations and contractual requirements applicable to us
and other market participants are complex and subject to change, making it necessary for us to invest significant
resources in complying with our regulatory and contractual requirements. Ongoing vigorous law enforcement and
the highly technical regulatory scheme mean that our compliance efforts in this area will continue to require
significant resources.
Regular and special governmental audits, investigations and reviews could result in changes to our business
practices, and also could result in significant or material premium refunds, fines, penalties, civil liabilities, criminal
liabilities or other sanctions, including suspension or exclusion from participation in government programs and loss
of licensure. Any of these could have a material adverse effect on our financial condition, operating results or
business or result in significant liabilities and negative publicity for our company. For more information on certain
CMS audits, see “We are subject to retroactive adjustments to certain premiums and fees, including as a result of
CMS RADV audits. We generally rely on health care providers to appropriately code claim submissions and
document their medical records. If these records do not appropriately support our risk adjusted premiums, CMS
may require us to refund premium payments”, beginning on page 57. Our Commercial business will be subject to
audits related to risk adjustment and reinsurance data when those Public Exchange programs are implemented
starting in 2014.
For more information regarding these matters, refer to “Regulatory Environment” beginning on page 29 and
“Litigation and Regulatory Proceedings” in Note 18 of Notes to Consolidated Financial Statements beginning on
page 130.
If our compliance systems and processes fail or are deemed inadequate, we may suffer reputational harm and
become subject to regulatory actions or litigation which could adversely affect our business, cash flows,
operating results or financial condition.
Our businesses are subject to extensive and complex regulations, and many of our contracts with customers include
detailed requirements. In order to be eligible to offer certain products or bid on certain contracts, we must
demonstrate that we have robust systems in place to ensure that we comply with all applicable legal, regulatory and
contractual requirements. These systems are frequently reviewed and audited by our customers and regulators. If
our systems and processes designed to maintain compliance with applicable requirements, and to prevent and detect
instances of, or the potential for, non-compliance fail or are deemed inadequate, we may suffer reputational harm
and be subject to regulatory actions, litigation and other proceedings which may result in fines, temporary or
permanent suspension from participation in government health care programs and/or other penalties, any of which
could adversely affect our business, cash flows, operating results or financial condition.