Aetna 2013 Annual Report Download - page 95

Download and view the complete annual report

Please find page 95 of the 2013 Aetna annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 156

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156

Annual Report- Page 89
Policyholders' funds
Policyholders' funds consist primarily of reserves for pension and annuity investment contracts in the Large Case
Pensions business and customer funds associated with group life and health contracts in the Health Care and Group
Insurance businesses. Reserves for such contracts are equal to cumulative deposits less withdrawals and charges
plus credited interest thereon, net of experience-rated adjustments. In 2013, interest rates for pension and annuity
investment contracts ranged from 3.8% to 12.2%, and interest rates for group life and health contracts ranged from
0% to 3.2%. In 2012, interest rates for pension and annuity investment contracts ranged from 3.5% to 11.1%, and
interest rates for group life and health contracts ranged from 0% to 3.3%. Reserves for contracts subject to
experience rating reflect our rights as well as the rights of policyholders and plan participants.
We review health care and other insurance liabilities periodically. We reflect any necessary adjustments during the
current period in operating results. While the ultimate amount of claims and related expenses are dependent on
future developments, it is management's opinion that the liabilities that have been established are adequate to cover
such costs. The health care and other insurance liabilities that are expected to be paid within twelve months are
classified as current on our balance sheets.
Premium Deficiency Reserves
We evaluate our insurance contracts to determine if it is probable that a loss will be incurred. We recognize a
premium deficiency loss when it is probable that expected future claims, including maintenance costs (for
example, claim processing costs), will exceed existing reserves plus anticipated future premiums and reinsurance
recoveries. Anticipated investment income is considered in the calculation of premium deficiency losses for short-
duration contracts. For purposes of determining premium deficiency losses, contracts are grouped in a manner
consistent with our method of acquiring, servicing and measuring the profitability of such contracts. We did not
have any premium deficiency reserves at December 31, 2013 or 2012.
Health Care Contract Acquisition Costs
Health care benefits products included in the Health Care segment are cancelable by either the customer or the
member monthly upon written notice. Acquisition costs related to our prepaid health care and health indemnity
contracts are generally expensed as incurred.
Revenue Recognition
Health care premiums are recognized as income in the month in which the enrollee is entitled to receive health care
services. Health care premiums are reported net of an allowance for estimated terminations and uncollectible
amounts. Additionally, premium revenue subject to the minimum MLR rebate requirements of Health Care Reform
is recorded net of the estimated minimum MLR rebates for the current calendar year. Other premium revenue for
group life, long-term care and disability products is recognized as income, net of allowances for termination and
uncollectible accounts, over the term of the coverage. Other premium revenue for Large Case Pensions' limited
payment pension and annuity contracts is recognized as revenue in the period received. Premiums related to
unexpired contractual coverage periods are reported as unearned premiums in our balance sheets.
The balance of the allowance for estimated terminations and uncollectible accounts on premiums receivable was
$90 million and $74 million at December 31, 2013 and 2012, respectively, and is reflected as a reduction of
premiums receivable in our balance sheets. The balance of the allowance for uncollectible accounts on other
receivables was $34 million and $16 million at December 31, 2013 and 2012, respectively, and is reflected as a
reduction of other receivables in our balance sheets.
Some of our contracts allow for premiums to be adjusted to reflect actual experience or the relative health status of
members. Such adjustments are reasonably estimable at the outset of the contract, and adjustments to those
estimates are made based on actual experience of the customer emerging under the contract and the terms of the
underlying contract.