Cigna 2012 Annual Report Download - page 36

PART I
ITEM 1 Business
Regulation
Cigna and its subsidiaries are subject to comprehensive state, federal reimbursement accounts and flexible spending accounts are also
and international regulations. The laws and regulations governing regulated by the U.S. Department of the Treasury and the Internal
Cigna’s business continue to increase each year and are subject to Revenue Service.
frequent change. Cigna has established policies and procedures to Cigna’s operations, accounts and other books and records are subject
comply with applicable requirements. to examination at regular intervals by regulatory agencies, including
Cigna’s insurance and HMO subsidiaries must be licensed by the state insurance and health and welfare departments, state boards of
jurisdictions in which they conduct business. These subsidiaries are pharmacy and the Centers for Medicare and Medicaid Services to
subject to numerous state and federal regulations related to their assess compliance with applicable laws and regulations. In addition,
business operations, including, but not limited to: Cigna’s current and past business practices are subject to review by,
and from time to time the Company receives subpoenas and other
the form and content of customer contracts including benefit requests of information from, various state insurance and health care
mandates (including special requirements for small groups, regulatory authorities, attorneys general, the Office of Inspector
generally under 50 employees); General, and other state and federal authorities, including inquiries
premium rates; by, and testimony before committees and subcommittees of the U.S.
medical loss ratios; Congress regarding certain of its business practices. These
examinations, reviews, subpoenas and requests may result in changes
the content of agreements with participating providers of covered to or clarifications of Cigna’s business practices, as well as fines,
services; penalties or other sanctions.
producer appointment and compensation;
claims processing and appeals;
Regulatory and Legislative Developments
underwriting practices; The federal and state governments in the U.S. as well as governments
reinsurance arrangements; in other countries where Cigna does business continue to enact and
unfair trade and claim practices; seriously consider many broad-based legislative and regulatory
proposals that could materially impact various aspects of Cigna’s
protecting the privacy and confidentiality of the information business.
received from customers;
risk sharing arrangements with providers;
Health Care Reform
reimbursement or payment levels for Medicare services;
In the first quarter of 2010, Health Care Reform was signed into law.
advertising; and Health Care Reform mandates broad changes in the delivery of health
the operation of consumer-directed plans (including health savings care benefits that may impact the Company’s current business model,
accounts, health reimbursement accounts, flexible spending including its relationship with current and future customers,
accounts and debit cards). producers and health care providers, products, services, processes and
Cigna and its international subsidiaries comply with regulations in technology. Health Care Reform includes, among other requirements,
international jurisdictions where foreign insurers may be faced with provisions for guaranteed coverage and renewal requirements,
more onerous regulations than their domestic competitors. The prohibitions on some annual and all lifetime limits on the dollar
broader regulatory environment may include anti-corruption laws, amount of benefits for essential health services, increased restrictions
economic sanctions laws, various privacy, consumer protection, on rescinding coverage, minimum medical loss ratio and customer
insurance, tax, tariff and trade laws and regulations, corporate rebate requirements, a requirement to cover preventive services on a
governance, employment, intellectual property and investment laws first dollar basis, and greater controls on premium rate increases for
and regulation, discriminatory licensing procedures, compulsory individual and small employer health insurance. It also reduces the
cessions of reinsurance, required localization of records and funds, Medicare Part D coverage gap and reduces payments to private plans
higher premium and income taxes, and requirements for local offering Medicare Advantage, as well as provides for state insurance
participation in an insurer’s ownership. In addition, the expansion of exchanges through which qualified insurers and HMOs will be able to
Cigna’s operations into foreign countries increases the Company’s offer insured plans to individuals and small employers. Certain of the
exposure to certain U.S. laws, such as the Foreign Corrupt Practices law’s provisions became effective between 2010 and 2012 and other
Act of 1977 (FCPA). See page 16 for further discussion of provisions will take effect from 2013 to 2018. Health Care Reform
international regulations. left many of the details of the new law to be established through
regulations. While federal agencies have published interim final
The business of administering and insuring employee benefit regulations with respect to certain requirements, many issues remain
programs, particularly health care programs, is heavily regulated by uncertain.
state and federal laws and administrative agencies, such as state
departments of insurance and the federal departments of Labor, The provisions of the new law that became effective between 2010
Health and Human Services, Treasury and Justice and the Internal and 2012 included those requiring coverage of preventive services
Revenue Service, as well as the courts. Health savings accounts, health with no enrollee cost-sharing, banning the use of lifetime and annual
14 CIGNA CORPORATION - 2012 Form 10-K
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