Cigna 2015 Annual Report Download - page 143

PART II
ITEM 8. Financial Statements and Supplementary Data
The outcome of litigation and other legal or regulatory matters is the use of data provided by Ingenix, Inc., a subsidiary of one of the
always uncertain, and unfavorable outcomes that are not justified by Company’s competitors. These actions were consolidated into Franco
the evidence or existing law can occur. The Company believes that it v. Connecticut General Life Insurance Company, et al., pending in the
has valid defenses to the matters pending against it and is defending U.S. District Court for the District of New Jersey. The consolidated
itself vigorously. Except as otherwise noted, the Company believes amended complaint, filed in 2009 on behalf of subscribers, health care
that the legal actions, regulatory matters, proceedings and providers and various medical associations, asserted claims related to
investigations currently pending against it should not have a material benefits and disclosure under ERISA, the Racketeer Influenced and
adverse effect on the Company’s results of operations, financial Corrupt Organizations (‘‘RICO’’) Act, the Sherman Antitrust Act and
condition or liquidity based upon current knowledge and taking into New Jersey state law and seeks recovery for alleged underpayments
consideration current accruals. The Company had pre-tax reserves as from 1998 through the present. Other major health insurers have
of December 31, 2015 of $190 million ($125 million after-tax) for been the subject of, or have settled, similar litigation.
the matters discussed below. Due to numerous uncertain factors In September 2011, the District Court (1) dismissed all claims by the
presented in these cases, it is not possible to estimate an aggregate health care provider and medical association plaintiffs for lack of
range of loss (if any) for these matters at this time. In light of the standing; and (2) dismissed the antitrust claims, the New Jersey state
uncertainties involved in these matters, there is no assurance that their law claims and the ERISA disclosure claim. In January 2013 and again
ultimate resolution will not exceed the amounts currently accrued by in April 2014, the District Court denied separate motions by the
the Company. An adverse outcome in one or more of these matters plaintiffs to certify a nationwide class of subscriber plaintiffs. The
could be material to the Company’s results of operations, financial Third Circuit denied plaintiff’s request for an immediate appeal of the
condition or liquidity for any particular period. January 2013 ruling. As a result, the case is proceeding on behalf of
the named plaintiffs only. In June 2014, the District Court granted
Litigation Matters
the Company’s motion for summary judgment to terminate all claims,
and denied the plaintiffs’ partial motion for summary judgment. In
Amara cash balance pension plan litigation. In December, 2001,
July 2014, the plaintiffs appealed all of the District Court’s decisions
Janice Amara filed a class action lawsuit in the U.S. District Court for
in favor of the Company, including the class certification decision, to
the District of Connecticut against Cigna Corporation and the Cigna
the Third Circuit. The Company will continue to vigorously defend
Pension Plan (the ‘‘Plan’’) on behalf of herself and other similarly
its position.
situated Plan participants affected by the 1998 conversion to a cash
balance formula. The plaintiffs allege various violations of the
Employee Retirement Income Security Act of 1974 (‘‘ERISA’’),
Regulatory Matters
including that the Plan’s cash balance formula discriminates against CMS actions. In January 2016, CMS issued to the Company a
older employees; that the conversion resulted in a wear-away period Notice of Imposition of Immediate Intermediate Sanctions (‘‘the
(when the pre-conversion accrued benefit exceeded the Notice’’). The Notice requires the Company to suspend certain
post-conversion benefit); and that the Plan communications enrollment and marketing activities for its Medicare Advantage-
contained inaccurate or inadequate disclosures about these Prescription Drug and Medicare Part D Plans. The sanctions do not
conditions. impact the ability of current enrollees to remain covered by the
In 2008, the District Court (1) affirmed the Company’s right to Company’s Medicare Advantage-Prescription Drug or Medicare
convert to a cash balance plan prospectively beginning in 1998; Part D Plans.
(2) found for plaintiffs on the disclosure claim only; and (3) required CMS imposed sanctions based on its finding of deficiencies with the
the Company to pay pre-1998 benefits under the pre-conversion Company’s operations of its Parts C and D appeals and grievances,
traditional annuity formula and post-1997 benefits under the Part D formulary and benefit administration, and compliance
post-conversion cash balance formula. The Second Circuit upheld program. The Company is working to resolve these matters as quickly
this decision. From 2008 through the present, this case has undergone as possible and is cooperating fully with CMS on its review. Based on
a series of court proceedings that resulted in the original District management’s current expectations, the Company does not expect the
Court order being largely upheld. In 2015, the Company submitted impact to its 2016 consolidated results of operations, financial
to the District Court its proposed method for calculating the condition or cash flows to be material.
additional pension benefits due to class members and plaintiffs
responded in August 2015. In January 2016, the District Court Disability claims regulatory matter. During the second quarter of
ordered the method of calculating the additional pension benefits due 2013, the Company finalized an agreement with the Departments of
to class members. Accordingly, management expects this lawsuit to be Insurance for Maine, Massachusetts, Pennsylvania, Connecticut and
resolved, and the Plan to be amended to comply with the District California (together, the ‘‘monitoring states’’) related to the
Court’s order, in 2016. The Company’s reserve for this litigation Company’s long-term disability claims handling practices. Most other
remains reasonable at December 31, 2015 based on a calculation jurisdictions have joined the agreement as participating,
compliant with the court order. non-monitoring states. The agreement requires, among other things:
(1) enhanced procedures related to documentation and disposition;
Ingenix. In April 2004, the Company was sued in a number of (2) a two-year monitoring period; and (3) reassessment of claims
putative nationwide class actions alleging that the Company denied or closed during a two-year prior period, except California that
improperly underpaid claims for out-of-network providers through has a three-year reassessment period. As previously disclosed, the
CIGNA CORPORATION - 2015 Form 10-K 113