Aetna Inc (AET) SEC Annual Report (10-K) for 2014

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)

☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2014

or

£ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to_________

Commission file number 1-16095

(Exact name of registrant as specified in its charter)

The aggregate market value of the outstanding common equity of the registrant held by non-affiliates as of the last business day of the registrant's most recently completed second fiscal quarter (June 30, 2014) was $27.9 billion.

There were 348.7 million shares of the registrant's voting common stock with a par value of $.01 per share outstanding at January 31, 2015.

DOCUMENTS INCORPORATED BY REFERENCE

The 2014 Annual Report, Financial Report to Shareholders (the "Annual Report") is incorporated by reference in Parts I, II and IV to the extent described therein. The definitive proxy statement related to Aetna Inc.'s 2015 Annual Meeting of Shareholders, to be filed on or about April 3, 2015 (the "Proxy Statement"), is incorporated by reference in Parts III and IV to the extent described therein.

Unless the context otherwise requires, references to the terms "we", "our" or "us" used throughout this Annual Report on Form 10-K refer to Aetna Inc. (a Pennsylvania corporation) ("Aetna") and its subsidiaries (collectively, the "Company").

We are working to build healthier communities, a healthier nation and a healthier world. Our operational, financial and strategically important accomplishments during 2014 included:

We believe that these accomplishments strategically position us for future success with the goal of participating in the shaping of more effective health care systems.

In addition, employers, consumers and the federal and state governments continue to increase their focus on health care costs, and federal and state governments continue to increase their focus on providing health insurance to the uninsured; and they continue to drive changes in the structure of health insurance and related benefits products and services. Product features continue to evolve that are directed at containing rising health care costs, addressing affordability problems, enhancing access to quality health care services and giving members greater control and responsibility in directing their benefit dollars. For employer-based health coverage, employers are continuing to require covered employee members to assume a greater portion of the cost of their health care and/or coverage. These economic and political factors and greater consumer awareness are leading to increased popularity of products that offer flexibility in design features such as deductibles and co-payments, health savings accounts, consumer access to a broader network of health care providers, quality-based physician networks and high value network solutions. The industry is also subject to other forces including adverse and uncertain economic conditions in the U.S. and abroad, federal and state legislative and regulatory reforms, the shift towards a consumer-focused retail marketplace, advances in pharmaceutical and medical technology and industry consolidation. All of these factors can affect the competitiveness of product and service offerings, the range of industry competitors and the bases of competition. We believe that these factors will exist for some time and will drive a continuing evolution in the health care and related benefits industry.

Over the last five years, this focus has led to the introduction of new products and tools, such as our Healthagen ® portfolio of products, including our ACS, ActiveHealth and Medicity Inc. ("Medicity") health information technology ("HIT") solutions, which further enhance our strategy of transforming the provider network model and in turn making health care more accessible and affordable; our consumer products and tools such as bSwift and iTriage, which provide consumers with important tools which help to make healthcare more convenient, help them make informed benefit plan choices, connect them to providers, and help them navigate the evolving health care system; and Aetna Vision Preferred SM , which provides members with access to one of the largest vision networks in the U.S. We also continue to develop and enhance our existing products and are continuing to expand our initiative to improve the transparency of our products and pricing.

In April 2014, we acquired the InterGlobal Group ("InterGlobal"), a company that specializes in international private medical insurance for groups and individuals in the Middle East, Asia, Africa and Europe. The purchase price was not material.

In November 2014, we acquired bSwift for approximately $400 million. bSwift provides a technology platform that offers a retail shopping experience for health insurance exchanges and employees nationwide and provides benefit administration technology and services to employers.

Products and Services

Health Care products consist of medical, pharmacy benefit management services, dental, behavioral health and vision plans offered on both an insured basis and an employer-funded, or administrative, basis and emerging businesses products and services, such as ACS, that complement and enhance our medical products. Medical products include point-of-service ("POS"), preferred provider organization ("PPO"), health maintenance organization ("HMO") and indemnity benefit ("Indemnity") plans. Medical products also include health savings accounts ("HSAs") and Aetna HealthFund ® , consumer-directed health plans that combine traditional POS or PPO and/or dental coverage, subject to a deductible, with an accumulating benefit account (which may be funded by the plan sponsor and/or the member in the case of HSAs). We also offer Medicare and Medicaid products and services and other medical products, such as medical management and data analytics services, medical stop loss insurance, workers' compensation administrative services and products that provide access to our provider networks in select geographies. We refer to insurance products (where we assume all or a majority of the risk for medical and dental care costs) as "Insured" and administrative services contract products (where the plan sponsor assumes all or a majority of the risk for medical and dental care costs) as "ASC."

Our principal products and services are targeted specifically to large multi-site national, mid-sized and small employers. We also serve individual insureds, expatriates and, in certain markets, Medicare, Medicaid and Duals beneficiaries and providers. Medicare, Medicaid and Duals products and services (collectively referred to as "Government") are categorized separately from the Health Care products and services we sell to employers, other groups, individuals and providers, which we refer to as Commercial.

Our primary Commercial health care products are POS, PPO, HMO, HSA and Indemnity plans.

In addition to these primary Commercial health care products, in select geographies we also offer Medicare Advantage plans, Medicare Supplement plans and prescription drug coverage for Medicare beneficiaries and participate in Medicaid and subsidized Children's Health Insurance Programs ("CHIP"). CHIP are state-subsidized insurance programs that provide benefits for families with uninsured children. We also participate in Duals demonstration projects in certain states which began operating in 2014. We are seeking to substantially grow our Medicare, Medicaid and Duals businesses over the next several years. Our Government products include:

Medicare

Through annual contracts with the Centers for Medicare & Medicaid Services ("CMS"), we offer HMO and PPO products for eligible individuals in certain geographic areas through the Medicare Advantage program. Members typically receive enhanced benefits over standard Medicare fee-for-service coverage, including reduced cost-sharing for preventive care, vision and other services. We offered network-based HMO and/or PPO plans in 929 counties in 40 states and Washington, D.C. in 2014. In addition, we are expanding to 999 counties in 41 states and Washington, D.C. in 2015.

We are a national provider of the Medicare Part D Prescription Drug Program ("PDP") in all 50 states and Washington, D.C. to both individuals and employer groups. All Medicare eligible individuals are eligible to participate in this voluntary prescription drug plan. Members typically receive coverage for certain prescription drugs, usually subject to a deductible, co-insurance and/or co-payment.

For certain qualifying employer groups, we offer our Medicare PPO products nationally. When combined with our PDP product, these national PPO plans form an integrated national fully-insured Medicare product for employers that provides medical and pharmacy benefits.

Medicare Supplement

For certain Medicare eligible members, we offer supplemental coverage for certain health care costs not covered by Medicare. The products included in our Medicare Supplement portfolio help to cover some of the gaps in Medicare, and include coverage for Medicare deductibles and coinsurance amounts. We offered a wide selection of Medicare Supplement products in 48 states and Washington, D.C. in 2014

Medicaid and CHIP

We offer health care management services to individuals eligible for Medicaid and CHIP under multi-year contracts which are subject to annual appropriations. We offered these services on an Insured or ASC basis in 15 states in 2014. During 2014, we were selected to offer these services in Louisiana, beginning in February 2015.

Duals

We provide health coverage to beneficiaries who are dually eligible for both Medicare and Medicaid coverage. These members must meet certain income and resource requirements in order to qualify for this coverage. We coordinate 100% of the care for these members and may provide them with additional services in order to manage their health care costs. During 2014, we offered services on an Insured basis to members who were dually eligible in two states under demonstration projects. During 2015, we expect to offer these services in two additional states under demonstration projects, bringing the total to four states.

In addition to the products described above, we also offer other products and services, including:

Healthagen ®

Healthagen is a portfolio of growing businesses that tackles the fundamental needs of greater value, coordination and transparency in health care. The Healthagen portfolio includes a variety of HIT products and services, including our ACS, ActiveHealth and Medicity HIT solutions. These products and services are marketed under the Healthagen brand name, and complement our Commercial, Medicare and Medicaid products.

Accountable Care Solutions

Our ACS products focus on growing membership in our medical products through provider collaborations that are designed to lower medical costs for us and our customers and make our products more affordable. Our ACS products offer a suite of solutions designed to facilitate delivery system reform and help reduce the cost of care by enabling population health management for providers. Our ACS products facilitate providers changing their business model from episodic acute care to patient population management which allows them to convert from volume-based reimbursement to value-based reimbursement. Our ACS products deploy Aetna's Medicity, Active Health and other capabilities to collaborate with providers in new ways to improve the quality and efficiency of care for all patients, whether they are Aetna members or members of other payors. In 2014, we continued expanding our offering of products and services to employers and individuals in more geographic areas including individuals eligible for Medicare Advantage and Public Exchange programs. Our ACS products create mutually beneficial relationships with providers through a variety of methods, including alignment of financial incentives based on cost and quality, implementation of innovative HIT and deploying leading care management programs. In 2014, we signed 24 new ACO collaborative agreements and had collaborations under contract with Carilion Clinic, Banner Health Network, Inova Health System, Memorial Hermann, among others.

ActiveHealth Management

Through the use of our patented CareEngine ® system, our ActiveHealth Management products provide evidence-based medical management and data analytics products and services to a broad range of customers, including health plans, employers and others. ActiveHealth Management also is a key component of our ACS solutions.

Medicity

Medicity is a health information exchange company and a key component of our ACS and provider enablement solutions. Medicity offers a set of convenient, easy-to-access technology solutions for physicians, hospitals and other health care providers. These capabilities allow us to further the adoption of electronic health records and contribute to initiatives that foster administrative simplicity in health care, a key issue for consumers, patients and providers. Medicity provides customers clinical data integration and secure data exchange capabilities.

Consumer

We believe the role of the consumer in health care is changing and that consumers will be the primary decision makers when it comes to choosing their health-related benefits. As a result, we are developing a portfolio of products and tools that are designed for a retail model in the health benefits industry that is consumer-centric, affordable and convenient. Our Consumer business is focusing on developing a simplified, integrated offering to help consumers navigate the health care system and manage their health care costs.

bSwift

In November 2014, we acquired bSwift, a company that provides a technology platform that offers a retail shopping experience for health insurance exchanges and employers nationwide and benefit administration technology and services to employers.

iTriage

The iTriage application gives smart phone and computer users access to a symptom navigator which assists users in finding nearby health facilities or physicians that could help with their specific health issue. iTriage assists users in finding health care that is right for them.

Behavioral Health

Our behavioral health and employee assistance products provide members who experience stress, depression and other types of mental health related illness with integrated behavioral health benefit administration, access to a network of providers and innovative wellness programs. We can provide customized behavioral health solutions to members in all 50 states.

Pharmacy

We offer pharmacy benefit management services and specialty and mail order pharmacy services to our members. Our pharmacy fulfillment services are delivered by Aetna Specialty Pharmacy ("ASP") and Aetna Rx Home Delivery ® . ASP dispenses specialty medications and offers certain support services associated with specialty medications. Specialty medications include injectable or infused medications that may not be readily available at local pharmacies. Aetna Rx Home Delivery ® provides mail order prescription drug services. CVS Health Corporation performs the administration of selected functions for our retail pharmacy network contracting and claims administration; mail order and specialty pharmacy order fulfillment and inventory purchasing and management; and certain administrative services for us. In addition, as a result of the Coventry acquisition, another supplier also provides certain pharmacy benefit management services to us and our customers.

Dental

We offer managed dental plans on an Insured and ASC basis. We are one of the nation's largest providers of dental coverage, based on membership at December 31, 2014 .

Provider Network Access ("First Health and Cofinity")

Through our First Health and Cofinity products, we provide access to regional health care provider networks to other insurance companies, third-party administrators, health plans and employers. First Health and Cofinity products are marketed nationally.

Stop Loss

We offer medical stop loss insurance coverage for certain employers who elect to self insure their health benefits. Under this product, we assume the costs associated with large individual claims and/or aggregate loss experience within an employer's plan above a pre-set annual threshold.

We offer vision benefits that provide members with access to one of the largest vision networks in the U.S. The Aetna Vision Preferred program can be customized with a wide range of benefit levels and co-payments.

Workers' Compensation Administrative Services

Our workers' compensation administrative services products and services consist of fee-based, managed care services, such as provider network access, cost containment services, pharmacy benefit management, durable medical equipment and ancillary services, and care management services to underwriters and administrators of workers' compensation insurance.

Other Commercial Products and Services

We offer a variety of other health care coverage products either as supplements to health products or as stand-alone products, such as indemnity programs, which may be offered on an Insured or an ASC basis. We also offer, directly or in cooperation with third parties, our Aetna Health Connections SM disease management program which addresses over 35 chronic conditions, including heart failure, asthma and cancer.

We also offer comprehensive health care benefits and health management solutions worldwide through several different arrangements and offerings that include medical, dental, vision, life, disability and emergency assistance to expatriates, foreign nationals and other constituents. Our health management business collaborates with health care systems, government entities and plan sponsors around the world to design and build health management solutions to improve health, quality and cost outcomes. In addition, in April 2014 we completed the acquisition of Interglobal, which expanded our footprint in certain fast growing geographies, increased our medical membership and enhanced our international penetration with individuals and small and mid-sized business customers.

Provider Networks

We contract with physicians, hospitals and other providers for services to our customers. The health care providers who participate in our networks are independent contractors and are neither our employees nor our agents, except for providers who work in our mail-order and specialty pharmacy facilities.

We use a variety of techniques designed to help encourage appropriate utilization of medical services ("utilization") and maintain affordability of quality coverage. In addition to contracts with health care providers for negotiated rates of reimbursement, these techniques include creating risk sharing arrangements that align economic incentives with our providers, the development and implementation of guidelines for the appropriate utilization of medical services and the provision of data to providers to enable them to improve health care quality.

At December 31, 2014 , Aetna's underlying nationwide provider network had over 1.0 million participating health care providers, including over 583,000 primary care and specialist physicians and approximately 5,550 hospitals. These figures do not reflect providers who participate in Coventry's networks but not Aetna's.

Accountable Care Solutions

We collaborate with hospitals and other providers through our ACS products. ACS arrangements focus on high value narrow network solutions to provide high-quality, low-cost options in local geographies. We are able to help enhance our relationships with hospitals and other providers through a variety of methods, including a re-alignment of financial incentives for providing high quality care, total cost management initiatives and risk sharing arrangements.

Primary Care Physicians

We compensate primary care physicians ("PCPs") participating in our networks on both a fee-for-service and capitated basis, with capitation generally limited to HMO products in certain geographic areas and representing approximately five percent of health care costs in each of the last three years. In a fee-for-service arrangement, physicians are paid for health care services provided to the member based upon a set fee for the services provided. Under a capitation arrangement, physicians receive a monthly fixed fee for each member, regardless of the volume of health care services provided to the member. In some cases, PCPs who are paid on a fee-for-service or capitated basis also receive additional incentive fees if certain performance metrics are attained.

Specialist Physicians

Specialist physicians participating in our networks are generally reimbursed at contracted rates per visit or per procedure.

Hospitals

We typically enter into contracts with hospitals that provide for per-day and/or per-case rates, often with fixed rates for ambulatory, surgery and emergency room services. We also have hospital contracts that provide for reimbursement based on a percentage of the charges billed by the hospital.

Our medical plans generally require notification of elective hospital admissions, and we monitor the length of hospital stays. Physicians who participate in our networks generally admit their patients in network-based products to participating hospitals using referral procedures that direct the hospital to contact our patient management unit in order to confirm the patient's membership status and facilitate the patient management process. This unit also assists members and providers with related activities, including, if necessary, the subsequent transition to the home environment and home care. Case management assistance for complex cases is provided by a special unit.

Other Providers

Laboratory, imaging, urgent care and other freestanding health facility providers are generally paid under fee-for-service arrangements, except for certain laboratory services.

CMS uses a 5-star rating system to monitor plans and ensure that they meet CMS's quality standards. CMS uses this rating system to provide Medicare beneficiaries with a tool that they can use to compare the overall quality of care and level of customer service of companies that provide Medicare health care and drug plans. The rating system considers a variety of measures adopted by CMS, including quality of preventative services, chronic illness management and overall customer satisfaction.

We seek Health Plan accreditation for our Aetna HMO plans from the National Committee for Quality Assurance (the "NCQA"), a national organization established to review the quality and medical management systems of health care plans. Health care plans seeking accreditation must pass a rigorous, comprehensive review and must annually report on their performance.

Aetna Life Insurance Company ("ALIC"), a wholly-owned subsidiary of Aetna, has received nationwide NCQA PPO Health Plan accreditation, through January 24, 2017. At December 31, 2014 , all of our Aetna Commercial HMO and PPO members who were eligible, participated in HMOs or PPOs that are accredited by the NCQA.

NCQA and URAC (formally known as American Accreditation HealthCare Commission, Inc.), are national organizations founded to establish standards for the health care industry. Purchasers and consumers look to URAC's and NCQA's accreditation and certification as an indication that a health care organization has the necessary structures and processes to promote high-quality care and preserve patient rights. In addition, regulators in over 80% of the states recognize NCQA's accreditation and certification standards.

Our provider selection and credentialing/recredentialing policies and procedures are consistent with NCQA and URAC, as well as state and federal, requirements. In addition, we are certified under the NCQA Credentials Verification Organization ("CVO") certification program for all certification options through January 13, 2017. Our URAC CVO accreditation is valid through October 1, 2015.

Our quality assessment programs for contracted providers who participate in our networks begin with the initial review of health care practitioners. Practitioners' licenses and education are verified, and their work history is collected by us or in some cases by the practitioner's affiliated group or organization. We generally require participating hospitals to be certified by CMS or accredited by the Joint Commission, the American Osteopathic Association, or Det Norske Veritas Healthcare.

We also offer quality and outcome measurement programs, quality improvement programs, and health care data analysis systems to providers and purchasers of health care services.

Principal Markets and Sales

Our medical membership is dispersed throughout the U.S., and we serve a limited but growing number of members in certain countries outside the U.S. Refer to Note 19 of Notes to Consolidated Financial Statements, beginning on page 132 of the Annual Report, which is incorporated herein by reference, for additional information on our foreign customers. We offer a broad range of traditional, voluntary and consumer-directed health insurance products and related services, many of which are available nationwide. Depending on the product, we market to a range of customers including employer groups, individuals, college students, part-time and hourly workers, health plans, providers, governmental units, government-sponsored plans, labor groups and expatriates.

The following table presents total medical membership by U.S. and other geographic region and funding arrangement at December 31, 2014 , 2013 and 2012 :

Additional information on Health Care's membership is included in the "Membership" section of the MD&A, on page 10 of the Annual Report, which is incorporated herein by reference.

We market both Insured and ASC products and services primarily to employers that sponsor our products (also called "plan sponsors") for the benefit of their employees and their employees' dependents. Frequently, larger employers offer employees a choice among coverage options, from which the employee makes his or her selection during a designated annual open enrollment period. Typically, employers pay all of the monthly premiums to us and, through payroll deductions, obtain reimbursement from employees for a percentage of the premiums that is determined by each employer. We also sell Insured plans directly to individual consumers in a number of states, including through Public Exchanges. Some Health Care products are sold directly to employees of employer groups on a fully employee-funded basis. In some cases, we bill the covered individual directly.

We offer Insured Medicare coverage on an individual basis as well as through employer groups to their retirees. Medicaid and CHIP members are enrolled on an individual basis. We also offer Insured health care coverage to members who are dually-eligible for both Medicare and Medicaid.

Health Care products are sold through our sales personnel, as well as through independent brokers, agents and consultants who assist in the production and servicing of business; Public Exchanges; and Private Exchanges. For large plan sponsors, independent consultants and brokers are frequently involved in employer health plan selection decisions and sales. In some instances, we may pay commissions, fees and other amounts to brokers, agents, consultants and sales representatives who place business with us. In certain cases, our customer pays the broker for services rendered, and we may facilitate that arrangement by collecting the funds from the customer and transmitting them to the broker. We support our marketing and sales efforts with an advertising program that may include television, radio, billboards, print media and social media, supplemented by market research and direct marketing efforts.

Pricing

For Commercial Insured plans (including our Public Exchange plans) contracts containing the pricing and other terms of the relationship are generally established in advance of the policy period and typically have a duration of one year. Fees under our ASC plans are generally fixed for a period of one year.

We use prospective rating methodologies in determining the premium rates charged to the majority of employer groups, and we also use retrospective rating methodologies for a limited number of groups. Premium rates for customers with more than approximately 125 employees generally take into consideration the individual plan sponsor's historical and anticipated claim experience where permitted by law. Some states may prohibit the use of one or more of these rating methods for some customers, such as small employer groups, or all customers.

Under prospective rating, a fixed premium rate is determined at the beginning of the policy period. We typically cannot recover unanticipated increases in health care costs in the current policy period; however, we may consider prior experience for a product in the aggregate or for a specific customer, among other factors, in determining premium rates for future policy periods. Where required by state laws, premium rates are filed and approved by state regulators prior to contract inception. Our future results could be adversely affected if the premium rates we request are not approved or are adjusted downward or their approval is delayed by state or federal regulators.

Under retrospective rating, we determine a premium rate at the beginning of the policy period. After the policy period has ended, the actual claim and cost experience is reviewed. If the actual claim costs and other expenses are less than expected, we may issue a refund to the plan sponsor based on this favorable experience. If the experience is unfavorable, in certain instances we may recover the resulting deficit through contractual provisions or consider the deficit in setting future premium levels. However, we may not recover the deficit if a plan sponsor elects to terminate coverage. Retrospective rating may be used for Commercial Insured plans that cover more than approximately 300 lives.

We have Medicare Advantage and PDP contracts with CMS to provide HMO, PPO and prescription drug coverage to Medicare beneficiaries in certain geographic areas. Under these annual contracts, CMS pays us a fixed capitation payment and/or a portion of the premium, both of which are based on membership and adjusted for demographic and health risk factors. CMS also considers inflation, changes in utilization patterns and average per capita fee-for-service Medicare costs in the calculation of the fixed capitation payment or premium. Our PDP contracts also provide a risk-sharing arrangement with CMS to limit our exposure to unfavorable expenses or benefit from favorable expenses. Amounts payable to us under the Medicare arrangements are subject to annual revision by CMS, and we elect to participate in each Medicare service area or region on an annual basis. Premiums paid to us for Medicare products are subject to federal government reviews and audits, which can result, and have resulted, in retroactive and prospective premium adjustments. In addition to payments received from CMS, some of our Medicare Advantage products and all of our PDP products require a supplemental premium to be paid by the member or sponsoring employer. In some cases these supplemental premiums are adjusted based on the member's income and asset levels. Compared to Commercial products, Medicare contracts generate higher per member per month revenues and health care costs.

Health Care Reform ties a portion of each Medicare Advantage plan's reimbursement to the plan's "star ratings." Beginning in 2015, plans must have an overall star rating of four or higher to qualify for quality bonus payments. CMS released our 2015 star ratings in October 2014. Our 2015 star ratings will be used to determine which of our Medicare Advantage plans have ratings of four stars or higher and qualify for bonus payments in 2016. Our average star ratings were 4.00, 4.04 and 3.53 for 2015, 2014 and 2013, respectively. Based on our membership at December 31, 2014, 79.4% of our Medicare Advantage members were in plans with 2015 star ratings of at least 4.0 stars. In 2015 and going forward our Medicare Advantage plans' operating results are likely to continue to be significantly determined by their star ratings.

Rates for our Medicare Supplement products are regulated at the state level and vary by state and plan.

Under our Insured Medicaid contracts, state government agencies pay us fixed monthly rates per member that vary by state, line of business and demographics; and we arrange, pay for and manage health care services provided to Medicaid beneficiaries. These rates are subject to change by each state, and in some instances, provide for adjustment for health risk factors. CMS requires these rates to be actuarially sound. We also receive fees from our customers where we provide services under ASC Medicaid contracts. Our ASC Medicaid contracts generally are for periods of more than one year, and certain of them contain performance incentives and limited

financial risk sharing with respect to certain medical, financial and operational metrics. Under these arrangements, performance is evaluated annually, with associated financial incentive opportunities, and our financial risk share obligations are typically limited to a percentage of the fees otherwise payable to us. Payments to us under our Medicaid contracts are subject to the annual appropriation process in the applicable state.

Under our Duals contracts, the rate setting process is generally established by CMS in partnership with the state government agency participating in the demonstration project. Both CMS and the state government agency may seek premium and other refunds under certain circumstances, including if we fail to comply with CMS regulations or other contractual requirements.

We offer HMO and consumer-directed medical and dental plans to federal employees under the Federal Employees Health Benefits Program and the Federal Employees Dental and Vision Insurance Program. Premium rates and fees for those plans are subject to federal government review and audit, which can result, and have resulted, in retroactive and prospective premium and fee adjustments.

Beginning in 2014, Health Care Reform imposed significant new industry-wide fees, assessments and taxes. Refer to Note 2 of Notes to Consolidated Financial Statements, beginning on page 80 of the Annual Report, which is incorporated by reference, for additional information on the Health Care Reform fees, assessments and taxes. Our goal is to collect in premiums and fees or solve for all of these estimated fees, assessments and taxes.

Competition

The health care benefits industry is highly competitive, primarily due to a large number of for-profit and not-for-profit competitors, our competitors' marketing and pricing, and a proliferation of competing products, including new products that are continually being introduced into the market. New entrants into the marketplace, as well as significant consolidation within the industry, have contributed to the competitive environment. In addition, the rapid pace of change as the industry evolves towards a consumer-focused retail marketplace, including Public and Private Exchanges, and the increased use of technology to interact with members, providers and customers, increase the risks we currently face from new entrants and disruptive actions by existing competitors compared to prior periods.

We believe that the significant factors that distinguish competing health plans include the perceived overall quality (including accreditation status), quality of service, comprehensiveness of coverage, cost (including premium rates, provider discounts and member out-of-pocket costs), product design, financial stability and ratings, breadth and quality of provider networks, ability to offer different provider network options, providers available in such networks, and quality of member support and care management programs. We believe that we are competitive on each of these factors. Our ability to increase the number of persons covered by our plans or to increase our revenues is affected by our ability to differentiate ourselves from our competitors on these factors. Competition may also affect the availability of services from health care providers, including primary care physicians, specialists and hospitals.

Our Insured products compete with local and regional health care benefits plans, in addition to health care benefits and other plans sponsored by other large commercial health care benefit insurance companies and numerous for-profit and not-for-profit organizations operating under licenses from the Blue Cross and Blue Shield Association. Additional competitors include other types of medical and dental provider organizations, various specialty service providers (including pharmacy benefit management services providers), integrated health care delivery organizations (networks of providers who also coordinate administrative services for and assume insurance risk of their members), HIT companies and, for certain plans, programs sponsored by the federal or state governments. Our ability to increase the number of persons enrolled in our Insured products also is affected by the desire and ability of employers to self-fund their health coverage.

Our ASC plans compete primarily with other large commercial health care benefit companies, numerous for-profit and not-for-profit organizations operating under licenses from the Blue Cross and Blue Shield Association and third-party administrators.

Our international products compete with local, global and U.S.-based health plans and commercial health care benefit insurance companies, many of whom have a longer operating history and better brand recognition and greater market place presence in one or more geographies.

The provider solutions and HIT marketplaces and provider solutions and HIT products are evolving rapidly. We compete for provider solutions and HIT business with other large health plans and commercial health care benefit insurance companies as well as information technology companies and companies that specialize in provider solutions and HIT. Many of our information technology product competitors have longer operating histories, better brand recognition, greater market place presence and more experience in developing innovative products.

In addition to competitive pressures affecting our ability to obtain new customers or retain existing customers, our membership has been and may continue to be adversely affected by uncertain economic conditions and reductions in workforce by existing customers due to adverse and uncertain general economic conditions, especially in the U.S. and industries where our membership is concentrated.

Reinsurance

We currently have several reinsurance agreements with nonaffiliated insurers that relate to Health Care insurance policies. We entered into these contracts to reduce the risk of catastrophic losses which in turn reduces our capital and surplus requirements. We frequently evaluate reinsurance opportunities and refine our reinsurance and risk management strategies on a regular basis.

Factors Affecting Forward-Looking Information

Information regarding certain of the important factors that may materially affect our Health Care business and our statements concerning future events is included in the "Forward-Looking Information/Risk Factors" section of the MD&A, beginning on page 42 of the Annual Report, which is incorporated herein by reference.

Principal Products

Group Insurance products consist primarily of the following:

Principal Markets and Sales

We offer our Group Insurance products in 49 states as well as Washington, D.C., Puerto Rico, the U.S. Virgin Islands and Canada. Depending on the product, we market to a range of customers from small employer groups to large, multi-site and/or multi-state employer programs.

We market Group Insurance products and services primarily to employers that sponsor our products for the benefit of their employees and their employees' dependents. Frequently, employers offer employees a choice of benefits, from which the employee makes his or her selection during a designated annual open enrollment period. Typically, employers pay all of the monthly premiums to us and, through payroll deductions, obtain reimbursement from employees for a percentage of the premiums that is determined by each employer. Some Group Insurance products are sold directly to employees of employer groups on a fully employee-funded basis. In some cases, we bill the covered individual directly.

Group Insurance products are sold through our sales personnel, as well as through independent brokers, agents and consultants who assist in the production and servicing of business. For large plan sponsors, independent consultants and brokers are frequently involved in employer plan selection decisions and sales. We pay commissions, fees and other amounts to brokers, agents, consultants and sales representatives who place business with us. We support our marketing and sales efforts with an advertising program that may include direct marketing efforts as well as television, radio, billboards, print media and social media, supplemented by market research.

Pricing

For Insured Group Insurance plans, employer group contracts containing the pricing and other terms of the relationship are generally established in advance of the policy period. We use prospective and retrospective rating methodologies to determine the premium rates charged to employer groups. These are typically offered with rate guarantees that generally range from one to five years.

Under prospective rating, a fixed premium rate is determined at the beginning of the policy period. We cannot recover unanticipated increases in mortality or morbidity costs in the current policy period; however, we may consider prior experience for a product in the aggregate or for a specific customer, among other factors, in determining premium rates for future policy periods.

Under retrospective rating, we determine a premium rate at the beginning of the policy period. After the policy period has ended, the actual claim and cost experience is reviewed. If the actual claim costs and other expenses are less than expected, we may issue a refund to the plan sponsor based on this favorable experience. If the experience is unfavorable, we consider the deficit in setting future premium levels, and in certain instances, we may recover the deficit through contractual provisions such as offsets against refund credits that develop for future policy periods. However, we may not recover the deficit if a plan sponsor elects to terminate coverage. Retrospective rating is most often used for Insured employer-funded plans that cover more than approximately 3,000 lives.

Competition

For the group insurance industry, we believe that the significant factors that distinguish competing companies are cost, quality of service, financial strength of the insurer, comprehensiveness of coverage, and product array and design. We believe we are reasonably competitive on each of these factors; however, some of our competitors have greater scale, financial and other resources, better brand recognition and lower expenses. The group life and group disability markets remain highly competitive.

Reinsurance

We currently have several reinsurance agreements with nonaffiliated insurers that relate to both life and long-term disability products. Most reinsurance arrangements are established on a case-by-case basis, and a subset of our reinsurance agreements cover closed blocks of business and cancelled cases. We also have reinsurance that provides a limited degree of catastrophic risk protection for certain of our life products. We frequently evaluate reinsurance opportunities and refine our reinsurance and risk management strategies on a regular basis.

Factors Affecting Forward-Looking Information

Information regarding certain of the important factors that may materially affect our Group Insurance business and our statements concerning future events is included in the "Forward-Looking Information/Risk Factors" section of the MD&A, beginning on page 42 of the Annual Report, which is incorporated herein by reference.

Principal Products

Large Case Pensions manages a variety of retirement products (including pension and annuity products) primarily for tax-qualified pension plans. We do not actively market Large Case Pensions products, but continue to accept deposits from existing customers and manage the run-off of our existing business. Contracts provide non-guaranteed, experience-rated and guaranteed investment options through general and separate account products. Large Case Pensions products that use separate accounts provide contract holders with a vehicle for investments under which the contract holders primarily assume the investment risk. Large Case Pensions earns a management fee on these separate accounts.

In 1993, we discontinued our fully-guaranteed Large Case Pensions products. Information regarding these products is incorporated herein by reference to Note 20 of Notes to Consolidated Financial Statements beginning on page 135 in the Annual Report.

Factors Affecting Forward-Looking Information

Information regarding certain of the important factors that may materially affect our Large Case Pensions business and our statements concerning future events is included in the "Forward-Looking Information/Risk Factors" section of the MD&A, beginning on page 42 of the Annual Report, which is incorporated herein by reference.

Our reports to the U.S. Securities and Exchange Commission (the "SEC"), including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports are available without charge on our website at www.aetna.com as soon as practicable after they are electronically filed with or furnished to the SEC. The information on or linked to our website is neither a part of nor incorporated by reference in this Form 10-K or any of our other SEC filings. Copies of these reports are also available, without charge, from Aetna's Investor Relations Department, 151 Farmington Avenue, Hartford, CT 06156.

For information regarding significant regulation affecting us, refer to "Regulatory Environment" and for a discussion of certain factors that may cause our actual results to differ from currently anticipated results in connection with regulation that affects us, see "Forward-Looking Information/Risk Factors", each sections of the MD&A, beginning on pages 26 and 42 , respectively, of the Annual Report, which are incorporated herein by reference.

We own a number of trademarks and patents that are important to Aetna. Some of the trademarks include Aetna, as well as the corresponding Aetna design logo, Aetna Navigator ® , ActiveHealth ® , bSwift TM , CareEngine ® , Coventry ® , DocFind ® , Healthagen ® , Healthy Merits ® , iTriage ® , Medicity ® , Meritain Health ® , NeoCare Solutions SM , PayFlex ® , Practice IQ SM , Prodigy Health Group ® , Springboard Marketplace TM and Wellmatch ® . Some of our patents include the CareEngine patent that expires in 2021 and the Master Patient Index patent that expires in 2028. We consider these patents and trademarks and our other patents, trademarks and trade names important in the operation of our business. However, our business, including that of each of our individual segments, is not dependent on any individual patent, trademark or trade name.

We had approximately 48,800 employees at December 31, 2014 .

The U.S. federal government is a significant customer of both the Health Care segment and the Company. Premiums and fees and other revenue paid by the federal government accounted for approximately 28% of the Health Care segment's revenue and 27% of our consolidated revenue in 2014 . Contracts with CMS for coverage of Medicare-eligible individuals accounted for 89% of our federal government premiums and fees and other revenue, with the balance coming from federal employee-related benefit programs. No other individual customer, in any of our segments, accounted for 10% or more of our consolidated revenues in 2014 . Our Medicaid business accounted for approximately 12% of the Health Care segment's revenue and approximately 11% of our consolidated revenue in 2014. However, no individual state government agency accounted for more than 10% of our consolidated revenue or the Health Care segment's revenue in 2014. Other than our contracts with CMS, our segments are not dependent upon a single customer or a few customers of which the loss would have a significant effect on the earnings of a segment. The loss of business from any one, or a few, independent brokers or agents would not have a material adverse effect on our earnings or the earnings of any of our segments. Refer to Note 19 of Notes to Consolidated Financial Statements, beginning on page 132 of the Annual Report, which is incorporated herein by reference, regarding segment information.

The information contained in the "Forward-Looking Information/Risk Factors" section of the MD&A, which begins on page 42 of the Annual Report, is incorporated herein by reference.

None.

Our principal office is a building complex that is approximately 1.7 million square feet in size and is located at 151 Farmington Avenue, Hartford, Connecticut. Our principal office is used by all of our business segments. We also own or lease other space in the greater Hartford area, Bethesda, Maryland, Blue Bell, Pennsylvania, and various field locations in the U.S. and several foreign countries. Such properties are primarily used by our Health Care segment. We believe our properties are adequate and suitable for our business as presently conducted.

The information contained under "Litigation and Regulatory Proceedings" in Note 18 of Notes to Consolidated Financial Statements, which begins on page 129 of the Annual Report, is incorporated herein by reference.

Not applicable.

Aetna's Chairman is elected by Aetna's Board of Directors (our "Board"). All of Aetna's other executive officers listed below are appointed by our Board, generally at its Annual Meeting, and such persons hold office until the next Annual Meeting of our Board or until their successors are elected or appointed. None of these officers has a family relationship with any other executive officer or Director. In addition, there are no arrangements or understandings, other than those with Directors or executive officers acting solely in their capacities as such, pursuant to which these executive officers were appointed.

*As of February 27, 2015

Our common shares ("common stock") are listed on the New York Stock Exchange, where they trade under the symbol AET. As of January 31, 2015, there were 7,225 record holders of our common stock.

Refer to Note 15 of Notes to Consolidated Financial Statements, beginning on page 125 of the Annual Report, which is incorporated herein by reference, regarding our share repurchases, including Board authorizations, shares repurchased during 2014 and our remaining share repurchase authorization as of December 31, 2014.

The following table provides information about our monthly share repurchases, all of which were purchased as part of a publicly-announced program, for the three months ended December 31, 2014 :

On November 21, 2014, our Board increased our quarterly dividend to shareholders to $.25 per common share. On February 27, 2015, our Board declared a cash dividend of $.25 per common share that will be paid on April 24, 2015, to shareholders of record at the close of business on April 9, 2015. Declaration and payment of future dividends is at the discretion of our Board and may be adjusted as business needs or market conditions change. Information regarding restrictions on our present and future ability to pay dividends is included in the "Liquidity and Capital Resources" section of the MD&A and Note 16 of Notes to Consolidated Financial Statements, beginning on pages 16 and 126 , respectively, of the Annual Report, which are incorporated herein by reference. Information regarding quarterly common stock prices is incorporated herein by reference to the "Quarterly Data (unaudited)" included on page 141 of the Annual Report.

The information contained in "Selected Financial Data" on page 73 of the Annual Report is incorporated herein by reference.

The information contained in the MD&A, beginning on page 2 of the Annual Report, is incorporated herein by reference.

The information contained in the "Risk Management and Market-Sensitive Instruments" section of the MD&A, beginning on page 15 of the Annual Report, is incorporated herein by reference.

The information contained in Consolidated Financial Statements, Notes to Consolidated Financial Statements, Report of Independent Registered Public Accounting Firm and "Quarterly Data (unaudited)," beginning on page 74 of the Annual Report, is incorporated herein by reference.

None.

We maintain disclosure controls and procedures, which are designed to ensure that information that we are required to disclose in the reports we file or furnish under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

An evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2014 was conducted under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of December 31, 2014 were designed to ensure that material information relating to Aetna Inc. and its consolidated subsidiaries would be made known to the Chief Executive Officer and Chief Financial Officer by others within those entities, particularly during the periods when periodic reports under the Exchange Act are being prepared and were effective. Refer to the Certifications by our Chief Executive Officer and Chief Financial Officer filed as Exhibits 31.1 and 31.2 to this Form 10-K.

Management's Report on Internal Control Over Financial Reporting, on page 139 of the Annual Report, is incorporated herein by reference.

The Report of Independent Registered Public Accounting Firm, on page 140 of the Annual Report, is incorporated herein by reference.

There has been no change in our internal control over financial reporting identified in connection with the evaluation of such control that occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

None.

Information concerning the Executive Officers of Aetna Inc. is included in Part I pursuant to General Instruction G to Form 10-K.

Information concerning our Directors, our Directors' and certain of our executives' compliance with Section 16(a) of the Exchange Act, our Code of Conduct (our written code of ethics) and our audit committee and audit committee financial experts is incorporated herein by reference to the information under the captions "Nominees for Directorships," "Section 16(a) Beneficial Ownership Reporting Compliance," "Aetna's Code of Conduct" and "Board and Committee Membership; Committee Descriptions" in the Proxy Statement.

The information under the captions "Compensation Discussion and Analysis," "Director Compensation Philosophy and Elements," "2014 Nonmanagement Director Compensation," "Additional Director Compensation Information," "Executive Compensation," "Compensation Committee Interlocks and Insider Participation" and "Compensation Committee Report" in the Proxy Statement is incorporated herein by reference.

The information under the caption "Security Ownership of Certain Beneficial Owners, Directors, Nominees and Executive Officers" and "Equity Compensation Plans" in the Proxy Statement is incorporated herein by reference.

The information under the captions "Director Independence" and "Related Party Transaction Policy" in the Proxy Statement is incorporated herein by reference.

The information under the captions "Fees Incurred for 2014 and 2013 Services Performed by the Independent Registered Public Accounting Firm" and "Nonaudit Services and Other Relationships Between the Company and the Independent Registered Public Accounting Firm" in the Proxy Statement is incorporated herein by reference.

The following documents are filed as part of this Form 10-K:

Financial Statements

The Consolidated Financial Statements, Notes to Consolidated Financial Statements and Report of Independent Registered Public Accounting Firm, which begin on pages 74 , 79 and 140 , respectively, of the Annual Report, are incorporated herein by reference.

Financial statement schedule

The "Condensed Financial Information of Aetna Inc. (Parent Company Only)" is included in this Item 15. Refer to Index to Financial Statement Schedule on page 24 .

Exhibits*

Exhibits to this Form 10-K are as follows:

The Board of Directors and Shareholders

Aetna Inc.:

Under the date of February 27, 2015 , we reported on the consolidated balance sheets of Aetna Inc. and subsidiaries (the "Company") as of December 31, 2014 and 2013 , and the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 2014 , as contained in the Annual Report on Form 10-K for the year ended December 31, 2014 .  In connection with our audits of the aforementioned consolidated financial statements, we also audited the related financial statement schedule listed in the accompanying index. The financial statement schedule is the responsibility of the Company's management.  Our responsibility is to express an opinion on the financial statement schedule based on our audits.

In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ KPMG LLP

Hartford, Connecticut

February 27, 2015

Refer to accompanying Notes to Financial Statements.

Refer to accompanying Notes to Financial Statements.

Refer to accompanying Notes to Financial Statements.

Refer to accompanying Notes to Financial Statements.

Refer to accompanying Notes to Financial Statements.

The financial statements reflect financial information for Aetna Inc. (a Pennsylvania corporation) only (the "Parent Company"). The financial information presented herein includes the balance sheet of the Parent Company as of December 31, 2014 and 2013 and the related statements of income, comprehensive income, shareholders' equity and cash flows for the years ended December 31, 2014 , 2013 and 2012 . The accompanying financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Annual Report.

Refer to Note 2 of Notes to Consolidated Financial Statements, beginning on page 80 of the Annual Report, for the summary of significant accounting policies.

Gross cash dividends received from subsidiaries and included in net cash provided by investing activities in the Statements of Cash Flows were $1.5 billion , $2.5 billion and $1.7 billion in 2014 , 2013 and 2012 , respectively.

Refer to Note 3 of Notes to Consolidated Financial Statements, on page 90 of the Annual Report, for a description of acquisitions and dispositions.

Refer to Note 9 of Notes to Consolidated Financial Statements, beginning on page 101 of the Annual Report, for a description of accumulated other comprehensive income (loss).

Long-term debt on the balance sheet of the parent company excludes long-term debt of a subsidiary. That debt was acquired in the Coventry acquisition. Refer to Note 14 of Notes to Consolidated Financial Statements, on page 123 of the Annual Report, for a description of Aetna's total debt.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.