ness operations, loss of existing customers, difficulty in attracting new customers, disputes with customers and providers, regulatory problems, increases in administrative expenses and other adverse consequences.  

Compliance with privacy laws could adversely affect our business and results of operations.  

The use of patient data by all of our businesses is regulated at the federal, state and local level. The Health Insurance Portability and Accountability Act of 1996, for example, imposed significant new requirements relating to maintaining the privacy of medical information. The government published regulations to implement these provisions in December 2000. Health plans must be in compliance by April 2003. The law is far-reaching and complex and proper interpretation and practice under the law continues to evolve. Consequently, our efforts to measure, monitor and adjust our business practices to comply with the law are ongoing. Because these regulations and other similar federal, state and local laws and regulations continue to evolve, we cannot guarantee that the costs of compliance will not adversely affect our results of operations or cause us to change our operations significantly.   

We conduct business in a heavily regulated industry and changes in regulations or violations of regulations could adversely affect our business and results of operations.  

Our business is heavily regulated by federal, state and local authorities. Legislation or other regulatory reform that increases the regulatory requirements imposed on us or that changes the way we currently do business may in the future adversely affect our business and results of operations. Legislative or regulatory changes that could significantly harm us and our subsidiaries include changes that:  

• impose increased liability for adverse consequences of medical decisions;  
• limit premium levels;  
• increase minimum capital, reserves and other financial viability requirements;  
• impose fines or other penalties for the failure to pay claims promptly;  
• prohibit or limit rental access to health care provider networks;  
• prohibit or limit provider financial incentives and provider risk-sharing arrangements;  
• require health plans to offer expanded or new benefits;  
• limit the ability of health plans to manage care and utilization due to “any willing provider” and direct access laws that restrict or prohibit product features that encourage members to seek services from contracted providers or through referral by a primary care provider;  
• limit contractual terms with providers, including audit, payment and termination provisions; and  
• implement mandatory third party review processes for coverage denials.  

In addition, we are required to obtain and maintain various regulatory approvals to market many of our products. Delays in obtaining or failure to obtain or maintain these approvals could adversely impact our results of operations. Federal, state and local authorities frequently consider changes to laws and regulations that could adversely affect our business. We cannot predict the changes that government authorities will approve in the future or assure you that those changes will not have an adverse effect on our business or results of operations.  

We face periodic reviews, audits and investigations under our contracts with federal and state government agencies, and these audits could have adverse findings that may negatively impact our business.  

We contract with various federal and state governmental agencies to provide managed health care services. Pursuant to these contracts, we are subject to various governmental reviews, audits and investigations to verify our compliance with the contracts and applicable laws and regulations. Any adverse review, audit or investigation could result in:  

• refunding of amounts we have been paid pursuant to our government contracts;  
• imposition of fines, penalties and other sanctions on us;  
• loss of our right to participate in various federal programs;  
• damage to our reputation in various markets;  
• increased difficulty in selling our products and services; and  
• loss of one or more of our licenses to act as an insurer or HMO or to otherwise provide a service.

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