Fighting over Aetna’s disclosure

Introduction

Two days before Aetna told Wall Street it would not allow policyholders who received cancellation notices to renew their cancelled policies next year, as President Obama had requested, the company was accused in a lawsuit of sending out false and misleading statements to shareholders about what it was spending to influence public policy.

Mark Bertolini, CEO of the nation’s third largest health insurer, reportedly told shareholders and Wall Street financial analysts at a meeting in New York last Thursday that the company was too busy to provide the information state insurance departments would need before giving Aetna the approval to reinstate the cancelled policies.

“If we were to go to all those states, refile all those plans, refile all those rates and do it in time for December 23, we would have paid attention to nothing else,” Bertolini was quoted as saying. He apparently wasn’t asked how other, smaller insurers were able to pull it off and do other things.

The reality is that it might have cost the company some money that otherwise would be available for profits — and shareholders would no doubt take a dim view of that.

Citizens for Responsibility and Ethics in Washington (CREW) thinks shareholders might also take a dim view of receiving inaccurate information on an issue they would be asked to vote on at the company’s annual shareholders’ meetings. In a lawsuit filed Tuesday in federal court in New York on behalf of an Aetna shareholder, CREW accuses the company of violating the Securities Exchange Act of 1934 by sending out false and misleading proxy statements to shareholders.

CREW alleges that Aetna tried to hide nearly $8 million in contributions to the American Action Network (AAN) and the Chamber of Commerce to influence recent elections.

“Aetna pretends to be a model of corporate transparency, but in truth, shareholders have almost no idea which dark money groups the company is funding or how much it is contributing,” CREW Executive Director Melanie Sloan said in a statement. “Who knows where else Aetna has been funneling money?”

In its last two proxy statements, which contain information about executive compensation and company governance, Aetna management recommended that shareholders reject two proposals that would have required the company to disclose more information about how it spends policyholders’ money to influence elections and legislation.

Aetna says it provides enough information about political spending to comply with the law, but the company did not disclose to shareholders the specific contributions it made to either American Action Network or the Chamber of Commerce, according to CREW.

CREW says that in recommending a vote against one of those shareholder reform proposals, Aetna maintained that its “Political Contributions and Related Activity Report” was adequate, accurate and could be found easily on its website.

Not so, says CREW. “In reality, Aetna has disclosed inaccurate information in those reports, which are hard to locate on the company’s website.”

CREW found out about the donations to AAN and the Chamber not from the company’s website but from reviewing the tax forms of the Republican and Democratic Governors Associations. CREW says those forms indicate that Aetna contributed far more to AAN and the Chamber than it actually reported elsewhere between 2006 and 2012.

CREW also questions Aetna’s contention that its 2011 contribution to the Chamber was for “voter education.” CREW says the money was actually spent “to run negative ads in hotly contested congressional elections.” Further, CREW says the contribution to AAN was not reported by Aetna at all— at least not on its website.

CREW first learned of Aetna’s contributions to AAN last year when it came across a document Aetna filed with the National Association of Insurance Commissioners, an organization comprising the country’s state insurance regulators that establishes industry operating standards.

Aetna apparently disclosed the contributions by accident because such contributions are not required to be reported to the NAIC. When the company amended the filing later, it didn’t list the donations.

Both the AAN and Chamber have spent millions on ads calling for the repeal of the Affordable Care Act. While Aetna stands to gain financially from the law, it and other insurers have been critical of the potentially profit-threatening consumer protections and regulations in it. About the only way insurers can get rid of the parts of the law they don’t like, however, is to help elect enough Republicans to ensure that the GOP can control both the House and Senate and take back the White House in 2016.

As the Center for Public Integrity reported, AAN conducted a campaign last year that targeted “select liberal members” of Congress and urged 35 Republican members of the House facing tough reelection fights to continue pushing for the repeal of Obamacare. The Chamber has also spent millions of dollars on anti-Obamacare ads. More than $100 million spent by the Chamber in 2009 and 2010 on such ads came from the insurance industry.

“We intend to vigorously defend against this lawsuit,” Aetna spokeswoman Cynthia Michener was quoted as telling the CT Mirror. “Aetna meets or exceeds disclosure requirements of current laws and regulations.”

Bertolini has said previously that Aetna’s donations to the groups were for “educational” — not political — purposes.

It will be interesting to see if Aetna can convince the court of that.