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One Day Pay
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is a claims initiative that we have focused on at Aflac U.S. to process, approve and pay eligible claims
in just one day. We believe that this claims practice enhances our brand reputation and the trust our policyholders have in
Aflac, and it helps Aflac stand out from competitors.
Our products provide cash benefits that can be used to help with increasing out-of-pocket medical expenses, help
cover household costs, or protect against income and asset loss. Our group products and relationships with insurance
brokers that handle the larger-case market are helping us as we expand our reach selling to larger businesses. We are
regularly evaluating the marketplace to identify opportunities to bring the most relevant, cost-effective products to our
customers. We believe the need for our products remains very strong, and we continue to work on enhancing our
distribution capabilities to access employers of all sizes, including initiatives that benefit our field force and the broker
community. At the same time, we are seeking opportunities to leverage our brand strength and attractive product portfolio
in the evolving health care environment.
U.S. Regulatory Environment
The Affordable Care Act (ACA), federal health care reform legislation, is intended to give Americans of all ages and
income levels access to comprehensive major medical health insurance and gave the U.S. federal government direct
regulatory authority over the business of health insurance. The reform included major changes to the U.S. health care
insurance marketplace. Among other changes, the reform legislation included an individual medical insurance coverage
mandate, provided for penalties on certain employers for failing to provide adequate coverage, created health insurance
exchanges, and addressed coverage and exclusions as well as medical loss ratios. It also imposed an excise tax on
certain high cost plans, known as the “Cadillac tax,” that is currently scheduled to begin in 2020. The legislation also
included changes in government reimbursements and tax credits for individuals and employers and alters federal and
state regulation of health insurers. At this time it is unclear whether implementation of the ACA will continue. While the
ACA was enacted in 2010, the major elements of the law became effective on January 1, 2014. We believe that the ACA,
as enacted, does not require material changes in the design of our insurance products. However, indirect consequences
of the legislation and regulations could present challenges and/or opportunities that could potentially have an impact on
our sales model, financial condition and results of operations.
Title VII of the Dodd-Frank Act and regulations issued thereunder, in particular rules to require central clearing and
collateral for certain types of derivatives, may have an impact on Aflac's derivative activity, including activity on behalf of
Aflac Japan. In 2015 and 2016, six U.S. financial regulators, including the U.S. Commodity Futures Trading Commission
(CFTC), issued final rules that impose greater obligations on swap dealers regarding uncleared swaps with certain
counterparties, such as Aflac. Such rules, as well as similar regulations in Europe, become effective on March 1, 2017
and may result in more stringent collateral requirements or affect other aspects of Aflac's derivatives activity.
The Dodd-Frank Act also established a Federal Insurance Office (FIO) under the U.S. Treasury Department to monitor
all aspects of the insurance industry and of lines of business other than certain health insurance, certain long-term care
insurance and crop insurance. Traditionally, U.S. insurance companies have been regulated primarily by state insurance
departments. In December 2013, the FIO released a report entitled "How To Modernize And Improve The System Of
Insurance Regulation In The United States." The report was required by the Dodd-Frank Act, and included 18
recommended areas of near-term reform for the states, including addressing capital adequacy and safety/soundness
issues, reform of insurer resolution practices, and reform of marketplace regulation. The report also listed nine
recommended areas for direct federal involvement in insurance regulation. Some of the recommendations outlined in the
FIO report released in December 2013 have been implemented. The National Association of Registered Agents and
Brokers Reform Act, signed into law in January 2015, simplifies the agent and broker licensing process across state
lines. The FIO has also engaged with the supervisory colleges to monitor financial stability and identify regulatory gaps for
large national and internationally active insurers. The new presidential administration in the United States and Congress
have stated proposals to reform or repeal certain provisions of the Dodd-Frank Act. We cannot predict with any degree of
certainty what impact, if any, such proposals will have on our U.S. business, financial condition, or results of operations.
Under state insurance guaranty association laws and similar laws in international jurisdictions, we are subject to
assessments, based on the share of business we write in the relevant jurisdiction, for certain obligations of insolvent
insurance companies to policyholders and claimants. In the United States, some states permit member insurers to recover
assessments paid through full or partial premium tax offsets. The Company's policy is to accrue assessments when the
entity for which the insolvency relates has met its state of domicile's statutory definition of insolvency, the amount of the
loss is reasonably estimable and the related premium upon which the assessment is based is written. In most states, the
definition is met with a declaration of financial insolvency by a court of competent jurisdiction.
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