Strategic Response to Healthcare Legislation

In March of 2010 the "Patient Protection and Affordable Care Act" (PPACA or sometimes ACA) was signed into law.

PPACA will clearly lead to a more challenging operating environment for payers (insurers), including:

  • Restrictions on product and pricing strategy, limiting opportunity for innovation and differentiation
  • Profit ceilings at the state and group-size segment level, and a more challenging overall underwriting environment
  • Churn and uncertainty in the small commercial market
  • A growing, but highly regulated and likely less profitable individual market
  • Ongoing uncertainty, as regulations take shape over the next few years
  • Potential for blowback, additional regulations, and even dissolution of the private insurance market, if health care costs continue to escalate and blame is placed on payers

Given the uncertainty surrounding PPACA’s ultimate form, many payers are struggling to develop and implement a coherent strategy.  However PPACA evolves, payers would do well to consider the following:

  • Take the time to think through the strategic implications of the Act on your sources of competitive advantage and overall operating and service models
  • Prepare for volatility and decline in the small group market, and growth in the self funded market
  • Capture cost reduction opportunities, focusing on process improvement and outsourcing of non-core activities
  • Revamp accounting for Medical Loss Ratio (MLR) requirements, and consider reallocating resources and reorganizing departments to improve marginal profitability under the Act
  • Don't cut broker compensation - but do work to make it sustainable in the long term
  • Don't abandon efforts to address the cost of care
  • Don't give up on the debate

Bridge has a strong track record of working with executive and management teams of health payers to adapt their strategies, organizations, and systems to PPACA-driven marketplace changes.  We are ‘on the ground’, helping payers anticipate market shifts and position themselves to succeed.