The Post-Reform Health System

The healthcare industry is undergoing sweeping change. To emerge as winners, incumbents should learn from other industries that have faced similar upheaval.

September 2015 | by Dr. Benjamin Warner

Implementation of the Patient Protection and Affordable Care Act (ACA) will usher in dramatic shifts in health insurance coverage over the next decade. For health systems, one of the most important changes will be the significant growth of the individual insurance market. In 2010, only fourteen million people—about five percent of the US population—belonged to this segment. By 2019, this figure is likely to rise to twenty to thirty-five million, primarily because of two related trends: first, many currently uninsured patients will gain coverage on the health insurance exchanges, driven by the individual mandate and federal insurance subsidies; second, workers will likely move from sponsored insurance to individual plans on the exchanges.

Our global research suggests that there are likely to be important differences between the consumers who purchase individual coverage on the exchanges and today’s typical commercial population. For example, purchasers of individual exchange plans are apt to be more price-sensitive and more willing to accept network restrictions in return for more affordable premiums. To be competitive in this new price-sensitive marketplace payors are looking to lower the cost of their individual plans through the use of limited (narrow or tiered) networks.

Many health systems believe that they will need to offer rate cuts in return for membership in these limited networks. In other words, they will have to accept a discount in order to capture additional individual commercial volume. However, health systems may find it difficult to determine how they can capture value effectively from the growing but price-sensitive individual market and, in particular, how they should respond to narrow- or tiered-network exchange offers from payors. Why is it critical for health systems to get their exchange pricing strategies right?

Developing a Regional Health System Strategy

We bring together the depth of its real-world management expertise, proprietary knowledge, and rigorous primary research and economic analysis to understand the implications of marketplace activity unfolding. Insights power high-impact client activities, and inform reports that are shared with the public. Our research focuses on the impact of reform across key health system stakeholders including commercial health insurers, global healthcare providers, distributors, Medicaid and Medicare organizations, retail pharmacies, pharmacy benefits manufacturers, and pharmaceutical manufacturers.

The coming disruption is likely to significantly reshape the healthcare industry. As the full effects take hold, disruptive forces will begin to attack business models. Winning payors will get in front of these forces by aggressively moving to refocus their portfolios around the most attractive segments, successfully transforming their business models, and/or building significant new businesses. The opportunities are many, but to take advantage of them, senior payor executives must make clear strategy choices and exercise the leadership required to ensure that the necessary organizational changes are made.


Executive Editor

Ms Anna Sullivan

Ms Anna Sullivan