New Healthcare Law Requires “Massive” New IT Investments

Last month, I posted a piece, titled “Governments will keep IT departments busy for a long time,” citing the increases in new regulations, and offsprings of established mandates such as Sarbanes-Oxley that will require ongoing investments by insurance companies in information technology. 

Now, with the advent of the Affordable Care Act (ACA)—the massive health care reform act passed earlier this year—health insurers also face major technology investments to keep up with new rules. As a new report in The New York Times puts it: “insurers are cutting administrative staff to lower overhead costs, investing in big technology upgrades and training employees to field the expected influx of customer inquiries.”

Indeed, the ACA has a lot of big changes that require changes in insurers' systems, to the point where entire business models are being reinvented. As Karen Ignagni, chief executive of America’s Health Insurance Plans, put it in the Times article: “It is really the Manhattan Project because of the scale and the scope.”

The article also cited Blue Shield of California, which is in the process of upgrading its information technology systems. According to the article, the plan is spending “several hundred million dollars” on the upgrade, and “both the new and old systems must be reprogrammed at the same time to reflect the new rules.” 

Jeff Fusile, a health care partner at PricewaterhouseCoopers calls it a “pretty massive investment in information technology” now taking place.

We may just be emerging from a recession, but these IT shops will soon be facing some very tough challenges in not only standing up new systems, but also finding the qualified architects, developers, and managers that can put this all in place. There may be efforts to lure talent from other sectors of the industry. Expect to see more competition for talent across the industry as a whole very shortly.

Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.

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