Employers, hospitals, insurance companies and patients wait
to see where they stand under the Affordable Care Act


H uge doesn’t begin to describe the Affordable Care Act.“This is the largest change to insurance since Lyndon B. Johnson signed the Medicare Act,” says Craig Garthwaite, assistant professor of management and strategy. “It could end up fundamentally changing the way all Americans receive health care — all Americans, not just the ones who are uninsured.”

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With a projected increase of 30 million newly insured individuals by 2022 and a goal of slowing the growth of health care spending at the same time, the health care law is bigger than huge. It’s ambitious to its defenders, big government run amok to its foes.

It affects 5,723 hospitals with nearly 1 million total hospital beds. It has an impact on about 880,000 licensed physicians, 2.7 million registered nurses and the 70 percent of Americans who take prescribed medication. That’s not counting the millions of businesses, both big and small, and business owners who must navigate this massive system.

Today, many of the law’s rules have yet to be defined and deadlines have been delayed. But the dust is starting to settle and a few possible trends are emerging for all the major players, from insurance companies and hospitals to the patients they serve.

Insurance Companies

One key part of the ACA, often called “Obamacare,” is the creation of marketplaces where people can purchase insurance. Yet, some of the largest insurance companies are not participating in the exchanges. United Healthcare is not participating in any of the 34 federally facilitated marketplaces. Many of the large national insurers, such as Aetna, Humana and Cigna, selectively entered markets.

Craig Garthwaite

Craig Garthwaite

areas of expertise:
Applied Microeconomics, Effects of Government Policies and Social Phenomena

“Some insurance companies that have the luxury of sitting on the sidelines have essentially said, ‘Year one or year two is going to be tough, let’s wait awhile for the kinks to get worked out,’” says Sanjay Saxena ’99, a Boston Consulting Group partner and managing director who advises hospitals on the ACA.

Meanwhile, the insurance companies that have entered the marketplace are contending with customers who were previously uninsurable on the individual market, says Leemore Dafny, professor of management and strategy and former deputy director of Health Care and Antitrust for the Federal Trade Commission’s Bureau of Economics.

This is the largest change to insurance since Lyndon B. Johnson signed the Medicare Act.

Craig Garthwaite
, assistant professor of
management and strategy

“The insurance industry is also seeing some action in terms of entry, which hasn’t happened in quite some time,” Dafny says, “and the barriers to entry are coming down because of the existence of the exchanges.”

The insurance companies involved with the exchanges have been hustling to keep up with the demand. For example, Blue Cross Blue Shield was so overwhelmed with the volume of calls in a handful of states that it hired hundreds more customer service agents to reduce the sometimes hours-long wait times.

By late January, more than 3 million people had signed up for Obamacare. Federal officials have said their goal is to have 7 million signed up by March 31, the last day to get coverage in 2014 without facing a tax penalty.

Leemore Dafny

Leemore Dafny

areas of expertise:
Competitive Interactions in Healthcare, Consolidation in U.S. Hospital Industry, Provider Practices, Insurance Industry

Another challenge for insurance companies has been processing customers’ information. Naperville, Ill.-based Infogix has been helping companies manage such data.

Infogix’s efforts have been complicated by the federal government’s delays in notifying companies about how various rules are being applied, says Infogix Chief Product Officer Bobby Koritala ’05.

“I think the CMS [Centers for Medicaid & Medicare Services] guys are working hard and working diligently to get it out, there’s just so much regulation they just can’t keep up, so it’s frustrating,” Koritala says.


Much like the insurance companies, many hospitals are taking the “wait-and-see” approach, says Saxena. They’re watching how the government handles reimbursements to the hospital for subsidized patients, as well as the demographics on the newly insured, he says.

Some hospitals, such as ones in New Jersey and Kansas, are hiring more staff to help with an anticipated increase in patients, as more people will be able to seek medical care. Meanwhile, the Chicago area’s North Shore University Health System is laying off about 130 people — 1 percent of its workforce. They say it’s to help protect the company from the financial uncertainty around the ACA.

We’ve got to set aside whether the exchanges work perfectly or not. That train has left the station. Health care is unaffordable — we’ve known it for years.

Sanjay Saxena ’99
, partner and managing director, Boston Consulting Group

Another trend is that more health systems are consolidating. A Medical Group Management Association survey found the percentage of physicians working in practices owned by a hospital or integrated delivery system increased from 24 percent in 2004 to 49 percent in 2011.

“It is a major phenomenon that is likely to stay,” says Saxena.

Health care experts say the ACA makes mergers and acquisitions more appealing because it can be easier to handle more patients and better meet ACA requirements that create a more comprehensive approach.

“Providers are coming to appreciate that they need to be accountable for the entire range of services provided to their patients, and not just the small area that a patient is given in any one visit,” says Dafny.

“Providers must take a step back and look at the entire spectrum of care that a patient is receiving, beginning with prevention and ending with treatment,” she says.

Joel I. Shalowitz

Joel I. Shalowitz

areas of expertise:
Healthcare Management, Healthcare Quality, Hospital/Physician Relations, International Healthcare, Managed Care Systems

For the most part, large employers have not yet seen dramatic changes because they already offer their full-time employees health care. Also, the deadline for businesses to tell the federal government the details of the coverage they offer employees has been pushed back a year to 2015.

Some big companies such as Target and Trader Joe’s have said they will not offer their part-time employees health insurance, allowing those employees to seek coverage through the exchanges.

It’s different for small businesses. Businesses that employ fewer than 50 employees can purchase plans through the Small Business Health Options Program, or SHOP. However, the launch of an online marketplace for SHOP, originally set for October 2013, has been delayed until November 2014.

Until the SHOP online marketplace launches, these businesses can buy SHOP plans through offline means they’ve used in the past, such as agents, brokers or the issuers themselves, says Marianne Markowitz, Chicago regional administrator of the Small Business Association.

After battling months of confusion about the Affordable Care Act, small business owners are now starting to understand the law better and “are really doing the math and evaluating what works best for their business,” Markowitz says.

Some have signed up for a plan to offer their employees health insurance. Others have decided to cut full-time employees’ hours to part-time, making the employees eligible for the individual exchanges. But most businesses are still trying to sort through their options.

[Providers] must take a step back and look at the entire spectrum of care that a patient is receiving.

Leemore Dafny
, professor of management and strategy and former deputy director of Health Care and Antitrust for the Federal Trade Commission’s Bureau of Economics.

Pepper Crutcher, a partner at the law firm Balch & Bingham advises insurance companies on the ACA. He says one good thing about the delays is that they buy businesses more time.

“This is really complicated stuff,” Crutcher says. “If you really want to understand it and make the best decision for your company, it’s not going to take days. It’s not going to take weeks. It’s going to take months and maybe even more.”


Despite pushes by the Obama administration and several nonprofits, Joel I. Shalowitz, MD, clinical professor of health enterprise management, director of the Health Industry Management Program at Kellogg and a professor of preventive medicine at Northwestern’s Feinberg School of Medicine, says it’s still unclear how many Americans are actually insured.

The government is only releasing numbers of people who have selected a plan through the marketplace, but under the law, insurance coverage does not take effect until after the person pays a premium. The Obama administration has not released those numbers.

But any gap between those numbers might not matter in the end, Saxena says. The Affordable Care Act is still the law of the land.

“We’ve got to set aside whether the exchanges work perfectly or not,” says Saxena. “That train has left the station. Health care is unaffordable — we’ve known it for years. We can’t put that burden on our employees, citizens, government. All of this [reform] will continue because there’s not an alternative to it moving forward.”