Periodically, a dramatic change in an industry enables CIOs to step up and play a decisive role in corporate affairs. We see such a seismic shift in the US health insurance industry, which faces the most sweeping changes in its half-century history. The ranks of the health care payers comprise more than 350 companies, with combined revenues of $500 billion and combined IT spending of $13 billion annually. These businesses range from statewide organizations, such as some of the Blue Cross and Blue Shield companies, to multistate companies, such as Aetna and Cigna.

Three mandates that will drive change

Three principal regulatory currents are producing the impending change: the recently passed federal health care reform bill, new health care IT mandates from last year’s US stimulus package, and ICD-10, a long-overdue expansion of coding standards for the exchange of health care data across payers and providers. Each of these forces will alter the way health care payers deliver services to patients and process the large flows of payments at the heart of the business. IT systems are central to both.

Across the industry, most of the payers’ IT functions are not fully prepared to assume the enormous challenges posed by the required changes. Payers face stark choices. They can make major investments to upgrade systems in order, to meet the new requirements, or consider new operating models based on strategic partnerships utilizing other companies’ IT capabilities. How payers choose to address these questions will determine not only the success of individual companies but also the shape of the entire industry as it faces disruptive regulatory change.