A low-cost strategy for health plans: Winning in a revenue-constrained environment

As the pressures created by healthcare reform, consumer demands, and rising competition squeeze margins, health plans should consider a low-cost strategy (LCS). To adopt such a strategy, plans have two major decisions: choosing an operating model, and determining the capabilities sets that will enable them to leverage the LCS value chain and differentiate themselves in the marketplace. Those plans that choose wisely can expect sustainable margins averaging 5.5 percent and operating model cost structures that are 20 to 30 percent lower than legacy models.