Managed Care Plans are health care plans that contract with area health care providers who agree to provide discounts to plan members or other favorable pricing in exchange for a stream of referrals. Generally, plan members must go to these contracted providers in order to receive non-emergency services. Premiums are generally lower for managed care plans than they are for other kinds of health insurance offering similar benefits, but access to care is generally restricted to the approved list of care providers.
Types of Plans
There are three basic types of managed care organizatons: Health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point of service (POS) plans. All of them contract with a limited numbers of plan providers in the service area. The list of contracted providers is called the "network." Managed care plans tend to emphasize access to preventive care services.
History of Managed Care Plans
Congress passed the Health Maintenance Organization Act in 1973 that subsidized start-up costs for managed care firms and required companies with 25 employees or more and which offered traditional health insurance benefits to offer a qualified HMO plan as well. This requirement expired in 1995, but by that time HMOs and other managed care organizations were well established in the workplace market.
Preferred Provider Networks
Preferred provider networks also contract with a specific network of care providers, but do not typically require a referral from a PCP in order to cover visits to specialists. They provide coverage for 'out-of-network' services as well, but at reduced rates. For example, visits to out-of-network providers may require large copayments (flat-fees per visit) or require the plan member to pay a greater percentage of costs out of pocket.
Health Maintenance Organizations
HMOs require plan members to select a primary care physician, or PCP. The PCP acts as a 'gatekeeper' to the plan network. Except for emergencies, all covered visits and services to specialists first require a referral from the PCP. In practice, these restrictions are effective at controlling costs. HMOs frequently have the lowest premiums for a given level of covered services compared to other private health care plans.
Point of Service Plans
Point of service plans encourage the use of a primary care physician, but it is not a requirement. Visits to specialists are still covered, but you pay less out of pocket if you first get a referral from a primary care physician. In a sense, they are a combination of the HMO and PPO approach.
Managed care plans — particularly HMOs — have come under criticism from consumer groups for restricting access to medically necessary care. Criticisms include the perceived conflict between profitability and providing quality care, the administrative termination of doctor-patient relationships, and the perception of reduced patient contact time. According to data from the Henry J. Kaiser foundation, managed care plan members rated their plans lower than traditional insurance plans.