What is Managed Care? Author:    Posted under: Health InsuranceHealth Insurance Types


The term managed care is used to describe an approach to healthcare designed to integrate services and provide quality and economical healthcare. Managed care plans directly deal with health care providers on an agreed payment for services. Most doctors and hospitals offer managed care plans a discount from their usual fees to enable them to join a provider network. In order for their members to use their provider network, managed care plans offer incentives such as lower out-of-pocket expenses. By restricting the use of more expensive services such as hospital care managed care plans are able to keep costs down.

The main reason most employers have shifted to managed care from traditional insurance is to help them keep their health care costs down.

The different types of Managed Care Plans

There are four different types of managed care plans. They are:

Health Maintenance Organization (HMO)

Under HMO, members are required to obtain all of their health care needs from within the plan’s provider network. An HMO recommends a list of accredited health services and health care providers for a fixed monthly premium. Members may only select a primary care physician from this list. The physician in turn, directs and approves medical services, specialty referrals and hospitalizations necessary for the patient’s treatment.

Independent Practice Association

As the name suggests, this is an association of independent physicians, or an organization that contracts the services of independent physicians to offer services to managed care organizations on a settled fee-for-service basis, flat retainer fee or negotiated per capita rate.

Preferred Provider Organization (PPO)

Members have more flexibility with regards to their choice of physicians and hospitals under PPO. They may opt to utilize the doctors and facilities offered within the plan’s network or go for for care from outside of the network. However, the member pays more for utilizing services and hospitals from outside of the network of providers. For instance, a PPO may pay 90% of the expenses for a visit with a doctor from within the network but only pay 70% for the same services from outside of the network.

Point of Service Plan

This plan works like a combination of HMO and PPO, in that primary care for members is supervised by a primary care physician from within the POS network; however like in PPO, members of POS are allowed to go out of the network for their care but they have to shoulder a larger portion of the cost by doing so.

Managed care plans usually cover a wide variety of health care. These include but are not limited to:

  • General checkups
  • Preventive care and immunizations for adults and children
  • Complete prenatal and newborn care
  • Diagnosis and treatment of illnesses (including lab tests, doctor’s visits, prescription medication, hospital care)
  • In some cases diagnosis and treatment of mental health conditions and substance abuse problems are also offered

Apart from your share of the monthly premium, most managed care plans require their members to pay an annual deductible (which you have to pay at the beginning of the year before your health plan is enforced). Each time you visit your physician, go to the emergency room, or get your prescription medicine filled, you will have to make a copayment.

Depending on how much you pay for your monthly premium, the amount of your deductible and copayments will vary. Generally, you will be charged lower premiums for a managed care plan that requires you to use a provider from within the network, has high deductibles and high copayments. On the other hand, you will be charged higher premiums for a plan that allows you to use a health care provider from outside their network, has lower deductibles and lower copayments.

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