Managed care concepts

What "managed care" means

Managed care describes health plans that do more than pay claims: they also organize how and where care is delivered. Instead of reimbursing any provider at any price, a managed care plan contracts with a defined group of doctors, hospitals, labs, and pharmacies, negotiates the fees those providers will accept, and then steers members toward that network with richer benefits and lower out-of-pocket costs.

The classic goals are cost containment, quality control, and access to preventive care. Managed care plans typically cover routine physicals, screenings, and immunizations at little or no cost sharing, on the theory that early detection is cheaper than late treatment.

The tools every managed care plan uses

• Contracted provider networks. Providers accept negotiated rates (and administrative rules) in exchange for patient volume.
• Gatekeeping and referrals. A primary care physician (PCP) coordinates care and authorizes specialist referrals in gatekeeper models.
• Utilization review. Preauthorization (before non-emergency care), concurrent review (while a member is hospitalized), and retrospective review (after the fact) test whether services are medically necessary and delivered in the right setting. Related tools include second surgical opinions and case management for high-cost conditions.
• Cost sharing that steers behavior. Copayments, deductibles, and coinsurance are set lower in network and higher out of network.
• Provider payment methods. Capitation pays a provider a fixed amount per member per month regardless of services used; discounted fee-for-service pays per service at a contracted rate.

Where the plan types fall

• HMO (health maintenance organization). Care must generally come from network providers, usually through a PCP gatekeeper; out-of-network care is not covered except in emergencies. Premiums and cost sharing tend to be lowest, choice most limited. Providers are often paid by capitation.
• EPO (exclusive provider organization). Network-only coverage like an HMO, but typically with fewer referral requirements.
• POS (point of service). A hybrid: the member chooses at the point of service whether to go through the PCP and network for maximum benefits, or self-refer outside the network and accept higher cost sharing.
• PPO (preferred provider organization). Both in- and out-of-network care are covered, at two different benefit levels. Providers are usually paid discounted fee-for-service.
• Traditional indemnity sits at the far end: any provider, no network, highest premium, most freedom.

Selling managed care honestly

Because managed care benefits depend on which provider a member uses, network questions are where producers get into trouble. Under Texas Insurance Code Chapter 541, misrepresenting the benefits, terms, or conditions of a policy, or advertising it in a false, deceptive, or misleading way, is an unfair or deceptive act or practice. Promising that a member's own physician is in network, glossing over referral or preauthorization requirements, or implying out-of-network care is covered the same as in-network care all invite liability.

If a health insurer becomes insolvent, the Texas Life, Health, and Accident Insurance Guaranty Association under Chapter 463 provides a statutory safety net for covered policyholders. Its existence is a consumer protection, not a sales feature -- sell the contract on its own terms.