Managed care plans

Managed care plans


Definition: Managed care plans are health-care delivery systems that integrate the financing and delivery of health care. Managed care organizations generally negotiate agreements with providers to offer packaged health care benefits to covered individuals.

Purpose: The purpose for managed care plans is to reduce the cost of health care services by stimulating competition and streamlining administration.



Three basic types of managed care plans exist: health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point-of-service (POS) plans.

• Participants in HMO plans must first see a primary care provider, who may be a physician or an advanced practice registered nurse (APRN), in order to be referred to a specialist. The Independent Practice Association (IPA) contracts with physicians in private practice to see HMO patients at a prepaid rate per visit as a part of their practice.

• PPOs are more flexible than HMOs. Like HMOs, they negotiate with networks of physicians and hospitals to get discounted rates for plan members. But, unlike HMOs, PPOs allow plan members to seek care from specialists without being referred by a primary care practitioner. These plans use financial incentives to encourage members to seek medical care from providers inside the network.

• POS plans are a blend of the other types of managed care plans. They encourage plan members to seek care from providers inside the network by charging low fees for their services, but they add the option of choosing an out-of-plan provider at any time and for any reason. POS plans carry a high premium, a high deductible, or a higher co-payment for choosing an out-of-plan provider