Managed care is a type of health care system focused on reducing costs, while ensuring a high quality of care. The most common health plans available include aspects of managed care, from provider networks to prescription drug tiers. The purpose of such plans is to help manage costs for consumers without compromising quality care.

Let’s talk about 10 things you should know about the managed care industry.

1. HMOs

Health Maintenance Organizations (HMOs) are one of the most common types of managed care systems, offering the lowest costs for members. However, you can only see providers that are included within a small local network and you must have a Primary Care Provider (PCP) to coordinate all your care and specialty visits.

2. PPOs

Preferred Provider Organizations (PPOs) allow you to see any doctor you want, both in and out of network; however, you will pay less if you stay in-network. You don’t have to get a referral from your PCP to see a specialist, and most preventive care will be 100 percent covered. Your costs are typically higher for this level of convenience.

3. POS Plans

Point of Service (POS) plans combined the features of HMOs and PPOs. You get the flexibility to see doctors in network or out of network, but you will pay a higher share of the costs, like a PPO. And like an HMO, your PCP will have to manage your care and coordinate specialist referrals.

4. EPO Plans

Exclusive Provider Organization (EPO) plans also give you the best of both HMOs and PPOs but at a higher cost. You don’t have to see your PCP for a referral, but you’ll have to see an in-network doctor in order to be covered. The cost to you is higher than an HMO yet less than a PPO.

5. Provider Networks

Health insurance companies contract with providers to offer members lower rates on care, with networks including anything from doctors and specialists to hospitals and labs. Depending on your plan, you may have to stay within the provider network to be covered.

6. Preventive Care Incentives

Managed care plans tend to prioritize preventive care, which includes annual check-ups, certain vaccines, and routine screenings. As such, they are 100 percent covered. With regular check-ups, physicians can identify problems early and treat them before they worsen and incur a higher cost.

7. Primary Care Providers (PCP)

Many health plans require members to designate a PCP, and depending on your type of plan, you may have to visit your PCP first before seeing a specialist. As such, your PCP coordinates all your health care needs.

8. Prior Authorization

With managed care plans, you will likely have to get approval prior to getting certain procedures or treatments done, or receiving prescriptions for specialty medications. This is to ensure you do not receive treatment or medications that you really don’t need, and to help the insurer better manage costs for tests, surgeries, and meds that can be very expensive. With prior authorization, you will be asked for additional information from the provider before they will give their approval or reject it.

9. Prescription Drug Tiers

Your particular health plan may offer you more coverage for generic medications than their brand-name counterparts. Even though they cost less, generics often contain the same formula and active ingredients as name brands, which helps keep costs down while ensuring effective medications and quality care.

10. Pros and Cons of Managed Care

As with anything else, there are benefits and drawbacks to managed care.


Network restrictions lower healthcare costs for members, with discounted rates for care within the network. Also, documents and medical files can be shared between in-network providers quickly. Networks can send information directly to in-network pharmacies, allowing patients to simply pay for and pick up their prescriptions. Receiving in-network care often goes more quickly, as no time is wasted on obtaining referrals in the case of PPOs.


Managed care plans may limit coverage options, as discounts can only be received with in-network providers. Providers are incentivized to over-utilize services such as screening and testing. A lot of paperwork can be involved with some managed care plans, and members have to coordinate their own appointments and follow-ups. Busy networks translate to long waits before care can be received, and due to network restrictions and doctor shortages, it can be challenging for members to schedule even the simplest of vaccines and visits.

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