Managed care refers to health insurance plans meant to provide its members with quality and affordable care. As health insurance plan, managed care liaises with health care providers and medical centers to control health care costs as well as managing quality of the care provided. Notably, every plan has its network (MedlinePlus, 2012). According to Tobin (n.d.), managed care is a system that combines financing and provision of appropriate health care by using given set of techniques and services. Managed care is a wide definition which envelops different organizations and insurance options. Examples are: Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and Point of Service (POS) plans. The growth of managed care was stimulated by the Health Maintenance Organizations Act which was enacted in the year 1973. Before the enactment of the act, the healthcare system had a non-profit model, this changed to a profit model with the enactment of the act, encouraging the quick growth of HMOs which were the first form managed care in the market (BOOK).
Currently, managed care uses the three health insurance plans that are listed above. They work in conjunction with health care providers to try and attain their goals of low cost, but quality health care. The cost of these plans vary depending on the restrictions accompanying each, with the more restrictive ones being less costly as compared to the more flexible plans. HMOs pay for health care done within their network, for fixed amounts that are prepaid periodically. PPOs on the other hand, pay a higher amount for care within their network of contracted hospitals/ physicians through a contract with employer and insurer or even a third-party facilitator, and also some portion if you go outside the network. Finally POSs combine elements of both HMOs and PPOs, allowing you to choose which plan to adopt at the point of need or service (MedlinePlus, 2012; Tobin, n.d.).
The health reforms are set to have both positive and negative impacts on managed care. On the negative side, managed care organizations (MCOs) will incur extra costs due to; inability to bar medical cover based on the health status of an individual, inability to rescind coverage, delayed fees until 2014, and prohibition of lifetime caps. However, there are positive impacts that may benefit MCOs, such include; enrollment gains due to individual mandate to obtain cover. This will lead to economies of scale which will leverage the additional costs. Furthermore, MCOs will have a greater number of people or a large clout that will favor their negotiations with providers. There are also chances of consolidation which may prove favorable. Therefore, on a balance the positive impact may outweigh the negative impacts, thus the general impact of health reforms on managed care is positive ((Maddigan, Deaton, & Boyle, 2010; Bloomberg BusinessWeek, 2010)