REASONS FOR USE OF MANAGED CARE

There are many reasons why employees elect coverage under a managed care plan. First, it may be the only plan the employer provides, although most employers allow a choice of benefit plans. In those situations, the following factors have been identified as reasons why a managed care plan, in general, or a particular managed care plan might be selected:

The reputation of the managed care plan. To some extent, this is a function of the managed care plan's experience. In areas where managed care plans have been established for many years, a larger percentage of employees participate. Employees are also concerned with perceived quality of care and are less likely to choose a plan known for frequent coverage denials and difficulty in obtaining referrals to specialists.

The extent to which employees have established relationships with physicians. Employees are reluctant to elect a managed care option if it requires that they give up a physician with whom they are satisfied. In some cases, of course, this physician also may participate in the managed care plan. In general, new employees are more likely to elect a managed care option if they are new residents of the area or are just entering the labor force.

Costs. Managed care plans are obviously more attractive to employers when they offer a less expensive alternative to coverage under insurance company plans. As a rule, managed care plans are less expensive, and any employee share of the premium is lower. Even when the premium cost is comparable, there is often broader coverage and no deductibles or percentage participation. If employees view a managed care alternative as being less expensive in the long run, their participation is greater.

In the early days of the growth of managed care, employers were concerned primarily with cost savings when they adopted managed care plans. In a more mature managed care marketplace, employers are concerned with the same factors when they change plans as are employees: reputation, availability of providers, and cost. Throughout most of the late 1990s, the economy was booming, labor markets were tight, and employers faced relatively modest premium increases from year to year. As a result, employers were much more likely than in the past to modify managed care plans or to adopt new plans that were less restrictive, and therefore somewhat more expensive, in their management of care. With greater premium increases as the new millennium begins, some benefit consultants feel that this trend may reverse itself, particularly if there is an economic downturn.