Risk Selection in Employer-Sponsored Managed Care Plans

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In 2002, more than 63 percent of nonelderly Americans had health insurance coverage through a current employer1— 90 percent of them enrolled in a managed care plan. At one time, managed care was promoted as a cost-efficient system that restrained costs by implementing strict controls on health care utilization and services such as preventive care, disease management, care management, and other cost-saving practices. These mechanisms assumed that managed care plans could pass on savings in the form of lower premiums. However, critics questioned the true source of these cost savings, and contended that managed care plans have incentives to design plans that attract healthy enrollees.