Reinvention of Health Insurance in the Consumer Era

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JAMA--April 2004

The private health insurance industry in the United States has fundamentally changed its strategic focus, product design, and pricing policy as a result of the backlash against managed care. Rather than seek to influence the behavior of physicians through capitation and utilization review, the major health plans now seek to influence the behavior of patients through benefit designs that cover a broad range of services but with high co-payments, tiered network designs that cover a broad range of physicians but with variable coinsurance, and medical management programs that provide incentives for patients to better manage their own health care. Premium prices are carefully adjusted to cover the expected costs of care for each type of product and each class of patient, with a commensurate willingness to abandon enrollment where insurance premiums cannot outrun medical costs. The contemporary product and pricing policies reflect a retreat by the insurance industry from previous efforts to transform the health care system and embody a delegation to individual consumers of responsibility for setting priorities and making financial tradeoffs.