The Birth of Managed Care for Controlling Health Insurance Costs
Managed health care started to become commonplace in the US after the enactment of the Health Maintenance Organization Act of 1973, which was created in an attempt to control health care medical insurance costs by stimulating greater competition within health care markets. It marked a significant shift in the US health care industry by introducing the concept of for-profit health care to an industry that was traditionally not-for-profit.
Many believe that managed care helped control medical cost inflation in the late 1980s. On the other hand, many believe that these cost-control efforts also caused the health care industry to become more interested in saving money than in providing quality health care. Whatever you believe, the fact is that managed health care has become ubiquitous in the US, with 90 percent of insured Americans enrolled in plans with some form of managed care, according to America's Health Insurance Plans.
So What is Managed Health Care?
Managed health care plans are a type of health insurance. Managed Care Organizations (MCOs) establish contracts with doctors, hospitals, clinics, and other health care providers such as pharmacies, labs, x-ray centers, and medical equipment vendors at a reduced cost. These health care providers and medical facilities are known as the plan’s “network.” Managed care health insurance plans typically cover a wide range of health services – from preventative care to diagnosis and treatment of illnesses.
There are Two Basic Types of Managed Care Health Insurance Plans:
- Health Maintenance Organizations (HMO) – HMOs require you to use their "network" of hospitals and doctors only. Coverage is usually broader, with less out-of-pocket expense, but is more restrictive than a PPO. "Out of network" medical expenses are not covered under an HMO medical insurance plan.
- Preferred Provider Organizations (PPO) – PPOs give you an incentive to use their "in network" hospitals and doctors. You can choose to go "out of network," which gives you freedom of choice, but usually with a higher deductible and co-insurance out-of-pocket expense than other forms of medical insurance.
Health Insurance and Worker’s Compensation Insurance Objectives
General health insurance and worker’s compensation have two slightly different objectives.
Health insurance (including managed health care) is "coverage that provides for the payments of benefits as a result of sickness or injury,” according to the Health Insurance Association of America. It provides coverage for medications, visits to the doctor or emergency room, hospital stays and other medical expenses.
Worker’s Compensation Insurance covers employees for work-related injuries, including not only medical expenses, but also lost wages incurred due to a work-related accident or injury. Keep in mind that while Worker’s Compensation only accounts for about three percent of a company’s total health care costs (about $111 billion), more than half of that $111 billion is paid in lost wages. Therefore, in addition to providing health care for employees, another objective of Worker’s Compensation Insurance is to get employee’s back to work.
How Can Managed Care Help Reduce Workers Compensation Insuance Costs?
By using some of the techniques used in managed care, companies can provide quality medical services to injured workers and get employee’s back to work.
Some of these techniques include:
- Medical Case Management
- Provider Network
- Record Analysis
- Utilization Review
- Fee Schedule Compliance
- Independent Medical Evaluations
Managed Care Worker's Comp Insurance Savings Example
John is an employee for XYZ Manufacturing. His normal job is lifting 50-lb bags onto a truck. One day, while he’s lifting one of those bags, he twists his back, which causes a lower back injury. The physician advises John not to lift anything over 20 pounds. Using managed care techniques, John could go back to work on light duty rather than missing work completely, saving XYZ Manufacturing the cost of lost wages for John.
How to Save on Quality Health & Worker's Compensation Insurance
For more information about MCOs and Worker’s Compensation Insurance and to find the right insurance for your business, please contact American Insuring Group at (800) 947-1270 or (610) 775-3848.
We have been supplying affordable, high-quality worker's compensation insurance and health insurance for over 25 years. And, as a Trusted Choice independent insurance agent we specialize in offering multiple insurance offerings from competing insurance brands. We'll help you get the right coverage at the the right price. Call today.