Principles of Risk Management and Insurance, 13th Edition

Managed Care Plans

Group medical expense plans have changed dramatically over time. Older plans typically were indemnity plans (also called fee-for-service plans) that have largely disappeared and currently account for less than 1 percent of all covered employees in group medical expense plans. Under indemnity plans, physicians were paid the usual, customary, and reasonable fee for each covered service as determined by the local market; employees had considerable freedom in selecting physicians and other healthcare providers; and cost containment was not heavily stressed. Today, the vast majority of covered employees are in managed care plans. Under managed care plans, the employee’s choice of physicians and hospitals may be limited to a network ...