Managed care is a form of health insurance that intends to do more than simply insure individuals in the event of a future medical need: It directs consumers toward specific medical procedures that are intended to reduce the overall cost of providing health insurance. Furthermore, managed care compels insured individuals to pursue preventative measures to offset the occurrence of a major illness or injury, in the hope of deflating the cost of health insurance to the system as a whole.
Although many would argue that managed care has in fact failed to keep medical insurance costs low since its inception in the late 1970s, it did lead to the widespread adoption of HMO (Health Maintenance Organization) and PPO (Preferred Provider Organization) health insurance. HMOs and PPOs currently cover most Americans who receive health insurance benefits through their employer. Both an HMO and a PPO are forms of managed care health insurance.
An HMO is a network of medical providers selected by the insurance company to meet your medical needs as the insured individual. If you belong to an HMO, the insurance company will only pay for you to visit the doctors, clinics and hospitals that belong to the organization's network. HMOs come with the benefits of being fairly priced, the ability to access your medical records easily and coverage of most major medical services.
A PPO is similar to an HMO, but it comes with the added benefit of choice—insured individuals are allowed to pick their own doctor or clinic for medical treatment. If you do select a provider outside the network of approved providers, you will be required to pay more out of your own pocket. However, depending upon your specific medical needs and your own preferences regarding your health, you may prefer to choose your own doctor or clinic if you feel it will be beneficial to your medical situation.
Point of service (POS) health insurance is a form of managed care insurance that operates essentially as an HMO with the benefits of a PPO. Those with POS insurance typically have a network primary care physician (like and HMO) but may have more options (like a PPO) when it comes to choosing other doctors.