Managed Care and the States


Updated May 2011; material added 6/2013

Table of Contents



Managed care is a term used to describe a variety of techniques intended to reduce the cost of providing health benefits and improve the quality of care for organizations that use those techniques or provide them as services to other organizations. It is also used to describe systems of financing and delivering health care to enrollees organized around managed care techniques and concepts.

Over the past 15 years, managed care has become the predominant form of health care in most parts of the United States.  More than 70 million Americans have been enrolled in HMOs (health maintenance organizations) and almost 90 million have been part of PPOs (preferred provider organizations). Overall enrollment numbers in HMOs peaked in 2001 and are declining substantially in almost every area, but managed care generally remains a dominant type of health care and coverage.  

According to Kaiser Family Foundation's Employer Health Benefits 2010 Annual Survey, 58 percent of covered workers are enrolled in PPOs, followed by HMOs (19 percent), HDHP/SOs (13 percent), POS plans (8 percent), and conventional indemnity plans (1 percent).  Enrollment in HDHP/SOs rose to 13 percent of covered workers in 2010, up from 8 percent  in 2009.

  • Plan enrollment patterns vary by firm size. Workers in large firms (200 or more workers) are more likely than workers in small firms (3-199 workers) to enroll in PPOs (63 percent vs. 51 percent). Workers in small firms are more likely than workers in large firms to enroll in POS plans (15 percent vs. 5 percent).
  • Plan enrollment patterns also differ across regions.
    • HMO enrollment is significantly higher in the West (33 percent) and Northeast (26 percent) and significantly lower in the South (12 percent) and Midwest (11 percent).
    • Workers in the South (67 percent) are more likely to be enrolled in PPO plans than workers in other regions; workers in the West (47 percent) are less likely to be enrolled in a PPO.
    • Enrollment in HDHP/SOs is higher among workers in the Midwest (20 percent) than in other regions.

Federal Health Reform

Health Law Expected To Boost Medicaid Enrollees In Managed Care, Kaiser Health News, Posted November 12, 2010.  

Managed Care in Medicaid

Medicaid managed care grew rapidly in the 1990s.  In 1991, 2.7 million beneficiaries were enrolled in some form of managed care.  By 2004, that number had grown to 27 million, an increase of 900 percent.  Of the total Medicaid enrollment in the United States in 2009, almost 72 percent were receiving Medicaid benefits through managed care.  All states except Alaska and Wyoming have all, or a portion of their Medicaid population enrolled in an MCO (Managed Care Organization).  States can make managed care enrollment voluntary, or seek a waiver of section 1915(b) of the Social Security Act from the Centers for Medicare and Medicaid Services to require certain populations to enroll in an MCO. 


Medicaid Managed Care Trends (as of June 30, 2009)
Year Total Medicaid Population Total Medicaid Managed Care Population Other Population Percent Managed Care Enrollment
2009 58,106,000 36,202,281 2,113,534 71.70%
2008 47,142,791 33,427,582 13,715,209 70.91%
2007 45,962,271 29,463,098 16,499,173 64.10%
2006 45,652,642 29,830,406 15,822,236 65.34%
2005 45,392,325 28,575,585 16,816,740 62.95%
2004 44,355,955 26,913,570 17,442,385 60.68%
2002 40,147,539 23,117,668 17,029,871 57.58%
2000 33,690,364 18,786,137 14,904,227 55.76%


Medicaid Managed Care State Contracts- The George Washington University's Department of Health Policy published a series of unique studies of managed care contracts.  State-by-state profiles are included on their webpage. These state profiles show the various components of each state's contract with health plans, including performance standards, reporting requirements, definition of actuarially sound rates, conditions under which money must be returned, etc.  Contact GWU for access to this material at

"Medicare Advantage" managed care plans saw a surge in enrollment as a result of the launch of "Part D" prescription drug coverage in 2006.    

The State Legislative Role-  Over the years, state legislatures have responded by passing numerous laws on the subject of managed care - over 900 in the past 15 years, in all 50 states. NCSL has a variety of print and web-based resources describing these efforts - see below.

In 2001-2002, the U.S. House of Representatives passed an amended Patients' Rights bill; the U.S. Senate passed a somewhat different bill. However, at the end of the congressional session the bills died in a House-Senate conference committee, primarily on issues related to liability and the right to sue. Similar federal measures were filed for 2003-06, but were not voted on.

NCSL Research and Articles

Managed Care Resources

These are selected research, academic and advocacy publications.  NCSL is not responsible for the contents or opinions expressed within these pages.

STATE REPORTS & MATERIAL (written and released by Allan Baumgarten):

Full reports are available for purchase from


  • PPOs Most Popular Form of Health Insurance- In 2006, PPOs continue to be the most common form of health coverage, with more than half (60 percent) of all employees with health coverage enrolling in a PPO.  HMOs, which cost significantly less than PPOs, cover about 20 percent of covered workers, down from 25 percent in 2004. Conventional, or indemnity, benefit plans have all but disappeared, covering just 3 percent of covered workers. Source: The 2006 Annual Employer Health Benefits Survey by the Kaiser Family Foundation and Health Research and Educational Trust.
  • Managed Care Digest Series - The HMO-PPORx Digest provides comprehensive overviews of the medical and pharmacy benefits—along with extensive retail pharmacy data by chronic disease category—at managed care plans, including HMOs, PPOs and point-of-service plans. This Digest features long-term trends and analyses of key industry measures, as well as information pertaining to the impact of health care reform legislation.

  • Language Barriers Pose a Risk for One Million+ California HMO Enrollees - UCLA Center for Health Policy Research, May 2006 
  • A Consumer Guide to Handling Disputes with Your Employer or Private Health Plan, 2005 Update, by Kaiser Family Foundation and Consumers Union-  "An updated guide to help consumers through the process of resolving disputes with their health plans. The resourceincludes information about how consumers can take advantage of their health plans' internal processes to resolve disputes, as well as external review processes as allowed under state laws."  The vast majority of Americans now receive their health coverage from PPOs, HMOs, or other types of managed care plans. This guide can help consumers to understand their coverage under these plans, their rights under the governmental rules that health plans must follow, and the role that state external review programs play in resolving disputes. 8/05.

  • U.S. Supreme Court Strikes Down State HMO Liability Laws- On June 21, 2004 the Supreme Court ruled unanimously that patients cannot sue their HMO under state laws for failing to pay for doctor recommended care.  Experts describe the decision as ruling that the federal ERISA law "completely pre-empted such lawsuits brought in state court." This ruling against the states will have substantial adverse legal impact on the enacted laws in the ten states listed below, plus two additional states, although the number of active cases brought under these state laws evidently is not large.  Also, note that some of the "right to sue" provisions are part of broader laws, affecting rights to independent appeals and other managed care procedures. Summary and Full Text of Court Opinion - Aetna Health v. Davila (02-1845) and Cigna v. Calad et al. (03-83)-23 pages.
  • "Managed Care Magazine"- provides timely updates useful to policymakers, researchers and professionals. NCSL is cited periodically. 6/04

  • Managed Care State Laws for Report Cards - NCSL report, updated 2009.

  • HMOs and Rural California - The CA Legislative Analyst's Office issued a 20 page report discussing the reasons for the recent withdrawals of health coverage by HMOs from rural areas and recommend a number of steps the authors believe will create a more attractive health care marketplace for HMOs. On June 20, 2002, the court confirmed the validity of laws in 42 states that provide for an independent review or appeal when care is denied. Although these laws are separate from HMO liability statutes, virtually all of the liability laws are intertwined with the appeals rights addressed in this case.

NCSL staff contact: Richard Cauchi - Health Program, Denver.

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