What Are the Six Models of Managed Care?

Managed care refers to a variety of methods and systems that are intended to control healthcare costs and utilization. There are several different managed care models that organize provider networks, member services, and reimbursement approaches in order to manage the cost, quality, and access to healthcare.

The six main types of managed care models include:

  • Health Maintenance Organization (HMO)
  • Preferred Provider Organization (PPO)
  • Exclusive Provider Organization (EPO)
  • Point-of-Service (POS) Plan
  • Independent Practice Association (IPA)
  • Accountable Care Organization (ACO)

Below we will look at the key characteristics, pros and cons, and examples of each managed care model:

Health Maintenance Organization (HMO)

An HMO is one of the most strictly managed care models. Key attributes include:

  • Members must select a primary care provider (PCP) to coordinate care
  • Referrals are required for most specialist visits
  • Care is only covered in the HMO’s network except emergencies
  • Preventive care is emphasized
  • Premiums, copays, and deductibles tend to be low


  • Low out-of-pocket medical costs
  • Focus on preventive care
  • No claim forms needed


  • Very limited provider choice
  • Primary doctor controls referrals
  • No out-of-network coverage


Kaiser Permanente, BlueKC HMO, Cigna HMO

Preferred Provider Organization (PPO)

A PPO model offers more provider choice than an HMO. Key features include:

  • Members have in-network providers but can also use out-of-network
  • Seeing in-network providers costs less through negotiated rates
  • No referrals required to see specialists
  • Preventive care is covered


  • Wider choice of in-network providers
  • Access to out-of-network providers
  • No referrals needed for specialist visits


  • Out-of-network care has higher costs
  • Premiums may be higher than HMO plans
  • Some utilization review may limit care


Blue Cross Blue Shield PPO, Aetna PPO, Cigna PPO

Exclusive Provider Organization (EPO)

An EPO has in-network providers like a PPO but no coverage for out-of-network care:

  • Members must utilize the EPO’s network of providers
  • No coverage for out-of-network providers except emergency care
  • No referrals required for specialist visits
  • Preventive care is covered


  • No bills for charges exceeding allowed amounts

  • Low copays and deductibles for in-network care

  • No claim forms to file


  • No out-of-network coverage at all

  • Narrower provider network than a PPO

  • May have service area limitations


BCBS BlueCare EPO, UnitedHealthcare Compass EPO, Cigna LocalPlus EPO

Point of Service (POS) Plan

A POS plan combines aspects of an HMO and PPO:

  • Members have a primary care doctor who coordinates care

  • Referrals are required for specialist visits

  • In-network care has copays and deductibles

  • Out-of-network care requires higher cost-sharing


  • Lower copays for in-network services

  • Ability to self-refer to specialists

  • Coverage for out-of-network care if needed


  • Out-of-network care costs more

  • Need referrals to see specialists

  • Records must be shared across network


Kaiser POS, Blue Cross Blue Shield POS, UnitedHealthcare POS

Independent Practice Association (IPA)

An IPA contracts directly with physicians in independent practices:

  • Network of private physicians and group practices

  • Doctors can see patients from multiple plans

  • Payments negotiated by the IPA with health plans


  • Maintain small private practice independence

  • Share administrative costs among practices

  • Negotiate higher reimbursement rates


  • Administrative coordination with IPA

  • Less leverage negotiating as individual practice

  • Allow external oversight and utilization rules


Monarch IPA, Hill Physicians IPA, Heritage California ACO

Accountable Care Organization (ACO)

An ACO brings together groups of doctors, hospitals, and other providers:

  • Network of providers works together to coordinate care

  • Goal to deliver quality care while reducing costs

  • Shared savings distributed when spending targets met


  • Promote evidence-based medicine practices

  • Reduce duplicative services and testing

  • Focus on patient-centered coordinated care


  • Requires major coordination between providers

  • Savings distribution can be challenging

  • Significant IT infrastructure investment


Partners Healthcare ACO, Memorial Hermann ACO, University of Michigan ACO

Comparing the Managed Care Models

There are some key differences between these major managed care models:

Model Provider Choice Referrals Claims Out-of-Network Coverage
HMO Very limited Required None Only emergencies
PPO Wider choice Not required For out-of-network Yes but costs more
EPO Limited network Not required None No, except emergencies
POS Primary PCP Required for specialists For out-of-network Yes but costs more
IPA Open access among IPA docs Set by IPA Varies Varies
ACO Providers in ACO network Per ACO rules Varies Limited

As you can see, managed care models cover a spectrum from very tight HMOs to more flexible POS plans and ACOs. The model impacts provider choice, coordination, costs, and other healthcare delivery factors.

How Health Plans Select Managed Care Models

Health insurance plans decide which type of managed care model to utilize based on these kinds of factors:

  • Type of coverage – Certain models like HMOs tend to be used for group insurance while PPOs are common for individual plans. Government programs like Medicaid often contract with HMOs or ACOs.

  • Provider availability – The number and type of providers in a geographic area may dictate viable models based on required provider networks.

  • Service area – Models like HMOs favor concentrated service areas while PPOs can have broader provider networks. Plans expand or limit their service region based on the model.

  • Market conditions – Competitor plan offerings, costs, enrollee needs, and regulatory conditions help determine which models are viable.

  • Cost considerations – Plans analyze projected costs, utilization, and reimbursement rates to assess which models produce desired savings and premium levels.

By evaluating these kinds of factors in a particular service region or market, health plans decide which managed care model aligns with their business strategy and health care delivery needs.

The Impact of Managed Care Models on Providers

The various managed care models also impact participating providers under the plan:

  • Tighter models like HMOs limit provider choices for patients, directing volume to network physicians. This ensures steady patient flow.

  • Many models like PPOs and EPOs create two tiers of providers – in-network and out-of-network. In-network providers gain volume but may have lower negotiated reimbursement rates.

  • Providers in models like ACOs and IPAs can maintain independence but share administrative costs and oversight. Reimbursements may improve through consolidated bargaining power.

  • Movement towards value-based reimbursement affects how providers are compensated under some managed care models, with a focus on quality and outcomes.

Providers must weigh factors like patient freedom of choice, reimbursement, and practice constraints when deciding whether to participate in each type of managed care model.

How Patients are Impacted by Managed Care Models

The type of managed care model also affects patients covered under the health plan:

  • Tightly managed models like HMOs mean care is only covered within a limited provider network and referrals are required. But premiums may be lower.

  • Models like PPOs offer open access to providers but using out-of-network doctors results in higher out-of-pocket costs for patients.

  • Preventive and primary care is emphasized throughout managed care. But specialty access might depend on the model and referral rules.

  • Managed care affects eligibility for procedures and what medical services are covered under health plan benefits.

  • Continuity of care can vary – models with less provider choice may mean disrupted doctor/patient relationships when networks change.

Understanding how their insurance plan works gives patients insight into their provider choice, coverage, costs, and care coordination experience.

The Evolving Landscape of Managed

Evolution of Managed Care


What is an example of a managed care model?

A good example of a managed care plan is a Health Maintenance Organization (HMO). HMOs closely manage your care. Your cost is lowest with an HMO. You are limited to seeing providers in a small local network, which also helps keep costs low.

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