What Does HMO Market Share Measure? Examining Provider Choice Restrictions

Many discussions of managed care, as well as policy making and research efforts, treat managed care with a broad brush, forcing a wide variety of organizations into a single framework that facilitates discussion but abstracts from a number of key issues. Although it may be instructive to conduct broad discussions about managed care, a more detailed understanding of the specific activities that managed care plans undertake and their likely effects is required to support comprehensive policy efforts. Frequently, however, efforts to be more detailed are hampered by shortcomings in the measurement of managed care.
This paper lays out a framework of the various activities undertaken by managed care organizations that may be helpful in developing further efforts to understand and measure specific plan activities. The paper also discusses and evaluates some common measures. Detailed data on the exact activities of health insurers and managed care plans are not widely available. One commonly used, but less detailed, measure is the percent of the population enrolled in health maintenance organizations (HMOs). Another places markets on a continuum based on the estimated stage of managed care development in the market. Using data from a new survey, this article compares available measures with more detailed data, suggesting that available data on HMO market share seems to accurately reflect HMO activity, but may not capture the prevalence of some underlying activities of plans like having strong restrictions on enrollee choice of providers, and may also not capture the prevalence of other forms of managed care plans (e.g. Preferred Provider Organizations).
These results suggest the importance of distinguishing between the many activities of managed care plans when considering policies that would influence the development of managed care, and when evaluating results from research studies that primarily rely on measures of HMO activity. Results from studies of HMOs may not apply to other types of managed care plans. Policies that target HMOs, or other managed care plans broadly, may be less effective than policies that target specific activities of plans.