A Closer Look at the Managed Care Backlash

Abstract

Much anecdotal evidence exists regarding the managed care backlash of the late 1990s, but limited empirical evidence is available. Using a unique series of employer surveys, we examined trends in enrollment rates in health maintenance organizations (HMOs) and other plan types between 1997 and 2003. We present enrollment rates in employer-sponsored health plans by plan type. These plan-level enrollment rates are disaggregated by whether or not enrollees had a choice of plan types and by firm size and year. Employees who were enrolled in employer-sponsored health insurance in private sector establishments. Although we found evidence of a decline in the popularity of HMOs, it occurred later than indicated in earlier studies. In our data, HMO enrollment rates fell from roughly 32% to 26% between 1997 and 2003, with most of the decline occurring after 2001. Earlier studies reported that the decline in HMO enrollment rates occurred between 1996 and 1998, and between 2000 and 2001. In addition, an interesting story emerged when we examined trends by firm size. We found evidence of a decline in the HMO enrollment rate for large employers starting in 1998. However, this was offset by an increase in the HMO enrollment rate in small employers, which explains the stability in our figures before 2002. Our data also indicated that when workers were given a choice between an HMO and other plan types, workers increasingly opted for the non-HMO plan during this time period.