Insurer-provider integration, credible commitment, and managed-care backlash

People distrust managed care organizations (MCOs) more than traditional health plans. This phenomenon has become known as “managed-care backlash.” Using a model of the interaction between insurers, physicians, and patients, this paper identifies two possible motivations for MCO backlash. The first, which comes from traditional health plans' superior ability to credibly commit to providing better than least-cost care, is efficiency promoting. The second, which arises when patients are able to obtain higher-benefit treatments through reneging on their initial insurance contracts through “doctor shopping,” may reduce efficiency.