Managed care and employer premiums.

This paper used 1993-1997 data from medium and large size employers to examine the effects of market wide managed care penetration on the premiums paid for employer sponsored health insurance. Regressions were run for weighted average single coverage premiums and for premiums on conventional, HMO, and PPO coverage. Four findings emerged from the analysis. First, increased managed care penetration had no statistically significant effect on weighted average employer premiums. Second, higher HMO penetration resulted in lower HMO premiums but higher conventional and PPO premiums. Third, higher PPO penetration had no statistically meaningful effects across plan types. Finally, the results depended critically on whether firms offered self-insured plans. Higher levels of HMO penetration led to smaller increases in conventional and PPO premiums for firms with self-insured plans, but also yielded smaller premium reductions from HMOs relative to those with purchased coverage.