Economics

Spurred by customer demands for greater control of medical care expenses, commercial insurers began during the 1980s to transform their business—from claims payer to manager of health care delivery systems.

At the turn of the decade, employers did not generally regard rising health insurance costs as a major problem.¹ However, as the energy-driven inflation of the 1970s cooled in the early 1980s, annual increases in health benefit plans accelerated to more than 20% (unpublished data from the Employer Cost Index of the Bureau of Labor Statistics). Businesses began to support insurance companies' efforts to take a more active role in improving the value employers received for their health care dollars. Insurers responded by undertaking the arduous process of examining the delivery systems their claims were supporting and constructing techniques and programs to manage the care provided.

As the programs have developed, different insurers have defined "managed care" differently. Some