Insurance-Based Managed Care Organisations and Products

Insurance companies are often considered the origin of MCOs. Even though this is true regarding the revival of managed care since the mid-1970s, MCOs in the United States originated in the form of prepaid group practices (PGP) connected to the assumption of risks by service providers in the 1920s. In rural areas physician group practices offered to let residents use the services of the group practice without restrictions in return for monthly or annual payments. Services outside of the group practice were not covered. The term health maintenance organisation (HMO) was coined by the physician Paul Ellwood at the beginning of the 1970s. In order to replace the negatively connotated term prepaid group practice. However, HMOs did not achieve their breakthrough with market successes, but rather through state regulations. The HMO law introduced by Nixon in 1973 prescribed that employers with 25 or more employees who provided their staff with healthcare as a social benefit had to offer at least one HMO product. HMOs could only become established thanks to this state stimulus, which opened doors to potential customers.