Managed Care in California Series, Issue 2: Network Adequacy Laws in Covered California Plans

Executive Summary

Managed Care and California Series Issue 2: Covered California QHPs receive a set premium payment (“capitation”) per enrollee in exchange for providing services. The plans accept the risk of incurring a loss if they spend more on services than they receive through the premium payments, but they will make a profit if providing services costs less than the payments. These arrangements give plans an incentive to limit coverage of services for their enrollees in order to maximize profits. Thus, strong legal protections are necessary to ensure that enrollees have access to high quality, medically necessary services.