Managed care can be defined in many ways and can involve different levels of care management. In its simplest form, managed care may include pre-certification of hospital stays or utilization review to ensure services that are received by patients are medically necessary. As such, "managed care" processes exist in may different types of health insurance, including indemnity plans.

More advanced forms of managed care, such as preferred provider organizations (PPOs) and point-of-service (POS) plans, not only require utilization review and medical necessity determinations, but also provide incentives for enrollees to receive care from network providers in order to obtain the highest level of the plan's benefits. Some PPOs and most POS plans also require an enrollee to select and use a primary care physician (PCP) who provides primary care and coordinates access to other health care services. The most advanced form of managed care is provided by health maintenance organizations (HMOs). HMOs require enrollees to select a PCP; require use of network physicians (unless a POS option is included); and generally have smaller specialty networks than PPOs and POS plans. Figure 1 provides a generalized continuum of managed care plans that are available in the marketplace.