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Policymakers are considering legislative changes that would increase managed care organizations’ exposure to civil liability for withholding coverage or failing to deliver needed care. Using a combination of empirical information and theoretical analysis, the authors assess the likely responses of health plans and Employee Retirement Income Security Act (ERISA) plan sponsors to an expansion of liability, and they evaluate the policy impact of those moves. They conclude that the direct costs of liability are uncertain but that the prospect of litigation may have other important effects on coverage decisionmaking, information exchange, risk contracting, and the extent of employers’ involvement in health coverage.

Originally published in: Health Affairs, v. 18, no. 6, November/December 1999, pp. 7-27.

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