Expanded managed care liability: What impact on employer coverage?

Policymakers are considering legislative changes that would increase manage d care organizations' exposure to civil liability for withholding coverage or failing to deliver needed care. Using a combination of empirical informa tion and theoretical analysis, we assess the likely responses of health pla ns and Employee Retirement Income Security Act (ERISA) plan sponsors to an expansion of liability, and we evaluate the policy impact of those moves. W e conclude that the direct costs of liability are uncertain but that the pr ospect of litigation may have other important effects on coverage decision making, information exchange, risk contracting, and the extent of employers ' involvement in health coverage.