What Is a Managed Care Organization (MCO)?

By Brevy Care Team · Last verified April 16, 2026

A Managed Care Organization (MCO) is a health plan that contracts with a state Medicaid agency to deliver covered services to enrolled members. The state pays the MCO a fixed monthly amount per member, and the MCO is responsible for building the provider network, paying doctors and hospitals, approving services, and coordinating care.

Federal regulation 42 CFR 438.2 defines an MCO as an entity holding a "comprehensive risk contract" with the state. In plain language, the MCO accepts financial risk for the cost of members' care in exchange for a set monthly payment.

As of July 2024, more than 66 million Americans (78% of all Medicaid enrollees) received their care through an MCO. Forty-two states plus Washington, D.C. run Medicaid through MCOs.

Why It Matters

If you or a family member is on Medicaid in most states, your MCO (not "Medicaid" directly) decides which doctors you can see, which services get approved, and how disputes are handled. Knowing the rules gives you real power: you can switch plans, appeal denials, and pick an MCO whose provider network includes the doctors you already trust.

For seniors, the stakes are higher. Long-term services like home care, nursing home placement, and service coordination usually flow through the MCO. The plan you choose shapes access to care for years.

How an MCO Is Different from Fee-for-Service Medicaid

Traditional "fee-for-service" (FFS) Medicaid pays doctors and hospitals for each individual service, billed to the state after the fact. Managed care flips that model.

Under capitated managed care, the state pays the MCO a per-member-per-month (PMPM) rate, called a "capitation payment," for every enrollee assigned to that plan. The payment goes out whether the member sees a doctor that month or not.

The MCO then uses that pool of money to pay providers, run care coordination, and cover administrative costs. If members need more care than the capitation rate covers, the MCO loses money. If they need less, the MCO profits. That's what "risk-based" means.

Federal rules set guardrails. Under 42 CFR 438.8, capitation rates must be designed so each plan is projected to hit a medical loss ratio (MLR) of at least 85%. At least 85 cents of every dollar must go to member care rather than administration or profit. The national average MLR in 2024 was 91%.

What an MCO Is Responsible For

Once a member is enrolled, the MCO handles most day-to-day Medicaid operations:

  • Provider network. Contracting with doctors, hospitals, pharmacies, home health agencies, and specialists in the member's area.
  • Claims payment. Paying providers for covered services.
  • Prior authorization. Approving (or denying) services that require pre-approval, such as certain procedures, home care hours, or durable medical equipment.
  • Care coordination. Assigning a service coordinator or case manager, especially for members with long-term care needs.
  • Member services. Running a 24/7 nurse line, handling ID cards, transportation to appointments, and complaint resolution.
  • Value-added benefits. Extras beyond standard Medicaid. Common examples: over-the-counter allowances, adult dental coverage, vision, and gym memberships. These vary by plan and are often the tiebreaker when choosing between MCOs.

Starting in June 2026, CMS will require every state to report plan-level prior authorization data annually: how many requests each MCO received, how many it denied, how often denials were reversed on appeal, and how long decisions took. That data will, for the first time, let families and policymakers compare plans on approval rates side by side.

Who Runs the MCOs

Most Medicaid MCOs are operated by large publicly traded insurance companies. Five parent companies control 47% of all Medicaid MCO enrollment nationally:

  • Centene (operates as Superior HealthPlan in Texas, Sunshine Health in Florida, and many others)
  • UnitedHealth Group (UnitedHealthcare Community Plan)
  • Elevance Health (parent of Wellpoint, formerly Amerigroup)
  • Molina Healthcare
  • Aetna / CVS Health

Regional and nonprofit plans fill out the rest. In Texas, for example, seven MCOs serve STAR+PLUS: UnitedHealthcare, Molina, Superior (Centene), Wellpoint (Elevance), Community First, El Paso Health, and Community Health Choice.

The plan lineup in your state and county is set by the state Medicaid agency. You typically get to choose between two or three plans in your area.

How to Choose or Change Your MCO

The specific process varies by state, but the basic mechanics are consistent:

  1. Check the provider network first. Before anything else, call your current doctors and ask which Medicaid plans they accept. The cheapest value-added benefit in the world won't help if your primary care physician isn't in-network.
  2. Compare value-added benefits. Each MCO publishes a comparison sheet. Dental allowances, transportation trips, OTC cards, and service coordinator ratios vary plan to plan.
  3. Call the state's enrollment broker. Most states use an independent contractor (in Texas, that's Maximus at 1-800-964-2777) to help members compare and switch plans. This counseling is free and not tied to any specific MCO.
  4. Know your switching window. Federal rules give new enrollees 90 days to change plans without cause. After that, most states allow a switch every 12 months during an open enrollment period, or sooner for cause (e.g., your doctor leaves the network).

In Texas STAR+PLUS, members can change MCOs at any time by calling the enrollment broker. Plan changes take 15 to 45 days to process.

Not sure which MCO to pick? Chat with Brevy and we'll walk you through the plans in your county and the questions to ask.

MCO vs. Other Managed Care Entities

Federal rules (42 CFR Part 438) actually recognize several types of managed care entities, not just MCOs. The distinction matters if you see acronyms like PIHP or PCCM in a state handbook:

  • MCO: handles a full benefit package (primary care, specialty care, hospital, long-term care in many states) under a capitation rate.
  • PIHP (Prepaid Inpatient Health Plan): specializes in inpatient and institutional services, often behavioral health.
  • PAHP (Prepaid Ambulatory Health Plan): handles outpatient services only. By federal definition it does not cover inpatient hospital care.
  • PCCM (Primary Care Case Manager): a doctor or practice that coordinates a member's primary care for a small monthly fee. Not risk-based. Used in a handful of states as an alternative to MCOs.

Most Medicaid members enrolled in managed care are with a full MCO.

Common Misconceptions

"MCO is the same as Medicaid." It isn't. Medicaid is the public insurance program, funded jointly by states and the federal government. MCOs are private or nonprofit insurers contracted to deliver Medicaid benefits. You can be on Medicaid without being in an MCO. That happens in states that still use fee-for-service for certain populations, or during the short window between eligibility and plan assignment.

"All MCOs are the same because Medicaid sets the rules." Covered services are largely identical because the state contract specifies them, but provider networks, prior authorization practices, service coordinator quality, and value-added benefits vary significantly. Switching plans is one of the most underused rights Medicaid members have.

"I can't change MCOs once I pick one." You can. Federal rules guarantee a 90-day window after initial enrollment and annual open enrollment after that. Many states allow changes outside those windows for specific reasons, like a provider leaving the network.

  • Capitation: The fixed per-member-per-month payment a state makes to an MCO in exchange for covering all the contracted services that member needs.
  • Medical Loss Ratio (MLR): The share of premium dollars an MCO spends on member care versus administration and profit. Federal floor: 85%.
  • Service coordinator: The MCO employee assigned to each long-term care member to arrange home care, equipment, and transitions between settings.
  • Prior authorization: An MCO's process for approving services before they're delivered.
  • Activities of Daily Living (ADLs): The self-care tasks MCOs use to assess whether a member qualifies for long-term services and supports.
  • Medicaid spend-down: The pathway for people above the income limit to qualify for Medicaid, after which they're assigned to an MCO.

Learn More

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Medicaid rules vary by state and change frequently. Always verify plan details with your state Medicaid agency, your MCO's member services line, or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.

BC

Brevy Care Team

Expert eldercare guidance from Brevy's team of healthcare professionals and researchers.