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If unhealthy people increasingly migrate from traditional plans to managed care plans, the average premiums for traditional plans would decrease because the pool of people covered under traditional plans would consist of healthier individuals. On the other hand, the average premiums for managed care plans would increase because the pool of people covered under managed care plans would consist of more high-risk individuals who are more expensive to cover. This phenomenon is known as adverse selection, where individuals with higher healthcare needs select plans that cover a broader range of services, leading to increased premiums. Managed care plans typically provide more comprehensive coverage and care management for high-risk individuals than traditional plans, which may be less attractive to healthier individuals who do not need such extensive coverage.

Selective contracting is a strategy used by managed care plans to negotiate with healthcare providers to offer services at a lower cost to the plan's members. This strategy can lower the cost of coverage for high-risk people in a managed care plan relative to a traditional plan because managed care plans can negotiate lower rates for their members due to their larger pool of enrollees. Managed care plans can also use their bargaining power to incentivize healthcare providers to improve the quality of care and outcomes for their members, leading to better health outcomes and lower costs over time.