Why are managed care plans commonly able to offer lower premiums than indemnity plans? University of Pennsylvania researchers explored whether this is because they are using health care resources more efficiently, or because they are attracting lower risk populations (i.e., favorable risk selection). To answer this question the researchers used data from the Community Tracking Study Health Survey, along with the InterStudy survey and the Area Resource File. The key analytic component of this study involved determining the proportion of the difference in health care expenditures that can be attributed to risk-selection between managed care plan enrollees and indemnity plan enrollees. This determination was estimated for enrollees in each of the 60 markets of the Community Tracking Study. The researchers then examined the correlation between characteristics of the market and the degree of risk selection in that market. Key characteristics included the level of HMO penetration and the degree to which HMOs utilize gatekeeper rules. The objective of this study was to better understand the role of risk selection plays in the setting of premiums offered via employer-sponsored insurance.