UPDATED: Sep 10, 2013
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An HMO, or health maintenance organization, differs from other forms of insurance in several important ways. Unlike an indemnity plan, an HMO provider carries a contract with healthcare professionals to ensure that medical care is delivered at a specific quality standard and price. By setting the price, the HMO provider is able to guarantee reasonable costs for its customers.
The best-known HMO is Kaiser, which was founded in the 1970s. Since then, numerous other HMOs have been established, including Aetna, Cigna, Humana and United Health. Some of these companies offer indemnity plans in addition to their HMO plans in order to provide options to their customers. Depending on your situation, you may be able to change to an HMO plan without moving to a new provider.
How Do Health Maintenance Organizations Work?
Through an HMO, the insurance company forms a working partnership with a medical organization. Healthcare is subsidized through this partnership, which helps to guarantee low-cost care for the insureds. This allows the insured to pay a predetermined flat fee for most types of care. Healthcare deductibles and co-payments are usually very minimal, making an HMO one of the best choices for patients looking for little out-of-pocket expense.
When you join an HMO plan, you will need to choose a primary care physician, or PCP. This doctor will be your gateway for any other treatment. If the PCP cannot provide the necessary care themselves, they will refer you to a doctor who can. In general, these referrals will be given to other doctors within the HMO network. Besides in emergency situations, you may only pursue care outside of the network if there are no qualified doctors within the HMO and the primary care physician provides the referral.
Pros and Cons of an HMO
In many ways, HMOs are ideal for consumers. Premiums are usually very affordable, and there are few out-of-pocket expenses to worry about. Receiving preventative care is also simple and affordable. Unfortunately, HMO plans do have a few drawbacks that must be considered.
First and most importantly, you cannot pursue care outside of the HMO without a referral unless you’re willing to pay for it yourself. This can be a problem if your PCP is unwilling or unable to give you a referral for care. It can also be problematic if you visit an emergency room. If your insurer determines that the visit did not qualify as a true emergency, the claim may be denied and you can be billed.
The other problem some people have with HMOs is that the doctors inside an HMO network tend to favor conservative treatment plans since they help keep costs lower. If you desire more aggressive or experimental care, you may have a difficult time getting it covered by insurance.
The specific details of a policy will vary somewhat between insurers, so it’s important to confirm how PCPs are assigned, what preventative care is covered and how much particular treatments will cost. By knowing the exact costs of the policy and weighing those against the potential drawbacks, you can determine whether an HMO is the best plan for you.