Table of ContentsView AllTable of ContentsHow HMOs WorkTypes of HMOsHMO vs. Other InsurancePros and Cons of HMOs
Table of ContentsView All
View All
Table of Contents
How HMOs Work
Types of HMOs
HMO vs. Other Insurance
Pros and Cons of HMOs
A health maintenance organization (HMO) is a type of health insurance that employs or contracts with a network of physicians or medical groups to offer care at set (and often reduced) costs.
HMOs can be more affordable than other types of health insurance, but they limit your choices of where to go and who to see.
This article will discuss how HMOs work, their requirements, and what other types of insurance options are available.
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What is an HMO?
Understanding HMOs and how they work is critical for choosing a health plan duringopen enrollment, the yearly period when you can select or switch your health insurance, and avoiding unexpected charges after you’re enrolled.
You’ll need to follow the steps necessary to receive coverage from the HMO.
You Need a Primary Care Provider
Your primary care provider, usually a family practitioner, internist, orpediatrician, will be your main healthcare professional and coordinate your care in an HMO.
Your relationship with your primary care provider is very important in an HMO. Make sure you feel comfortable with them, or make a switch.
You can choose your primary care provider as long as they are in the HMO’s network. If you don’t choose one, your insurer will assign you one.
Referrals for Special Treatments Are Required
In most HMOs, your primary care provider will be the one who decides whether or not you need other types of special care and must make a referral for you to receive it.Referrals will all be within the region where you live.
With an HMO, you typically need a referral for the following:
The purpose of the referral is to ensure that the treatments, tests, and specialty care are medically necessary. Without a referral, you don’t have permission for those services, and the HMO won’t pay for them.
The benefit of this system is fewer unnecessary services. The drawback is that you have to see multiple providers (a primary care provider before a specialist) and pay copays or othercost-sharingfor each visit.
A copay is a set amount you pay each time you use a particular service. For example, you may have a $30 copay each time you see your primary care provider.
Deductible vs. Copayment: What’s the Difference?
Need for ReferralsReferrals have long been a feature of HMOs, but some HMOs may drop this requirement and allow you to see certain in-network specialists without one. Become familiar with your HMO plan and read the fine print.
Need for Referrals
Referrals have long been a feature of HMOs, but some HMOs may drop this requirement and allow you to see certain in-network specialists without one. Become familiar with your HMO plan and read the fine print.
You Must Use In-Network Providers
Every HMO has a list of healthcare providers in its provider network. Those providers cover a wide range of healthcare services, including doctors, specialists, pharmacies, hospitals, labs,X-rayfacilities, andspeech therapists.
It’s your responsibility to know which providers are in your HMO’s network. And you can’t assume that it is in-network just because a lab is down the hall from your healthcare provider’s office. You have to check.
And sometimes, out-of-network providers end up treating you without you even knowing about it—an assistant surgeon or ananesthesiologist, for example.
If you’re planning any medical treatment, ask lots of questions in advance to ensure that everyone involved in your care is in your HMO’s network.
Exceptions
There are some exceptions to the requirement to stay in-network. This can include:
As the name implies, an HMO’s primary goal is to keep its members healthy. Your HMO would rather spend a small amount of money upfront to prevent an illness than a lot of money later to treat it.
If you already have achroniccondition, your HMO will try to manage that condition to keep you as healthy as possible.
There are three main types of HMOs.
Differences Between HMO and Other Insurance
An HMO is a type of managed care health insurance, which means that the health insurance company has agreements with providers for the cost of care. (Managed care includes virtually all private coverage in the U.S.)
HMO vs. PPO
PPO stands forpreferred provider organization. These tend to be more expensive but allow more choices than HMOs. PPOs charge different rates based on in-network or out-of-network healthcare providers and facilities, which means you still have some coverage if you go out-of-network. You don’t need to go through a primary care physician.
HMO vs. EPO
Exclusive provider organizations (EPOs)are another type of health insurance. Similar to an HMO, an EPO only covers in-network care. It may or may not require referrals from a primary care provider.
HMO vs. Point-of-Service
Dropping HMO Numbers
No managed care health plan will pay for care that isn’t medically necessary. All managed care plans have guidelines in place to help them figure out what care is medically necessary, and what isn’t.
Premiums, or the monthly amount you pay for the plan, tend to be lower with HMOs than other health insurance options. In addition,cost-sharingrequirements such asdeductibles,copayments, andcoinsuranceare usually low with an HMO—but not always.
Some employer-sponsored HMOs don’t require any deductible (or have a minimal deductible) and only require a small copayment for some services.
However, in the individual health insurance market, where about 6% of the U.S. population got coverage in 2021, HMOs tend to have much higher deductibles and out-of-pocket costs.
ProsConsLower premiumsMay have some higher out-of-pocket costsUsually have low deductiblesCoverage for emergencies must meet certain conditionsUsually have low copaymentsYou must use only in-network providers to get coveragePrimary care provider care can lead to better preventative careMust have a referral from your primary care physician to see a specialistSome preventative care, like mammograms, don’t require a referralIn some states, the only plans available in the individual market are HMOs, with deductibles as high as several thousand dollars. In most states, there tends to be less choice available in the individual market regarding network types (HMO, PPO, EPO, or POS) versus the employer-sponsored market, where choice remains more robust.SummaryHMOs are considered one of the more affordable health insurance choices, yet costs vary based on the plan, region, and whether you enroll through your employer or as an individual. HMOs only cover in-network services. A primary care provider typically manages care.
In some states, the only plans available in the individual market are HMOs, with deductibles as high as several thousand dollars. In most states, there tends to be less choice available in the individual market regarding network types (HMO, PPO, EPO, or POS) versus the employer-sponsored market, where choice remains more robust.
Summary
HMOs are considered one of the more affordable health insurance choices, yet costs vary based on the plan, region, and whether you enroll through your employer or as an individual. HMOs only cover in-network services. A primary care provider typically manages care.
4 SourcesVerywell Health uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read oureditorial processto learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.Centers for Medicare and Medicaid Services.Health maintenance organizations (HMOs).Alliance for Health Policy.Network-model HMO.Health Insurance Marketplace.Health insurance plan & network types: HMOs, PPOs, and more.KFF.2023 Employer Health Benefits Survey.
4 Sources
Verywell Health uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read oureditorial processto learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.Centers for Medicare and Medicaid Services.Health maintenance organizations (HMOs).Alliance for Health Policy.Network-model HMO.Health Insurance Marketplace.Health insurance plan & network types: HMOs, PPOs, and more.KFF.2023 Employer Health Benefits Survey.
Verywell Health uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read oureditorial processto learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
Centers for Medicare and Medicaid Services.Health maintenance organizations (HMOs).Alliance for Health Policy.Network-model HMO.Health Insurance Marketplace.Health insurance plan & network types: HMOs, PPOs, and more.KFF.2023 Employer Health Benefits Survey.
Centers for Medicare and Medicaid Services.Health maintenance organizations (HMOs).
Alliance for Health Policy.Network-model HMO.
Health Insurance Marketplace.Health insurance plan & network types: HMOs, PPOs, and more.
KFF.2023 Employer Health Benefits Survey.
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