Health Maintenance Organization (HMO) Health Insurance Plans

Health maintenance organization (HMO) plans are a form of managed care health insurance. Managed care plans attempt to maximize efficiency and quality in the delivery of patients’ care.

To do this, they rely on networks of providers, standardized processes, incentives and “gatekeeper” primary care providers. Patients may need to live in a certain region to be considered within range of network providers and qualify to purchase coverage.

Health care professionals often recommend HMOs for consumers with chronic illnesses or disabilities. They can also be a good fit for individuals with complex health concerns who regularly need a variety of integrated services and care. Many HMO enrollees benefit from the continuity and coordination primary care providers bring to patient care in HMO plans. Some patients are drawn to HMO plans for their focus on preventative health care and overall wellness.

After enjoying a spate of high popularity in the late 1990s and early 2000s, HMOs briefly fell out of favor. In recent years, health maintenance organization plans have been brought up-to-date and generated renewed interest among insurers and consumers alike. In 2018, they accounted for over half of the plans available on federally operated state ACA health insurance exchanges.

Primary Care Providers as Gatekeepers

Nearly all health maintenance organization plans require that policyholders select a primary care provider (PCP). Within the HMO system, patients’ PCPs serve as the coordinators and gatekeepers of patients’ care. HMO patients, therefore, need to exercise great care when choosing a health care provider as their PCP, as the decision will directly impact every aspect of their health care. Depending on the insurer, PCPs may include nurse practitioners and physician assistants as well as physicians. Enrollees’ primary care providers must be part of the HMO’s network.

HMOs position PCPs as gatekeepers for two reasons. First, it creates consistency and continuity in care, which directly contributes to the quality of care. For example, an HMO might approve certain best practices or standards of care for controlling high blood pressure and then hold all providers to that standard. PCPs would then deliver the same interventions in the same order to every patient diagnosed with that condition. This ensures that all patients receive appropriate, approved care beginning with the least invasive or extreme methods and escalating only if necessary.

HMOs create continuity of care by requiring that patients get referrals from their PCP to see specialists and other care providers. This guarantees that PCPs remain aware of all aspects of patients’ care so that they can offer support and follow up accordingly. Informed primary care providers can track the care and services that patients have requested and received. They can then work with patients to understand the results and to determine how to proceed.

The second primary benefit to positioning PCPs as gatekeepers is that it helps HMOs contain costs. In HMOs, primary care providers bear some direct responsibility for the costs of patients’ care. In some cases, they may even share a portion of the costs if the expenses associated with patients’ care surpasses approved limits for their conditions. This strongly motivates PCPs to actively work with their patients on proactively maintaining good health. It also provides the incentive for them to intensively support and follow through on patient care in order to prevent health conditions from spiraling to the point that they require costlier interventions.

In-Network Versus Out-Of-Network Care

Patients with HMO insurance plans are required to get all of their care from in-network providers. Products and services delivered by out-of-network providers or facilities will not be covered, except in rare and specific cases. Examples of common exemptions include dialysis and emergency care, which may be accessed as needed wherever they are available when patients are outside the geographical range of their HMO’s network.

Even within their HMO’s network, patients typically need a referral from their primary care provider to see a specialist. Care provided by in-network specialists without a referral generally does not qualify for coverage under the plan except in emergencies. Some types of standard routine care, such as periodic mammograms or annual vision exams, may be exempt from the referral requirement.

Occasionally, HMO plans will offer a “point-of-service” (POS) clause. A POS clause grants patients permission to access services from out-of-network providers in certain circumstances. For example, an HMO might offer a POS clause for a particular type of surgery if it does not have a surgeon specializing in that area in-network or if it has insufficient in-network providers to meet the demand for that service. Services accessed through POS clauses generally cost more than regular, in-network care.

Premiums and Other Costs

The costs of health care under an HMO plan is largely dependent on patients’ ability and willingness to comply with plan guidelines. Patients who abide by plan mandates to get referrals from their PCP before seeing specialists and who seek services only from in-network providers or facilities can often keep their costs low.

Prescription medications are almost always covered as part of HMO plans. Some restrictions may apply and brand-name prescriptions may require higher co-pays than generic medications.

Other Considerations

HMOs often incentivize physicians and facilities in their networks to encourage efficient use of resources. They may actively discourage the prescription of extra services, products or medications in situations where the benefits of those items are not clearly documented or approved.

This can work to patients’ benefit. For example, HMOs’ emphasis on reducing unnecessary expenses can result in patients being prescribed fewer medications than they might have been under other plan types. It can also lead to frustration for some patients interested in unapproved or experimental treatment options, as those may not be covered. Where they are covered, patients can expect to complete the full range of standard care without effect before they will be able to secure approval for unproven alternatives.

HMOs tend to have fairly large networks, which provide policyholders with numerous options when it is time to select providers or facilities. Due to their highly integrated nature and the referral system, HMO plans can offer patients a noticeably lower level of paperwork and billing than they are likely to experience under other plans.

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