What Does HMO Stand For?

What is an HMO and how it works. Is it the ideal plan for you? Well, keep on reading to find out.

Regardless of whether you are a tenant looking for some place to live or a landowner searching for property to invest into, odds are you have come across the abbreviation ‘HMO’. What does HMO stand for? The HMO as it exists today was set up under the Health Maintenance Organization Act of 1973. Passed by former President Richard Nixon, the Act explained the meaning of HMOs as “a public or private entity organized to give essential and supplemental health services to its members.” The law further requires that plans furnish insured people with fundamental healthcare in return for standard, fixed expenses that are set up “under a community rating.”

What is an HMO?

HMO is an abbreviation for “health maintenance organization.” It is a kind of health insurance plan that requires you to use only “in-network” healthcare providers. These include doctors (along with other medical services like labs and hospitals) that have a contract with your insurance plan. You can also visit providers outside of your network for medical services. However, an HMO plan usually will not cover the expenses unless it is for emergency care.

It is essential to keep in mind that if you are having a medical crisis, you should go to the closest hospital — regardless of whether or not your HMO has a contract with it. As per healthcare.gov, all plans should assist you when it comes to covering emergency care, regardless of whether you go to a doctor or hospital within the HMO’s network of providers or not.

HMOs work like conventional health insurance plans since you:

  • have to pay copays (a set amount you are charged for services like a visit to the doctor or X-ray), deductibles (a sum you have to pay yearly before your health insurance starts covering the expenses), and coinsurance (the percentage of the total expense of care you pay after you have reached your deductible)
  • pay a monthly premium (a continuous fee to have health insurance)

As per healthinsurance.org, since the federal government’s Affordable Care Act (ACA) came into action in 2014, HMOs have increased in popularity as compared to many other healthcare plans in the United States. The California Office of the Patient Advocate states that nearly 50% of California residents are covered by HMOs.

An HMO plan may be right for you if:

  • You are shopping for a plan with lower premiums
  • You need preventive care services like coverage for checkups and vaccinations
  • You want a plan without a deductible and do not mind having an out-of-pocket limit

Despite the fact the structure of an HMO plan does not support seeking out-of-network care, there are cases when it is possible to see a medical provider that is out of your plan’s network. Usually you can visit an out-of-network provider or go to an out-of-network emergency room in case of a crisis. That being said, often your out-of-network benefits are finished once you are admitted to a hospital. Therefore, make sure that you are admitted to a facility that is in-network to avoid being liable for all expenses.

When talking about employer plans, 13% of employees are covered by HMO plans, as compared to 47% who are covered by PPO plans, as per the Kaiser Family Foundation’s employer survey. Moreover, there are also regional differences, with HMO enrollment being way higher in the West (22%) than in the Midwest (7%).

How does an HMO plan work?

Health maintenance organizations (HMOs) give health insurance inclusion for a monthly or yearly charge. An HMO limits member inclusion to clinical care given through a network of specialists and other healthcare providers who are under contract with the HMO. These contracts take into account that premiums need to be lower than in conventional health insurance — since the health providers enjoy the benefit of having patients directed to them. They likewise add extra limitations to the HMO’s members.

When concluding whether to pick an HMO protection plan, you should consider the expense of premiums, out-of-pocket costs, any necessities you might have for specialized clinical care, and whether you have your own primary care provider.

An HMO is an organized public or private entity that gives essential and supplemental health services to its subscribers. The organization gets its network of health providers by going into contracts with primary care physicians, clinical offices, and specialists. The medical entities that go into contracts with the HMO are paid an agreed-upon expense to offer a scope of services to the HMO’s subscribers. The agreed-upon payment permits an HMO to offer lower premiums than other sorts of health insurance plans while holding a high quality of care from its network.

Rules for HMO Subscribers

HMO subscribers pay a monthly or yearly premium to get to clinical benefits in the organization’s network of providers, yet they are restricted to accepting their care and services from specialists within the HMO network. In any case, some out-of-network services, including emergency care and dialysis, can be covered under the HMO.

The individuals who are insured under an HMO might need to live or work in the plan’s network region to be qualified for inclusion. In situations where a subscriber gets urgent care while out of the HMO network locale, the HMO might cover the costs. However, HMO subscribers who get non-emergency, out-of-network care need to pay for it out-of-pocket.

Notwithstanding low premiums, there are ordinarily low or no deductibles with an HMO. All things considered, the organization charges a co-pay for each clinical visit, test, or prescription. Co-pays in HMOs are usually low — generally, $5, $10, or $20 per service — in this way limiting out-of-pocket costs and making HMO arrangements affordable for families and employers.

The Role of the Primary Care Physician

The insured party should pick a primary care physician (PCP) from the network of local healthcare providers under an HMO plan. A primary care doctor is normally a person’s first resource for all health-related issues. This implies that an insured individual cannot see a specialist without first getting a reference from their PCP.

In any case, certain specific services, for example, screening mammograms, do not need references. Specialists to whom PCPs normally refer insured individuals are within the HMO coverage, so their services are covered under the HMO plan after co-pays are made. In the event that a primary care physician leaves the network, subscribers are informed and are needed to pick another PCP from within the HMO plan.

In-Network Providers

Each HMO has a list of healthcare providers that are in its provider network. Those providers cover a wide scope of healthcare services including specialists, doctors, drug stores, hospitals, labs, X-beam facilities, and speech therapists. Inadvertently receiving out-of-network care can be a huge error when you have an HMO. Round out a prescription at an out-of-network pharmacy or complete your blood tests by the wrong lab and you could be left with a bill for hundreds or even thousands of dollars.

It is your duty to know which providers are in your HMO’s network. Furthermore, you can’t expect that in light of the fact that a lab is a few doors down from your doctor’s office, it is in-network. You need to check. Furthermore, once in a while out-of-network providers wind up treating you without you even knowing about it — an assistant surgeon or an anesthesiologist, for instance. In case you are arranging any kind of clinical treatment, ask heaps of questions before time with an effort to guarantee that every individual who will be engaged in your care is in your HMO’s network. There are a few special cases for the requirements to remain in-network. This can include:

  • The HMO does not have a provider for the service you require. This is not common. However, if it happens to you, pre-arrange the out-of-network specialty care with the HMO.
  • You are in the middle of a difficult course of specialty treatment when you become an HMO member, and your doctor is not part of the HMO. Most HMOs decide whether or not you may end the course of treatment with your current physician on a case-by-case basis.
  • You are out of the network area and need emergency care or dialysis.
  • You have a true medical emergency, for instance, a life-threatening accident that requires emergency care.

Types of HMO plans

As the name suggests, one of an HMO’s main objectives is to keep its members healthy. Your HMO would rather spend a small sum of cash up front to prevent an illness instead of a lot of cash later to treat it. If you already have a chronic condition, your HMO will try to handle that condition to keep you as healthy as possible. There are three main types of HMOs.

  • Staff model: Physicians are employed by the HMO and only see patients who are signed up with the HMO.
  • Group model: Physicians are not directly employed by the HMO but have contracts to offer care at a fixed rate. The group physicians only see patients who are signed up with the HMO.
  • Network model: Physicians are not directly employed by the HMO and the HMO has contracts with various physician groups. The physicians see patients with the HMO along with patients with other kinds of insurance.

How much does an HMO plan cost?

Since HMOs are the most restrictive kind of health plan, they are also the most inexpensive. As per the Kaiser Family Foundations Employer Health Benefits Survey, in 2020, the average HMO premium was $607 per month and $7,285 per year. In comparison, the average premium for a PPO plan was $656.67 per month and $7,880 per year.

What does PPO stand for?

PPO stands for “Preferred Provider Organization” plans, and are one of the most popular kinds of plans in the Individual and Family market. These plans permit you to visit any in-network physician or healthcare provider you want to see without first asking for a referral from a primary care physician.

How does a PPO plan work?

As a member from a PPO plan, you will be urged to utilize the insurance agency’s network of preferred specialists and you typically will not have to pick a primary care physician. Regardless of which healthcare provider you pick, in-network healthcare services will be covered at a higher advantage level than out-of-network services. Make sure to check if your provider acknowledges your health plan so you get the most significant level of benefit coverage.

You will presumably have a yearly deductible to pay before the insurance agency begins covering your doctor’s visit expenses. You may likewise have a co-payment of about $10 – $30 for specific services or be needed to cover a specific percentage of the total charges for your hospital expenses.

A PPO plan may be right for you if:

  • You do not want to get referrals prior to visiting a specialist
  • You want a portion of out-of-network claims to be covered by your insurance company
  • You want the freedom to select almost any medical facility or provider for your healthcare needs

HMO vs. Preferred Provider Organization (PPO)

A preferred provider organization (PPO) is a clinical care plan in which health professionals and offices offer services to subscribed customers at diminished rates. PPO medical and healthcare providers are called preferred providers. PPO members are allowed to utilize the services of any provider inside their network. Out-of-network care is accessible, however it costs more to the insured. As opposed to a PPO, HMO plans necessitate that members get healthcare services from an assigned provider. PPO plans usually have deductibles while HMOs generally do not.

The two programs take into account specialist services. Notwithstanding, the assigned primary care physician should give a reference to a specialist under an HMO plan. PPO plans are the oldest and — because of their adaptability, flexibility, and moderately low out-of-pocket costs — have been the most popular managed healthcare plans. However, that has been changing, as plans have decreased the size of their provider networks and found alternate ways to control costs. On the off chance that you like to have your care coordinated through a single doctor, an HMO plan may be appropriate for you. On the other hand, assuming you need more flexibility or  if you see a ton of specialists, a PPO plan may be what you are searching for.

HMO vs. Point-of-Service (POS)

A point-of-service (POS) plan resembles an HMO in that it requires a policyholder to pick an in-network primary care physician and get references from that specialist assuming they need the [lan to cover a specialist’s services. A point of service plan is likewise similar to a PPO in that it actually gives inclusion to out-of-network services, however the policyholder needs to pay more for those services than if they utilized in-network providers.

Notwithstanding, a POS plan will pay more toward an out-of-network service if the policyholder gets a reference from their primary care physician than if they do not get a reference. The premiums for a POS plan fall in the middle of the lower premiums offered by an HMO and the higher premiums of a PPO. POS plans require the policyholder to make co-pays, however, in-network copays are often only $10 to $25 per appointment. POS plans likewise do not have deductibles for in-network services, which is a huge benefit over PPOs.

Likewise, POS plans offer nationwide inclusion, which benefits patients who travel as often as possible. A disadvantage is that out-of-network deductibles will in general be high for POS plans, so patients who use out-of-network services will pay the full expense of care out of pocket until they meet the plan’s deductible. Notwithstanding, a patient who never uses a POS plan’s out-of-network services would likely be in an ideal situation with an HMO in view of its lower premiums.

HMO vs. Exclusive Provider Organization (EPO)

An Exclusive Provider Organization (EPO) plan works like an HMO, however with a more extensive network of healthcare providers and hospitals. Like an HMO, you might need to pick a PCP and you might need to get a reference to see a specialist, however there are more providers to pick from. Premiums are higher for this sort of plan, yet at the same time lower than premiums for a PPO.

Is HMO good or bad?

It is essential to weigh the advantages and disadvantages of HMOs before you decide upon a plan, just as you would with any other option. Below are some advantages and disadvantages of an HMO plan.

Advantages

The first and most clear benefit of taking an interest in an HMO is the minimal expense. You will pay fixed premiums on a monthly or yearly premise that are lower than conventional types of health protection. These plans will in general accompany low or no deductibles and your co-pays are generally lower than other plans. Your out-of-pocket expenses will likewise be lower for your prescription. Billing additionally will be less difficult to grasp for those with an HMO.

There is also an awesome probability that you will need to manage the insurer itself. That is on the grounds that you have a primary care physician you should choose from who is responsible to deal with your treatment and care. This professional will likewise advocate for services on your behalf. This incorporates making references for specialty services for you. The quality of care is by and large higher with a HMO. The reason is that patients are urged to get yearly physicals and to look for treatment early.

Pros:

  • Higher quality of care.
  • Lower out-of-pocket costs, including lower premiums, low or no deductibles, and low co-pays.
  • Primary care physicians will direct your treatment and advocate on your behalf.

Disadvantages

In case you are paying for an HMO, you are limited on how you can utilize the plan. You will need to assign a specialist, who will be answerable for your healthcare needs, including your primary care and references. This specialist, however, should be part of the network. This implies that you are responsible for any expenses brought about if you see somebody out of the network, regardless of whether there is no contracted specialist in your area.

You will require references for any specialists assuming you need your HMO to pay for any visits. So in the event that you need to visit a rheumatologist or a dermatologist, your primary doctor should create a reference before you can see one for the plan to pay for your visit. If not, you are liable to pay for the whole expense. There are specific conditions that you should meet for certain clinical cases, like emergencies. For example, there are normally extremely severe definitions of what comprises a crisis. If your condition does not, the HMO plan will not pay.

Cons:

  • Emergencies must meet specific conditions before the plan pays.
  • Medical professionals should be part of the plan’s network.
  • You cannot visit a specialist without a referral from your family doctor.

Frequently Asked Questions

What does HMO insurance mean?

HMO or health maintenance organization insurance gives covered people health insurance in exchange for monthly or yearly fees. Individuals pay lower premiums than those with other types of health insurance when they visit doctors and other providers who are part of the HMO’s network.

What is the difference between an HMO and health insurance?

Inclusion under an HMO is normally quite restrictive and comes at a lower cost to insured parties. Conventional health insurance, on the other hand, has higher premiums costs, higher deductibles, and higher co-pays. However, health insurance plans are much more flexible. Individuals with health insurance do not need to have a primary care physician to outline treatment. Health insurance also covers some of the expenses for out-of-network providers.

What are HMO examples?

Almost every major insurance organization gives an HMO plan. For example, Cigna and Humana provide their own versions of the HMO. Aetna also gives individuals two options, including the Aetna HMO and the Aetna Health Network Only plan.

Are prescription drugs covered in HMO plans?

In most situations, prescription drugs are covered in HMO Plans. Make sure that you ask the plan beforehand if they cover prescription medication or not. If you want Medicare Drug Coverage (Part D), you need to join an HMO Plan that offers prescription drug coverage.

Do I need to choose a primary care doctor in HMO plans?

In most situations, yes, you need to choose a primary care doctor in HMO Plans.

Do I have to get a referral to see a specialist in HMO plans?

In most situations you need to get a referral to see a specialist in HMO Plans. Specific services, like yearly screening mammograms, do not require a referral.

What are the benefits of an HMO?

The fundamental advantages are cost and quality of care. Individuals who buy HMO plans profit with lower premiums than customary types of health insurance. This permits insured parties to get a higher quality of care from providers who are contracted with the organization. HMOs normally accompany low or no deductibles and only charge generally low co-pays. HMO members additionally need not bother with references to get specialty services like mammograms.

Why do HMOs have a bad reputation?

There are a few limitations for those covered under HMOs, which is the reason why these plans have a bad reputation. For example, HMOs only permit insured parties to see people in their own network, which implies that they are answerable for the full amount of a visit to any specialist or doctor outside this group. The plan may likewise expect people to live in a specific region. This implies that somebody who gets clinical benefits out of the HMO’s network should pay for it themselves. The plans additionally expect people to pick a primary doctor who decides the type of treatment patients need.

What else do I need to know about this type of plan?

  • It is important that you follow the plan’s rules, such as getting approval beforehand for a specific service when required.
  • If your doctor or other health care provider leaves the plan, your plan will inform you. You can pick another doctor in the plan.
  • If you get health care outside the plan’s network , you may have to pay the full expense.

Conclusion

A HMO is a somewhat more restrictive type of health insurance as it limits which specialists it will pay through insurance. In the event that you pick to go out-of-network, you could get stuck paying the whole cost of that care. However, since you are more restricted, you usually pay less in health insurance premiums for HMOs versus other health plans. That can be a shelter for a fairly young, healthy individual who normally just gets access to health care for preventive care, like a yearly checkup. Notwithstanding lower health inclusion costs, Kaiser Permanente noticed that some of the advantages of HMOs are; cheaper prescription drugs, and having one specialist who knows your clinical necessities and arranges all your care. At the point when cost is more a factor over flexibility, an HMO could be the right health protection insurance for you.

Health insurance is important for each person. Picking the right plan relies upon your own circumstance, including your health, funds, and personal satisfaction. You can browse conventional health insurance, like the preferred provider organization, or the HMO, otherwise called the health maintenance organization. The HMO gives insured people lower out-of-pocket costs, yet more restrictive conditions, including the specialist you see. Ensure that you weigh out the advantages and disadvantages of the arrangement, paying little mind to what you pick.

Charles Bains

Charles Bains

Charles Bains started his insurance career as a marketing intern before pounding the pavement as a commercial lines agent in Orlando, FL. As an industry journalist, his articles have appeared in a variety of trade publications. His insurance television career, short-lived but glorious, once saw him serve as the expert adviser on an insurance-themed infomercial (yes, you read that correctly). Having recently worked for various organizations, coupled with his broader insurance knowledge, Charles is able to understand our client’s needs and guide them accordingly. He is a gem for Insurance Noon as his wide area of expertise and experience have been beneficial in conducting further researches to come up with solutions and writing them in a manner which is easy for everyone including beginners to comprehend.