Health Maintenance Organization Basics

Do you know what a Health Maintenance Organization is? A Health Maintenance Organization (also called an HMO) is one of three managed care health insurance systems in the United States. An HMO is designed to offer financial support and medical treatment to plan members. Some managed care systems don't offer medical treatment themselves. Rather, they offer different levels of financial coverage based on whether you visit in-network or out-of-network care providers. HMOs, on the other hand, have a system of physicians and hospitals that are involved in a specific coverage structure. If you're part of a Health Maintenance Organization, you are only covered if you go to a physician within the HMO network.

HMO members pay monthly fees that cover most of the medical expenses they may or may not incur during the month. Often, they are also required to pay a co-payment (also referred to as a co-pay). A co-payment is an amount paid at the time of treatment to offset a portion of the medical costs. The amount of the co-pay varies depending on the specific medical treatment. Medical office visits have a different co-payment rate than prescriptions and more involved medical treatments.

Health Maintenance Organization plans also require members to select a physician as their primary care physician (PCP). This physician is the member's primary care giver regarding all health-related issues and must refer them to other physicians if a specialist is needed. Members cannot go directly to a specialist on their own accord. Not all managed care providers have this requirement. A preferred provider organization (also known as a PPO) does not require a PCP.

Why a Health Maintenance Organization?

Health Maintenance Organizations are generally more affordable than other managed care insurance systems. The monthly fees and co-payments are usually not high and are an affordable alternative to paying a percentage of the bill like other managed care providers require.

HMOs are also very "prevention" focused. That means they promote ways to stay healthy rather than ways to treat illness. Health Maintenance Organizations provide their members with a wealth of medical information on how to prevent illness and disease. They often distribute health guides and informative handbooks on how to stay healthy and avoid getting sick. This strategy helps HMO members avoid multiple visits to the doctor for illnesses that could have been easily avoided.

Why Not a Health Maintenance Organization?

HMOs are more restrictive than other managed care providers. HMOs only cover members if they visit doctors within the HMO insurer network. If there's a specialist a member wants to see for a specific ailment and the physician is not in the HMO network, the member will have to pay out-of-pocket expenses.

Also, since members have to initially establish a primary care physician, all medical treatments and referrals need to go through their PCP. Even if a specialist is in the HMO network, members still need to get approval from their PCP before they visit the specialist if they want to be covered by their HMO.

A health maintenance organization is a practical solution for health care coverage. Monthly fees and co-payments are often minor and cover members regardless of how often they visit their physician each month. However, HMO members do have restrictions that could hinder specialized treatment if needed.

Before you decide on an HMO, read all the facts. Base you decision on your typical medical needs and whether or not an HMO will be able to provide you with the medical care you need.

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