Health maintenance organization insurance, or HMO, is a managed health care option. HMOs consist of insurance companies, doctors and hospitals all working together to encourage preventive medical care as well as provide the financial backing for health care needs such as medical treatment.
Purpose
HMO insurance policies serve the purpose of reducing health care costs and giving members access to top quality health care professionals. Although the network of health care professionals may be limited depending on the HMO plan, the reduced health care costs for members attempt to increase the frequency and ease of preventive health care so that members can avoid more serious and costly medical care later.
Process
After joining an HMO, members are required to choose a primary care physician, or PCP, who provides all general medical care for the member and must be consulted if a referral to a specialist is needed. The PCP can only refer policyholders to specialists within the HMO network of providers; the size of the network depends on the specific policy and can vary quite a bit.
Advantages
The biggest advantage of HMO insurance is the low costs that members incur. Additional advantages include the emphasis on preventive care. The increased preventive care results in lower out-of-pocket costs because of fewer expensive procedures. HMOs also offer special rates on health care memberships as well as free health education classes. HMOs do not have a lifetime maximum payout, so members can receive treatment for the length of their membership without worrying.
Costs
HMO members are required to pay a small fixed monthly fee, which does not change no matter how many doctor or hospital visits are made. HMOs only require minimal co-payments for each doctor visit and do not require a deductible to be met before the insurance coverage begins paying the bill. These costs are limited and controlled as long as policy holders stay within the list of providers; HMOs will not pay for any expenses outside their specific network of doctors and hospitals.
Types
Two other basic types of managed health care insurance co-exist with HMOs: preferred provider organization and point of service policy plans. HMO insurance is less costly than PPO and POS policy options, though HMOs offer less flexibility in choosing doctors, specialists and hospitals. PPOs provide a larger network of doctors and hospitals, usually including dental and vision care. If members stay within the network, costs are covered up to 90 percent, but if members seek medical attention outside the network, the coverage only picks up around 60 percent of the bill. A POS plan combines characteristics of both HMO and PPO plans. Just like HMOs, members of POS plans are required to select a primary care physician, and no deductibles are required, only minimal co-payments if members stay within the network. POS plans are similar to PPO plans with regard to the coverage provided outside the network of doctors, hospitals and specialists.
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