An HMO is a health maintenance organization. With an HMO health plan, you pay a monthly fee in exchange for cheaper health care, but your doctor must be approved by your HMO. HMOs offer more preventative care than traditional health insurance plans, according to an article by BBC News.
History
In the middle of 20th century, most Americans had indemnity insurance. A person with indemnity insurance could "go to any doctor, hospital, or other provider, and the insurance and the patient would each pay part of the bill," according to an article published by CBS News. As health costs increased, HMOs were created "in an effort to lower health care costs for you and for whomever is helping you pay for your health care, such as an employer."
Function
HMOs negotiate contracts with doctors, surgeons, hospitals, physical therapists and others in the industry to form what the HMOs call "provider networks," according to the American Heart Association. Health care providers in these networks agree to charge less for patients with an HMO health plan. In exchange, the HMOs refer patients to health care professionals in their provider network. An HMO will not pay for your medical care if you see a doctor outside your HMO's provider network.
Features
With an HMO health plan, you choose a family doctor from your HMO's provider network. The doctor you choose becomes your primary care physician and is responsible for your health care. According to the American Heart Association, you cannot see a specialist without a referral from you primary care physician. If you see another doctor without a referral, your HMO will not pay for your care.
Benefits
Cost is the main benefit of an HMO health plan. HMOs are one of the cheapest forms of health insurance because they "are usually large organizations that can buy services for thousands of people," according to CBS News. Moreover, people with an HMO health plan only have to pay a small co-payment for doctor or hospital visits.
Considerations
HMO health plans are the most restrictive type of health insurance because they give members the least choice in selecting a health care provider. Also, getting approval from a primary care physician to see a specialist can be "time-consuming and difficult.
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