What is HMO Insurance?

Health Maintenance Organizations 

HMO is the abbreviation for a Health Maintenance Organization. 

These are healthcare groups who offer a broad range of medical services for a pre-determined fee. 

Health Maintenance Organizations will partner with  Health Insurance Companies to provide healthcare services to the public. 

When shopping for health insurance, you will probably see a lot of different options when it comes to HMO plans.

HMO plans are popular because they are generally less expensive than other health insurance plans and they fit the needs of most people.

HMO plans are relatively low in price because of how they manage the healthcare of their customers (you).

Unlike other health insurance options, an HMO plan requires all patients to first visit with their primary doctor before being able to access specialists or an elevated level of care.  

This format is known as the ‘gatekeeper’ method of care and it helps limit the cost of healthcare.  

The primary doctor is the ‘gatekeeper’ and patients must get passed her in order to gain access to a higher level of care.

Dodo Tip:  Before buying an HMO plan, make sure your doctor is set up as a medical provider within that plan’s network.

Health Maintenance Organizations are created by bringing together health care providers.

Health care providers include doctors, hospitals, clinics, pharmacies, path labs, x-ray centres, and medical equipment manufacturers.

Upon association the health care provider abides by a set of rules & guidelines.

This collection of health care providers is called a network.

The network of care providers is able to offer lower rates to the health insurance company HMO custmers because of the huge amount of business they receive by being a part of the network.  

The healthcare provider network is happy because they have a steady stream of patients (customers).  

The health insurance company is happy because they are able to offer their policyholders a quality healthcare experience at a lower than average cost.  

The consumer is happy because we get low cost, quality healthcare.  

Everyone wins with an HMO!

A Short & Interesting History of HMO

Health Maintenance Organizations are not a new concept.

They dates back to the 1930’s.

HMO like organizations were first established in California, Washington, Oregon, and Oklahoma.

Industrialist Henry J Kaiser and Dr. Sidney Garfield were its pioneers.

They marketed the Kaiser Permanente Health Care Program.

The program had 100,000 members in the states of Oregon and California during World War II.

Mr. Kaiser finally settled in Hawaii and entered the Hotel industry.

Kaiser Permanente entered Hawaii in 1954 and went on to become the state’s second largest insurer.

Resistance from Organized Medicine

In its initial days Health Maintenance Organizations faced stiff resistance from American Medical Association.  The AMA feared that the new concept will result in inferior medical care.

State medical associations were able to persuade the legislatures in a number of states to outlaw HMO like programs.

Physicians participating in these programs were orchestrated by state and county medical societies.

Thankfully, the benefits of the HMO method of delivery became evident by and by the early 1970’s, conservative politicians crossed over the fence.

In 1973, President Richard Nixon signed the “HMO Act”, which set standards for HMO providers and also encouraged the formation of new HMOs.  

This government action caused a rapid expansion of Health Maintenance Organizations in the United States.

How HMO Plans Work?

Lets say John is a member of a Health Management Organization managed care plan and he has a mole on the top of his head that won’t stop bleeding.

He thinks it might have turned cancerous, so he wants to see a specialist.

Before John can access the care of a skin cancer specialist, he first must visit with his primary doctor and get a referral to the skin cancer specialist.

Luckily for John, his primary doctor, Dr. Wu, is set up for consultations via Zoom.  

At his appointment with Dr. Wu, John describes his mole to Dr. Wu.

He explains that his mole won’t heal, and Dr. Wu refers him over to Dr. Jackson, a dermatologist who will be able to biopsy John’s mole.

John is contacted by Dr. Jackson’s office to schedule an appointment once Dr. Wu informs them that John’s mole may be cancerous and he needs to see a specialist for further care.

Dr. Jackson is able to biopsy the mole and it is found to indeed contain basel cell carcenoma, which is a slow spreading type of skin cancer.

Dr. Jackson’s office then refers John to an ear, nose, and throat doctor to have the mole removed.

The doctors work in concert to provide the special healthcare services John requires.

This is a classic example of an HMO being used by John.

As a member of HMO managed care plan John cannot directly go to a hospital or a specialist.

Primary care physicians include general practitioners (a.k.a. internal medicine practitioners), gynecologists, pediatrician, and family physician.

Members choose their primary care physician when joining the plan.

Thereafter the physician manages and coordinates the member’s health care.

Seeking Care Outside the HMO Network

What if John decides to visit a service provider outside of his HMOs network?

Well, in this case John will most likely be paying 100% of the medical bills from his pocket.

There are two exceptions to this rule.

• In case of emergencies John can visit any health care provider including the ones outside of his HMO’s network.
• Some plans allow a member to receive care from outside the network. Usually in such cases the member has to bear a large portion of the bill.

Problems with HMO Plans?

A number of experts and analysts are of the opinion that this model of managed care has many shortcomings especially its adverse The main arguments against this model are:

• Decrease in the earning potential for specialists and increasing earning potential for general practitioners.
• It influences where a medical doctor decides to practice. It also seems to be influencing physicians’ retirement decisions.
• Primary care physicians who act as gatekeepers may restrict patient access to specialists.
• Patients may have to wait for as long as 10 days to consult a general practitioner.
• There is a shortage of general practitioners.