Health Maintenance Organization (HMO)
Another health plan category is the Health Maintenance Organization, or HMO. The guiding principle behind an HMO is prevention. An HMO is intended to keep you healthy, so it will cover annual checkups, some tests to spot problems before they get bad, and other "preventive maintenance" services.
Think of it this way: Your 5,000-mile oil change, tuneup, and fluid check is your car's HMO. You don't want to miss that visit to your mechanic, because you may not see that little leak until the coolant runs down the driveway and your car overheats. Of course, no matter how careful you are, your car eventually will wear out, but if you take care of it, you can drive it much longer. Your body's the same. If you take care of the preventive maintenance, you're less likely to get really sick, need lots of prescriptions, have to go to the hospital - you get the idea.
An HMO often costs less than other insurance coverage, because the insurance company negotiates significant discounts with the healthcare providers in the HMO's network. Your out-of-pocket costs - like copayments - are lower with an HMO than with other types of plans. Your premiums even may be lower. On the other hand, you have to go to a provider who's in the network, or your care isn't covered.
Also, most HMOs require you to pick a Primary Care Physician, or PCP - an in-network doctor, usually in general or family practice, internal medicine, or pediatrics. Your PCP tends to most of your health needs, refers you to in-network specialists, if necessary, and orders any tests or other treatment you need. So, with an HMO, you get lower costs, but you also have fewer choices. Your PCP coordinates all your healthcare.
Why you may want an HMO
An HMO plan is a good choice for people willing to use certain providers in exchange for lower out-of-pocket costs.
- Out-of-pocket costs are predictable. You're only responsible for copayments, so it's easier to predict your costs and feel secure about unexpected medical expenses.
- You work one-on-one with your doctor. Your personal doctor keeps an eye on your total healthcare picture and is the first person you go to anytime you have a health problem.
- You have less paperwork. Because your PCP is in the plan's network, you don't have to fill out claim forms.
- Your plan provides for preventive care. HMO plans typically include coverage for preventive care like annual checkups, flu shots, and screenings.
HMO out-of-pocket costs
With an HMO, you're responsible for copayments - fixed fees you pay when you see a doctor, have a prescription filled, or are admitted to the hospital. You don't have to meet a deductible or pay coinsurance. Other than your copayments, the plan covers 100 percent as long as you see a healthcare provider in the network, because HMOs only cover services from in-network providers.
Compare Health Plans
A more in-depth look at how HMOs, PPOs, and High Deductible Health Plans compare to each other.
Watch Healthcare Video: What are PPOs and HMOs?