Health Maintenance Organizations (HMOs)

Health Maintenance Organizations, otherwise known as HMOs, are one type of Medicare Advantage plan. HMOs are typically the most affordable type of plan available. HMO offers the lower premiums, co-pays and co-insurance than PPO plans. However, HMOs are less flexible than some other options.

HMOs have a set network of hospitals, doctors, and other health care providers. The HMO has a set payment level for services with these providers. With an HMO, you must use providers in your network to be covered for services. There are exceptions to the in-network requirement for true emergencies.

The HMO Model

Under an HMO, you must select a primary care physician (PCP) from the network of providers. You will see this provider first whenever you need medical care. The idea is for this person to have the best overall picture of your health, so that he/she can manage your care and refer you to specialists as needed.

You must use in-network providers to be covered under an HMO. You must also obtain a referral from your PCP for specialist services to be covered. Certain specialized services do not require a referral, with the rules varying by plan.

Unless you are willing to change providers, make sure your current providers are in-network when selecting an HMO plan. Under an HMO, there is no coverage for out-of-network services except in the case a true emergency. If your PCP leaves the network, you will be notified and required to find a new PCP.

The PCP system allows many HMOs to provide integrated care with a focus on prevention and wellness to reduce overall costs and improve health outcomes.

HMO Plans & Prescription Drug Coverage

Many HMO plans provide prescription drug coverage. Consult with the plan you are considering regarding prescription drug coverage. If you want prescription drug coverage and a HMO plan, you need to select a plan that covers prescription drugs.

As a Medicare Advantage (Part C) plan, you will not be eligible to join a Part D plan if you are part of a HMO plan.

HMO Plan Costs

HMO plans typically charge lower premiums than PPO plans, because the fees for all services have been set ahead of time with the in-network providers.

There are also out-of-pocket costs to consider when evaluating your projected total healthcare costs under an HMO plan. HMO plans typically have co-payments, although these are often lower than under a comparable PPO plan. HMO plans typically have a low deductible or no deductible. Review the plan you are considering for an idea of your out of pocket costs.

HMO Plan Considerations

As one of the lowest cost options, Health Maintenance Organization plans can be a great fit depending on your situation. If you don’t mind having specialist care managed by a PCP, or you do not have any providers that you’re committed to, an HMO plan can be a great choice. These plans are also an attractive option for individuals who are generally in good health, allowing them to obtain the security of an insurance plan while keeping costs low.

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