HMOs, or health maintenance organizations, are types of managed care providers that can operate in both the public and private sectors. HMOs are expected to provide health services to its members while adhering to state regulations and operating procedures.
They have been in practice since the 1970’s, and in general, managed care plans have evolved to become a popular choice for companies seeking a healthcare plan for their employees.
The ultimate purpose of an HMO is to provide preventative health services to people at a low cost which can be beneficial to those who need a health plan but could not otherwise afford one.
How are HMOs different from other types of health plans?
Here are a few ways that HMOs differ from other health plans.
- They prioritize preventative care at a low cost. Whereas traditional healthcare insurance plans cover costs for sickness or injury as it happens, HMOs are structured around the concept of preventative care. This plan offers its members access to cancer screenings, physicals and vaccinations, either covering their member’s fees, or helping them pay a fraction of the fee. This can encourage members to actively partake in appointments and health consultations on a routine basis, and in doing so, prevent costly injury or illness in the future.
- They don’t always allow members to select their own physicians. Another aspect to this care plan that differentiates it from other insurance providers is the inability for a member to seek outside care from a physician that is not contracted to their health insurance provider. This means that if an employee needs to see a provider outside of their network, they will need to pay the full out-of-pocket cost.
Best practices to use in HMOs
There are four organizational models to choose from when an employee becomes a member of an HMO. Each of these models represents different plans that a member can have in order to best accommodate their healthcare needs.
- Individual practice associations (IPA)
- The group plan
- The network plan
- Staff arrangement
1. Individual practice associations (IPA)
This plan operates under a pay-as-needed basis, meaning each time a member needs to go to their primary physician for illness, injury or a general checkup, the sponsor pays the amount for that specific visit to the health care provider and nothing more.
2. The group plan
This option allows an HMO to pay a per capita fee to a group of physicians, with the head physician determining the distribution of pay among them.
3. The network plan
This option is good for members with more complex needs. In this plan, an HMO opens a contract with multiple groups of physicians, some catering to specialized areas and others assuming general practitioner operations. This approach allows members more options when choosing their provider.
4. Staff arrangement
This plan includes an HMO owning a physician facility and therefore being the employer of a physician or group of physicians. This option can be a great way to reduce per-capita costs, but this means that the member might have to pay a hefty starting fee in order to benefit from their services.
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Frequently asked questions about HMOs
Here are the answers to two potential questions you might still have regarding HMOs and whether or not an HMO plan would be a good fit for your company.
How can you compare HMOs to PPOs and POS plans?
HMOs, PPOs, and POS are all forms of managed health care plans. The main comparisons that can be drawn between these three sponsors is that PPOs allow members to have access to health care providers that are not a part of their program, however, if this happens a member must pay a fee. It is also important to note that members of a PPO plan might have to pay for a lot of their health care services themselves.
In HMO plans, members must choose from the healthcare providers that are contracted to work with their managed care plan, and there is no outside coverage offered, however, there is only a little out-of-pocket expense that they must provide for their health services.
POS can be compared as a combination of the benefits and restrictions that make up HMOs and PPOs. In this managed care plan, members receive access to healthcare providers at low cost like HMOs, and they are able to access healthcare providers outside of those recommended by their plan, as is the case in PPO plans.
What businesses would benefit most from an HMO plan?
Managed-care plans, or more specifically, HMOs might not be the best health insurance option for every company, however, there is a niche group where HMOs can be a helpful form of healthcare to offer to one’s employees.
Small businesses can achieve great benefit from enlisting the services of a managed health care plan because they are relatively easy to manage and have the ability to offer coverage in a broad range of health-related areas while maintaining little-to-no cost to employees.
Be sure to measure the cost and benefits that are included in HMOs and compare this to the size of your company.
Do HMOs cover emergency care needs?
Although emergency room visits are not considered to be a service provided by HMOs, HMOs do cover them for insurance members. It is important to note that PPOs are more likely to cover emergency care expenses at the same rate as preventative services, whereas HMO coverage for emergency care might be lower than coverage for in-network expenses.