HMO (Health Maintenance Organization)

If you receive health insurance through your employer, there is a good chance that you belong to an HMO (health maintenance organization). An HMO covers only the services of doctors and other healthcare providers who have agreed to work within the guidelines and restrictions of the HMO company.

A Brief History of the HMO

The HMO officially came into being with the passage of the Health Maintenance Organization Act of 1973, which required employers with 25 or more workers to offer federally certified HMO options if traditional indemnity options were offered. However, prior to passage of this act, several insurance companies began to operate under the rules of an HMO, starting in 1929 with Los Angeles-based Ross-Loos Medical Group. Several of the nation’s largest healthcare insurance providers, including CIGNA and Blue Cross and Blue Shield, can trace their origins to early forms of HMOs.

How an HMO Works

Unlike a PPO (preferred provider organization), an HMO generally requires its members to specify a primary care physician, who must belong to the organization and directs care and refers patients to HMO-approved specialists. Member patients are responsible for co-payments for services, and the insurance company negotiates lower costs for services where applicable. There are three main models of HMO: the staff model, in which physicians are employed by and have offices at the HMO company; the group model, in which physicians belong to group practices contracted with the HMO; and the network model, in which individual physicians are contracted directly with the HMO.