HMOs (health maintenance organizations) offer a different structure to helping cover health care costs than preferred provider organizations and point of service plans, the other leading forms of health insurance. HMOs have grown in popularity since their introduction in the 1970s, according to an article in financial journal "Kiplinger."
History
According to Exam/Cram's guide for Life and Health Insurance licensing, health maintenance organizations first appeared in the 1970s as an attempt to reduce the cost of health benefits for employers and employees alike. As the first kind of managed care health system, they controlled health care costs by placing an emphasis on preventative care. Lower health care costs meant lower premiums, which motivated more employers to provide coverage for their employees.
Kinds of HMO Plans
The "Kiplinger" article outlines the three basic structures of HMOs. Traditional health insurance plans reimburse customers for their medical expenses. HMO plans instead pool monthly payments of all members to fund an in-house staff of doctors, nurses and other professionals. The group practice plan keeps all professionals on staff and pays them a salary regardless of how many patients they see. Members visit a primary care physician who can refer them for further treatment as necessary. An individual practice association also keeps a staff of primary care physicians, who are paid a flat monthly fee per patient on the individual doctor's roster. An open-ended HMO provides a primary care physician, but is also open to visits with out of system doctors, albeit at an additional fee.
Preventative Medicine and Copayments
Members in an HMO pay a monthly premium for access to the medical services provided by the HMO. This subscription plan will outline a schedule of co-payments for medical treatments. Unlike deductible plans, which can run to the hundreds or thousands of dollars or a percentage of medical costs, HMO co-payments are often low or even token payments. According to insurance executive Courtney Rogers, this is in keeping with the preventative medicine focus of HMOs. By making regular checkups and preventative appointments affordable, the HMO is designed to save money by avoiding expensive procedures down the line.
Advantages of HMOs
Preventative medicine is a major advantage of using an HMO. Regular wellness checks can mean longer and healthier lives for patients. According to "Kiplinger," HMO members have fewer hospital visits, miss less work and have lower health care bills. The low co-payments, even at the expense of a higher monthly premium, make for more easily predictable, and thus budgeted for, medical costs. Most HMOs also do without lifetime maximums or pre-existing condition restrictions, staples of other insurance plans that can mean real hardships to members.
Disadvantages of HMOs
HMOs limit your choice of primary care physician to those on its staff roster, which may mean changing your doctor if you join an HMO. The limited geographic scope of local HMO plans may mean inconvenience or uncovered incidents while traveling out of the area. Finally, while HMOs work well for people and families with routine medical costs, they are not as suitable for those who rarely need medical treatment. For example, a family of four could benefit from an HMO while a single, healthy male in his 20s would probably get better value from a traditional indemnity plan.
References
- "Exam Cram: Life and Health"; Bisys Education; 2006
- Kiplinger: Health Maintenance Organizations
- Courtney Rogers, Insurance Executive, Richmond, VA
- Missouri Families: What is an HMO?
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