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Health Maintenance Organizations (HMO)

Health Maintenance Organization (HMO) is a type of Managed Care Organization system. It provides a wide range of health insurance services through a network of hospitals, physicians, and other health care providers having a contract with the HMO, for a fixed, prepaid fee.

The general goal of Managed Care programs is to provide customers with quality health care services within a network of practitioners or health care providers at a lower cost. The benefit of HMOs is the reduction of healthcare costs for the plan members.

HMO plan members receive health care services from physicians and hospitals involved with the HMO network. Members of this plan choose a primary care physician (PCP) who makes health care decisions and refers patients to in-network specialists who are employees of the HMO or contracted health care providers. This arrangement allows an HMO to control costs. Each family member can select his/her own primary care physician. A PCP may be a family doctor, an internal medicine doctor, or a pediatrician.

HMOs usually offer health coverage through employer-sponsored group health plans. The HMO and the employer make a contract and establish the costs and benefits of their plans. Thus, members of the same HMO working for different employers may enjoy different benefits. Individuals and their families can also be part of HMOs if they find the conditions favorable.

The system when health care providers contract with an HMO and offer medical services to HMO enrollees, guarantees those providers a greater number of patients, a so-called built-in clientage. It allows them to provide services to the HMO's members at a discount. In their turn, customers have a benefit of lower monthly premiums.

HMO members take advantage of the prepaid health services provided by the plan; however they may get medical care from providers out of the HMO network as well. In this case they should be ready to deal with referrals and pay more, - a substantial deductible, co-payment, or coinsurance for the use of non-panel providers.

An HMO member will pay:

- Premiums - If you have become a part of an HMO through your employer, your monthly premiums will be deducted from your paycheck. Some employers may pay the premium costs for you.

- Co-payments - This is what you pay when you receive a covered medical service, for example, a prescription drug. Co-payments are more expensive for emergency or specialized care. If your HMO plan requires a $20 co-payment for a doctor visit, while the contracted rate for the doctor is $80, you have to pay the $20 co-payment, and the HMO will pay the remaining $60.

- Deductibles - Many HMOs do not have deductible, the amount you pay out of pocket before the HMO starts paying for covered health services. An HMO may charge a deductible only for services provided out of the HMO's service area or for services provided by a doctor who is not part of the HMO's network.

- Maximum out-of-pocket expenses - This is the maximum amount you have to pay for covered services during a certain period of time.

An HMO covers basic health services, such as physician services, including doctor's advice and referral services, (but excluding psychiatric services and consultations); emergency health services; ambulatory services; inpatient hospital services if they are not for any mental illness treatment; limited intermediate and outpatient care for substance abuse; diagnostic services; home health services; and preventive health services. This type of health care plan may also offer prescription drugs coverage.

The mandatory health services that this plan offers include: hospice care; prosthetic devices; some mental health services; antineoplastic therapy (chemotherapy for cancer treatment); program preventing the onset of clinical diabetes; breast cancer dignostics, outpatient treatment services and rehabilitative services.

Mind that such notion as medical necessity plays a crucial role in determining the level of your coverage. Unless the HMO decides that this or that procedure is medically necessary, the reimbursement for a health service or treatment may be denied.

Read your policy carefully to check what medical services HMO covers in your area. An HMO often excludes procedures considered to be experimental. However, in most cases coverage depends on specific circumstances and health condition of an individual.

Remember that an HMO pays benefits only if you use physicians and hospitals within the plan's network. You pay co-payments, that is fixed fees for doctor visits, drug prescriptions, or hospital. In case you receive out-of-network services, you are likely to be responsible for all the costs yourself, unless:

- you have an emergency case and require treatment in an emergency facility;

- you need a medically necessary service that providers within your HMO's network fail to offer;

- you have a point-of-service option, i.e. a special provision allowing you to apply to non-network providers if you agree to pay a greater share of the cost.

HMO members normally do not have to file claims and wait for reimbursements. They may have to pay for services at the time they receive them, for instance, when it comes to emergency care from an out-of-network provider. After that they will need to submit a claim to the HMO in order to receive compensation.

If you are a regular traveler or your doctor is not part of the HMO provider network, this type of plan may be a poor choice for you. Also, there is no guarantee that doctors and hospitals within your HMO's provider network won't leave the network. Geographic restrictions of the HMO network may limit coverage as well.

In case your primary care physician, or plan physician who guides you through some course of treatment, happens to leave the HMO network, you may carry on with your ongoing treatment for 90 days. If the plan member is in the second or third trimester of pregnancy at the time of the doctor's termination, she is allowed to continue the postpartum care associated with a pregnancy. In case the patient is terminally ill, he/she may count on the continuation of treatment related to the terminal illness through the remainder of his/her lifetime. The HMO members obtain a provider directory at the time of their initial enrollment. Contact the HMO's member services department or use their website to learn about recent changes in HMO provider network.

There are several types, or models, of HMOs:

Group Model HMO

This type of HMO implies a contract with a multi-specialty medical group that provides care to the plan's members. The HMO pays the medical group an established rate, which the group distributes among the individual physicians as salaries. The group may work with the HMO members only, or also may offer medical services to patients who don't belong to HMO.

Staff Model HMO

This is a type of HMO in which doctors and all other medical professionals are hired as HMO employees on salary and see HMO members in the clinics and other facilities owned by the HMO. This model is also called a type of closed-panel HMO, which means that contracted doctors are limited to provide medical services to only HMO patients.

Network Model HMO

This HMO model is based on contracts with more than one physician multi-specialty groups, individual practice groups, and individual physicians that provide a variety of medical services to HMO members.

Individual Practice Association (IPA)

This type is an open-panel HMO, in which independent practicing physicians have an opportunity to maintain their own offices and provide their services to both HMO and non-HMO patients. This group of physicians receives a fee or a fixed amount per patient.

Mixed Model HMO

An HMO type combines features of several HMO forms within a single plan and provides comprehensive medical care to enrollees on the basis of a prepaid contract. For example, a Staff Model HMO may also have a contract and cooperate with independent physician groups or with individual private practice physicians.