About HMOs

Health Maintenance Organizations, or HMOs, are health plans that are responsible for delivering and paying for their members' medical care. First created in the 1920s, HMOs, or pre-paid group practices, have become very popular over the past decade because of their success at making high-quality health care more available and less costly.

Full Range of Benefits

HMOs provide access to services ranging from primary care office visits to highly sophisticated medical intervention for life-threatening conditions. They cover the full range of health care services, including physician, hospital and out-patient services, laboratory tests, x-rays, home care, rehabilitation therapy, mental health care, and other services. HMOs also offer supplemental benefits, such as prescription drugs.

Low Out-of-Pocket Costs

Unlike ordinary insurance, in which patients pay a fee each time they receive medical services, HMOs provide health care coverage for a fixed monthly premium that is, on average, much lower than the cost of old-style health insurance. Moreover, while ordinary insurance commonly covers only 80% of many medical expenses, HMOs usually have minimal or no co-payments and do not require members to pay deductibles. Not only do these practices save consumers money, they remove financial barriers that can prevent people from seeking treatment early, before health problems become severe.

Minimal Paperwork

The typical HMO member does not receive bills and does not have to fill out a claims form for routine service. Generally, the HMO--not the member--processes the paperwork. By minimizing the paperwork traditionally associated with obtaining medical services, HMOs make it simpler and less costly for their members to get the health care they need.

A Focus on Staying Well

HMOs take an active interest in helping their members stay healthy, not simply treating them once they become ill, as conventional health plans do. Most provide health education classes on topics such as nutrition, stress management, smoking cessation, parenting, CPR, and first aid. Many HMOs offer discounts at health clubs and fitness centers and provide cancer screening and other tests for early detection and treatment of disease.

Networks: Controlling Costs, Ensuring Quality

HMOs employ or contract with select networks of doctors, hospitals, and other types of health care providers. HMO members use providers within their plan's network. This system has enabled HMOs to control health care costs as well as monitor providers for quality. Because HMOs direct a high volume of business to providers within a network, providers are able to offer HMOs lower prices for their services.

Networks also enable HMOs to monitor the quality of care their members receive. HMOs review their providers' credentials before accepting them into the network. Once providers become part of an HMO network, their performance is routinely reviewed. Teams of physicians and other health care professionals regularly look at patient treatment histories in order to evaluate the appropriateness of all health care services. This practice, known as utilization review or utilization management, discourages the use of unnecessary procedures and duplicative tests, ensures that treatment is provided in the most appropriate setting, and establishes high standards of care.

Emphasis on a Personal Physician Chosen by the Member

Upon joining an HMO, members select a primary care physician who becomes both their personal doctor and their health care manager. Primary care physicians advise patients on personal health issues, diagnose and treat medical problems, and coordinate and monitor the care patients receive from specialists. This system, known as "managed care," ensures that the treatment HMO members receive is efficient and appropriate. By having a primary care physician serve as a patient's guide through the health care system, HMOs eliminate the fragmented treatment a patient may receive under old-fashioned, ordinary health insurance.

Increasing Access to Care

HMOs increase access to health care in a variety of ways. Attractive HMO Contributions enable more businesses to offer health insurance benefits to their employees. In addition, HMOs' emphasis on preventive care means members are covered for a broader range of health services than are persons with ordinary insurance. Because members do not have to file reimbursement claims or pay deductibles, and are responsible for only minimal co-payments, HMOs remove financial barriers present with old-style insurance that can discourage people from seeking care. Finally, most HMOs do not impose restrictions on pre-existing conditions or require waiting periods for persons enrolling as part of a group.

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