What is HMO Health Insurance?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 09 September 2019
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HMO health insurance is health coverage that is offered by a health maintenance organization, or HMO. This type of health insurance is considered to be a subset of prepaid medical services in which members of the organization can obtain medical services from a select group of physicians and health care facilities. The structure of most HMO health insurance options is different from other medical insurance options in that the coverage is only valid when the member utilizes the services of doctors and facilities that have a contractual arrangement with the organization.

While there is some difference in operating structure, most HMO health insurance plans require that each member select a primary care physician. This physician functions as the pipeline through which all medical services provided under the plan must be arranged. For example, should a member feel the need to see a specialist of any kind, he or she must first receive a referral from the primary care physician before the HMO will compensate the specialist for services rendered. Outside of a medical emergency, the member must always go through the primary care physician before seeking any type of covered medical treatment from another health professional, even if that professional is also part of the HMO network.


The goal of HMO care in general is to provide affordable and competent medical services to as many people as possible. At the same time, the structure of HMO health insurance is also designed to eliminate spurious treatments, tests, and other factors that often drive the cost of medical care upwards. These two primary goals helped boost the appeal of HMO health insurance in the United States during the 1970s, prompting a number of companies to switch from more traditional health insurance options to an HMO plan.

HMO health insurance providers normally function within one of two models. With the group model, the organization contracts with physicians in a given geographical area to provide services to members who reside within the region. The physicians are paid a monthly fee for each HMO member placed under their care, with the stipulation they provide a specified minimum of basic services. With this independent group model, the physicians are still free to accept patients not associated with the HMO and who are covered under other insurance plans.

There is also a group model known as the captive group. In this scenario, the group practice is created by the HMO for the express purpose of serving HMO patients. The physicians associated with the practice do not accept non-HMO patients and receive their compensation in the form of monthly payments for each HMO member assigned to their care.

In addition to the two group models, there is also the staff model. With this approach, the physicians are based in a facility owned and operated by the HMO, and are full-time employees of the organization. Instead of monthly pay based on the number of patients assigned to the physician, each healthcare professional is paid a salary.

Over the years, HMO health insurance has been the subject of controversy. Proponents of this type of medical coverage note that the structure of most HMO organizations has led to a reduction of the performance of unnecessary procedures and treatments in some cases. In addition, the provisions for an annual examination as a safeguard is also touted as one sign of the proactive approach that most HMO organizations have toward the medical well being of members.

Detractors of HMO health insurance plans note that many plans provide a fixed monthly payment for every member assigned to a specific primary care physician. If there are very few HMO affiliated physicians in a given locale, this can lead to a single primary care physician being inundated with a huge number of patients. As a result, the amount of time that the physician can spend with each patient may be limited and thus impact the quality of the medical care that is provided.

While some of the initial enthusiasm for HMO health insurance has cooled somewhat in the United States, this approach to healthcare remains a viable alternative. There remain several HMO health insurance companies in operation, most of them having refined the original model from the 1970s so that some of the operational issues of years past are no longer in place.


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Post 2

@ocelot60- Your post has some valid points, but I think that HMO health insurance is still a valuable option for many people. For example, younger people who have few health issues and access to HMO health insurance coverage may be quite happy with the savings they enjoy from these types of health insurance policies.

Post 1

Another downside of HMO health insurance is that you may not be able to go to a specialist in another town or city if you ever have the need for more specialized care. For example, if you need surgery and want to go to a facility that specializes in the treatment options you need, you may end up paying more money from your own pocket if the provider you choose in not in your HMO network of providers.

This is especially concerning for people who live in smaller areas with few medical facilities. If someone with an HMO health insurance plan in this type of situation gets a difficult diagnosis, she or she may prefer to go to a larger city with more advanced medical care. The HMO may not cover this type of care, which is concerning because it limits health care choices.

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