Health Maintenance Organization (HMO) - ByteScout

Health Maintenance Organization (HMO)

The Health Maintenance Organization or HMO is a popular healthcare insurance plan, which provides an individual healthcare coverage via a web of doctors or physicians. HPO provides healthcare insurance to an individual for a fee that is paid monthly, yearly, or as agreed between the insurer and the assurer.

Health Maintenance Organization (HMO)

An individual that purchases an HMO insurance plan is only allowed to receive medical services from a web of approved doctors, pharmacies, and other providers called provider network. The insurer that offers an HMO plan enters into contracts with different service providers to form its provider network.

The provider network arrangement is advantageous to the assurer as it lowers the rate of premium paid compared to other healthcare insurance policies. However, such an arrangement significantly restricts the number of service providers an assurer can access.

As such, when an individual wants to select an HMO plan, they should consider several factors, which include premium rates, copay rates, specialists within the provider network, and more. For example, an individual that needs to access a particular specialist medical service should find an insurer that has that service provider amongst their provider network.

How it Works

HMO provides basic healthcare insurance policies and addon services to policyholders. All service providers within the provider network of the HMO receive an agreed amount of money for the services they offer to assurers. This arrangement significantly lowers the premium rates assurers pay to receiver healthcare insurance and services that are of high quality.


Assurers pay premiums on an agreed frequency, which guarantees healthcare insurance within a limited provider network. Notwithstanding, HMO allows assurers to receive healthcare services from service providers that are outside of the provider network in certain situations. In an emergency, an assurer is allowed to seek healthcare from the closest healthcare provider. Such emergencies include accidents, heart attacks, strokes, and dialysis. HMOs usually provide insurance cover in these circumstances.

To ensure efficiency and to reduce the tendency of an assurer requiring healthcare services from providers outside the HMO provider network, many insurance companies require clients and service providers that are in the same geographical location.

However, HMO still provides coverage in the event of emergencies unless the services received are none essential. In such a scenario, an HMO would not cover for such a charge. Therefore, assurers must be careful not to access none essential healthcare service from outside the provider network of their HMO.

Unlike other insurance plans, HMO plans may not require deductibles. As such, insurance companies collect copay from assurers for each healthcare service received. These copayments are usually as low as $20 or less for every healthcare services rendered. The low copay of the HMO plan makes it suitable for workers and families.

Primary Healthcare Doctor

Assurers are required to select a primary healthcare doctor or physician who is responsible for their primary healthcare. The doctor oversees all medical requirements of the individual and makes referrals when needed. Therefore, an assurer cannot go to a specialist directly without a referral. The doctor would most likely refer the patient to a specialist that is within the provider network. However, assurers are allowed to seek specialized services like mammograms without the need for referral as long as the service provider is part of the provider network.