Health maintenance organizations (HMOs) are making a comeback. The plans have grown steadily in popularity since 2014, as the changes brought about by the Affordable Care Act have taken effect. Some studies have even shown that HMOs now account for more than one-third of all health insurance plans. Just a few years ago, it was less than 10 percent.
“More consumers today don’t have a strong preference about the doctor they see for things like minor illnesses,” says Amber Hulme, Medical Mutual vice president, Central and Southern Ohio. “For those types of consumers, HMOs offer a less expensive health insurance option, and their employer saves money in the process.”
Smart Business spoke with Hulme about how HMOs work, what makes the HMO plans currently on the market different from their predecessors and how organizations can save money on health care by offering an HMO option to their employees.
What is an HMO?
HMOs are a type of health insurance plan that offer access to a narrow network of doctors and hospitals. When members go out of network, the plan might not cover the services they receive and they could be responsible for the full cost. The specific rules for an HMO can vary from carrier to carrier.
How is an HMO different from a traditional plan?
The type of plan many people are used to is called a preferred provider organization (PPO) plan. With a PPO plan, members have the freedom to choose any doctor or hospital in the network. If they receive medical services from a doctor who is not in network, the services are usually still covered — they just have to pay a higher share of the medical costs.
An HMO is a less expensive option, but members do lose some of the flexibility of a PPO plan. HMOs don’t generally cover out-of-network care except in the case of an emergency. If a member gets medical services from a doctor not in the network, they normally are responsible for all the costs for those services.
What are the main advantages of an HMO?
With HMOs, the first advantage you usually hear about is cost. Insurance carriers can negotiate rates with providers differently for an HMO, which allows them to charge lower premiums. The deductibles are typically lower than comparable PPO plans, as well.
Another big advantage of an HMO involves the quality of care. With an HMO’s narrow network, care can be more coordinated and, in many cases, that integration can help make the outcomes better. Organizations pay less, while employees see a number of benefits in terms of how their care is managed.
How have HMOs evolved from what was available in the past?
The overall structure is similar, but there are some important differences to keep in mind. Many HMOs now offer some benefits for care received outside of the HMO’s network or service area. And in most cases, referral from a primary care physician (PCP) is no longer required to see a specialist. However, it’s still recommended that members choose a PCP to make sure they get the care they need. When PCPs coordinate care with specialists, it actually relieves some of the burden on the patient and more consumers are seeing that as a benefit.
How should organizations decide if this option makes sense for them?
With an HMO, access to care is one of the most important factors. HMOs are often a better option for organizations that have a limited number of office locations, where access to care isn’t an issue. If your employees live in localized areas, an HMO can definitely be a good option. In rural areas, it might be less practical.
Organizations should talk to their insurance carrier to evaluate whether an HMO makes sense for their employees.
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