HMOs are the most common health insurance program in the United States. They're designed to maximize efficiency while reducing unnecessary expenses. The majority of people insured under HMO plans receive acceptable and appropriate service, but some have specific situations that illuminate the flaws in the HMO structure.
What Is an HMO?
An HMO (Health Maintenance Organization) is a method of providing health care services to members of an insurance plan by restricting their treatment to a predefined network of physicians and facilities. The insurance companies have agreements with certain health care providers to offer their services to members at a negotiated price. Insured members are required to visit only those physicians and facilities in the insurance company's network to receive the benefits of their health care plan. If the member chooses to seek treatment from a provider outside the network, the individual is responsible for the total cost of that treatment.
The specifics of every HMO plan are different, but the structure is the same. At the time treatment is received, the member is required to pay a copay and/or a deductible, which is a percentage of the total cost of services. After the member has fulfilled this financial obligation, all remaining expenses are paid by the insurance company. The HMO plan caps the member's out-of-pocket expenses when treatment is rendered by participating providers.
Advantages of an HMO
Cost containment is the biggest advantage of an HMO. Regardless of the type of treatment provided or the severity of the situation, an HMO member enters every situation knowing what his maximum financial exposure will be. If the member receives services from participating providers, all costs are fixed and predictable. The premiums and deductibles for HMOs are significantly less expensive than those associated with other kinds of insurance plans, and members are not required to fill out claim forms. In most cases, the only paperwork required is a referral form for a visit to a specialist.
Disadvantages of an HMO
Perhaps the most legitimate concern regarding HMOs is the member's inability to seek treatment from any provider they choose. Being restricted to physicians under contract with the insurance company may limit the member's ability to seek treatment from a provider he believes to be of better quality than those available.
Another common complaint from HMO members regards the need to obtain a referral from their family physician before seeing specialists. While this requirement does not necessarily present a hazard to the member's quality of care, it can be inconvenient and be perceived as a waste of time.
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