The term “HMO” is an acronym standing for Health Maintenance Organization. Their name is a reference to these organizations coverage for preventative medical expenses, like regular physicals, well baby visits, and immunizations and vaccinations. This distinction, while not necessarily accurate today, was considerable when HMOs were first formed and becoming prevalent immediately before and during the great depression. The model was favored at this time by customers for its affordability and by insurers because of the stead stream of revenue it provided. <?xml:namespace prefix = o ns = “urn:schemas-microsoft-com:office:office” />
These early HMOs functioned as prepaid health plans offered to employees by their companies, where for a predetermined monthly payment the employee would receive coverage for a predetermined list of treatments and procedures with specific doctors and hospitals. But it wasn’t until the passage of the Health Maintenance Organization Act of 1973 that the HMO as currently known was truly born. This legislation allowed for the distribution of loans and grants to start or expand an HMO, removed state restrictions on HMOs as long as they were federally certified, and most importantly required companies with more than 25 employees to offer some form of either federally certified HMO coverage or traditional health insurance to their employees.
As a type of managed care organization, HMOs share a common objective of reducing the overall cost of health care while also aiming to improve or maintain the quality of that care for their members. An HMO will seek to achieve cost savings for itself and members by first determining what procedures and treatments it will pay for, and these determinations can vary considerably from one organization to another, since HMO’s are only required by law to provide some form of coverage in the following areas:
~In-patient and Out-patient Doctor and Hospital Services.
~Diagnostic Services, such as X-rays.
~Services to Treat Health Problems.
~Diabetic Care and Supplies.
~Care for Serious Mental Health Issues.
~Certain Types of Rehabilitation.
~Some Healthcare or Nursing Home Care Following Hospitalization.
~Certain Hospice Care for Terminal Patients.
However, elective or experimental procedures are almost never included. HMOs then determine what they are willing to pay for every procedure and treatment, and only contract with hospitals and doctors that will accept their price. Because of the large member base of most HMOs they are able to negotiate a much better rate for the procedures that they view as necessary than an individual would on their own.
Nearly every form of HMO will also require their members to choose their Primary Care Physician (PCP). Primary Care Physicians can chosen in one of four specialties; OBGYNs, Pediatricians, General Practitioners / Family Doctors, or Internists. This individual often acts as an agent for the HMO in determining whether a treatment or referral is necessary, and if a less expensive procedure can be tried first to keep the cost of care down. If the PCP cannot treat the patient his/herself, the patient will then be referred to a specialist in the HMO network. Very rarely will a patient be referred outside the HMO’s network, and typically if the patient is referred beyond the network the HMO will charge them significantly higher co-payment rates.
In order to maintain their services at as affordable a level as possible, HMO guidelines for both participating physicians as well as members seeking treatment can be quite restrictive. Doctors in the network are regularly evaluated by the HMO for quality and compliance with the HMO’s policies. And patients who seek treatment without a referral from their PCP or outside the HMO’s network will find their claims unpaid. Because of this HMOs have come under fire for denying needed care and for delaying that care with their requirements and authorization processes, but that has hardly stemmed the large numbers of Americans turning to these giants for health insurance. In the end their decision between accepting the HMO’s restrictions or going without health insurance because they can’t afford it isn’t much of a decision at all.