In the insurance world, the letters HMO stand for Healthcare Maintenance Organization. It’s a type of insurance policy that requires the insured to select a “gate keeper”, also known as a Primary Care Physician (PCP), from a list of general practitioners or internal medicine physicians contracted by the insurance company. This panel of PCPs will then receive a specified dollar amount for every patient assigned to them. This payment they receive is also called a capitation fee or per capita rate. It is typically only a few dollars per patient per month, but if the doctor participates with multiple HMO insurance plans and has a lot of patients assigned from each insurance, then these capitation fees can add up to substantial amounts of money.
Once a patient is assigned to a PCP, then that doctor is responsible for overseeing the care of the assigned patient. The patient must then schedule an appointment with their PCP any time non-emergency medical treatment is necessary. The patient will pay a co-payment (a set dollar amount) to the PCP at the time of treatment. The PCP will then submit a claim to the insurance company in order to receive a contractual dollar amount from the insurance. If the PCP bills more to the insurance company than what the contract allows, then the excess amount billed must be written off by the PCP and can’t be billed to the patient.
If a patient on an HMO should require additional care that the PCP is unable to provide, then the PCP will refer the patient to another physician such as a surgeon or other specialist that is also in-network (contracted) with the patient’s HMO plan. The PCP will submit a written referral form to the HMO and also to the specialist or other provider. The patient should always check with the HMO to make sure that the referral is on file and that the provider they have been referred to is in-network. This is extremely important because if the patient is accidentally referred to an out-of-network (non-contracted) physician and they receive treatment, the HMO will not pay and the patient can be held responsible for any services they received from the non-contracted provider.
If a patient requires surgery or any other major services, the doctor or provider ordering the services must submit medical records as well as an authorization request form to the HMO. The request will then be reviewed by a nurse of physician on staff with the insurance company and it will be up to them to decide if the procedure or service is medically necessary and a covered service according to the contract. This is where many HMOs have gotten a bad reputation. Please keep in mind that most HMOs are very fair about authorizing services that are necessary, but over the years, there have been some HMOs that have denied services that should have been approved and patients were denied care, which resulted in further complications and sometimes death. It is rare that this happens, but in the case that it does happen, I strongly suggest that the patient or patient’s family contact their local insurance commissioner as well as an attorney. Of course, they should first go through the proper appeals process with the assistance of their PCP and/or specialist. If the services are needed urgently, then the patient has the right to request an expedited appeal. If services are still denied, then the insurance commissioner and attorney are the only other solution.
As I stated before though, this type of situation is extremely rare. However, before signing up with any insurance plan, I suggest thoroughly researching the background of the insurance company online. If you discover that there have been a lot of lawsuits against the insurance company or a lot of negative reviews of the insurance then you really should look for another company.
When a patient does receive in-patient or out-patient hospital services and the HMO has approved these services, then the patient will only be responsible for a set dollar amount per admission, regardless of the services performed, as long as the services are covered under the plan document (contract). This is one of the major ways that an HMO is in the patient’s favor. Many other plans such as POS and PPO plans will require that the patient meet a deductible (often thousands of dollars) before a percentage of the contractual fees will be paid by the insurance.
To make this a little easier to understand, I will give an example. Let’s say that you have an accident and are admitted to the hospital where you receive surgery and must then remain in the hospital for a week to recover. If you have an HMO policy and you have gone to an in-network facility and the services were authorized by your HMO, then you will only pay one co-payment. This co-payment amount is pre-determined and spelled out in the plan document (contract) that you should have received when you enrolled. If it says that you owe a $100 co-payment per hospital admission, then even if the facility bills $150,000.00 or more for services, you will only be required to pay $100. On the other hand, if you had a PPO or POS plan, you might first have to meet a deductible and then pay an additional percentage of the medical charges. A PPO plan might read that a $5,000 deductible is required before the insurance company will then cover say… 80% of allowed charges. That means that you will have to pay the first $5000 and then an additional 20% of the remaining charges. It’s a lot of money no matter how you look at it.
Most people who select an HMO over a PPO or POS plan do so because they know exactly how much they will have to pay each time they go to a doctor or hospital. They also would not have to pay a huge deductible and unknown coinsurance amounts. HMO plans can be a bit intimidating with all of their rules about having to go to in-network providers only and having to get referrals and pre-authorizations, but in the long run, they can really save the insured a lot of money in case of a serious illness or injury.