Advantages & Disadvantages of HMO Insurance

A health maintenance organization, or HMO, is a group insurance policy in which covered members must get referrals from a primary care physician to see a specialist. Relative to other group policies, such as PPO and POS, HMOs offer financial savings and preventative health advantages. However, they present several restrictions for members.

HMOs typically have a lower cost structure than other group plans. Because of the requirement that participants visit a primary care physician before seeing a specialist, health care services and expenses are minimized. This setup leads to lower premium costs for the employer, and members who pay some or all of their own premiums.

Also, HMOs normally only have co-payments on routine services. Some don't have deductibles, which means any service costs above the co-pays is covered by the plan.

As the name suggests, a health maintenance organization centers on preventative rather than treatment-based services. Unnecessary specialist visits are avoided. Also, the prescriptions and treatments provided to one member are compared to those recommended to other members. This monitoring system ensures that health care providers aren't making self-serving financial decisions rather than ones that suit individual patients.

Regular interaction with the primary care physician also contributes to routine conversations about health, as well as consistent diagnostic testing, such as mammograms, colonoscopies and blood labs.

For some HMO members, the requirement to visit a primary care physician to get a referral is more of a burden than a benefit. Someone who has a strong sense that she needs care from a podiatrist for a foot provider would likely prefer direct access, which is the case with a PPO.

HMO members are also bound to use in-network providers to get the best benefits possible. This restriction means that if the closest PCP opportunity is a significant distance, the burden to get referrals becomes even greater.

Patients sometimes struggle to get treatment they feel is necessary, but the HMO insurer doesn't, according to One Medical Group. In general, HMOs have more restrictive treatment policies.

Another example is the requirement that a covered member has to verify covered services prior to receiving care. If a patient goes to a doctor and a treatment is given, the HMO plan may not cover it if the insurer deems that treatment unnecessary. Regularly verifying treatments is cumbersome and can delay the delivery of medical care.