The Benefits of Health Maintenance Organizations (HMOs) – Why Employers should think about offering HMO’s to their employees.

In the world of health insurance, there are several types of plans an employer can choose from to offer to their employees. Among the list, perhaps the most popular are Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), Heath Saving Account compatible High Deductible Health Plans (HAS compatible HDHP), and more recently since the age of white collar startups, Professional Employer Organizations (PEOs). Each of these different policies has their own pro and cons, but for this post I will be going over the, very popular, HMO plans’ benefits and why an employer should consider offering them to employees.

HMOs Generally Follow These Lines

To start, I want to make sure that you, the reader, realizes that the HMO information I will be going over in this post will be regarding the general format of HMOs, and not the very specific alterations an insurance carrier may have on one of their HMOs, or another. So, this post will give you the knowledge to understand what HMOs are going to normally consist of, which will save you time from memorizing plans that slightly go “off track” from most HMOs, since current health care reform will most likely end up changing the HMOs that are a bit, rare.

How HMOs Work

Health Maintenance Organizations, or HMOs, provide health services to its members in an “in-network” model. When you are insured by an HMO plan, you must seek your health care services through physicians and hospitals that are contracted by your insurance carrier (if they are contracted by your carrier, it means that they are in-network).

Broker Tip: If you are ever in a life-threatening situation where you believe you need emergency care, you are instructed to go to the closest hospital nearby, whether or not it is contracted with your insurance carrier. This rule was put in place so that when you are struggling to survive due to an accident or illness, you don’t need to call the hospital to make sure they are in your network to save money. Going to the emergency room in this case, even in an out-of-network hospital, will generally cost the same as your in-network emergency care services.

The Importance of Primary Care Physicians in HMOs

HMOs also need the member to choose a Primary Care Physician (PCP) who will be there primary doctor, as well as their referral “gatekeeper”. In an HMO, the member is not allowed to go straight to a specialist, such as an orthopedic physician, until they visit their PCP and are given a referral from their PCP to visit the orthopedic doctor.

It may currently seem like HMO’s demand you to always go through your PCP, which is true in non-emergency situations, but this in-network process will end up costing less money for the employee since your primary care physician won’t direct you to an out-of-network hospital or service (always ask, just in case, this is another “general” fact of HMOs) which will also make decisions much easier for your employee and decrease the amount of stress they may face trying to find in-network hospitals that have in-network physicians.

Copayments in HMOs

Another cost saving measure HMOs generally have is copayments for their services instead of coinsurance, which are normally found in PPOs (you can find copayments in PPOs, it usually depends on what medical service used). The benefit of having an HMO copayment is that you only have to pay a fixed dollar amount, such as a $20 copayment for an office visit or $350 for an inpatient surgery (after the deductible, if it applies), whereas the PPOs’ coinsurance will cost the member a percentage of care, such as 20% for the inpatient surgery, which could cost $5000, which means after the PPO member paid the deductible, they would then have to pay 20% of the $5000, so $1000 in coinsurance. As you can see, copayments can be preferable because they will normally cost less than coinsurance, and they are predictable because they are on your summary of benefits and coverage in dollar amounts.

HMO Premiums may Save you Money

HMOs generally have less expensive premiums (amount the member pays the carrier to keep their insurance in force). This can be a great selling point for employees that would rather pay less per month, especially if they enjoy the referral process that HMOs provide through the primary care physicians.

HMOs can Help put Your Health Care in the Hands of Your Primary Doctor

Lastly, a great benefit of HMOs is their ability to put the member’s care in the hands of the primary care physician. In an HMO, the member must always go to their primary care physician for referrals, so instead of the member self-referring themselves to a specialist which may not actually be needed to fix/cure/diagnose/etc the problem, the primary physician can first check to see what the problem is related to, then appropriately refer the member to a specialist which the primary physician sees most fit.

 

In summary, Health Maintenance Organizations, or HMOs:

• Have a PCP that the member selects that will refer the member to specialists or hospitals, cutting the stress of having to choose your own physicians or specialists and researching to see if they are in your contracted network.
• Normally cost less due to charging copayments instead of coinsurance.
• Have costs associated with health services that are more predictable, since the costs of services are in dollar amounts and can be found on your statement of benefits and coverage.
• Have premiums that are normally lower than PPOs
• Help put the health care into the hands of the primary care physician.

If you are an employer and are currently looking at health plans, consider these benefits that HMOs can provide.

Additional Disclaimer – Although I am an Insurance broker and a professional in the field, the Health Care laws are ever changing, especially in the age of the Affordable Health Care Act, and the laws, information, opinions, or understandings that I have wrote about may be obsolete by the time you come across them and I take no legal responsibility for what actions you may or may not take because of it. To keep yourself safe, please seek updated professional advice, because changes are happening and I would like to keep everyone safe from any misleading or dead information. Please check out the “Terms and Conditions” page for more information and/or bookmark my blog for upcoming changes and updates to the ACA. Thank you for reading, and have a great day!