Health Maintenance Organization - Explained
What is a Health Maintenance Organization?
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Back To: INSURANCE & RISK MANAGEMENT
What is a Health Maintenance Organization?
A health maintenance organization (HMO) is a public or private body of medical insurance providers that offers health insurance coverage in lieu of a fee. The insurance fee can be collected on a monthly or annual basis. The health maintenance organization limits coverage to medical assistance provided by health practitioners that are contractually tied to it. Mandating such contractual obligations has both its advantages as well as shortcomings while on one hand it facilitates discounts on premiums payable, on the other, it restricts the functioning of the members on its network.
How Does a Health Maintenance Organization Work?
Every health insurance provider brings to the table a set of unique attributes and options that it offers to a prospective policy buyer. A health maintenance organization (HMO) typically offers to the prospective buyer the option to choose from a wide network of health practitioners that are contractually tied to it. The HMO not only provides basic health services to its subscribers, but also offers them a wide range of supplemental healthcare amenities. It has an extensive network of medical health practitioners across specialties that it builds up via service contracts with health facilities and doctors, including both primary care physicians (PCP) and specialists. Such contracts mandate payment of a stipulated fee to doctors and health facilities by the HMO for their services to its subscribers. These contracts also make it possible for HMOs to offer discounts to its subscribers on the premiums payable.
Services Provided by an HMO to its Subscribers
While subscription to an HMOs services limits coverage of its subscribers to healthcare received from contracted providers only, there are instances (especially emergencies and dialysis) when an insured can avail healthcare services from doctors or healthcare facilities outside of the HMOs network and still expect coverage. It is also usually mandatory for subscribers to live or work at locations within the HMOs coverage area. In instances where a subscriber needs to avail emergency medical attention outside the HMOs coverage area, the HMO is bound to reimburse all expenses incurred. The subscribers of an HMO are relieved from having to pay any deductibles out of their pockets; instead they are required to pay a nominal fee, called a co-payment for each visit to a doctor or medical facility. It is also obligatory for the insured to opt for a primary care physician (PCP) who is contractually tied to the HMO. The HMO also makes it mandatory for its subscribers to seek their PCPs referral for visits to any specialists within the purview of their healthcare coverage. In cases where a subscribers PCP leaves the HMO network, he/she is assigned another PCP within the HMOs network. Advantages of having a health maintenance organization in place are twofold. On the one hand, the HMO provides time-tested and well-managed healthcare plans to the employees of an organization. On the other, it assures a continuous supply of patients to healthcare providers under the HMOs network.
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