Keeping your costs down … with caveats.
A health maintenance organization, or HMO, is a health plan that tends to have fewer expenses.
Your only costs are monthly premiums – the monthly amount you pay for insurance – copayments, and coinsurance . These costs are usually lower than other types of plans. Your deductible will probably be lower too – if you even have a deductible.
The flipside of less expensive care is that these managed health insurance plans also restrict your healthcare choices to care from doctors who work for, or contract with, the HMO.
You usually need to choose a primary care doctor to oversee your care. To see a specialist, you need a referral from your doctor. That also goes for having your plan cover physical therapy or even buying medical equipment like a wheelchair or home oxygen system. If your healthcare provider leaves the HMO, your plan will tell you – and you’ll have to choose another doctor.
You can’t get care from just any doctor, hospital, or pharmacy. You’ll have to pay the full price for a prescription from an out-of-network pharmacy. Accidentally have an expensive test like an MRI at a non-participating imaging center, and you’ll be on the hook for the entire cost. HMOs rarely cover any out-of-network care, except for emergencies.
Your plan will have specialists in your network, but sometimes you may need to go outside of the network for the best care. If you do, the HMO will first have to approve a referral.
You may have to live or work in the HMO’s service area, usually covering only certain counties or zip codes. If you travel, spend a lot of time away from the HMO’s service area, or have a child attending college outside your zip code, an HMO may not be the best plan. Your child, for instance, will have to travel back to the service area for healthcare.
HMOs, based on the concept that you can prevent future medical problems if you maintain your health now, were popular in the 1990s. In recent years, their popularity has waned, as more people choose another less expensive insurance option, consumer-driven, high-deductible health plans. PPOs remain the most popular health plan. Moreover, many preventive healthcare services are now covered according to federal law.
It is very important to understand all of your in-network, and out-of-network, costs before you sign up for a health insurance plan. You should always consider all of your anticipated healthcare costs, as well as plan for unanticipated healthcare costs, before choosing a health plan.
June 15, 2015
Christopher Nystuen, MD, MBA