What is a Health Maintenance Organization (HMO)?

A Health Maintenance Organization (HMO) is designed specifically to promote managed care and cost efficiency. The defining characteristic of an HMO is that it requires its members to use a specific network of doctors, hospitals, and other healthcare providers for their medical needs. This network is established to control costs and ensure coordinated care among providers.

Members of an HMO typically must select a primary care physician (PCP) who acts as the gatekeeper for their healthcare. If a member needs specialized care or services outside of the PCP's scope, they usually require a referral from the primary care physician. By using a network of providers, HMOs can negotiate lower rates and provide comprehensive care at a lower cost to members.

In contrast, other types of insurance plans, such as Preferred Provider Organizations (PPOs), may offer more flexibility in choosing healthcare providers but often come with higher costs. Options covering only catastrophic illnesses or solely paying for premiums do not accurately describe the comprehensive, preventive, and routine care approach that HMOs promote. Additionally, unrestricted choice without network limitations is characteristic of other plan types but not of HMOs.