A Health Maintenance Organization (HMO) is a type of insurance plan that works with a contracted network of healthcare providers, clinics, and hospitals.
HMO insurance coverage may be available as part of a health, dental (typically referred to as a DHMO), or vision benefits plan. Regardless of the type of care, HMO insurance is typically characterized by three main features: lower coverage costs, referral requirements, and stricter coverage guidelines.
How does an HMO plan work?
HMOs typically work with a group of healthcare providers, known as a network. These healthcare providers — called in-network providers — are contracted to offer care at reduced rates for enrollees or members.
HMO plans require you to pre-select a primary care physician (PCP), dentist, or optometrist from a list of in-network providers.
A PCP is an important part of your HMO medical team, so choose one with care. Your PCP will coordinate medical treatments and services throughout your coverage term. They will also be responsible for providing referrals if you need to visit an in-network specialist.
HMO plan: In-network vs. out-of-network
HMO plans often cover a lot of your costs when you get care from an in-network provider.
Unlike other types of insurance plans— like a PPO plan — HMO plans rarely offer benefits for out-of-network care. There is one exception. Most HMO plans allow you to receive emergency care from an out-of-network provider, but the guidelines around what constitutes an emergency may be strict.
If your medical event doesn’t meet your plan’s requirements, you may not receive coverage. You’ll also be responsible for paying for your medical expenses out-of-pocket. With that in mind, do your research and learn more about a plan’s terms before enrolling to make sure you have the coverage you need, when you need it.
How much does HMO insurance cost?
In 2021, the average annual premium costs for employer-sponsored HMO plans was $1,204 for individuals and $5,254 for families, according to the Kaiser Family Foundation (KFF). In comparison, annual premiums for employer-sponsored PPO plans was $1,389 for an individual and $6,428 for families.1
Many HMO plans come with fewer out-of-pocket expenses — like deductibles, copayments, and coinsurance — as well. For instance, the KFF found that approximately 43% of members enrolled in HMO plans in 2021 didn’t have to meet a yearly deductible before their coverage kicked in.2
Are HMOs better than PPOs?
HMO plans aren’t necessarily better than PPO plans. Instead, they offer a different approach to health care. When comparing differences between HMO and PPO plans, you’ll need to consider variances in out-of-pocket costs, coverage flexibility, and referral requirements.
Is HMO insurance right for me?
Deciding to enroll in an HMO plan depends on your personal circumstances, be sure to research and consider all your benefits options. Familiarizing yourself with the different types of insurance plans available is invaluable when choosing coverage during open enrollment.
Before enrolling in a plan, take some time to learn about your coverage options and the networks of doctors, dentists, and optometrists available to you. Ask questions about potential out-of-pocket costs and make sure you understand what to do in the event of an emergency.
If you’re still not sure which option is right for you, talk to your HR representative or employer to find a plan that aligns with your priorities.