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What is HMO health insurance coverage?

Keep in mind...
  • An HMO is a managed-care organization that cuts the costs of healthcare coverage by putting restrictions on what types of services can be paid for and how many people can utilize these services at one time
  • HMOs usually have lower costs than other insurance plans
  • Members of an HMO also pay some of the cost of services. This payment is called a co-pay because members co-pay for the services provided

Many companies utilize Health Maintenance Organization (HMOs) to manage their healthcare coverage. HMOs tend to have lower costs than other insurance plans.

In fact, for many employers, HMO health insurance plans may be the only affordable for healthcare coverage.

An HMO is an organization that cuts the costs of health care coverage by putting restrictions on what types of services can be paid for, the cost of those services, and how many people can utilize these services in a given time.

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What kind of restrictions are imposed with HMO health insurance plans?

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There are several requirements that HMOs impose on their members and service providers. In certain cases, some of these requirements can be waived, but the HMO must approve any variations from its requirements.

The HMO contracts with certain doctors, hospitals, and other healthcare providers to create a “network” of healthcare services. If you visit a doctor or other service provider outside of the network, the HMO may not pay for the costs of your care.

Doctors and healthcare services contract with the HMO by agreeing to accept a set price for services. This is referred to as an “agreed cost” settlement.

For example, if a doctor normally charges $80 for an office visit, the doctor may contract with the HMO to provide routine office visits to members at $50.

This benefits the doctor because he or she is guaranteed payment. It benefits the HMO because clients receive healthcare at a reduced cost.

Members of an HMO also pay some of the cost of services. This payment is called a co-pay because members co-pay for the services provided. In most cases, co-pays are a set amount.

For example, a doctor’s office may charge $50 for an office visit under an agreed cost with the HMO, and the client’s co-pay might be $20.

HMOs also manage costs by requiring members to get approval prior to receiving certain treatments. If a doctor suggests an ultrasound, the doctor may have to show the HMO why the ultrasound is medically necessary before payment will be given.

HMOs sometimes deny coverage based on this situation. Most have a board of former doctors or insurance professionals who assess proposed treatment and made a decision as to whether it is medically necessary.

Can a denied health insurance claim be appealed?

If denied coverage, you can appeal the decision. However, a more detailed explanation of the proposed coverage will help the HMO make a better decision.

If you are denied treatment by an HMO, talking to your primary care prior to taking action is the best route to go.

HMOs may also deny coverage if an in-network doctor is not involved in the treatment. Most HMOs have large lists of local doctors and service providers from which to choose.

In this case, the member can talk to the HMO about adding the doctor. In addition, doctors can apply for admission to the network. While this is not always successful, most HMOs are eager to add doctors who will agree to abide by their payment policies.

How popular is HMO health insurance coverage?

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More and more employers are choosing HMOs for their employee’s health care coverage. Some employers offer a choice between traditional plans, PPOs, and HMO coverage to their employees.

Premiums are based on which plan you choose, but in general, HMO coverage is far less expensive than other plans.

Whether you choose an HMO will depend (in large part) on how willing you are to abide by the restrictions imposed by these types of plans but HMO plans are extremely popular.

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