What is an HMO?
An HMO (Health Maintenance Organization) is a system that brings
members, physicians, facilities, and insurers together to provide
health care service and control medical costs. In an HMO, members pay a
prepaid fee, in the form of a monthly premium, which, covers all or
nearly all of the cost of their health care. Each HMO has a network of
providers from which a member can choose. Unlike the traditional
fee-for-service system of health care, members must utilize the
physicians and services within the network to receive the fullest
coverage to which they are entitled; some HMOs will allow members to
use out-of-network physicians, but members will have to pay a higher
percentage of the cost of the service to do so.
In the traditional fee-for-service system, members pay for each service
as it is needed, and then have to complete often lengthy and
complicated claim forms in order to receive reimbursement for the
covered services. HMOs eliminate paperwork for the most part, eliminate
the need for the consumer to pay expenses out-of-pocket and wait for
reimbursement, and reduce overall out-of-pocket expenses for consumers.
To control health care costs, HMOs employ or contract with a network of
doctors, sometimes providing most services in one or a few centralized
locations. Each HMO has a directory of providers, which includes both
primary care physicians and specialists. All HMOs require each member
to have a primary car physician, a doctor who oversees and coordinates
all of the patient’s health care. Members must choose their primary
care physicians and their specialists from the directory of providers.
Since specialized care tends to be costly, HMOs tend to limit access to
specialized care. The primary care physician determines whether or not
a member needs to see a specialist, and then makes the appropriate
referral. For this reason, primary care physicians are often called
“gatekeepers”; you may not go through the “gate” to see a specialist
until your primary care provider gives you approval. While this
restriction on access to specialists is a cost saving measure for both
the HMO and its consumers, it is one of the main disadvantages of
belonging to an HMO.
Besides physicians, many HMOs have laboratories and pharmacies within
their network. In such cases, using these network facilities is usually
less expensive than going outside of the network. For example, if an
HMO has network pharmacies, getting a prescription filled at a network
pharmacy may cost $5, while getting the prescription filled at an
out-of-network pharmacy may be subject to a $50 deductible, after which
the prescription is only covered at 80% of the price. The same concept
applies to primary care physicians and specialists. Some HMOs allow
members to see doctors outside of the network, but members are then
subject to a deductible of several hundred dollars, have to pay a
higher percentage of the cost of the visit, usually 20% to %50, and are
required to fill out claim forms, as in the traditional fee-for-service
health care system. In an attempt to allow members more freedom in
choosing their providers, the PPO (Preferred Provider Organization) has
been established.
Disadvantages
There are some disadvantages to HMOs. There can be long waiting periods
to get an appointment, with both primary care physicians and
specialists, since there are a limited number of providers, and then
long waits in the waiting rooms. Members are required to see a primary
care physician before they can see a specialist, a rule that can
further delay treatment, sometimes even by months. Choice of doctors is
limited to those within the HMO network. Some HMOs will allow access to
out-of-network doctors, but at a much higher cost to the consumer. In
addition, HMOs determine the “reasonable and customary” cost of each
service, and will only cover up to that amount of the out-of-network
service, leaving the consumer to pay his or her percentage of the
“reasonable and customary” amount, plus the entire amount of the
service above what the HMO has deemed “reasonable and customary”. Minor
procedures that were once done in the hospital may be performed in one
of the HMO clinics, on an outpatient basis. Procedures still performed
in the hospital may be covered be covered by the HMO, but covered with
a shorter in-patient hospital stay than before.
If you choose HMO or PPO coverage, be aware that policies can vary
widely. Know what to look for. The Better Business Bureau suggests you
ask the following questions:
-
Will I be allowed the freedom to be seen and treated by my current personal physician, or must I accept a designated physician?
- If I am assigned a physician, will I be allowed the freedom to change my physician if I do not like the one selected for me?
- Will I be seen and treated each time by the same physician who knows and understands my medical history?
- How
many doctors who were affiliated with the HMO or PPO a year ago are no
longer there? How many doctors are now affiliated with each plan?
- Will
I always see a physician, or will routine care be handled by nurse
practitioners, physician assistants or other physician extenders?
- What is the policy if I want to be seen by a physician only, rather than by a physician extender?
- What about physicians’ credentials? What percentage of the physicians are board certified or board eligible?
- How
many routine medical care locations does each plan have in my community
and where are they located? Will I have a choice of locations? Plan
members usually must go assigned locations to receive care. If your
access to transportation is limited, determine whether the travel will
create a burden for you.
- Will I be able to see a
physician immediately? How long must I wait for an appointment? How
many patients does the plan have in my community? Compare the number of
offices in the area to the total number of patients each must serve.
If, for instance, a few locations are responsible for seeing and
treating several thousand patients, you may have long waits for routine
care.
- What percentage of the plan’s patients voluntarily dropped out during the past year?
- Where do I go for care if I have a serious or chronic health problem requiring the attention of a specialist?
- Will the insurance company make any provisions if the plan is not affiliated with a particular specialist I may need?
- Will the plan pay for a second opinion from a physician outside the plan?
• What hospitals and nursing facilities will be covered in my plan?
- If I am hospitalized, are there any limitations to my coverage under the plan?
- Is 24-hour emergency care available?
- Where must I go to receive 24-hour emergency care?
- If, in an emergency, I am taken to the nearest hospital and require extended treatment, will the plan pay for my bill?
- What should I do if the plan’s offices are closed and I need to see a physician?
- What costs am I responsible for under the plan?
The way physicians are compensated may affect the quality of service a
patient receives at HMOs. There are three main ways physicians can be
compensated at HMOs. Some physicians are paid a straight salary, some
are paid according to the number of enrolled patients under their care,
and others are paid a fee for each service they perform. Some HMOs
withhold a part of the physician’s salary until the end of the year,
receipt of which is contingent upon the physician meeting the HMOs’
cost-containment goals. For example, HMOs may strongly encourage
primary care physicians to refer patients to specialists only when
absolutely necessary – primary care physician’s salary may be reduced
if he or she exceeds a certain number of specialist referrals during a
specific time period. Find out how physicians are compensated at the
HMOs you are looking at, and take that into consideration when making
your choice. Another cost-containment measure some HMOs use is a
restriction on the types of prescription medicine for which the HMOs
will provide coverage. HMOs emphasize cost-containment, and it is
important to know just how they save money and to consider how this
might affect the quality of care they provide.
Keep in mind that HMO representatives are trying to sell you
something. It is in their best interests to make their particular
health plans sound as good as possible. Do not be afraid to ask every
question that comes to mind, and do not assume that the HMO
representative automatically knows what is best for you or your
employees. Look at a number of different health plans, and compare and
contrast the services they offer and their costs. Be sure to read ALL
the conditions for coverage of each service. The HMO with the lowest
monthly premium is often not the least expensive in the long run.
Similarly, the HMO with the highest monthly premium is not necessarily
the most comprehensive, nor is it necessarily best suited to your needs
or the needs of your employees.
Conclusion
There are many HMOs to choose from. Before you make the important
decision of choosing an organization to insure your or your family’s
health, make sure that you read all the information that each HMO sends
to you. Read a copy of the HMO contract, and read and make sure you
have a firm understanding of what services are included in your
coverage, and what kind of benefits you receive if you go to a provider
outside of the network. If there is anything you do not understand, ask
the sales representative to explain it to you. If you know people who
belong to an HMO, ask them if they are satisfied with the service they
are receiving, and what problems, if any, they have encountered.
