The situation in which a group of physicians are salaried employees and conduct business in an HMO

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Selecting health insurance is often one of the most important decisions you will make. Health maintenance organizations (HMOs) and preferred provider organizations (PPOs) are types of managed health-care plans and can cost much less than comprehensive individual policies.

Through the use of managed care, HMOs and PPOs are able to reduce the costs of hospitals and physicians. Managed care is a set of incentives and disincentives for physicians to limit what the HMOs and PPOs consider unnecessary tests and procedures. Managed care generally requires the consent of a primary-care physician before a patient can see a specialist.

An HMO provides comprehensive health-care services to the insured for a fixed periodic payment. There may also be a nominal fee paid for each visit to a health-care provider. Unlike traditional insurance, HMOs actually provide the health care rather than just making payments to health-care providers. HMOs can have a variety of relationships with hospitals and physicians. Plan physicians may be salaried employees, members of an independent multi-specialty group, part of a network of independent multi-specialty groups, or part of an individual practice association.

Because HMOs integrate health-care providers with insurance, they are able to provide improved health-care delivery. This unique relationship often allows HMOs to maintain a lower cost of service from plan providers. Because the HMO is both a provider and an insurer, this allows for lower administrative costs and paperwork for the patient.

HMOs also try to reduce costs by providing preventive care. Because visits to primary-care physicians are inexpensive for patients, the chance of early detection and care increases.

Preferred provider organizations have also contracted with hospitals and physicians to provide health-care services. Unlike the case with an HMO, you do not have to go to these physicians. However, you will pay more if you go outside the list of preferred providers. PPO plans usually have a deductible, which is the amount that the insured must pay before the PPO begins to pay. When the PPO plan does start to pay, it will usually pay a percentage of the bill and you have to pay the remainder, which is called “coinsurance.” Most plans have an out-of-pocket maximum. This helps protect you from paying more than a certain amount per year. After you exceed the out-of-pocket maximum, the coinsurance percentage paid by the PPO increases to 100%.

The out-of-pocket maximum, deductible, and coinsurance will each affect the cost of the PPO insurance coverage. You can help lower your premiums by having as high a deductible as you can afford to pay.

The information in this newsletter is not intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the ­purpose of ­avoiding any ­federal tax penalties. You are encouraged to seek guidance from an independent tax or legal professional. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the ­purchase or sale of any security. This material was written and prepared by Broadridge Advisor Solutions. © 2022 Broadridge Financial Solutions, Inc.

A Health Maintenance Organization (HMO) is a type of network health insurance plan which focuses on prevention and coordinated care by a primary care physician (PCP). The PCP coordinates members’ care with in-network specialists, so members must receive a PCP’s referral to see any specialist. Out-of-network care generally isn’t covered at all, except in an emergency.

What Is a Health Maintenance Organization (HMO)?

A Health Maintenance Organization is a health insurance plan that focuses on prevention and provides integrated care by requiring a referral from an in-network primary care physician in order to visit an in-network specialist.

With most HMO plans, patients must receive care and services from in-network primary care physicians, specialists, hospitals, clinics, and pharmacies unless it is for out-of-area urgent care or emergency care.

There are a few other points of consideration regarding HMO insurance plans:

• Many services require a referral or prior approval.

• If patients receive care from outside the network, services may not be covered.

• In most cases, prescription drugs are covered.

What Is the Purpose of a Health Maintenance Organization?

The purpose of a Health Maintenance Organization is to focus on overall patient wellness and preventive healthcare while keeping costs low for its members by only covering in-network physicians and facilities.

What Is One Advantage of an HMO?

One advantage of an HMO is that they typically offer lower monthly premiums and out-of-pocket costs (deductibles, copays, and coinsurance) than other types of insurance plans. An HMO is especially affordable for people who only need basic medical care such as annual checkups and immunizations.

In addition to lower costs, there are other advantages of an HMO:

• HMOs in just about every part of the U.S. have large networks of doctors, including specialists.

• HMOs often honor the networks of associated plans (such as plans run by the same insurance carrier in other states). Members who travel can call the plan to ask about in-network care on the road.

• There are no restrictions on the number of primary care visits.

• Drug costs are kept low (generally requiring only a small co-payment) and both generic and brand name drugs are available.

• Usually, patients will not be required to submit claims to the insurance company.

• They offer an appeal process if a claim is denied.

There are, however, a few disadvantages of an HMO:

• Patients will only get insurance coverage if they visit an in-network physician and facility.

• If a primary care physician leaves the network, patients will need to change doctors.

• Patients must get a referral from their primary care physician before seeing a specialist (unless it’s an emergency).

Is It Better to Have a PPO or HMO?

Whether or not it is better to have a PPO or an HMO depends on several factors, including the general health of the plan’s members, the desired amount of flexibility in choosing doctors and healthcare facilities, and budget constraints.

A Preferred Provider Organization (PPO) offers more flexibility in doctors and facilities than HMOs because members have more options. Members don’t need a primary care physician’s referral to visit a specialist and also have the option to visit out-of-network healthcare providers, albeit, at a higher out-of-pocket cost. Also, PPOs generally come with higher co-payments and/or deductibles.

PPO:

• Does not require a primary care physician.

• Members may select any doctor, even out-of-network (at a higher cost).

• There is no need to get a referral to see a specialist.

• Members may need to submit an insurance claim for out-of-network care.

• The plan costs are generally higher.

HMO:

• A primary care physician coordinates all healthcare decisions and makes referrals to specialists and for hospital visits (except in the case of an emergency).

• Members are not required to file claims, since the insurance company pays the provider directly.

• The costs are generally lower.

When deciding between the two plans, it basically comes down to the greater flexibility of a PPO plan versus the lower cost of an HMO plan.

Which of the following types of organizations are prepaid group health plans where members pay in advance?

Which best describes how a preferred provider organization PPO differs from a health maintenance organization HMO )?

What are the six types of health insurance for individuals who participate in individual group or pre paid plans?

What is a network model HMO?