When selecting a health insurance plan, your coverage options look something like this:
HMO, PPO, EPO, POS, etc.
If you are like most people, these insurance plan acronyms may as well be the word bank to last week’s unsolvable Wordle puzzle. With nearly half of Americans in agreement that the basics of health care coverage are confusing, choosing the right insurance plan can seem as arbitrary a game of guess and check.
Here at Combined, our benefits specialists want to help you understand health care insurance. We have the answers you need, so you can intentionally choose the right health insurance plan on your first try.
In this article, we will explore a popular coverage option – Health Maintenance Organization (HMO) insurance plans. By reading it, you’ll learn the pros and cons of selecting an HMO plan as your insurance type.
The Fundamentals of HMO insurance plans
Understanding HMO health care coverage can be difficult, but it doesn’t have to be. Let’s make it simple with a guided breakdown of how HMO plans work.
If you enroll in HMO coverage, here is what you can expect:
- You will pay a monthly premium rate.
- You will only be covered for care received from your HMO's network of health care providers.
- You will select an in-network primary care physician (PCP) who will be your point-of-contact professional for all health care concerns.
- You will need to request a referral from your PCP should you require specialized or advanced treatment.
- You will pay a fixed copayment amount for all in-network appointments or prescriptions, with the exception of preventative care.
- You will have access to cost-free, in-network preventive care.
- You will have to pay out of pocket should you receive any care outside of this network of providers.
To learn more about how HMO coverage works, read our article – What is an HMO Insurance Plan? – or visit our Learning Center for additional resources.
Pros and Cons of HMO Insurance Plans
According to a 2020 eHealth report, 49% of insured Americans receive coverage through an HMO plan, making it the leading choice for health care coverage in the United States.
So, why are HMO plans such a popular coverage option?
Pros of an HMO
Here are the advantages of health care coverage under an HMO.
Low-cost coverage
The cost of your health insurance varies in expense based on the following factors:
- Premium – the amount you pay each month for coverage
- Copayment – the fixed amount you pay for appointments and prescriptions
- Coinsurance – a percentage of the cost of care that you are responsible to pay for
- Deductible – the amount you have to pay before your insurance covers any cost of care
HMO plans typically do not have a deductible or coinsurance. Therefore, the cost of HMO coverage depends primarily on your plan’s monthly premium and the copayment amount. And, generally, the premium rates and copayment amounts for HMO plans are lower than those of other insurance models.
For example – In 2023, the average monthly premium for HMO coverage was $546, whereas this same figure ranged between $566 and $620 for EPO, PPO, and POS plans.
This corresponds to lower-cost coverage which is, perhaps, the biggest advantage of HMO insurance plans.
Predictable out-of-pocket payment
Recall that the cost of HMO coverage depends primarily on your plan’s monthly premium and copayment, both of which are fixed amounts.
Because a copayment is due for all appointments and prescriptions, the only variable affecting the fluctuation of your out-of-pocket payment is how often you will need care.
For example – If you anticipate visiting your doctor 4 times per year, you can expect to pay 4 copayments. If you anticipate visiting your doctor 10 times per year, you can expect to pay 10 copayments.
With this in mind, the total cost of HMO coverage is relatively controlled, making it easy to estimate what your out-of-pocket expense will be. This allows you to predict the cost of your coverage more accurately, and then budget accordingly.
Convenient coordinated care
Once enrolled in an HMO plan, you will select an in-network primary care physician (PCP). Your PCP will be your point-of-contact person for all of your health care concerns – they will administer general care and, should you require specialized or advanced treatment, they will coordinate it.
Having a PCP coordinate your care has several advantages:
- A direct outlet to get the care you need – Whether it be treatment, a referral, or a prescription, your PCP will always be your first non-emergency call.
- An organized referral process – Should you need advanced care, your PCP will help you find an in-network specialist who can help.
- No claims paperwork - Your PCP coordinates all of your care including filing the claims paperwork for it.
Cons of an HMO
Here are the disadvantages of health care coverage under an HMO.
Limited provider options
HMO plans only cover a select network of health care providers. For you to receive covered care, you must see professionals within this group.
This lack of flexibility is a disadvantage of HMO insurance plans because, without easily accessible in-network providers, covered care will also be inaccessible.
When selecting an HMO, you want to ask the following network questions:
- Are your preferred providers within your HMO network?
- Are you located in an area with adequate and available in-network provider options?
- Does your network of providers give you access to any specialized services you may need?
No out-of-network coverage
This leads us to the next disadvantage – HMO plans do not cover any care from out-of-network providers.
This means that the cost of out-of-network care, regardless of access to in-network providers or specialized services, will be an out-of-pocket expense. Given a limited provider network, the price of this could be a pretty penny.
PCP referrals regulate access to specialized care
While PCP-coordinated care can be advantageous, it can also lengthen the time it takes to get specialized care.
Recall that, under an HMO plan, your PCP is your point-of-contact person. This means, as long as the care you need is not an emergency, you will always see your PCP – they will either be able to extend the appropriate care or will refer you to a specialist for advanced treatment.
However, even if you know that you need to see a specialist, you first have to visit your PCP and get an in-network referral. Once you do, you can proceed to receive covered care from the referred specialist.
In this case, the referral requirement for HMO insurance plans adds an additional step in the process of getting the health care you need. It also increases the base cost of coverage because your copayment would be due at both PCP and specialist appointments.
Take the next steps – Find the right health insurance plan for you
If you are here, you are having trouble making an educated decision about the right type of health care insurance for you. But every attempt to learn more about different health insurance plans leaves you more confused than ever.
This makes choosing the right coverage both difficult and frustrating.
In this article, we discussed the pros and cons of HMO insurance plans. By reading it, you have a better understanding of HMO coverage and how it may suit your health care needs.
Here at Combined, our benefits experts want to ease your process of finding an ideal health insurance plan by providing you with insight into all available options. With years of field experience, our team can answer all of your health insurance questions so you can confidently enroll in your choice of coverage.
This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.
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