HMO & How It Work

The Benefits and Disadvantages of Health Maintenance Organizations

HMO is health maintenance organization (HMO) is a type of health insurance that employs or contracts with a network of physicians or medical groups to offer care at set (and often reduced) costs. HMOs can be more affordable than other types of health insurance, but they limit your choices of where to go and who to see.

This topic will discuss how HMOs work, their requirements, and what other types of insurance options are available.


A health maintenance organization is a health insurance plan that controls costs by limiting services to a local network of healthcare providers and facilities. HMOs usually require referrals from a primary care physician for any form of specialty care.


An individual must live in the plan’s service area to be eligible for HMO insurance.

Employees may also be eligible if their employer offers HMO plans as part of the company’s health benefits.

Understanding HMOs and how they work is critical for choosing a health plan during open enrollment, the yearly period when you can select or switch your health insurance, and avoiding unexpected charges after you’re enrolled.

You’ll need to follow the steps necessary to receive coverage from the HMO.


Your primary care provider, usually a family practitioner, internist, or pediatrician, will be your main healthcare professional and coordinate your care in an HMO.

Your relationship with your primary care provider is very important in an HMO.

Make sure you feel comfortable with them, or make a switch.

You can choose your primary care provider as long as they are in the HMO’s network.

If you don’t choose one, your insurer will assign you one.

Understanding HMO

Referrals for Special Treatments Are Required

In most HMOs, your primary care provider will be the one who decides whether or not you need other types of special care and must make a referral for you to receive it. Referrals will all be within the region where you live.

With an HMO, you typically need a referral for the following:

  • To see a specialist
  • To get physical therapy
  • To obtain medical equipment, such as a wheelchair

The purpose of the referral is to ensure that the treatments, tests, and specialty care are medically necessary. Without a referral, you don’t have permission for those services, and the HMO won’t pay for them.

The benefit of this system is fewer unnecessary services. The drawback is that you have to see multiple providers (a primary care provider before a specialist) and pay co pays or other cost-sharing for each visit.

A co pay is a set amount you pay each time you use a particular service. For example, you may have a $30 co pay each time you see your primary care provider.


Referrals have long been a feature of HMOs, but some HMOs may drop this requirement and allow you to see certain in-network specialists without one. Become familiar with your HMO plan and read the fine print.


Every HMO has a list of healthcare providers in its provider network. Those providers cover a wide range of healthcare services, including doctors, specialists, pharmacies, hospitals, labs, X-ray facilities, and speech therapists.

Accidentally getting out-of-network care can be costly when you have an HMO. Fill a prescription at an out-of-network pharmacy or get your blood tests done by the wrong lab, and you could be stuck with a bill for hundreds or even thousands of Naira.

It’s your responsibility to know which providers are in your HMO’s network. And you can’t assume that it is in-network just because a lab is down the hall from your healthcare provider’s office. You have to check.

And sometimes, out-of-network providers end up treating you without you even knowing about it—an assistant surgeon or an anesthesiologist, for example.

If you’re planning any medical treatment, ask lots of questions in advance to ensure that everyone involved in your care is in your HMO’s network.


Exceptions: There are some exceptions to the requirement to stay in-network. This can include:

  • You have a true medical emergency, such as a life-threatening accident that requires emergency care.
  • The HMO doesn’t have a provider for the service you need. This is rare. But, if it happens to you, pre-arrange the out-of-network specialty care with the HMO.
  • You’re in the middle of a complex course of specialty treatmentwhen you become an HMO member, and your specialist isn’t part of the HMO. Most HMOs decide whether or not you may finish the course of treatment with your current provider on a case-by-case basis.
  • You’re out of the network region and need emergency care or dialysis. If there are no providers in-network in the place where you experience an emergency or need dialysis, care should be covered. Visit our social media to keep a date with us on HMO.

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