As the name implies, an HMO’s primary goal is to keep its members healthy. Your HMO would rather spend a small amount of money upfront to prevent an illness than a lot of money later to treat it.

If you already have a chronic condition, your HMO will try to manage that condition to keep you as healthy as possible.

There are three main types of HMOs.

  • Staff model:Healthcare professionals are employed by the HMO and only see patients enrolled with the HMO.
  • Group model: Healthcare professionals are not directly employed by the HMO but have contracts to offer care at a fixed rate. The group physicians only see patients enrolled with the HMO.
  • Network model: Healthcare professionals are not directly employed by the HMO, and the HMO has contracts with multiple physician groups. Healthcare professionals see patients with the HMO as well as patients with other types of insurance.


An HMO is a type of managed care health insurance, which means that the health insurance company has agreements with providers for the cost of care. (Managed care includes virtually all private coverage.

The type of options you’re likely to have will depend on where you live and how you get your health insurance. For example, if you are selecting health insurance through your employer, there may only be one or two options, or there may be multiple. If you are purchasing insurance on your own, the options vary.

HMO vs. PPO: Which Is Better?

Whether or not it is better to have an HMO or PPO 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 have the option to visit out-of-network healthcare providers at a higher out-of-pocket cost. Also, PPOs generally come with higher co-payments and/or deductibles.


PPO stands for preferred provider organization. These tend to be more expensive but allow more choices than HMOs. PPOs charge different rates based on in-network or out-of-network healthcare providers and facilities, which means you still have some coverage if you go out-of-network. You don’t need to go through a primary care physician.


Exclusive provider organizations (EPOs) are another type of health insurance. Similar to an HMO, an EPO only covers in-network care. It may or may not require referrals from a primary care provider.

HMO vs. Point-of-Service

Point of service (POS) is a combination of an HMO and PPO. This type of plan means that you can decide to stay in-network and have care managed by a primary care provider or go out-of-network with higher costs but still some coverage.

Dropping HMO Numbers

According to the Kaiser Family Foundation’s annual health benefits survey, 12% of employees with employer-sponsored health benefits had HMO coverage as of 2022, versus 49% of employees covered by PPOs.

No managed care health plan will pay for care that isn’t medically necessary. All managed care plans have guidelines in place to help them figure out what care is medically necessary, and what isn’t.

Premiums, or the monthly amount you pay for the plan, tend to be lower with HMOs than other health insurance options. In addition, cost-sharing requirements such as deductibles, copayments, and coinsurance are usually low with an HMO—but not always.
Some employer-sponsored HMOs don’t require any deductible (or have a minimal deductible) and only require a small co-payment for some services.
However, in the individual health insurance market, where about 6% of the U.S. population got coverage in 2021, HMOs tend to have much higher deductibles and out-of-pocket costs.
Lower premiums
Usually have low deductibles
Usually have low copayments
Primary care provider care can lead to better preventative care
Some preventative care, like mammograms, don’t require a referral
May have some higher out-of-pocket costs
Coverage for emergencies must meet certain conditions
You must use only in-network providers to get coverage
Must have a referral from your primary care physician to see a specialist.


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