Health maintenance organizations are large groups of insurance companies that provide a specific type of health insurance coverage. Such companies were designed with principles of cost containment and cost savings in mind. A person can obtain health insurance through an HMO either privately, through an employer-subsidized plan, or through a government-subsidized plan such as Medicaid.
Limitations are created by health maintenance organizations regarding the types of medical care a person can obtain, to limit costs of health care that are paid out. For example, an HMO generally requires a covered person to go to a doctor who is in its network. This means that the doctor is part of an agreement with the HMO, works with the organization, and has generally agreed to charge lower rates or otherwise provide some concession or benefit to the health maintenance organization that keeps costs lower.
Other limitations generally apply to a consumer who obtains insurance through health maintenance organizations. For example, an insured usually must obtain a referral to a specialist before he can go and see such a doctor, unless the insured wants to pay his costs himself. The referral can be obtained though consultation with an in-network primary care physician. The patient will usually be referred to a specialist in network.
Health maintenance organizations also manage other aspects of care, in addition to placing rule regarding doctor visits. Doctors and patients generally have to obtain approval for certain types of treatment or medical care. Health maintenance organizations have their own doctors on staff who review claims and treatment recommendations to determine if the insurance company will cover such methods of treatment.
The management by the insurance company of health care is essentially the key aspect of what an HMO is. Instead of a doctor and patient deciding on care themselves, the health maintenance organization plays a role in making treatment decisions, with an eye toward cost. Such insurance companies generally cost less than point-of-service (POS) insurance, because of the cost containment efforts built into the HMO.
HMOs are often referred to as managed care organizations because of their involvement with controlling aspects of care. This involvement with a patient's treatment has earned HMOs criticism by some commentators and doctors. It is, however, a popular method of offering insurance to customers. In fact, within some states, the government has subcontracted Medicaid or Medicare insurance to HMOs, who provide insurance coverage to patients and who manage the care of these individuals to lower the costs of the government-funded insurance coverage.