Key takeaways:
A health maintenance organization (HMO) is a type of managed care insurance plan.
HMOs are usually more affordable than preferred provider organization (PPO) plans, but they offer patients less flexibility.
An enrollee in an HMO must choose from selected healthcare professionals to pick a primary care provider to coordinate their care. People with HMO plans are covered only for in-network providers and have to pay on their own for visits with out-of-network healthcare professionals.
When exploring your health insurance options, you may want to examine plans offered by health maintenance organizations (HMOs) if you’re looking for coverage that offers:
Centrally coordinated care
A defined network of healthcare professionals and covered facilities
Comparatively low premiums, deductibles, and copays
Here’s what you should know about HMO plans.
Search and compare options
What’s the meaning of HMO?
An HMO is a type of managed care health insurance. Other managed care plans include preferred provider organization (PPO) insurance and exclusive provider organization (EPO) insurance.
Each HMO has its own network of approved healthcare professionals and facilities. In-network providers have negotiated rates for services, which can reduce what the plan pays and your cost sharing. But HMO plans typically don’t cover care that you receive outside their networks. Some HMOs are also point-of-service plans that let you go outside the network, but your cost sharing is higher.
HMOs are more affordable than PPO plans, but they’re more restrictive. Read on for more details on how HMOs work.
How does HMO insurance work?
After you enroll, you pay a monthly premium for coverage. According to the KFF 2024 Employer Health Benefits Survey, the average HMO premium is slightly lower than other plan types for individually covered workers. HMO enrollees may not have to face a deductible: According to the survey, 46% of employer-based HMO plans impose no annual deductible for individual coverage. For certain services, you may be charged a small copay.
You’ll also pick a primary care provider from your HMO’s list. Your primary care provider is the chief coordinator of your medical care. You’ll go to them first for treatment and for referrals to specialists. This healthcare professional is typically a physician, a physician assistant, or an advanced practice nurse, such as a nurse practitioner.
One challenge with HMOs can be knowing which healthcare professionals and facilities are in network — and remembering to stay in your network. Your plan should provide a list. Because participating professionals and facilities can join and drop anytime, it’s important to make sure your care is in network before your services begin.
Free and low-cost health insurance: You may be eligible for health coverage that fits your budget through an Affordable Care Act marketplace plan, your partner’s insurance, or your parent’s plan.
How to select an insurance plan: Choosing the right health insurance coverage involves evaluating your family’s healthcare needs, understanding the benefits of different plans, and comparing costs.
Is a high-deductible health plan (HDHP) right for you? An HDHP offers health insurance with a low premium, but you pay fully for services other than preventive care until you meet your deductible.
Also, when choosing an HMO, consider whether its network is suitable for you. You can often search your plan website for the healthcare professionals you already use. It’s important to know that some plans have limited networks and may not include the specialists you need or the facilities you prefer.
Who is eligible for HMO insurance?
Anyone can join an HMO if they live or work within its service area. Most people who enroll do so in one the following ways:
Through an employer: In 2024, nearly half of workers were enrolled in PPO plans, and 13% were covered by HMO plans, according to the KFF survey.
Through Medicare: Enrollees can choose a Medicare Advantage plan that’s an HMO. Nearly two-thirds (62%) of Medicare Advantage participants have HMO plans.
Through an ACA marketplace: Many HMOs are available on the HealthCare.gov national marketplace or via state ACA marketplaces.
Read more like this
Explore these related articles, suggested for readers like you.
Which out-of-pocket costs should I be concerned about with an HMO?
Premiums aside, the out-of-pocket costs to consider as you shop for an HMO are:
Deductibles: A deductible is a set annual amount you pay during a plan term, usually annually, toward your covered healthcare costs before your insurance begins cost sharing.
Coinsurance: Coinsurance is the cost-sharing percentage you pay on covered healthcare expenses after meeting your deductible. For example, if an HMO has a coinsurance split of 80/20, the insurer pays 80% of covered services, and you pay 20%. After reaching your deductible, a $100 treatment would cost you $20 in coinsurance.
Copays: A copay is a fixed dollar amount that is your responsibility when you access care. HMOs typically operate with copays. Your copay amount may differ for a primary care provider, a specialist, emergency care, and medication. The different amounts are sometimes printed on your insurance card as a reminder. If the copay for a doctor visit is $25, that’s what you will pay, whether or not you’ve hit your deductible. Covered preventive care will not typically require a copay or for you to meet your deductible.
What are the advantages of HMOs?
More affordable premiums: According to the 2024 KFF survey of employer plans, HMO plans for covered individual workers tend to have slightly lower annual premiums than PPOs. In 2024, the average monthly premiums for HMOs were $729 for individuals and $2,100 for families. For PPO plans, the average monthly premiums in 2024 were $782 for individuals and $2,223 for families. (A share of premium costs are often paid by the employer.)
Fewer plans with deductibles: KFF research also found that 46% of workers with HMOs didn’t have general annual deductibles in 2024, compared with 12% of those with PPOs. (Among workers whose plans had a general annual deductible, the average PPO deductible for an individual was $1,252 — less than the average HMO deductible of $1,484 for one covered person.)
Coordinated care: In an HMO plan, your primary care provider helps coordinate your care and must refer you to specialists.
No extra fees for care: In-network specialists you’re referred to by primary care are also covered by your plan. You may need to handle only the copay.
What are the disadvantages of HMOs?
Limited options: One reason HMOs tend to be more affordable is that they offer a smaller selection of healthcare professionals and facilities. Also, to join a particular HMO, you may have to live in an eligible service area.
Coverage does not travel: If you’re far from home, and you see an out-of-network doctor, that visit will be covered only if it is a medical emergency, out-of-area urgent care, or temporary dialysis outside your area. Otherwise, you’ll have to pay the entire bill out of pocket.
Required referrals: You must be referred by your primary care provider to see any other doctor. Adding this step to the process may cost you some time, and your options may be limited. If primary care doesn’t provide a referral, you’ll have to cover the costs to see the other healthcare professional.
You may lose preferred doctors and facilities: If a healthcare professional or facility leaves your HMO, you’ll need to find a replacement within the HMO’s network.
What are the differences between HMOs, PPOs, and EPOs?
The main differences between PPOs, HMOs, and EPOs are how much autonomy you have in choosing healthcare professionals, how services are covered, and how much they cost.
Differences Between HMO, PPO, and EPO Insurance Plans
HMOs: health maintenance organizations | PPOs: preferred provider organizations | EPOs: exclusive provider organizations | |
|---|---|---|---|
Do the plans rely on a network of providers? | Yes | Yes | Yes |
Is a primary care provider required? | Yes | No | Depends on the plan, but often yes |
Do you need a referral to see a specialist? | Yes | No | Depends on the plan, but often no |
Do you need to file claims paperwork? | No | Yes, but only for out-of-network care | Depends on the plan |
Can you get coverage for out-of-network providers? | Only in a medical emergency | Yes | Only in a medical emergency |
What are the costs of seeing out-of-network providers? | You must pay all costs (except covered emergency fees) out of pocket. | You typically pay a higher rate of coinsurance than for in-network care. | You must pay all costs (except covered emergency fees) out of pocket. |
How do I know if an HMO is right for me?
Aside from costs, these are some reasons why an HMO may appeal to your needs and lifestyle.
Your primary care provider is in a particular network: If you like your primary care provider, you may want to sign on with their HMO. This keeps your doctor-patient relationship intact, and you get referrals from someone you already trust.
You need more coordinated care: Your primary care provider is your main point of contact, who will refer you to specialists and follow up on your care. With access to your test results and records, they can work with you on a comprehensive treatment plan.
You don’t need a lot of flexibility: Do you visit your doctor just for regular check-ups without needing to see specialists or get referrals? An HMO may be all you need.
You rarely travel outside your network area: Staying within your HMO network, which will be close to home, helps keep your healthcare costs lower.
Frequently asked questions
Many Medicare Advantage plans are HMOs that require you to use a specific network of doctors and facilities and have a primary care provider coordinate your care.
Typically, you can choose from preferred professionals in the HMO plan’s network and select your own primary care provider. You may be able to select a physician, a physician assistant, or a nurse practitioner.
Unlike PPOs, HMOs have a specific network of healthcare professionals and facilities you must use to be covered by the insurance plan. A primary care provider must coordinate your care and make referrals to specialists for your care to be covered. Out-of-network care is typically not covered. PPO plans offer more flexibility in choosing healthcare professionals and facilities, and you’re not required to have a primary care provider. PPOs often partially cover out-of-network care, but with a higher copay or coinsurance than in-network care.
Many Medicare Advantage plans are HMOs that require you to use a specific network of doctors and facilities and have a primary care provider coordinate your care.
Typically, you can choose from preferred professionals in the HMO plan’s network and select your own primary care provider. You may be able to select a physician, a physician assistant, or a nurse practitioner.
Unlike PPOs, HMOs have a specific network of healthcare professionals and facilities you must use to be covered by the insurance plan. A primary care provider must coordinate your care and make referrals to specialists for your care to be covered. Out-of-network care is typically not covered. PPO plans offer more flexibility in choosing healthcare professionals and facilities, and you’re not required to have a primary care provider. PPOs often partially cover out-of-network care, but with a higher copay or coinsurance than in-network care.
The bottom line
HMOs are a popular type of health insurance for a reason: They offer comparatively affordable coverage and focus on coordinated care. HMOs provide less flexibility than PPOs, but people who want to spend less on medical costs may be satisfied with the tradeoff.
Why trust our experts?
References
Claxton, G., et al. (2024). Employer health benefits 2024 annual survey. KFF.
Freed, M., et al. (2024). Medicare advantage in 2024: Enrollment update and key trends. KFF.
HealthCare.gov. (n.d.). Health insurance plan & network types: HMOs, PPOs, and more. U.S. Centers for Medicare & Medicaid Services.
Medicare.gov. (n.d.). Health maintenance organizations (HMOs). U.S. Centers for Medicare & Medicaid Services.
United HealthCare. (n.d.). What are HMO, PPO, EPO, POS and HDHP health insurance plans?
