A health maintenance organization, or HMO, is a common group insurance policy structure. With an HMO, each covered person selects a primary care physician, or PCP, who is the point of contact for all routine health care. The PCP must refer the patient to a specialist for insurance to cover the care.
Preventive care and wellness are the primary goals of an HMO policy. By compelling an insured person to see a PCP for health needs, the insurance company enables that doctor to offer healthy living advice and manage ongoing health challenges. The referral requirement also ensures that people only see specialists for care when it is necessary.
As a group plan, an HMO network consists of member providers. Each medical facility and physician that participates in the network agrees to accept contracted rates for treatments in exchange for participation. The insurer encourages in-network services for insured people by offering the best benefits. Covered people can visit out-of-network doctors or see specialists without a referral, but such services typically are not covered with full benefits.
HMOs share several characteristics with preferred provider organizations, or PPOs. PPOs are the other major group insurance setup. The primary difference is that with a PPO, insured people typically don't need a referral from a PCP to get care from a specialist.