How HMO Works: Not Your Grandfather’s (or Your Father’s) HMO Part II
It’s important to know how the HMO works to understand how it can help manage health care costs. Here’s a then-and-now look at HMO.
How HMO Works: Then and NowIn the Beginning: HMOs, or Health maintenance organizations, evolved from “pre-paid” plans that companies started providing for their workers back in the late 1930s. At that time, the plans usually only covered hospital stays and care for acute illnesses and injuries.
These plans were created by hospitals or groups of doctors for companies. That means a company gave their employees access to a specific hospital or doctors . If a person went to another doctor or hospital, they paid for their care themselves.
Now: Today’s HMO is still built on the model of care provided by a network of doctors and hospitals. It defines where people get care, and who pays for it. But HMO now also focuses on lowering costs by making sure people get the right care, at the right time and in the right place. It looks at who makes the decisions. And at its core is the idea that offering preventive care —many times free or with a low copay -- can keep members from having more expensive health problems down the road. It is this idea of “maintaining” health that gave the HMO its name.
Buying HMO: Then and NowIn the beginning: Providers offering these pre-paid plans were able to convince employers that they could have a healthier workforce by making sure the workers got the care they need. They explained that it would save the company money in the long run, so it made sense to buy their workers health coverage at a set price.
In the 1970s: As I mentioned, the HMO was started by providers. Most HMOs were locally based, meaning members used doctors and went to hospitals close to home. It wasn’t until the late 1970s, when insurance companies began partnering with provider HMOs or offering their own HMOs, that HMOS began offering larger provider networks and expanded areas of coverage.
Now: Most HMOs today are offered by insurance companies such as Blue Cross and Blue Shield of Montana. They may offer a variety of HMOs, including a lower cost option that covers providers in an area where you live and work. You may be able to buy an HMO plan that only covers doctors and hospitals in a certain health system. . A larger HMO may cover certain providers across the state, and may even offer “away from home” benefits for people who travel or who have kids in college in another area or state.
HMOs continue to only cover, or pay, for care when using providers in the HMO’s provider “network.” There are some HMO plans you can buy that offer limited coverage when you see providers not in the HMO’s provider network. The out-of-network benefits would be limited and cost more, but do give you more choices.
1Lone Star Legacy: The Birth of Group Hospitalization and The Story of Blue Cross and Blue Shield of Texas; Samuel Schaal, copyright 1999.
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