How Does an HMO Work?
HMOs are different from other kinds of health insurance in the way they manage the cost of health care and the services they offer.
HMOs try to keep health care costs down. They do this in a number of ways. For example, HMOs decide how much they will pay for each service. Then they contract with doctors and hospitals who agree to accept those payments. In some cases, HMOs pay doctors a fixed amount each month for each patient they see. Members must get their care from the doctors, hospitals and other providers who work with the HMO. This is called a network.
HMOs usually only pay for treatments or procedures that they can show are effective. They may require their members to try less expensive tests or treatments before they will cover ones that cost more.
HMOs usually require members to pay for part of their care. Members may pay a fixed amount, called a co-payment, for each service they get. The HMO may also have a yearly deductible. This is the amount members have to pay each year before the HMO pays for any services. Co-payments and deductibles help keep the cost of health care down. If members have to pay part of the cost of a service, they are not as likely to get services they do not need.
HMOs also require members to get approval before the HMO will pay for some services and treatments. This usually means that members have to get a referral from their primary care doctor or an approval from their HMO. If members get services without a referral and approval they
may have to pay for the service themselves.
If the HMO will not approve a service, the member or the doctor can appeal the decision with the HMO. If the HMO still will not approve the service, the member can appeal to the HMO Help Center, which is part of the California Department of Managed Health Care (DMHC).
What Are Point-of-Service Plans and Preferred Provider Organizations?
Some patients want to be able to decide what doctors they see and what tests or treatments they get. Some HMOs offer plans that give their members more choices. A Point-of-Service (POS) plan and a Preferred Provider Organization (PPO) are two examples of these insurance plans. These types of plans may cost more than a traditional HMO.
With a POS Plan, members can use doctors who are in the health plan network or doctors who are not in the network to get services. If they choose doctors who are not in the network, they usually have to pay more for the services. Members in a POS often must have a main doctor, or a Primary Care Physician. (See "Choosing a Doctor," on the How to Choose an HMO page.)
With a PPO, members usually have a bigger network of doctors and hospitals they can use. They do not need to have a main doctor, or a Primary Care Physician. They can also use doctors and hospitals who are not in the network. However, if members go to doctors and hospitals outside of the network, typically they may pay more for the services.
Almost one-third of all Californians, who get health insurance through their job, belong to a PPO.