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The Pros and Cons of HMO Plans

The Pros and Cons of HMO Plans

Most health insurance plans fall into one of two categories: HMO or PPO coverage. If you plan to purchase your own health insurance, you will have to decide between the two types of coverage. The strongest appeal of an HMO, or Health Maintenance Organization, is usually its price. These plans are one of the most economical forms of health insurance, but policyholders must forgo a certain degree of choice and flexibility in return for the savings. Read on to find out if this is the right health insurance plan for you.

Budget Considerations

This type of policy is ideal for consumers who need health insurance but are on a tight budget. Out of all the types of health insurance policies, an HMO plan can offer the lowest premiums and out-of-pocket medical costs. HMOs employ a network of healthcare providers and hospitals that work for a discounted fee. The HMO is then able to pass on these savings to the policyholder. Typically, this type of policy will have very low or no co-pays for office visits and prescription medications. Unlike most other health insurance plans, HMOs also usually do not have deductibles that the policyholder must meet before benefits apply.

Freedom of Choice

Members have a fairly limited selection of healthcare providers and facilities from which they may choose. To receive benefits, policyholders must choose an in-network provider or facility. If the policyholder chooses a physician or facility that is out of network, an HMO plan will typically not provide benefits. If the policy does provide reimbursement for out-of-network care, it will likely be minimal compared to in-network benefits. Consequently, policyholders who do not want to incur extraordinary out-of-pocket costs must choose from the HMO’s directory of providers and facilities. Consumers who prefer to choose their own doctors and hospitals may find this option too limiting.

Specialist Referrals

A feature unique to HMOs is the primary care physician, or PCP. The PCP acts as the gatekeeper to advanced medical services in order to prevent unnecessary claims. Members (policyholders) must see their primary care physician before they can see a specialist. If the PCP believes a specialist visit is warranted, he/she will provide a referral to an in-network physician. These plans will only reimburse policyholders for specialist visits if they obtain a referral from their PCP. Some HMO plans will provide benefits for out-of-network specialists, but only if the PCP refers the patient to an out-of-network provider. Consumers who are used to making their own decisions often find the referral process inefficient and cumbersome.

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