An HR Glossary for HR Terms

Glossary of Human Resources Management and Employee Benefit Terms

Health Maintenance Organization (HMO)

A Health Maintenance Organization (HMO) is a type of network health insurance plan which focuses on prevention and coordinated care by a primary care physician (PCP). The PCP coordinates members’ care with in-network specialists, so members must receive a PCP’s referral to see any specialist. Out-of-network care generally isn’t covered at all, except in an emergency.

What Is a Health Maintenance Organization (HMO)?

A Health Maintenance Organization is a health insurance plan that focuses on prevention and provides integrated care by requiring a referral from an in-network primary care physician in order to visit an in-network specialist.

With most HMO plans, patients must receive care and services from in-network primary care physicians, specialists, hospitals, clinics, and pharmacies unless it is for out-of-area urgent care or emergency care.

There are a few other points of consideration regarding HMO insurance plans:

What Is the Purpose of a Health Maintenance Organization?

The purpose of a Health Maintenance Organization is to focus on overall patient wellness and preventive healthcare while keeping costs low for its members by only covering in-network physicians and facilities.

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What Is One Advantage of an HMO?

One advantage of an HMO is that they typically offer lower monthly premiums and out-of-pocket costs (deductibles, copays, and coinsurance) than other types of insurance plans. An HMO is especially affordable for people who only need basic medical care such as annual checkups and immunizations.

In addition to lower costs, there are other advantages of an HMO:

There are, however, a few disadvantages of an HMO:

Is It Better to Have a PPO or HMO?

Whether or not it is better to have a PPO or an HMO depends on several factors, including the general health of the plan’s members, the desired amount of flexibility in choosing doctors and healthcare facilities, and budget constraints.

A Preferred Provider Organization (PPO) offers more flexibility in doctors and facilities than HMOs because members have more options. Members don’t need a primary care physician’s referral to visit a specialist and also have the option to visit out-of-network healthcare providers, albeit, at a higher out-of-pocket cost. Also, PPOs generally come with higher co-payments and/or deductibles.



When deciding between the two plans, it basically comes down to the greater flexibility of a PPO plan versus the lower cost of an HMO plan.