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Health Insurance: HMOs (Managed Care Policies)

Benefits Provided By An HMO

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Each HMO offers several different types of plans to employers and individuals. While they all are built on the model of managed care instead of the traditional fee-for-service insurance model, benefits vary according to the plan. Benefits include:

Hospital charges: Hospital charges are usually covered 100%, although the plan may require that a member pay a deductible. Some plans may only cover 70% or 80% of charges up to a certain amount after which they'll cover 100%. For example if the amount (known as a "stop-loss") is $5,000, the member would pay 70% of the cost of hospitalization until the member has paid $5,000. All amounts over $5,000 will be paid in full by the HMO.

Doctor's visits: Doctor's visits are generally covered 100% except that members are required to pay a small amount for each doctor visit known as a co-pay. Co-pays can be as low as $5 or $10, or can be as much as $25. The co-pay covers everything that a member receives a visit including any shots, x-rays or lab tests.

Prescription Drugs: Prescription drugs on the HMO's formulary are usually covered in the same manner as a doctor's visit: the member pays a small co-pay and the HMO pays the rest. Often, there are two levels of co-pays, a low one for generic drugs, a higher one for brand name. Some plans add a third, mid-range co-pay for those cases where a brand name drug has no generic equivalent.

Emergency Room: HMOs cover emergency room care.

  • For plans issued before September 23, 2010: This is the one area in which most HMOs permit use of non-HMO facilities because emergencies can happen anywhere at any time.
  • For plans issued on or after September 23, 2010: New health plans cannot require you to get prior approval before seeking emergency room services from a provider or hospital outside your plan's network. Plans can not require higher co-payments or co-insurance for out-of-network emergency room services.

HMO's used to insist on prior approval to use an emergency room unless the reason for the visit is life threatening or if failure to obtain immediate treatment would have resulted in a much more serious medical condition. Many are relaxing that obligation, but continue a requirement that a prudent person would have sought emergency room care in the situation.

Many plans impose a co-pay of $50 - $100 for each emergency room visit which does not result in a hospital confinement.

Stop Loss: Some HMOs also offer a stop-loss provision which means that after out-of-pocket co-pay expenses reach an amount in a calendar such as $1,000 or $2,500, there are no more co-pays for the remainder of the year.

Home Health Care and Nursing Homes: All HMO plans cover some degree of home health care and care in nursing homes. Most treatments have limits on them. Home health, for example, or nursing home care will be limited to a specific number of days of care the HMO will provide in a calendar year.

Mental Health: Mental health care under an HMO is generally designed to provide crisis care only for a specific problem, not long term psychotherapy.

Plans usually provide only a limited number of mental health visits per calendar year and require a higher co-payment per visit than for other physician visits.

Maximum Lifetime Benefit: HMOs generally do not have an overall maximum benefit -- a limitation which is normally found in Indemnity and PPO plans. (To learn more, see Types of Plans.)

Preventive Treatment: Preventive treatment is frequently covered under an HMO -- but generally not other types of insurance plans.

Preventive treatment includes:

  • Regular check-ups
  • Regular pap smears and mammography exams for women
  • Prostate tests for men
  • Immunizations
  • Vaccinations

Preventive treatments are often covered under a schedule under which the time interval between preventive treatments varies by the test and the age of the member. For example, prostate screening may be provided only once every five years for men under age 50 but every two years for members over age 50.

Many HMOs offer classes on healthy lifestyles, such as how to stop smoking, low fat cooking, and stress management. They also provide literature and periodic magazines or newsletters to members about healthy living.

Some HMOs provide refunds or rebates for members who regularly use a gym facility that includes cardio-vascular equipment and classes.


  • For health plans issued on or after September 23, 2010: Because of The Affordable Care Act (Obamacare), you have the right to both an internal appeal and an external appeal to an independent reviewer.
  • For a glossary of health insurance terms to know, click here

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