What is an HMO?

Health Maintenance Organization – HMO’s are both insurers and health care providers. They accept responsibility for a specific set of health care benefits offered to customers and provide those benefits through a network of physicians and hospitals.

Many people today are using HMO’s. According to a New York Times article (Freudenheim, M. “Health Care in the Era of Capitalism,” New York Times, April 2, 1996), an estimated 58 million Americans are enrolled in HMO’s, and another 81 million are enrolled in other types of managed care. A July 8, 1996 Reuter’s article says that more than 4 million Medicare beneficiaries and 12 million Medicaid recipients are in HMO’s and other managed-care plans.

What kinds of HMO’s are there? Staff model HMO’s own and operate physician-staffed health centers that offer a broad range of medical care including laboratory, x-ray, vision, and pharmacy services.

Group practice HMO’s contract with medical groups to provide health services to HMO members.

group model HMO

A health maintenance organization (HMO) that contracts with a group of physicians with multiple specialties who are employees of the group practice. Also known as a group practice model HMO.

health maintenance organization (HMO)

A healthcare system that assumes or shares both the financial risks and the delivery risks associated with providing comprehensive medical services to a voluntarily enrolled population in a particular geographic area, usually in return for a fixed, prepaid fee.

health promotion programs

Programs designed to educate and motivate members to prevent illness and injury and to promote good health through lifestyle choices, such as smoking cessation and dietary changes. Also known as preventive care programs or wellness programs.

Indemnity and Traditional Insurance

Traditional insurance, also known as Indemnity or Fee-for-Service, allows members to select any healthcare provider for services. Traditional insurance offers the most freedom of choice and control over healthcare, but benefits are maximized when using a participating Blue Cross Blue Shield company.

managed care

The integration of financing and delivery of healthcare within a system that seeks to manage the accessibility, cost and quality of that care.

managed dental care

Any dental plan offered by an organization that provides a benefit plan that differs from a traditional fee-for-service plan.

medical advisory committee

The MCO (managed care organization) committee that evaluates proposed policies and action plans related to clinical practice management, including changes in provider contracts, compensation and changes in authorization procedures. Medical advisory committees also review data regarding new medical technology and examine proposed medical policies.

network model HMO

A health maintenance organization (HMO) that contracts with multiple group practices of physicians or specialty groups

Description Common Resolutions 

0453 Enrolled in HMO or an Encounter Claim for F. F. S. Verify the enrollee eligibility and bill the claim to the appropriate carrier.


Managed Care can be a type of company or type of plan offered by company.

Managed Care Companies: Are both for profit and non profit companies, which offer only managed care plans. It is financed by premiums and sell both group and individual plans and only health insurance.

Managed Care Plan: There are three common types of managed care plans: Health Maintenance Organization, Point of Service Organization, and Preferred Provider organization. Each plan has a different balance of a patient’s cost for the plan. In general, the more choice a patient has of which provider he can see, the more expensive the plan.

Managed care is different from Commercial Insurance because it attempts to “manage a person’s care” by restricting the providers an enrollee can visit. Managed care usually has cheaper premiums than Commercial insurance.

The main emphasis of managed care is to control utilization of services to achieve appropriate, efficient use of resources along with positive outcomes. As a result, managed care organizations employ such strategies as pre-authorizations, re-authorizations, and on-going case review. Most often patient care under managed care is coordinated by a managed care case manager who may follow patients through all settings or just specific settings.


HMO consists of a network of physicians, hospitals, and other healthcare providers that have contracted with an insurance company to manage an enrollee’s care. Services rendered by providers outside of network are not eligible for coverage. With an HMO plan, a patient must first refer a primary care physician (PCP); the PCP then manages the patient’s care and may refer that patient to other provider if necessary. HMO’s are generally the least expensive managed care plans for enrollees because this type of plan has the most restrictions on provider choice.