Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 31, 2021

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The lowdown...

  • Health Maintenance Organizations are the most popular type of managed care company
  • Health maintenance is the idea of medical care that uses prevention and wellness
  • HMO uses one doctor as the primary care physician
  • The primary care physician delivers services and coordinates other network resources
  • HMO’s can have variations like a POS option that uses outside network with higher charges

The early healthcare managers developed the HMO to promote prevention and wellness care. The idea was to reduce the need for later medical care by preventing severe diseases. They sought to detect and treat them while in early stages. The ideas of prevention and wellness were fundamental; they named their organization the health maintenance organization or HMO. Today, most healthcare providers use some form of the HMO.

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Comparison shopping is an excellent approach to selecting health insurance. It can compare HMOs with other types of providers. Comparison shopping focuses on the costs and benefits that are most important to an individual or family situation.

What is an HMO?

The HMO is an organization of doctors, hospitals, and other medical facilities. The owners design them to provide medical care in a particular geographic area. While there is no limit to the size, most HMO’s serve a specific area within a state or county.

The owners select doctors and facilities and form a network with a view towards meeting the expected medical care needs of a diverse population.

The HMO charges a flat fee per patient and requires them to use only the resources of the HMO network. The key is the primary care physician.

Each patient gets a primary care physician that provides medical care and coordinates for any additional resources such as hospitals or specialists. When compared to Preferred Provider Organizations, Health Maintenance Organizations usually have lower premiums, more reachable deductibles, and fewer out-of-pocket expenses.

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The Affordable Care Act uses Prevention and Wellness


The basic principles of the ACA include universal coverage, no denials of insurance, and promoting prevention. The overall approach of the law is that it is far easier to maintain good health than to treat illness or cure disease.

With expanded insurance coverage, millions more will get regular medical care.

Expanded coverage is an opportunity to build a solid medical foundation for those that are healthy and symptom-free.

The law provides a robust set of wellness visits and prevention resources at no added costs to the consumer. These services provide a cost effective incentive for regular visits, checkups, and routine care like vaccinations, screenings, and tests. The primary goal of the Affordable Care Act is improved health maintenance.

HMOs and Obamacare Plans

Obamacare offers four types of plans. Called the metal bands, the platinum, gold, silver and bronze plans include HMOs. The bands describe the percentage of essential services paid by insurance and the consumer. This split is an overall average and helps consumers understand the level of benefits they can get. The below-listed items describe the value of Obamacare plans.

  • Platinum plans- provide insurance payment for an average of 90 percent of covered benefits. The 90 to 10 division is the best ratio of any class of plan. They have high premiums and low deductibles.
  • Gold plans- split costs between insurance and consumers in an 80 percent to 20 percent ratio. Gold plans have high premiums and low deductibles.
  • Silver plans- divide costs in a 70 percent insurance to 30 percent consumer ratio. They have moderate deductibles and premiums. They can pair with Health Savings Accounts to reduce the impact of deductibles.
  • Bronze plans- divide costs at 60 percent by insurance and 40 percent consumer paid. Bronze plans have low premiums and high deductibles. Many people look at them because they offer low monthly premiums. They are ideal for those with few medical care needs beyond annual physicals, health screenings, and vaccines. HMOs count out-of-pocket expenses towards the annual limit.

The HMO is the Most Common Form

Today the HMO is the most common form of organization on the Obamacare marketplace. It can exist as an HMO or with variations. The other widely used forms are the PPO, EPO, and POS types.

The EPO and POS also appear as options on HMO and PPO plans. For example, an HMO can have a POS option to permit outside referrals with a different, higher, level of consumer cost. The below-listed items describe the other widely-used forms of managed care organizations.

  • PPO stands for preferred provider organization; it does not use a primary care doctor and permits outside resources with lower payments.
  • EPO represents the exclusive provider organization. It brings savings to users by using a simple structure only in-network resources.
  • POS is the name for point of service managed care. This type uses a primary care physician to provide primary care and to control the use of in-network resources. POS systems are usually small and simple; the PCP has authority to refer to outside resources.

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Advantages of the HMO

The HMO uses in-network resources for patient care. It controls the level of care and type of referrals through the Primary Care Physician.

The consumer gets the advantage of low copays, more coinsurance, and lower out-of-pocket costs.

The primary care physician can be an important asset for improved health care. A single doctor oversees the patient’s condition. He or she hears complaints and watches the progress and maintains a medical record. These are valuable tools for medical care.

Observation and medical baseline information can make later diagnosis more insightful and productive. The HMO is flexible it can be the best choice in any form such as a silver plan with powerful HSA benefits.

Advantages of the PPO

The main advantage of the PPO is greater consumer choice of doctors and facilities. The preferred provider organization does not use a primary care physician. This change from the HMO model reduces the layer between the patient and organization resources. The PPO permits outside resources but charges a different rate.

The customer gets more choices and decides when to pay more out-of-pocket to use them. This is a good balance for many subscribers particularly those with a strong preference for using their preferred specialist and doctors rather than the PPO listed resources.

Cost Savings with the EPO


The Exclusive Provider Organization uses a small number of doctors and medical facilities and does not pay for outside services. The EPO can generate costs savings for users with low copays and insurance payments for a wide range of services.

The EPO offers some flexibility; patients do not need referrals to in-network resources and specialists. The EPO offers some greater flexibility than the POS or HMO, and patients do not need a primary care physician.

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Flexibility with POS

The point of sale style of managed care borrows from the PPO and the HMO. The basic structure is a small group of doctors and medical facilities, and the basic approach is to treat all patients with network resources. It uses a primary care doctor like the HMO, and it is flexible like the PPO.

The system routes all patients to a primary care doctor for initial care and diagnosis. The PCP then refers the patient to specialists in the network as needed. The PCP can also refer the patient to specialists outside of the network. The POS system covers out-of-network referrals with varying levels of insurance coverage.

In Healthcare HMO Means Prevention

The HMOs have been leaders in promoting prevention. The HMO means low out-of-pocket expenses, low copays, and usually lower deductibles than comparable PPO plans.

The HMO offers prevention and wellness services at no added cost as required by the Affordable Care Act.

The primary care physician is the hub for medical care and an asset for compiling information for later treatment needs. Their low costs structure helps subscribers maintain regular medical care. The problem of high medical costs worsens when people avoid medical to save money.

Comparison shopping is a vital tool for finding the right plan for an individual or family. HMO plans have options and features that bring greater flexibility. Comparison shopping can rate plans and establish a better understanding of their overall costs. Compare car insurance rates now by using our FREE tool below!