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Health insurance is not a one-size-fits-all, and there are several types of health insurance plans to choose from. They vary in terms of cost, coverage, rules and network size.
One of the most common types of health insurance is an HMO, which stands for health maintenance organization. HMOs are known for being one of the most affordable health insurance plans, but they don’t offer the flexibility found in other plans.
What Is an HMO Health Insurance Plan?
An HMO is a health insurance plan that contracts with a network of physicians, hospitals and medical specialists. An HMO plan covers only the cost of medical services involving an in-network doctor or hospital, except for emergency care.
HMOs typically require that you work with a primary care physician who coordinates your care. HMOs generally require a referral from your primary care doctor if you need to see a specialist, like a dermatologist or cardiologist.
There are a few ways to purchase an HMO health insurance plan:
- Through the Affordable Care Act health insurance marketplace at HealthCare.gov
- Directly from a health insurance company
- Through your employer’s workplace benefits
How Does an HMO Health Insurance Plan Work?
HMO plans cover the cost of medical care when you visit an in-network provider. Doctors and hospitals in the HMO’s network agree to accept a certain payment for services, which is why HMO premiums are more affordable than other plans.
When you receive care in-network, your health insurance company covers a certain percentage of the cost. You pay the rest in the form of out-of-pocket costs, such as a health insurance deductible, copayment or coinsurance (depending on your specific plan).
It’s important to know that HMO plans don’t provide coverage for out-of-network care. If you choose to see a doctor or visit a hospital that isn’t in the HMO’s provider network, you’re responsible for the full medical bill unless you’re receiving emergency or urgent care. Out-of-network care costs also don’t usually go toward your plan’s annual deductible.
How Much Does an HMO Health Insurance Plan Cost?
The average monthly cost of an HMO on the ACA marketplace is $390 for single coverage for a 30-year-old, $438 for a 40-year old, $613 for a 50-year-old and $930 for a 60-year-old.
The cost of an HMO plan depends on a few factors. If you purchase coverage through the ACA marketplace or enroll in an individual plan through a private health insurer, some of the things that will impact your health insurance premium include:
- Location
- Age
- Plan tier (Bronze, Silver, Gold or Platinum)
- Dependents on the plan (such as a spouse and children)
- Tobacco use
Average HMO costs in ACA marketplace
Enrolling in an HMO through your employer’s group health insurance will usually cost less trhan buying an individual or family health plan on your own. Group health insurance premiums are subsidized by employers, lowering the amount of money that comes from your paycheck.
Employees paid an average of $108 per month for single coverage and $497 per month for family coverage in an employer-sponsored health plan in 2021, according to the Kaiser Family Foundation.
HMO Health Insurance Pros and Cons
While HMO health insurance plans have benefits like lower premiums, they have some drawbacks. Before you purchase an HMO plan, it’s a good idea to review the pros and cons of this type of health insurance plan.
HMO pros
- Affordable premiums: HMOs are usually more affordable than other types of health insurance because providers in the network agree to accept a certain level of payment for every service available.
- Lower out-of-pocket costs: With an HMO plan, you might pay less out-of-pocket for deductibles, copays and coinsurance when you need to visit a doctor.
- Coordinated medical care: A primary care provider coordinates your care under an HMO, which can streamline your treatment and takes the guesswork out of finding reputable specialists.
HMO cons
- No out-of-network coverage: HMO plans won’t pay for care from out-of-network providers unless it’s an emergency. If you get health care from someone out of the network, you’ll have to pay for it yourself.
- Referrals required: If you want to see a specialist, the HMO typically requires you to get a referral from your primary care physician first.
- Limited number of providers: HMOs cover only in-network care, limiting the number of providers and hospitals you can visit if you want your health plan to pay.
HMO vs. PPO
Preferred provider organization (PPO) health insurance allows you to get coverage in-network or out-of-network. Out-of-network care usually costs more, though. Your health plan pays the largest share of the cost when you visit an in-network provider, and a smaller portion when you go out of network.
Another difference between PPO and HMO plans is that PPO plans don’t require members to work with a primary care physician, and referrals to specialists aren’t required. But PPOs typically have higher premiums due to the flexibility this type of plan provides.
HMO vs. PPO main differences
| Feature | HMO | PPO |
|---|---|---|
Cost | Lower premiums | Higher premiums |
Referrals required? | Yes | No |
Out-of-network care? | No | Yes |
HMO vs. EPO
An EPO health insurance plan, which stands for exclusive provider organization, is similar to an HMO.
Like an HMO, EPO plans provide coverage for in-network care exclusively. Your insurance company will only cover the cost of medical services if you visit a provider or hospital in the EPO’s network. Out-of-network medical care is only covered in the event of an emergency.
Some EPOs require you to work with a primary care physician and get referrals to see a specialist, but it depends on the specific plan.
One of the biggest differences between HMOs and EPOs is the network size. EPO health insurance plans generally contract with a larger network of doctors and hospitals, giving you more options. As a result, EPO plans are usually more expensive than HMO plans.
HMO vs. EPO main differences
| Feature | HMO | EPO |
|---|---|---|
Cost | Lower premiums | Higher premiums |
Referrals required? | Yes | No |
Out-of-network care? | No | No |
HMO vs. POS
If you’re considering an HMO but want a larger selection of providers, a point of service (POS) plan might be the right choice for you if you have that option.
POS plans share similarities with HMOs and PPOs. Like an HMO, POS plans require you to work with a primary care provider and get a referral to visit specialists. But you’re allowed to see providers that are in-network and out-of-network, like a PPO.
When you get medical treatment under a POS, your health insurance company pays the largest portion of the bill when you go in-network. A smaller portion of the cost is covered when you go out-of-network, and the rest you pay in the form of a health insurance deductible or coinsurance.
Because POS plans provide more choices than an HMO but less freedom than a PPO, the cost ends up somewhere in the middle. POS premiums are generally more expensive than an HMO, but less expensive than a PPO.
HMO vs. POS main differences
| Feature | HMO | POS |
|---|---|---|
Cost | Lower premiums | Higher premiums |
Referrals required? | Yes | Yes |
Out-of-network care? | No | Yes |
Featured Health Insurance Partners
1
Aetna
Coverage area
Offers plans in all 50 states and Washington, D.C.
Number of providers in network
About 1.2 million
Physician copays start at
$20
2
Blue Cross Blue Shield
Coverage area:
Offers plans in all 50 states and Washington, D.C.
Number of providers in network
About 1.7 million
Physician copays start at
$10
3
Cigna
Coverage area
Offers plans in all 50 states and Washington, D.C.
Number of providers in network
About 1.5 million
Physician copays start at
$0
Who Should Get an HMO Health Insurance Plan?
If you want the most affordable health insurance plan, an HMO might be the right choice. Compared to other plans, like PPO and POS plans, HMOs tend to be less expensive.
In addition, you may benefit from an HMO if you don’t mind working with a primary care provider, getting referrals to see specialists and staying in-network for your medical care. Make sure that doctors in your area, especially your favorite providers, are in the plan’s provider network.
If you already see doctors in the HMO’s network, enrolling in an HMO might be an easy decision. If you work with providers that are out-of-network or want the ability to see any doctor, an HMO might not offer enough flexibility.
HMO Health Insurance FAQ
Does an HMO cover out-of-network care?
No, an HMO doesn’t usually cover out-of-network care. Your health insurance company will only cover its portion of the medical bill if you receive care from a doctor or hospital that contracts with the HMO’s network.
If you get care out-of-network, you’re responsible for the full cost of the medical services. The only exception to this rule is emergency care. If you visit the emergency room or an urgent care clinic, the cost of services is covered at the normal rate, even if the facility is out-of-network.
Do you need a primary care physician if you have an HMO?
Yes, HMO members are required to work with a primary care provider that is in-network. HMOs are health insurance plans that generally require a doctor to coordinate your care and provide referrals if you need to see a specialist.
Do HMOs require a referral to see a specialist?
If you have an HMO plan, you must visit your primary care provider to get a referral before you can see a specialist. There are some situations where a referral is not required. For example, females are not required to get a referral to see an obstetrician or gynecologist.
When you visit your primary care provider, they will determine if a specialist visit is necessary, and if so, what specialist is appropriate for your medical needs. If you make an appointment with a specialist without a referral, the cost of the visit might not be covered by your health insurance company.
