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What is an HMO health plan?

A Health Maintenance Organization (HMO) is a type of health insurance plan that provides coverage through a restricted network of doctors, hospitals, and specialists.

In exchange for lower monthly premiums and more predictable out-of-pocket costs, members agree to stay within that network and use a primary care physician (PCP) to coordinate all their care. In the world of Texas insurance, the HMO is the managed care that’s built for cost savings.

The Specialist Surprise in Sherman

Clint, who runs a small HVAC business in Sherman, signed his family up for an HMO health insurance plan through the healthcare exchange. When his daughter developed a persistent skin rash, Clint did what he’d done in the past. He called a dermatologist he’d seen years ago and made an appointment.

Two weeks later, he got a bill for the full cost of the visit. Why? Because under an HMO, you can't see a specialist without a referral. Clint hadn't taken his daughter to see her primary care physician first to get a referral. A dermatologist is a specialist and this particular doctor was out-of-network for his HMO plan. Clint learned the hard way that an HMO isn't just a list of doctors, it’s a strict system of rules you have to follow if you want the insurance company to cover your doctor’s visits and medical treatments.

How HMOs Function

The defining feature of an HMO is a restricted network that requires a referral from your primary care physician. When you join an HMO plan, you must choose a PCP from the HMO’s list.

  • Coordination: This doctor handles your routine check-ups and is your first stop for any new health issue.
  • Referrals: If you need to see a cardiologist, an ENT, or any other specialist, your PCP must write a referral. If you go without one, the HMO won’t pay for the visit. Often, the specialist’s office won’t let you schedule the appointment without a referral either. 
  • Network Restrictions: Except for true emergencies, an HMO will not cover any care received from an out-of-network provider. 

HMO (health)

HMO vs. PPO: The Texas Trade-off

For many Texas business owners and families, the choice between an HMO and a PPO comes down to what is available to you and which one fits your needs. 

HMOs

  • Typically lower monthly premiums
  • Requires referral from PCP  to see a specialist
  • Strict network
  • Co-pays for office visits
  • Built around specific service areas

PPOs

  • Monthly premiums are typically higher
  • Flexibility in choice of doctors and facilities
  • Co-pays for office visits 

Don't Get Locked Into the Wrong System

An HMO health plan can be a powerful tool for saving money, but it requires discipline. If you have a specific doctor you love who isn't in the network, or if you hate the idea of needing a referral to see a specialist, a PPO plan may be a better option.

Is your network wide enough for your life? Most Texans don't check the provider list until they’re already sick. Our personalized risk assessment looks at your current doctors and your budget to see if an HMO is a smart move or a restriction for your family or business.