Health Maintenance Organization (HMO)

Published: | Updated: September 17, 2017

Definition - What does Health Maintenance Organization (HMO) mean?

A health maintenance organization (HMO) is a health service organization that offers medical services to members from a network of providers under contract. Because the contract directs a steady amount of patients to the providers, this results in lower premiums; however, HMOs place certain restrictions on its members. Members can only receive services outside of the HMO network through a referral from a primary care physician (PCP), or if they pay out of pocket.

Insuranceopedia explains Health Maintenance Organization (HMO)

Typically, HMOs require members to choose a PCP who directs access to the necessary medical services. A PCP will not issue a referral unless it meets the HMO guidelines. However, other combined health insurance products, such as open access or point of service, may offer more freedom outside the approved provider network.

Moreover, HMOs often provide preventative services, such as physicals and immunizations, for free to lower the likelihood of the members developing preventable conditions that would later require various medical services and increases costs for the HMO.

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