Health maintenance organizations (HMOs) offer predictable cost-sharing and administrative simplicity for patients. These features come with fairly restrictive rules about which providers patients may see. Participants are entitled to doctor visits, preventive care and medical treatment from providers who are in the HMO’s network. In addition to the monthly premium (which may be shared by the employer and employee), participants usually need to pay a small fee at the time of service called a copay (often in the range of $10 to $30), while the HMO covers 100% of the services provided. Most HMOs use capitation arrangements to reimburse physicians.

What is covered? 

Usually comprehensive.

Whom can you see? 

Limited network; no benefits for services outside network. Generally, services must be referred by primary care physician (some exceptions such as preventive gynecological exams, emergency services, etc.).

Cost-sharing at time of service: 

Typically low copayments at time of service ($10 to $40); no co-insurance.

Monthly premium*: 

Typically medium range; averages roughly $575.


Makes sense when employees are willing to give up flexibility in provider choice and accept greater management of their care. Also offers benefits in terms of ease of administration. Less attractive if some or many employees feel strongly about having access to a wide selection of providers.

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