How does a Health Maintenance Organization (HMO) function?

A Health Maintenance Organization (HMO) functions by providing a range of healthcare services to its members for a fixed, usually lower premium. This model emphasizes preventive care and a network of providers, which means that members must select a primary care physician who coordinates their care and provides referrals to specialists when necessary. This structure helps manage costs and often leads to better health outcomes by focusing on preventive measures.

In contrast, HMOs generally do not cover out-of-network services unless they are emergencies, which makes the approach distinct from insurance plans that might allow for broader service access at a higher cost. Additionally, HMOs do not require all services to be paid out-of-pocket; instead, members pay premiums and may also have copayments for specific services, along with an emphasis on lower overall healthcare costs by promoting preventive care rather than reactive treatments. Hence, offering a wide range of services for a fixed premium accurately describes the primary characteristics of an HMO.