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There is another way that HMOs differ from the traditional health insurance providers. HMOs have two step system that is not shared by insurance companies. Under the traditional method, consumers receive the health care itself from the medical profession and the financial coverage from the insurance company.
In sharp contrast, the HMO provides both the health care services AND the health care coverage.
These are combined because the HMO is made up of medical practitioners who provide specific services to HMO members at prices that are pre-set and the HMO member agrees to pay the HMO a specified amount in advance to cover necessary services. Therefore, the HMO is furnishing health services as well as making the financial arrangements.
As we have stated, the emphasis on prevention and the effort to containing cost is the major factor for developing HMOs. However, federal law also encourages the development of HMOS. They may receive government grants as well as requiring certain employers who offer health benefits, to offer HMO enrollment as an option by meeting certain criteria.
The basic structure of HMOs includes contractual agreements with a variety of facilities and health care providers to provide services to HMO subscribers. Within this structure are four different types, Group, Staff, Network and Individual Practice Association.
Group model – Early on this was the predominant scenario. With this arrangement the HMO contracts with an independent medical group that specializes in a variety of medical services and the HMO in turn provides these services to members. Additionally, the HMO is paying another entity as a whole rather than individuals.
Staff model – This arrangement is pretty self-explanatory wherein the physicians are paid employees working on the staff of an HMO in a clinical setting at the HMO physical facilities. The HMO often owns the hospital as well. In this model the HMO is taking all the financial risk as opposed to the group model.
Network model – This arrangement works like the Group model with the difference being that the HMO will contract with more than one group to provide the services.The primary purpose for this model is to provide convenience and increase accessibility for the members.
Individual Practice Association Model – This structure is designed to give maximum flexibility to the HMO members wherein they contract individually for all services. There are no separate HMO facilities and all services operate out of their own facilities.
There are several types of groups that may sponsor HMOs, some of which are:
§ Medical schools or associations
§ Labor unions
§ Physicians
§ Hospitals
§ Insurance companies
§ Labor groups
§ Consumer groups
§ Service organizations (Blue Cross/Blue Shield)
§ Government entities
Most HMOs restrict membership to a narrowly defined group. For instance, a labor union might limit enrollment to active members of their union.
HMOs are required to provide the following basic health care services:
§ Physicians’ services
§ Hospital inpatient services
§ Outpatient medical services
§ Emergency services
§ Preventive services
§ Diagnostic laboratory services
§ Diagnostic and therapeutic radiology services
Many HMOs may also provide the following, but are not required to do so:
§ Vision care
§ Dental care
§ Home health care
§ Nursing services
§ Long-term care
§ Mental health care
§ Traditional insurance companies
§ Blue Cross/Blue Shield
§ Local groups of hospitals
§ Local groups of physicians
§ An existing HMO
§ Large employers
§ Trade unions
Those people who will receive services select a preferred provider from a list that the PPO distributes. Usually the choices are more extensive with a PPO than a HMO.
Sometimes PPOs and HMOs are lumped together and called a managed care system. One characteristic still exists concerning regulation, however. HMOs increasingly have to meet state requirements as well as standard established by federal government. PPOs are less stringently regulated since any group that can agree on the arrangements can call itself a PPO.
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