What Is an HMO?

Medically Reviewed by Sarah Goodell on July 18, 2023
3 min read

A health maintenance organization, or an HMO, is a common type of health insurance plan.

If you’re a member of an HMO, your insurance company agrees to pay for your health care when you use a specific network of doctors, hospitals, and health care providers. Many HMOs are budget-friendly and focus on wellness, prevention, and integrated care.

With an HMO, which is a type of managed care organization, you use a network of doctors, hospitals, and other health care providers that your insurance company has pre-approved for services and payment. They’re called in-network providers.

Your HMO makes agreements with these providers. The HMO chooses how much it’s willing to pay for different services. The in-network providers agree to accept these fees for their services.

With an HMO, you choose a primary care doctor who’s in-network to coordinate your care. You must get a referral from your primary care provider in order to see a specialist.

Your HMO generally covers the care you need if you get it from an in-network provider.

You may not be covered if you seek care from an out-of-network provider or if you get a service that isn’t approved. But the HMO could make an exception if it’s an emergency or if you can’t get care from an in-network specialist.

If you need to see a specialist, you have to get a referral from your primary care doctor or approval from your HMO. This doesn’t include regular services like annual mammograms or checkups.

If your HMO doesn’t approve a health care service, you or your doctor can appeal the decision.

As a member of an HMO, you pay a monthly premium. If you get your insurance through your employer, this usually comes directly out of your paycheck.

You may pay a copayment, or fixed amount, when you get care. Some plans also have an annual deductible, which is an amount you pay on your own before the HMO starts covering your care.

HMOs keep their costs down by making agreements with in-network providers to charge a certain amount.

The HMO may pay in-network providers on a per-member basis. It’s usually a fixed amount every month for each patient, so it doesn’t cost them for each visit.

HMOs also decide which treatments or procedures to cover. They may not cover those that aren’t cost-effective. The HMO may require you to try less expensive tests or treatments.

HMOs are more budget-friendly than many other plans because they keep their expenses low.

These are some advantages of HMOs, compared to other health insurance plans.

  • Budget-friendly
  • Lower monthly premiums
  • Lower out-of-pocket costs
  • Lower prescription costs -- if your plan includes prescription drug coverage
  • Less paperwork
  • One doctor coordinates and manages your care

The disadvantages of HMOs, compared to other health insurance plans, include:

  • You’re limited to in-network providers, unless it’s an emergency.
  • If you use an out-of-network provider, you may pay the full cost.
  • To see a specialist, you need a referral from your primary care doctor.
  • You need prior approval from the HMO for certain services.
  • If your doctor is out-of-network, you may have to switch to another one.
  • The HMO may require you to try less expensive tests or treatments before it covers more expensive ones.


Insurance plans vary, so one HMO may be different from another. States may also have different standards, so individual insurers may offer different types of plans with different names.

Other types of plans you may consider when choosing your health insurance include:

Preferred provider organization (PPO). Like an HMO, you have a network of providers that are pre-contracted for services. Unlike an HMO, you can get care from out-of-network providers, and you don’t need a referral. But you pay more for out-of-network providers. Generally, you don’t need a referral to see a specialist in a PPO.

Point of service (POS). This is similar to an HMO, but you may be able to go out of network for some services. Like HMOs, you’ll need a referral to see a specialist. If you get in-network care, you pay less. For out-of-network providers, you pay more.

Exclusive provider organization (EPO). These plans are similar to HMOs because they don’t cover out-of-network medical care. But unlike HMOs, you may see a specialist without getting a referral.