What is it?

1. What is it? An organization of physicians or other health care professionals that provides a broad and nearly complete range of health care services on prepaid basis An alternative to traditional health insurance

2. When is it indicated? • When desire alternative to traditional health insurance • Have younger employees with dependents – HMO covers all medical expenses with relatively small co-pays per visit

3. Advantages • HMOs typically cover more health care services than traditional health insurance, with fewer deductibles and lower co-payments • HMOs focus on preventive medicine, can control overall costs better than plans that pay only when employee hospitalized or sick

4. Disadvantages • Except for certain emergencies, HMO will not pay for non-HMO services • Cost advantage of HMO may be result of attracting younger, healthier participants; if so, cost advantage diminishes with aging population

5. HMO Benefit Structure HMO employs or contracts directly with providers funding designed to reduce costs • medical service provided to subscribers for annual advance payment • payment based on HMO’s projected cost • HMO assumes risk of cost overage; creates incentive to reduce cost

6. HMO Benefit Structure HMO limits physician choice except • emergencies outside HMO’s geographic area • referral by primary care physicians to specialists

7. Types of HMOs Staff model HMO directly employs care providers who provide health care services

8. Types of HMOs Group practice model HMO contracts with medical group or groups that provide services to subscribers Doctors and other providers are not employed directly by HMO

9. Types of HMOs Staff and group practice models are called closed panel plans because subscribers must use providers employed by or under contract to HMO

10. Types of HMOs Individual practice association (IPA) HMO is association of individual doctors or medical groups An IPA is an open panel plan – subscriber can choose any doctor who is part of the IPA

11. Types of HMOs Success of HMO can depend on • desire to retain physicians used before HMO implemented • support of HMO by local medical community—greater support creates potentially wider choice for employees

12. Tax Implications Tax implications are same as for other types of health insurance Eligibility and coverage requirements, including COBRA are the same as for health insurance