What Is a Health Maintenance Organization (HMO)?

HMOs Explained in Less Than 5 Minutes

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A health maintenance organization (HMO) is a type of health insurance plan for which you pick a primary care doctor to manage and coordinate your medical care.

Key Takeaways

  • An HMO is a type of health insurance plan. It stands for health maintenance organization. 
  • With an HMO, you must select a primary care doctor and they must refer you for other care. 
  • HMOs typically have lower monthly premiums and out-of-pocket costs if you stay in-network.

How Does an HMO Work?

An HMO is one type of health insurance plan that focuses on illness prevention and wellness. With this model of health insurance, you pick a primary care doctor from a network of providers. This doctor is your point of contact for all of your medical needs. If you need to see a specialist, your primary care doctor can refer you to someone in the HMO’s network of providers.

With an HMO, your specialist gets a good picture of your overall health and keeps track of results from different specialists. It’s an integrated care model that focuses on keeping you healthy.


Since HMOs don’t typically cover out-of-network care (except in emergencies), you may need to live in a specific coverage area to be eligible to join a particular HMO.

When you need to see a specialist, your primary care doctor will refer you to one who’s part of the HMO’s network. By seeing only in-network providers, you’ll pay lower medical costs and you won’t have any unexpected bills showing up in the mail. Specialists and services that may be included in your HMO network include:

  • Clinics
  • Health care professionals
  • Hospitals
  • Imaging centers
  • Labs
  • Medical equipment vendors
  • Pharmacies

However, if you go to an out-of-network health care provider, your HMO typically won’t cover any of the costs. This is because in-network providers have agreed to charge certain prices for services. Out-of-network providers may charge more. 


Always check with your insurance company to make sure your provider is in-network. Many insurance companies have an online directory you can search to quickly check the status of a new doctor, hospital, pharmacy, or lab before you visit.

Example of an HMO

For example, if you’re experiencing debilitating headaches, you’d need to see your primary care doctor first. If your doctor thinks you need additional testing, they might refer you to an in-network neurologist. If you called a neurologist directly for an appointment without a referral, your insurance likely wouldn’t pay for your visit.


Primary care provider (PCP)  You must select a PCP to oversee your care You may see any doctor you wish and do not need to select a PCP
Specialists  Your PCP refers you to in-network specialists if the need arises You don’t need a referral to visit a specialist
Out-of-network care Not covered by your insurance plan Covered by your insurance plan, but you may have higher out-of-pocket expenses if the provider charges more than the approved insurance rate
Price  Lower monthly premiums and set out-of-pocket rates if you stay in the network Higher monthly premiums, an annual deductible, and higher out-of-pocket rates for doctors not in the network

HMOs are one common type of health insurance plan. Preferred provider organizations (PPOs) are another. Like an HMO, a PPO has a network of providers who have agreed to bill at a certain rate. However, there are a few key differences between HMOs and PPOs.

For example, with a PPO, you don’t have to select a primary care doctor. This means if you need to see a specialist, you can contact one directly and schedule an appointment. You can also visit doctors outside of your network if you have a PPO. This means if you’re traveling and get sick, you can visit any doctor.

If you want to save money on monthly health insurance costs, an HMO is typically less expensive than a PPO. However, a PPO offers greater flexibility since you can choose from more options when you need care.

Is an HMO Right for You?

You want to make sure your health insurance is a good fit for you and your lifestyle. An HMO might be right for you if: 

  • You’re concerned about monthly costs and want to save money on health insurance. 
  • You don’t mind partnering with a primary care doctor for your health decisions. 
  • You typically stay in your local area, where you can be treated by in-network providers. 

However, if you want more flexibility to see doctors outside of the approved network or without a referral, an HMO might not be the best choice for you.

Frequently Asked Questions (FAQs)

Why would a person choose a PPO over an HMO?

A person may prefer a PPO over an HMO if they have highly specific medical needs that require frequent specialist visits. PPO plans typically come with higher out-of-pocket costs, but you won't have to consult a PCP before each specialist visit.

Who chooses a primary care physician in an HMO?

Patients choose their primary care physicians, although insurance providers typically limit their choices to a network of providers.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. BlueCross BlueShield of Illinois. "What Is an HMO?"

  2. Medicare.gov. "Preferred Provider Organization (PPO)."

  3. Medicare.gov. "Health Maintenance Organization (HMO)." 

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