What is a "health maintenance organization (HMO)"?

A health maintenance organization (HMO) is a specific type of managed care health insurance plan that promotes the use of a network of contracted healthcare providers to deliver medical services to its members. By requiring members to utilize these contracted providers, an HMO can effectively negotiate lower rates for medical services, leading to reduced costs for both the insurer and the insured.

Members typically must select a primary care physician (PCP) from the network, who acts as a gatekeeper for access to other specialists and services. This model not only helps manage healthcare costs but also emphasizes preventive care and holistic health management, as the HMO aims to provide timely and efficient care to its members.

This understanding of HMOs is essential for grasping how they operate within the broader health insurance marketplace, distinguishing them from other types of insurance options that might not require such a network structure or focus on cost management in this way.