Health maintenance organization

A Health Maintenance Organization (HMO) is a type of Managed Care Organization (MCO) that provides a form of health insurance coverage that is fulfilled through hospitals, doctors, and other providers with which the HMO has a contract. Unlike traditional indemnity insurance, care provided in an HMO generally follows a set of care guidelines provided through the HMO's network of providers. Under this model, providers contract with an HMO to receive more patients and in return usually agree to provide services at a discount. This arrangement allows the HMO to charge a lower monthly premium, which is an advantage over indemnity insurance, provided that its members are willing to abide by the additional restrictions.

History

The earliest form of HMOs can be seen in a number of prepaid health plans. In 1910, the Western Clinic in Tacoma, Washington offered lumber mill owners and their employees certain medical services from its providers for a premium of $0.50 per member per month. This is considered by some to be the first example of an HMO. In 1929, Dr. Michael Shadid created a health plan in Elk City, Oklahoma in which farmers bought shares for $50 to raise the money to build a hospital. The medical community did not like this arrangement and threatened to suspend Shadid's licence. The Farmer's Union took control of the hospital and the health plan in 1934. Also in 1929, Baylor Hospital provided approximately 1,500 teachers with prepaid care. This was the origin of Blue Cross. Around 1939, state medical societies created Blue Shield plans to cover physician services, as Blue Cross covered only hospital services.

Related Topics:
Prepaid health plans - 1910 - Tacoma, Washington - 1929 - Dr. Michael Shadid - Elk City, Oklahoma - 1934 - Baylor Hospital - Blue Cross - 1939 - Blue Shield

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These prepaid plans burgeoned during the Great Depression as a method for providers to ensure constant and steady revenue.

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In 1970, the number of HMOs declined to less than 40. Paul Ellwood, often called the "father" of the HMO, began having discussions with what is today the U.S. Department of Health and Human Services that led to the enactment of the Health Maintenance Organization Act of 1973. This act had three main provisions:

Related Topics:
1970 - Paul Ellwood - U.S. Department of Health and Human Services - Health Maintenance Organization Act of 1973

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• Grants and loans were provided to plan, start, or expand an HMO
• Certain state-imposed restrictions on HMOs were removed if the HMOs were federally certified
• Employers with 25 or more employees were required to offer federally certified HMO options alongside indemnity upon request

This last provision, called the dual choice provision, was the most important, as it gave HMOs access to the critical employer-based market that had often been blocked in the past. The federal government was slow to issue regulations and certify plans until 1977, when HMOs began to grow rapidly. The dual choice provision expired in 1995.

Related Topics:
Dual choice provision - 1977 - 1995

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The largest HMO today is Kaiser Permanente, with 8.3 million members in nine states and the District of Columbia. Kaiser Permanente is structured into eight regional units; the organization's largest unit, the Northern California unit, is itself larger than any other HMO in the country.

Related Topics:
Kaiser Permanente - District of Columbia

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Starting in 1990, Switzerland has founded several HMOs which at the moment include some 10 percent of the Swiss population. The percentage would be much higher if there were HMOs in all regions. This is not possible because there are mountainous regions where the population density is too low.

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