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What's an HMO?

Sidebar to the main story on HMO regulation.

JEFFERSON CITY - Pretend you're standing in the middle of a discount store. The aisles overflow with low-priced merchandise and sale signs. You know you can save money. It's because of disc-o-nomics: Buy in high quantity. Sell at a low cost.

The same goes for the managed health care insurance industry. Health maintenance organizations, or HMOs, manage health care much like discounts manage to sell merchandise at reduced prices.

An HMO purchases medical care at bulk prices - contracting with a doctor to cover a large number of patients under the HMO's plan.

And then, the HMO delegates to a "primary care provider" responsibility for holding down medical costs by allowing the patient to see a more expensive specialist only when needed.

In the older health-insurance model (fee-for-service), patients could go to any doctor and their insurance would cover it. HMO enrollees, instead, can go to doctors only on the HMO's list.

This is how it works in keeping health care costs down:

An HMO signs doctors into a plan, promising them higher number of patients by limiting the amount of doctors in the plan.

An enrollee signs up with an HMO's plan, and chooses a primary provider from the HMO's list of doctors covered under the plan.

For every medical visit, the patient must go through the primary provider. If a patient needs referral to a specialist, the primary physician must authorize it.

Depending on the HMO plan, some medical expenses like ambulances, are not covered. In other plans, patients can go only to hospitals covered by the HMO.