What is a health maintenance organization (HMO)?

A health insurance plan that only pays for visits to doctors and hospitals within your network

Derek Silva

Derek Silva

Published August 26, 2019

Advertising Disclosure


  • HMO insurance only covers the cost for doctors or facilities that are within your network

  • With an HMO, seeing a specialist requires you to get a referral from your primary care physician

  • PPO plans are an alternative to HMOs if you want to see doctors outside your network, but monthly premiums may be higher

A health maintenance organization (HMO) is a type of health insurance plan that limits your coverage to a particular network of doctors, hospitals, and health care providers. Your insurance will not cover the cost if you go to a provider outside of that network. Likewise, going to the emergency room is costly.

HMO plans require you to choose a primary care physician. Sometimes referred to as a PCP, family physician, or general practitioner, this is a doctor who is your first point of contact for health issues. Your insurance will only cover your visit to a specialist physician if you get a referral from your primary care doctor.

In this article:

How HMO plans work

Like most types of health insurance coverage an HMO is a type of managed care. Under this system of health coverage, your health insurance plan comes with a network of providers — doctors, hospitals, and others that offer health care. If you visit someone that is within the network, your insurance company will cover some of the costs. You will have to pay for some of the services yourself, such as through copays, but once you spend a certain amount — your deductible — your insurer will kick in to start covering your costs.

The biggest differences between types of health insurance plans is usually whether you can go to out-of-network providers and how much your insurer would cover if you do. An HMO plan does not pay for medical expenses that you incur from going to providers outside of your network. While this may not be a problem for most people, it can make certain situations difficult (and expensive). One example is if you’re traveling, you get sick, and you need urgent care. This could leave you with significant out-of-pocket expenses.

Recession-proof your money. Get the free ebook.

Get the all-new ebook from Easy Money by Policygenius: 50 money moves to make in a recession.

Policygenius Image

The other major element of an HMO is that you need to select a primary care physician. This person serves as your primary point of contact for all health care needs. That includes preventive care and care for more serious issues. If you think that you need to see a specialist, like a specialty eye doctor, you need to get a referral from your primary care physician. Without a referral, your insurance will not cover the bill you get from the specialist.

While HMOs can restrict your health care options, the providers in your network have contracts with your insurance company that often allow the insurer to offer you a lower health insurance premium — the amount you pay each month in order to receive health coverage. Other health care plans, like a preferred provider organization (PPO), allow you to see doctors outside of your network, but you will have to pay more to do so, like through higher premiums.

Emergency care with an HMO

If you have an HMO and need to go to the emergency room, you will have to pay a lot more than you would if you went to your primary physician first. Even if you go to a doctor who is in-network, the copay for emergency care may be hundreds of dollars higher than the copay for your primary care physician.

If you go to a hospital via ambulance, it’s possible that the ambulance could be out-of-network, costing you hundreds or even thousands of dollars. It’s also possible that the ambulance will take you to an out-of-network hospital. Even if the hospital is in-network, it is possible that a doctor you see will not be in your network. You should especially look out for this if you see a specialist, such as a surgeon. Ultimately, emergency room visits can end up costing thousands or even tens of thousands of dollars out of pocket.

4 other types of health insurance plans

There are several options if you need health insurance. Weigh the costs versus benefits and decide which one is right for you.


The most common alternative to an HMO health plan is a preferred provider organization (PPO). A PPO, as the name suggests, offers you health care services from a network of preferred providers. You will pay the lowest rates and your insurance will cover more of your medical expenses if you visit someone within that network. However, PPOs don’t limit you from getting care outside of our network. Most PPO plans will cover at least some of the cost from seeing an out-of-network provider. You also usually pay more if you go to out-of-network providers.

To help you decide between HMOs and PPOs, read more about how PPOs work.


An exclusive provider organization (EPO) offers some of the advantages of both an HMO and PPO. An EPO plan will not cover any of the cost if you go to an out-of-network provider. On the flip side, you won’t need to get a referral from a primary care physician if you want to see a specialist. Just make sure you go to a specialist who is in your network, or you could be left with a big bill. (Read more how EPO plans work).


A point-of-service-plan (POS) is a hybrid of HMO and PPO plans. Like an HMO, you may have to choose a primary care physician. That physician will be your point of contact and will refer you to specialists if necessary. You cannot see specialists without a referral. At the same time, POS plans give you the freedom to visit a provider outside of your network. Going out of network will cost more though, with a higher deductible and copays.

Indemnity plan

An indemnity plan, also known as fee-for-service plan, differs from the previous plans we’ve discussed because it is not a managed care plan. Indemnity plans give you the most choice because you can go to just about any doctor or health care provider you want. Then your insurer will reimburse you for a portion of your total costs. You often need to pay the full cost up front and then submit a claim with your insurance company to get reimbursement.

Policygenius Image

Health insurance and life insurance work together to offer financial protection.

Health insurance can pay your medical expenses. Life insurance keeps your loved ones whole after you die.

About the author

Personal Finance Expert

Derek Silva

Personal Finance Expert

Derek is a tax expert at Policygenius in New York City. He has written about multiple personal finance topics in the past, and his work has been covered by Yahoo Finance, MSN, Business Insider and CNBC.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.

Was this article helpful?