What is a health maintenance organization (HMO)?

This health insurance plan only pays for visits to doctors and hospitals within your network.

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Derek SilvaSenior Editor & Personal Finance ExpertDerek is a former senior editor and personal finance expert at Policygenius, where he specialized in financial data, taxes, estate planning, and investing. Previously, he was a staff writer at SmartAsset.

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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.

One of the main characteristics of an HMO insurance plan is that it requires you to choose a primary care provider. 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, like a dermatologist or, if you get a referral from your primary care doctor.

Key takeaways

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

  • Seeing a specialist requires a referral from your primary care physician

  • A PPO plan is an HMO-alternative with higher premiums, but you would be able to see doctors outside your network

What is a health maintenance organization?

HMO plans often have lower monthly premiums than other types of health insurance plans because your insurer may cover a smaller network of doctors and less of your possible costs. You may want to choose an HMO over other plans if you want to save money and don’t usually go to the doctor for much beyond preventive care or outside of your local area.

You will encounter HMOs, among other types of health plans, like PPOs, when you buy an individual plan on the health insurance marketplace, sign up for a Medicare Advantage plan, as well as when you get health coverage through your employer.

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How HMO plans work

An HMO plan is a type of managed care health insurance plan that comes with lower costs if you use health care providers within your plan’s network of providers — doctors, hospitals, and others that offer health care. An HMO’s network may be restricted to local providers in some cases. You will have to pay for some of the costs yourself, such as through copays, but once you spend a certain amount — your deductible — your insurer will kick in to start paying some of your costs.

Learn more about how copays and deductibles work.

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 the services if you do. An HMO plan does not pay for medical expenses that you incur from going to providers outside of the HMO 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.

HMO insurance plans require a primary doctor

The other major element of an HMO is that you need to select a primary care physician. This doctor 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 plan's 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 PPO (discussed more later), allow you to see doctors outside of your network, but you will likely have to pay higher premiums.

Related article: What is a primary care provider?.

Emergency care with an HMO

Emergency care with an HMO can quickly become costly if you go to an out-of-network emergency room, hospital, or doctor. Taking an out-of-network ambulance could also cost you a lot. If you have an HMO and need to go to the ER, you may not have time to check if the ambulance or hospital is part of your HMO network. Normally, receiving health services from a non-HMO member is very costly, but under the Affordable Care Act (Obamacare), health insurance providers cannot charge you more for out-of-network care for emergency services. However, emergency services are narrowly defined and your insurer isn't obligated to cover every medical procedure or service; if you call 911 seeking medical care, but your condition turns out not to be life-threatening, the health insurance company could classify it as a non-emergency and bill you accordingly for using an out-of-network provider.

Emergency care is just one of 10 essential health benefits that Obamacare plans must include. If you need a health insurance plan, you can buy an Obamacare plan during open enrollment.

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 difference between HMOs and PPOs

The most common alternative to an HMO health plan is a preferred provider organization (PPO). A PPO also offers you health care services from a network of preferred providers, but PPOs don't limit you from getting care outside of your network. You will pay more for out-of-network care, but this could offer some flexibility if you travel a lot. PPOs also allow you to see a specialist without a referral, which is good for someone who needs to see a specialist regularly.

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, but 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.

Check out how an EPO plan works.


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.

See also: A detailed guide to the differences between different health insurance plans.

Indemnity plan

An indemnity plan, also known as a 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. 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.