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HMO Vs. Indemnity

Health maintenance organization (HMO) and indemnity health plans are health coverages you can buy based on what is important to you: cost or choice. HMO plans give members cost-efficient health coverage by limiting their options to necessary procedures. Indemnity health plans, on the other hand, offer maximum flexibility to members at higher costs.

  1. HMO Plans

    • HMO plans are one of three types of managed health care plans in the United States, along with Preferred Provider Organization (PPO) and Point of Service (POS). Of the three, HMO plans have the most members. In 2010, HMOs covered 66 million of the 135 million people who had managed health care coverage. HMO plans pay out the highest amount of insurance coverage of the three; however, they are the most restrictive as well.

    Features of HMO Plans

    • HMO members receive a list of doctors they can see in their geographical areas. These are provider networks contracted by insurers to perform medical services at discounted rates. By visiting these doctors, members enjoy higher insurance benefits with little out-of-pocket cost. HMO members must choose primary care physicians (PCPs) from their provider networks as well. PCPs are doctors who control their patients' medical decisions. They have the authority to refer or deny patient services they deem unnecessary to save costs.

    What are Indemnity Health Plans

    • Indemnity plans were the first types of health care policies sold in the United States. They give members more control over their medical decisions by not restricting doctor choices. Members can visit doctors anywhere in the country and still receive insurance coverage. These freedoms come at a higher price as indemnity plans are more expensive than managed health care plans. Insurers pay doctor bills on a fee-for-service basis, which means members receive reimbursement when they submit claim forms after receiving medical services.

    Disadvantages

    • HMO members cannot go out of network and receive insurance coverage without referrals from their PCPs. Without referrals, they would be responsible for all charges unless the medical services are emergencies. For indemnity health plan members, some physicians may require up-front payments before offering any services. Also, if members pay for services not covered by their plans, the insurer could deny their claims.

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