Medicare health maintenance organization (HMO) plans are a type of Medicare Advantage plan. The plans are offered by private insurance companies, with varied coverage and costs.
In this article, we discuss Medicare Advantage, look at the HMO plans, and examine how they compare with original Medicare. We also look at eligibility, enrollment, and costs.
We may use a few terms in this piece that can be helpful to understand when selecting the best insurance plan:
- Deductible: This is an annual amount that a person must spend out of pocket within a certain time period before an insurer starts to fund their treatments.
- Coinsurance: This is a percentage of a treatment cost that a person will need to self-fund. For Medicare Part B, this comes to 20%.
- Copayment: This is a fixed dollar amount that an insured person pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.
The Balanced Budget Act of 1997 added a new Part C to Medicare called the Medicare+choice program. It included various coordinated healthcare plans, including health maintenance organizations (HMOs).
The Medicare+choice program is now known as Medicare Advantage. In addition to plans such as the health maintenance organization (HMO) and HMO point-of-service (HMOPOS) plans, the program offers:
- Medicare savings account (MSA)
- preferred provider organization (PPO) plans
- private fee-for-service (PFFS) plans
- special needs plans (SNPs) plans
Advantage healthcare plans are offered by private companies that must follow Medicare rules and offer the same benefits as original Medicare (Part A and Part B). Many also offer prescription drug coverage.
One type of Advantage healthcare plan is the health maintenance organization (HMO) plan. It limits healthcare to providers within the plan’s network.
The focus of HMO plans is on prevention and wellness. They provide coordinated care, often using care managers within the company or a primary care doctor.
Usually, the doctors and other service providers must either contract with, or work for, the company offering the HMP plan.
HMO plans have certain limitations and conditions:
- Most HMOs do not cover out-of-network care except in an emergency. If a person uses the services of a provider who is not in the network, they are responsible for the out-of-pocket costs.
- A person may need a referral from their doctor to see a specialist or to get certain tests.
- To be eligible for an HMO a person must live or work in the plan’s service area. HMO networks are usually smaller than an HMO with a point-of-service (POS) option that can cover a wider area.
This online tool can help a person compare HMO plans in their area.
To access the plan a person uses the benefit card from the HMO and not their Medicare card.
The list of healthcare providers in an HMO plan’s network may be limited in number and specialty. A person may wish to consider an HMO plan with point-of-service (POS) options.
A POS plan is a hybrid of an HMO and a preferred provider organization (PPO) plan, with these differences:
- In an HMO plan, a person chooses an in-network doctor as a primary healthcare provider.
- With an HMO-POS plan, a person can choose to use a healthcare provider outside the plan’s network.
- An HMO-POS does not usually have a deductible for in-network providers and the copays may be low.
When a person takes the HMO-POS option, they may have higher out-of-pocket costs. They may also have to pay most of the cost unless they have a referral from a doctor to the out-of-network provider. If a person has been referred, the HMO-POS plan will cover the services.
In addition, if a person goes to an out-of-network healthcare provider, they have to file the paperwork with their HMO-POS company. A person has to pay the provider, and then wait for reimbursement for the allowable charges.
Medicare Advantage plans combine the benefits of original Medicare (Part A and Part B).
Medicare Part A is hospital insurance and provides coverage for hospital, skilled nursing, and hospice care.
Medicare Part B is medical insurance and provides coverage for the diagnosis and treatment of medical conditions, and some preventive services such as flu shots or cancer screening.
Medicare Advantage plans must provide coverage for the same benefits offered through original Medicare. However, Advantage HMOs may offer additional benefits, such as:
- eye care
- dental care
- health and wellness programs
In addition, if a person wants prescription drug coverage, Medicare Part D, they can get it through the HMO plan. However, a person cannot have Medicare Part D and an Advantage HMO plan at the same time.
A person must be enrolled in original Medicare to be eligible for an Advantage plan. For the HMO plan, a person must also live in the plan’s service area.
The Centers for Medicare and Medicaid Services (CMS) added two special enrollment periods for a person enrolled in an Advantage plan who has a consistent record of poor performance, or is having financial problems and the assets are held by a third party called receivership.
In addition, there are other eligibility requirements for a person with end stage renal disease (ESRD).
In 2020, people with ESRD are only eligible for an HMO Advantage plan if they enroll in a special needs plan (SNP), or previously enrolled in an HMO before the ESRD diagnosis.
From January 1, 2021, changes in the regulations mean that a person with ESRD can enroll in an Advantage plan during any valid enrollment period.
People can enroll in a Medicare Advantage plan, including a HMO plan, during several enrollment periods:
- The initial enrollment period (IEP) begins 3 months before the month a person turns 65, includes their birthday month, and ends 3 months after their birthday month.
- The general enrollment period (GEP)is from January 1 to March 31 every year during which a person can enroll in an Advantage plan if they have enrolled in original Medicare.
- During the Medicare Advantage open enrollment period (OEP) from October 15 to December 7, a person can join, switch, or drop an Advantage plan.
A person enrolled in an Advantage HMO plan must generally pay the premium for Medicare Part B, and a plan premium. However, some HMO plans help pay a percentage of the Medicare Part B premium.
HMOs usually have the lowest out-of-pocket costs. These can include premiums, deductibles, coinsurance, and copays.
- Advantage HMO plans may offer premium-free plans, or a person may have to pay the premium.
- A person has to pay the Medicare Part B monthly premium, which is $148.50 in 2021. Some plans cover the premium.
- The deductible for the HMP plan may be as low as zero, depending on the plan.
All HMO plans have an out-of-pocket maximum, although the amounts vary among plans. A person can check plan costs and other details using this online tool.
Medicare Advantage plans combine the benefits of original Medicare (Part A and Part B), and may offer prescription drug coverage.
Among several other Advantage plans, a HMO plan generally has lower out-of-pocket expenses. Healthcare is given by in-network providers, although emergency services can be covered out-of-network.