Health Maintenance Organization (HMO) Plans

Medicare health maintenance organizations (HMOs) are private Medicare Advantage plans that provide you with the same benefits as Original Medicare. Joining an HMO generally means you have to use the doctors, hospitals or other health care providers in the HMO network except in emergencies.

What Are Medicare Advantage HMO Plans?

Medicare Advantage HMO plans are run by private insurers who contract with the U.S. Centers for Medicare & Medicaid Services to administer Medicare benefits. These private insurers contract with health care providers to pay a certain level of fees for various medical care and services.

HMO plans are a type of Medicare Advantage coordinated care plans that may give you more flexibility on coverage and out-of-pocket health care costs.

If you join a Medicare HMO, you have to use the health care providers in the HMO’s network to be covered. You can still use doctors, hospitals or other health care providers outside the HMO network, but you will have to pay extra for their services.

Other types of coordinated care plans include Medicare PPO and Medicare POS plans.

End-Stage Renal Disease and Medicare HMO Coverage

Currently, people with End-Stage Renal Disease (ESRD) cannot join a Medicare HMO or any other Medicare Advantage plan except in certain situations. These restrictions will end in 2021.

Exceptions Allowing People with ESRD to Join Medicare HMO Plans
  • If you were already in a Medicare Advantage plan when you developed ESRD.
  • You are medically determined to no longer have ESRD, usually after a successful kidney transplant.
  • If you were in a plan and it left Medicare or no longer offers coverage in your area, you have a one-time right to join another Medicare Advantage plan.
  • If you have an employer, union or other plan that offers one or more Medicare Advantage plans, you may be eligible for one of those.
  • You may qualify for a Medicare Special Needs Plan (SNP) that covers ESRD if one is available in your area.

What’s Covered with Medicare HMO Plans?

Medicare HMO plans are part of Medicare Part C, also known as Medicare Advantage plans. All Part C plans, including HMOs, must cover everything that Original Medicare covers.

Many Medicare HMOs also offer vision, hearing and prescription drug coverage. You should ask which of these and other additional services are covered by a plan before purchasing it.

Rules, restrictions and costs of Medicare HMO plans may vary from plan to plan and from one provider to another.

Tip
You can compare Medicare HMO plans available in your area by using Medicare’s plan locator.
Source: U.S. Centers for Medicare & Medicaid Services

While Medicare HMO plans generally require you to use doctors, hospitals and other health care providers in its network, there are a few exceptions in which you can use providers outside of the network.

Ask about these exceptions when buying a Medicare HMO plan:
  • Emergency care
  • Out of-area urgent care
  • Out-of-area dialysis

While Original Medicare does not cover hearing, vision and most prescription drugs, Medicare HMO plans may offer these benefits. Ask about this coverage when considering a Medicare HMO or any other Medicare Advantage plan.

Costs of Medicare Advantage HMO Plans

The big advantage of HMO plans is that you will likely pay less than with other types of insurance as long as you only see doctors or use facilities within the plan’s network. If you want to see a doctor or have to use a hospital outside that network, you may be responsible for the full cost.

In some cases, you will not have to pay Medicare Part B premiums. But some Medicare HMO plans still require you to pay a reduced Part B premium.

Pros and Cons of Medicare HMO Plans
Advantages
  • Premiums are generally lower with little or no deductibles.
  • Small, local networks means doctors may know each other allowing better coordinated care.
  • Billing is usually easier to understand.
  • Typically includes extra coverage such as vision, hearing and dental.
  • Appeals process for denied Medicare claims includes extra levels of appeals.
Disadvantages
  • You’ll pay full price for doctors not in the HMO network.
  • You will need a referral from your primary care doctor to see a specialist.
  • Localized networks make it difficult to find care when traveling or if you spend part of the year living in a different location.
  • You cannot use Medicare HMO plans with supplemental insurance (Medigap).

And while you can seek emergency care at facilities outside of your network, if the emergency department admits you to a hospital outside the network, you’ll be on the hook for all hospitalization costs.

HMO Point-of-Service Plans

HMO Point-of-Service (POS) plans are specific types of Medicare HMO plans that may let you receive services out of network in exchange for a higher copayment or coinsurance. You still need to follow the plan’s rules carefully. These may require you to get approval from the insurance company before seeking the service.

You’ll have a separate deductible for a POS portion of a Medicare HMO plan.

Prescription Drug Coverage with HMO Plans

Prescription drug coverage is usually included in Medicare HMO plans, but insurers are not required to offer drug coverage. It’s up to you to make sure a plan provides drug coverage before purchasing it.

If you join a Medicare HMO plan that does not cover prescription drug costs, you will not be able to get a separate Medicare Part D prescription drug coverage plan.

It’s also important to remember that if you don’t sign up for prescription drug coverage during your Medicare enrollment, you will most likely have to pay a late enrollment penalty when you do sign up for prescription drug coverage later on.

Last Modified: August 10, 2020

5 Cited Research Articles

  1. U.S. Centers for Medicare & Medicaid Services. (2019, September). Understanding Medicare Advantage Plans. Retrieved from https://www.medicare.gov/Pubs/pdf/12026-Understanding-Medicare-Advantage-Plans.pdf
  2. Humana. (2017, October 1). What Is an HMO? Retrieved from https://www.humana.com/health-and-well-being/what-is-hmo
  3. U.S. Centers for Medicare & Medicaid Services. (n.d.). Find a Medicare Plan. Retrieved from https://www.medicare.gov/plan-compare/#/?lang=en
  4. U.S. Centers for Medicare & Medicaid Services. (n.d.). Health Maintenance Organization (HMO). Retrieved from https://www.medicare.gov/sign-up-change-plans/types-of-medicare-health-plans/medicare-advantage-plans/health-maintenance-organization-hmo
  5. Cigna. (n.d.). Cigna Health Maintenance Organization (HMO). Retrieved from https://www.cigna.com/individuals-families/plans-services/plans-through-employer/hmo