What is a health maintenance organization (HMO)?  According to the LIFE Foundation, health maintenance organization plans are often the most affordable health insurance available. Among health plan options, HMOs typically have the most inexpensive premiums. However, HMOs are also more restrictive in terms of how and where you can access health care services.

How does an HMO work?

With an HMO, you have access to a comprehensive range of benefits for a set monthly premium, which may include physician services, outpatient care, emergency room services and preventive care.

When compared with other types of medical insurance, HMOs have fewer out-of-pocket expenses but you may be charged a fee or copayment for health services. For example, when you visit your doctor or get a prescription filled, you may be required to pay a copayment. Depending on the health plan, these copayments can range from $10 to $20 or more.

HMO plan participants have access to a network of health care providers, including doctors, hospitals and other health professionals. When you enroll in an HMO, you will be required to select a doctor, called your primary care physician (PCP), from a list of network providers.

The California Department of Insurance advises that your choice of PCP is important because this doctor directs your health care. Not only is your PCP your main physician, but she also coordinates referrals to specialists and other health care providers.

Affordable health insurance, but fewer choices

In order to have your health insurance claims paid for by the HMO, you must receive care from a network provider. The LIFE Foundation explains that HMOs are able to provide affordable health insurance by negotiating a discounted fee schedule, which is why you must receive services from a provider in your network.

Treatment received outside of the HMO network is usually not covered, or coverage is at a significantly reduced level. The California Department of Insurance notes that many HMOs are restricted to specific geographical regions, which can limit coverage if you need medical care outside of the network or coverage area.