An HMO, or health maintenance organization, is a type of health insurance. If you have an HMO, your health coverage is limited to the network of local health care providers provided by the HMO. You’ll need to get a referral to see a specialist and approval if you need to use an out-of-network provider, which could be a problem if your favorite doctor isn’t in-network. While HMOs can be more restrictive than a preferred provider organization (PPO) or exclusive provider organization (EPO), your premiums with an HMO may be lower. Read on to learn about the details of HMO health insurance and find out if it’s a good fit for you.

What You Should Know About HMOs

  • In-network providers: HMOs only cover a select local network of doctors, hospitals, and other health care providers.
  • Referrals: You may need to get a referral from your primary care physician (PCP) to see a specialist.
  • Affordability: The monthly premiums for an HMO can be lower than a comparable PPO or EPO.

What Is an HMO?

HMO is a plan that has a select local network of doctors, hospitals, and providers. If you have to see a particular specialist and have HMO coverage, you’ll need to obtain a referral from your assigned PCP.

“Generally speaking, an HMO requires enrollees to use in-network providers, except in the case of an emergency,” says a spokesperson for the Centers for Medicare & Medicaid Services (CMS). “Other plan types might allow people to seek care outside of the insurer’s network or may not have a network at all.”

Some might view HMOs as restrictive regarding provider choice. But there are benefits to HMOs. For one, HMO providers agree on a payment level and often offer lower premiums, making these plans more affordable. Understanding how an HMO works, what premiums and out-of-pocket expenses to expect, and the plan’s metal category (bronze, silver, gold, platinum) allows you to assess your financial responsibility.

When Should You Get an HMO?

The two defining characteristics of an HMO health insurance plan are cost-sharing and provider network. HMOs generally limit coverage to care from providers who work for or are directly contracted by the HMO network. Usually, out-of-network providers are not covered unless it’s an emergency. Also, some HMOs require you to live or work in the service area. Otherwise, you will not be eligible for coverage.

For the most part, HMOs focus on prevention and wellness and “maintenance of health.” If you’re considering an HMO plan, you should be sure it includes your preferred doctors. If you do not have established providers, the requirement to use only in-network doctors probably won’t matter as much.

“Consumers may want to consider an HMO if there are certain doctors, hospitals, or other providers that are in an HMO network if being able to see a particular provider is important to them,” CMS says. “Consumers who want the flexibility to see nonnetwork providers may want to consider a PPO. We also encourage consumers to look at other factors, such as premiums, cost-sharing, and metal level, when selecting a plan.”

Who Should Get an HMO?

An HMO health insurance plan is for you if you’re looking for a lower monthly premium cost, want a lower out-of-pocket cost for prescriptions, and don’t mind using only in-network providers or using a referral from your primary care doctor to see a specialist.

Before you select any health insurance plan, it’s essential to understand how the different coverage structures work so you can choose the right one for you based on your financial needs and provider preferences.

How Are HMO Plans Different From Other Insurance Plans?

The main difference between a PPO and HMO is that you have more choices of providers if you go with a PPO:

  • PPOs allow you to use in-network and out-of-network providers, although you will likely pay more if you select a doctor that isn’t in-network since there is no negotiated provider discount. Also, you can see a specialist without getting a referral, which is convenient if you prefer to manage your health care and do not want to wait for a primary care doctor to assess your situation and then refer you to another provider.
  • However, PPOs have some cost disadvantages compared to HMOs. Usually, PPOs have higher premiums and out-of-pocket costs. HMOs make financial arrangements with their in-network providers, who agree to offer services for a given cost that is lower than what uninsured or out-of-plan patients would pay.
  • PPOs place you in the driver’s seat when it comes to selecting specialists. HMO plans assume that responsibility. There are pros and cons to managing your care, and the decision is a matter of personal preference. For some, the time and stress of finding specialists and making those appointments are not worth the trade-off of having to use only in-network providers.
  • An EPO provides coverage only if you use providers in the plan’s network, except in emergencies. A point-of-service (POS) plan charges less if you use in-network providers, and you must get a referral from your primary care doctor if you want to see a specialist. While the EPO is similar to an HMO concerning using in-network providers, it lacks comprehensive coverage that includes specialists. A POS plan is also similar to an HMO because your coverage extends only to in-network providers unless it’s an emergency, and you’ll need a referral to see specialists.

Comparing HMOs to Other Health Insurance Plans

Ultimately, when you compare these different health insurance plan structures to determine which best suits your needs, read the Summary of Benefits and Coverage (SBC) carefully.

The summary should allow you to make apples-to-apples comparisons of plans’ costs and coverage. As you review the SBC, keep in mind what is important to you. Here are some questions you might ask yourself before comparing plans:

  • Do you have existing providers you want to continue visiting?
  • Are you willing to pay more at the time of service to have a lower monthly premium?
  • Which prescriptions are you currently taking?
  • Are you dealing with a chronic illness that requires care from a specialist?
  • What is the most you’ll have to spend?
  • What is the annual deductible?
  • What benefits are covered aside from routine doctors’ appointments and hospital visits?

What Are the Advantages and Disadvantages of HMO Insurance?

HMO plans can be a good choice for health coverage but aren’t right for everyone. Consider your budget, health care needs, and doctor preferences if you’re shopping for HMO plans.

Advantages Disadvantages
  • Typically lower cost monthly premiums than comparable PPO health plans.
  • Negotiated rates with in-network providers.
  • Out-of-network coverage is under special approval or emergencies only.
  • You’ll need to consult your assigned primary care physician before seeing a specialist.

The Bottom Line — Why Get an HMO?

HMO plans are a great fit for those who don’t mind staying in-network and want lower premiums. But if you often need specialized care that’s not in-network, a different type of plan may be a better choice.

MPH, CPH, Health Care Advisor

Dr. Noor Ali is a licensed medical doctor and surgeon with an established national health insurance consulting practice serving clients in more than 30 states. Dr. Ali has worked in the health care field since 2012 as a doctor, researcher, and advisor. She earned her Bachelor of Medicine and Bachelor of Surgery degrees from Kumudini Women’s Medical College, followed by a master’s degree in international public health from the University of South Florida. She holds a Certified in Public Health credential and is a licensed life, health, and annuities professional in Florida.

Dr. Ali regularly contributes to the medical and public health field with research and community-based work in the women’s reproductive health and maternal and child health spheres. She has built a brand around bridging the gap between patients and health insurance services through education, information and empowerment.

She is a frequent expert guest on podcasts including Next Level Success and Miller IP Law and a medical proofreader for Dr. Ali has been consulted for articles by Denver News Channel 7,, Massage magazine, and the Journal of American College Health.