Health Maintenance Organizations from the Texas Department of Insurance

Health Maintenance Organizations

(July 2009)

Health maintenance organizations (HMOs) are managed care plans that provide health care services to their members through networks of doctors, hospitals, and other health care providers. HMOs are popular alternatives to traditional health care plans because they cover a wide variety of services, usually at a lower cost.

How HMOs Work

HMOs use “networks” of doctors, hospitals, clinics, and other health care providers that together provide comprehensive health services to the HMO’s members. An HMO usually requires members to seek routine care from providers in its network. In exchange for a built-in clientele, health care providers in an HMO’s network agree to treat the HMO’s members at a lower than normal rate.

When you join an HMO, you must select a “primary care physician” from a list of doctors in the HMO’s network. Except for a few exceptions, your primary care physician will oversee all of your medical care and provide referrals to specialists and other providers. In general, you lose some freedom of choice of providers in an HMO, but your out-of-pocket expenses are typically lower than in other types of health care plans.

Some HMOs offer memberships to individuals and their families, but they most often provide coverage through group health plans offered by employers, associations, or other groups. Employers or groups that sponsor that plans negotiate a contract with the HMO to establish the plan’s costs and benefits. Contracts can vary by employer or group, and members of the same HMO who work for different employers or belong to different groups can have different benefits.

The two types of HMO plans available are state-mandated plans and consumer choice plans. State-mandated plans provide certain minimum features and coverages. Consumer choice plans are developed by carriers that exclude some state-mandated benefits.

Costs Associated with an HMO

What You will Pay

Premiums. Premiums are the amounts you pay up front for coverage. If you belong to an HMO through an employer-sponsored health plan, your premiums will probably be deducted from your paycheck each month. Some employers may pay all or some of your premium costs for you.

Copayments. Copayments are amounts you pay to receive covered medical services. For instance, you will typically pay a copayment each time you go to the doctor or fill a prescription. Copayments may vary by service and are usually more expensive for emergency or specialized care.

Deductibles. A deductible is the amount you must pay out of pocket before the HMO will pay. HMOs generally don’t have deductibles. However, a state-mandated HMO plan may require you to meet a deductible for services performed outside its network or service area.

Some plans may cap your out-of-pocket expenses. If the amount you must pay on your own exceeds a specified amount within a certain time period, you no longer have to pay copayments or coinsurance for the remainder of that period.

What the HMO will Pay

HMOs pay the cost for covered services in excess of the copayment. For example, if your HMO requires a $20 copayment for a doctor visit and the doctor’s contracted rate is $80, you would pay the $20 copayment, and the HMO would pay the remaining $60.

Physicians and providers in an HMO’s network may only bill you for deductibles or copayments that you owe for covered services. They may not bill you for covered services if the HMO fails to pay or only partially pays.

HMOs only pay for services they deem “medically necessary” and usually don’t cover health care services you receive outside the network. You will likely have to pay the full cost of out-of-network care, except in the following situations:

You have a medical emergency and seek treatment in an emergency facility. Make sure you understand how your HMO defines a medical emergency and whether there are any special procedures you must follow. For instance, you may be required to notify your HMO within a certain amount of time if you received emergency care outside your network or service area.
You need a covered service that is medically necessary and is not available from providers within your HMO’s network.
You have a point-of-service option. This is a special provision that allows you to go to non-network providers if you’re willing to pay a greater share of the cost.

HMO members usually do not have to file claims or wait for reimbursements, but there may be times, when you have to pay for services when you receive them. For example, you may have to pay for emergency care up front if an out-of-network provider requires payment. You would then need to submit a claim to your HMO for reimbursement.

Service Areas

HMOs provide services within specific geographic areas, which may include all or part of a particular county. To be a member of an HMO, you must live or work in its service area. To learn whether an HMO is available in your area, call the Texas Department of Insurance (TDI) Consumer Help Line or visit our website

1-800-252-3439
463-6515 in Austin
www.tdi.state.tx.us

If you travel often or are away from home for long periods at a time, an HMO may not be right for you because of the requirement to use network providers for most of your health care. Dependents who are students living outside the service area to attend school will also have to travel to the service area to receive routine care. There is still an exception if a covered student receives emergency care outside the service area. The service area requirement does not apply to children for whom you are required to provide court-ordered medical child support.

Point-of-Service Option

Some HMOs offer a point-of-service (POS) option that allows for greater choice of providers. With a POS option, you can use out-of-network providers, but you’ll have to pay a higher share of the cost than you would for using providers in the network.

Not all HMOs are required to offer a POS option. However, state law requires HMOs to offer the POS option to members with a plan sponsored by an employer with more than 50 full-time workers.

Delegated Networks

Some HMOs contract with “delegated networks” to provide certain services. A delegated network is an entity that arranges for or provides medical care to an HMO’s members in exchange for a predetermined payment from the HMO. Some delegated networks require the member to receive services only from providers in the network.

HMOs are responsible for monitoring the services provided through its delegated networks. Delegated networks are required to comply with the same state laws and regulations as HMOs.

Delegated networks are prohibited from billing HMO members or collecting any payment other than authorized copayments or deductibles. If you have a concern about the care you receive through a delegated network, contact your HMO representative.

Your Primary Care Physician

One of the first things you’ll do when you join an HMO is choose a primary care physician from a list of network doctors your HMO will provide. You can change your primary care physician to another in-network doctor, but HMOs may limit switching to four times a year.

It’s a good idea to talk to the doctor you’re considering as your primary care physician before making a decision. Also talk to family members and friends who’ve used the doctor and ask if they were satisfied. Ask about the doctor’s style of care, office hours, how long it takes to get an appointment, charges for appointment cancellations, and any other questions that might help you decide.

Your primary care physician will coordinate and supervise all your routine care, checkups, and referrals to specialists. An HMO will generally not pay for any care you receive without a referral from your primary care physician. There are exceptions for emergency care, obstetrician/gynecologist visits, including one well-woman exam each year, and any care related to pregnancy.

If you make an appointment for routine care, a doctor’s assistant or advance-practice nurse may see you instead of your primary care physician. This is another way HMOs control costs. Even though the assistant treats you, you still pay the regular copayment. You have the right to see your primary care physician in person if you choose.

Drug Formularies

Many HMOs use “drug formularies” as another way to control costs. Formularies are lists of medications that HMOs authorize providers in their networks to prescribe.

Formularies are not regulated. Each HMO may decide which drugs to include on its formulary. If an HMO doesn’t cover a specific drug, network providers may prescribe a similar drug that is on the formulary.

Most HMOs must cover any prescription drug – whether or not it is on the formulary – that your doctor prescribes for a chronic, disabling, or life-threatening illness, as long as

the illness is covered by the plan
the HMO offers at least some form of prescription drug coverage
the drug is approved by the U.S. Food and Drug Administration and recognized in a prescription drug reference book
the drug has been approved in peer-reviewed literature for treatment of the patient’s illness.

The only exception to this requirement is for HMO plans sponsored by small employers. (Small employers are defined as having two to 50 eligible employees. Eligible employees are those who usually work at least 30 hours per week; are not temporary, part-time, or seasonal; and are not already covered by another group health plan.)

If an HMO drops a drug from its formulary that you’re already taking, it must continue to cover the drug until your plan’s next renewal date. However, this does not prevent a physician from prescribing a different medically appropriate drug that is on the plan’s formulary.

Any HMO group plan that includes a prescription drug benefit must tell you whether or not it uses a formulary, how it works, and which drugs are on the list. You may also contact the plan to find out whether a specific drug is on the formulary. The HMO must respond within three business days.

Denial of Services, Treatments, or Medications

An HMO will almost always deny coverage for any service, treatment, or drug prescription that is not medically necessary. The process HMOs use to determine if something is medically necessary is called “utilization review.”

Reviews are made on a case-by-case basis and generally must be conducted before any health services are provided, except for basic, routine care. The law requires HMOs to use a physician’s “best medical judgment” as the deciding factor in any utilization review.

All HMOs must have an internal appeals procedure to allow members to challenge a plan’s denial of medically necessary services, treatments, and medications not on the HMO’s formulary.

After you exhaust your appeal rights within the HMO, you can contact TDI to request that an Independent Review Organization (IRO) review the denial and make a determination. The HMO must pay for the review. The IRO’s decision is binding on the HMO.

An IRO review is only available if the HMO decides that the covered service or treatment is not medically necessary. An IRO review is not available if the denial was issued because your contract excludes the service or treatment.

Not all health plans are required to participate in the IRO review process. Contact your plan to find out if an IRO review is available. You also have the right to sue an HMO for harm caused by any treatment decisions.

For more information about TDI’s IRO process, call the HWCN Information Line

1-866-554-4926
322-3400 in Austin

Your Rights in an HMO

In addition to the appeals process, HMOs must have a procedure to resolve complaints from members. HMOs may not cancel or retaliate against a group contract holder (employer), a doctor, or a patient who files a complaint or appeals a decision.

HMOs may not prohibit doctors from talking to you about your medical condition, treatment options, and terms of your health care plan, including how to appeal an HMO’s decision. An HMO also may not provide financial rewards to doctors for withholding necessary care.

If an HMO fails to pay or only partially pays for a covered service, network physicians and providers are prohibited from billing you for the remainder.

Texas law provides additional protections by requiring that HMOs

have adequate personnel and facilities
make covered health care services available within a certain distance of your home or workplace
allow referrals to out-of-network providers when medically necessary covered services aren’t available within the network
allow members to change a primary care physician up to four times a year
allow members with chronic, disabling, or life-threatening illnesses to use specialists as their primary care physicians under certain circumstances
allow members with terminal illness, disability, life-threatening condition, or pregnancy to temporarily continue seeing providers no longer with the network if the provider agrees to continue treatment at the HMO’s contracted rat
pay for emergency care if not getting immediate medical care could place your health – or the health of your unborn child if you’re pregnant – in serious jeopardy. If a facility outside the HMO’s network provides emergency care, the member may be transferred to a network facility and physician once the patient’s condition is stabilized.

Deciding on an HMO

When evaluating any type of health plan, be sure you understand the coverage it provides. Choose a plan with the highest level of coverage you can afford.

If you have a choice between an HMO and a traditional health care plan, consider the trade-offs. In an HMO, you will likely have lower overall costs, but you lose some freedom of choice in providers. In a traditional health plan, your costs can be higher, but you can choose your providers without restriction. Ask yourself if you’re willing to potentially end a long-standing relationship with a doctor or health care provider who is not in the HMO’s network.

In addition to cost, consider the HMO’s customer service record. Consumer complaints against the HMO are a good indicator of the service you can expect. You can learn an HMO’s complaint history by calling TDI’s Consumer Help Line or by using the “Company Lookup” feature on our website.

When deciding on an HMO, carefully review the plan and the benefits booklet. Ask the HMO’s representative or your employer’s benefits coordinator the following questions:

Is my current family doctor in the HMO’s network?
Which specialists will the plan allow me to see?
Which hospitals are in the HMO’s network?
Where are the plan’s doctors and hospitals located?
What will my expenses (premiums and copayments) be?
What is the maximum amount I’ll have to pay out of pocket?
Is there a deductible I have to meet before the HMO will pay for emergency services performed outside the service area or for services performed by a non-network physician or provider?
How many members left the health plan last year?

HMO Report Cards

The National Committee for Quality Assurance is an independent health-care monitoring organization that accredits HMOs and issues annual report cards for managed care plans. To learn more about a plan or an HMO, call the NCQA or visit its website

1-888-275-7585
www.ncqa.org

The Texas Office of Public Insurance Counsel (OPIC) issues two annual reports that compare and evaluate HMOs in Texas. “Comparing Texas HMOs” includes results of a survey asking members to rate their plans, the quality of care they receive, and their doctors. This report also provides the number of customer and doctor complaints against HMOs. “Guide to Texas HMO Quality” compares detailed data on quality of care delivered by Texas HMOs. To request a copy of these reports, call OPIC or visit its website

1-512-322-4143
www.opic.state.tx.us

Filing a Complaint

If you have a problem with an HMO, first file a complaint through the HMO’s internal complaint process. If the problem persists, TDI may be able to help. Call our Consumer Help Line.

TDI handles complaints about the quality or availability of HMO medical care and administrative procedures (claims, billing, enrollment, appeals, etc.). A complaint form is available on our website or by calling the Consumer Help Line. Send your complaint along with copies of any related documentation to

Texas Department of Insurance
HMO Quality Assurance (103-6A)
P.O. Box 149091
Austin, TX 78714-9091
1-512-490-1012 (fax)

If the problem involves medical treatment provided by your doctor, you may want to call the Texas Medical Board

1-800-248-4062

For More Information or Assistance

For answers to general insurance questions or for information on filing an insurance-related complaint, call the Consumer Help Line between 8 a.m. and 5 p.m., Central time, Monday-Friday, or visit our website

1-800-252-3439
463-6515 in Austin
www.tdi.state.tx.us

For printed copies of consumer publications, call the 24-hour Publications Order Line

1-800-599-SHOP (7467)
305-7211 in Austin

Help us prevent insurance fraud. To report suspected fraud, call our toll-free Fraud Hot Line

1-888-327-8818

To report suspected arson or suspicious activity involving fires, call the State Fire Marshal’s 24-hour Arson Hot Line

1-877-4FIRE45 (434-7345)

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