Health Maintenance Organizations (HMOs)
Health Maintenance Organizations (HMOs) provide preventive care and other services that are basic to good health. It is a health care system that joins together the financing and delivery of health care services to covered individuals by arrangement with selected providers who furnish a broad set of health care services. If you have health care coverage through an HMO, there is a provider network to provide covered health services. Be sure to follow your HMO's network rules when you need care.
The HMO must employ or contract with health care providers who undertake a continuing responsibility to provide health care to enrollees.
BEFORE CHOOSING AN HMO:
If you decide to purchase health care coverage from an HMO, your choices are limited to the HMOs that contract with your employer or serve your county. It's a good idea to check the HMO's provider directory to see what doctors and hospitals participate with the HMO to see if your doctors are in its network. However, it's important to remember this list can change at any time. You may also wish to visit and compare the network's facilities (clinics, hospitals) before making a final decision.
THE HMO DIFFERENCE:
Health coverage under an HMO is provided primarily through its contracted provider network. HMOs are responsible for the availability, accessibility and quality of health services provided. Depending on your health status an HMO may have special programs designed to address your situation.
Typically compared to a "traditional" fee-for-service plan, HMOs have fewer out-of-pocket costs for the enrollee, including smaller copayments and deductibles. HMOs cover preventive care and may cover prescription drugs. When visiting network providers, claims are filed directly to the HMO. In addition, every HMO licensed in Michigan must have formal procedures to appeal decisions to which you disagree. Further information on formal procedures to appeal decisions is available at Health Coverage Grievances and Appeals.
An HMO may not provide coverage if you receive health care services from a doctor, hospital or other health care provider outside its network or service area, and you may need a referral to see a specialist. HMOs might not be your best choice if you travel regularly, or have a specific physician you want to see that is not part of the HMO's provider network. Also, you have no guarantee that doctors and hospitals in your HMO's provider network will stay in the network.
PRIMARY CARE PHYSICIAN:
A primary care physician (PCP) is a contracted physician (general or family practitioner, internist, pediatrician and sometimes obstetrician/gynecologist). HMOs use PCPs to serve as the initial screening, testing, treatment and referral source for members. Generally, the PCP assumes continuing responsibility for the overall course of treatment of the member. PCPs often act as gatekeepers for HMOs, determining if a member's illness requires treatment by specialists, and/or hospital care. A member usually selects a network PCP at the time of initial enrollment with an HMO and can change PCPs with prior notification to the HMO.
HMO PROVIDER NETWORK:
Generally, at the time of initial enrollment in an HMO a provider directory is provided to a member. In addition, at any time a member may request an HMO to provide its provider directory. As an HMO's provider network is subject to change, contacting the HMO's member services department will be able to provide current provider information. In addition, some HMOs provide current information regarding their provider network through its web site.
If your primary care physician, or plan physician with whom you are undergoing a course of treatment, leaves the HMO network, under certain circumstances you may be allowed to:
- Continue an ongoing course of treatment for 90 days
- Continue postpartum care directly related to a pregnancy if the member is in the second or third trimester of pregnancy at the time of the physician's termination
- Continue treatment, if the patient is determined to be terminally ill prior to the physician's termination through the remainder of the patient's life for care directly related to the treatment of the terminal illness
HMO SERVICE AREA:
If you wish to purchase health care coverage from an HMO, it's important to remember that each HMO has a specific territory or "service area," where it may sell its contracts and have its own eligibility requirements.
A service area for an HMO is a geographic area where health services are generally available and readily accessible to members and where an HMO may market its products. In Michigan, service areas are full or partial counties.
Your coverage may continue, or it may be terminated if you move out of the HMO's service area. Contact your HMO to determine if your move outside of its service area affects your eligibility for coverage or continued coverage. See HMO Service Areas.
Eligibility to join an HMO may depend on certain factors
- Where you live
- Your employer or association
- Open enrollment requirements
INDIVIDUAL OPEN ENROLLMENT FOR HMOs:
Most HMOs that issue individual policies are required by Michigan law to annually hold an open enrollment period for not less than 30 days for eligible Michigan residents. You are not considered eligible for enrollment during the HMO's open enrollment period if you are eligible for Medicare, Medicaid or continuation or conversion of a group policy. This rule does not apply to the Health Insurance Portability and Accountability Act (HIPAA) eligible individuals. During an HMO's individual annual open enrollment period the number of new applications an HMO accepts is limited. However, an HMO cannot use underwriting to reject an individual applicant during the annual open enrollment period. See HMO Open Enrollment.
HMO COVERAGE FOR PRE-EXISTING CONDITIONS:
If your health care coverage is provided through your employer, HMOs cannot make you wait before covering a pre-existing condition. If you individually purchase your health care coverage through an HMO, it may exclude or limit coverage for a condition for a period not to exceed six months after the effective date of coverage.
In a group plan, the HMO cannot reject individual members. If an HMO accepts a group, the entire group must be covered. Under Michigan Law and the federal HIPAA, an HMO must continue to renew a group policy once it accepts the group.
HMOs may use underwriting to reject an individual applicant, except during open enrollment.
HMO BASIC HEALTH SERVICES AND MANDATORY COVERAGE:
Every HMO must provide coverage for basic health services, which includes:
- Physician services including consultant and referral services by a physician, but not including psychiatric services
- Ambulatory services
- Inpatient hospital services, other than those for the treatment of mental illness
- Emergency health services
- Outpatient mental health services
- Limited intermediate and outpatient care for substance abuse
- Diagnostic laboratory and diagnostic and therapeutic radiological services
- Home health services
- Preventive health services as required under the Affordable Care Act (Preventive Services List)
Other mandatory covered services include:
- Prosthetic devices to maintain or replace body parts of an individual who has undergone a mastectomy
- Mental health services provided by a mental health care provider operated by or under contract with the Michigan Department of Community Health or county community mental health board
- Hospice care
- Breast cancer diagnostic services, outpatient treatment services, rehabilitative services and breast cancer screening mammography
- Antineoplastic therapy (chemotherapy for cancer treatment) and cost of its administration
- Program to prevent the onset of clinical diabetes, including coverage for blood glucose monitors, test strips, and insulin pumps
- Off-label use of a federal Food and Drug Administration (FDA) approved drug (only applies if you have pharmacy coverage through the HMO)
- Coverage for obstetrical and gynecology services provided by a physician or nurse midwife
Remember, even though HMOs provide all the basic and mandatory health services listed above, medical necessity is a very important part of determining coverage. You may not be covered for a health service or treatment if the HMO determines the procedure is not medically necessary.
SERVICES NOT COVERED BY HMOs:
HMOs must cover any basic and mandatory health services that are medically necessary. If the HMO determines a service you want is not medically necessary, payment for that service may be denied. An HMO usually excludes procedures it considers to be experimental, investigational, or cosmetic but in some situations coverage may be provided with prior authorization. HMO contract language must be clear and name exclusions specifically.
Many HMOs exclude coverage for treatment that is not medically necessary. Medical necessity is a matter of judgment and your HMO contract may not agree with your doctor's judgment of what treatment is medically necessary.
GOING OUTSIDE THE HMO NETWORK:
An HMO shall ensure that members obtain medically necessary covered benefits. An HMO must permit you to go outside its network for any basic or covered service it cannot provide through its provider network. If you can only receive a basic or covered service through an out-of-network provider you will not be required to pay any more than if covered benefit were obtained from a participating provider. Prior approval from your HMO may be required to obtain coverage for services provided through an out-of-network provider.
In many cases, your primary care physician must refer you to a specialist within the network in order for you to be covered. However, women cannot be required to get a referral in order to see a plan obstetrician-gynecologist for annual well-woman examinations and routine obstetrical and gynecologic services. In addition, no referral is required to see an HMO's pediatrician for general pediatric care services. Some HMOs allow direct access to a network specialist without obtaining a referral.
In most circumstances you must obtain your HMO's prior approval to obtain coverage for health services provided by a non-contracted specialist. Some HMOs may cover health services provided by a non-contracted specialist. Always review your HMO's certificate of coverage and discuss your needs to see a non-contracted specialist with your HMO prior to obtaining services.
EMERGENCY SERVICES FROM AN HMO:
You are not required to use the HMO's network hospitals, providers or facilities in the case of a medical emergency. However, if your HMO determines your condition was not an emergency, it could refuse to pay the emergency room charges.
An HMO is required to provide coverage for medically necessary emergency health care services provided to an enrollee for the sudden onset of a medical condition that includes signs and symptoms of sufficient severity, including severe pain, such that the absence of immediate medical attention could reasonably be expected to result in the following:
- Serious jeopardy to the individual's health
- Serious impairment to bodily functions
- Serious dysfunction of any bodily organ or part
An HMO cannot require a physician to transfer a patient before the physician determines that the enrollee has reached the point of stabilization. An HMO cannot deny payment for emergency health services up to the point of stabilization provided to a patient because of either of the following:
- The final diagnosis
- The HMO did not give prior authorization before emergency health care services were provided
HMOs are required to provide coverage for medically necessary emergency care outside of its service area. If you receive emergency care outside of the HMO's service area you should contact your HMO within 48 hours.
HMO PRESCRIPTION DRUG COVERAGE:
In Michigan, HMOs are not required to cover prescriptions. However, HMOs that do provide prescription coverage may have a list of drugs it will pay for. This list is called a formulary. Michigan law requires HMOs to provide for exceptions from the formulary when a non-formulary alternative is medically necessary and an appropriate alternative.
ADDITIONAL HMO PRODUCTS:
In addition to traditional HMO products, some HMOs offer the following products:
- A point-of-service product which allows for covered health services to be provided by an out-of-network provider (usually with higher out-of-pocket costs)
- Medicare Advantage
- Medicare Supplement (Medigap)
You should contact the individual HMO to obtain information regarding these products.
HMO DEDUCTIBLES, COPAYMENTS AND COINSURANCE:
In addition to your monthly premium payments, most HMOs require you to pay some share of the cost for covered health care expenses.
- Deductible: A set amount that you have to pay toward covered expenses before the HMO contract starts to pay
- Copayment: A specified dollar amount which an HMO requires a covered person to pay toward eligible medical bills
- Coinsurance: A percentage of covered expenses which an HMO requires a covered person to pay toward eligible medical bills
You may be required to pay a deductible, copayment, or coinsurance whenever you receive health care services within the network. If you follow the HMO's rules, billing disputes are strictly between the network provider and the HMO. Under Michigan law, you are "HELD HARMLESS," and you aren't responsible for charges that are greater than the amount paid to the network provider by the HMO.
Copayments and coinsurance under an HMO contract are required to be fair, sound and reasonable. Coinsurance for basic health services, excluding deductibles, shall not be more than 50 percent of the HMO's reimbursement to a network provider for providing the health care service and shall not be based on the provider's standard charge for the service.
Once you've paid the copayment or coinsurance, excluding deductibles, the HMO will pay the balance of the bill directly to the network provider.
Important: Deductibles, copayments, and coinsurance costs are separate items. Services and costs not covered by the HMO contract do not satisfy deductibles or out-of-pocket maximums.
HMO CLAIM HANDLING:
If your health care coverage is through an HMO, the HMO pays its network providers directly. As long as you use network providers, you will not have to file claims.
If a network provider has a contract with your HMO, the provider is prohibited from seeking payment from you for rendered covered services. The only exception is that network providers are allowed to collect copayments, coinsurance or deductibles in accordance with your coverage. If you are being billed by a network provider and believe the claim should be paid by your HMO, you may want to contact the HMO's member services department. If you receive health care services from a non-network provider you may be responsible for any unpaid portion of the claim or the full amount.
HMO COVERAGE FOR FAMILY MEMBERS and COORDINATION OF BENEFITS:
If you belong to an HMO, and have dependent coverage your HMO shall cover eligible family members (dependents) in accordance with the HMO's eligibility policies. Check with the HMO to determine if your dependents are eligible for coverage.
New dependents receive health care coverage at the moment of birth, adoption or marriage. However, you will need to notify your HMO within 31 days of the change to have the dependent added to your coverage. You may be required to pay additional premiums.
New additions have the same coverage as the subscriber and current dependents.
If you and your spouse both work and have health care coverage through your employers, you and your dependents may be covered by both plans. The HMO must follow Michigan's coordination of benefits (COB) rule to decide which plan is primary, which one is secondary, and how much each of the plans must pay.
When you are the patient, your employer's health coverage is always primary and your spouse's plan is secondary. When your child is the patient, the plans follow the birthday rule. The spouse with the first birthday in the calendar year is the primary plan. If you are divorced or legally separated, the court decree is followed. If the decree doesn't designate which parent is responsible for the children's health care, the plan that covers the parent with physical custody is the source of primary coverage.
- Primary plan: This is the plan that pays first.
- Secondary plan: After the primary plan has paid its part, the secondary plan pays its appropriate portion.
There are many different possible situations and Michigan's COB rules cover most of them. The Michigan rules should be described in your HMO contract.
HMO COMPLAINTS and GRIEVANCES:
Each HMO is required by law to have an internal complaint/grievance process available to its members to address problems regarding a health care service. Information regarding the HMO's complaint/grievance process is contained in its member handbook and/or certificate of coverage. You should contact your HMO to begin the internal complaint/grievance process.
Once the HMO receives your written grievance, it must contact you in writing with its final determination within 35 calendar days. The HMO can request up to an additional 10 business days to obtain necessary medical information. If the issue involves coverage of a health care service, the HMO must advise you of your right to an external review with the Department of Insurance and Financial Services and provide you with the proper form to request an external review when it advises you of its final determination. You must exhaust the internal grievance process of the HMO before you can request an external review.
Further information about the internal grievance process and the external review process is available at Health Coverage Grievances and Appeals.
MEDICAID HMO CLEAN CLAIMS:
In 2000, the Michigan Legislature enacted MCL 400.111i to allow Medicaid providers to file clean claims with the Director of DIFS against Medicaid HMOs for timely payment. Ordinarily a clean claim must be paid within 45 days after receipt of the claim by the qualified health plan. A "clean claim" must meet certain criteria set forth in the legislation and must be submitted on form FIS 278. Additional information on clean claims is available here.
ADDITIONAL HMO INFORMATION:
HMO Consumer Guide
HMO Financial Information
HMO Service Areas
HMO Enrollment Information
HMO Accreditation Information
HMO Complaint Information
HMO Statutes - Chapter 35