Should I Join a HMO in the FEHB Program?

HMO plans provide not just insurance, but also a different approach to health care delivery from traditional fee-for-service medicine. Therefore, although cost and benefit comparisons are the key considerations in assessing most plans, other factors are important in deciding whether to enroll in an HMO plan and, if so, which one.

There are two main types of HMO plans. One is the facility-based group practice where enrollees agree to receive their health care from a group of doctors working together at the plan's facilities and at hospitals chosen by the plan. The doctors usually are on salary or in a form of partnership. They generally are paid no more if their patients receive more extensive surgery or other medical treatment, thus, their incentives are different from those of doctors working in the traditional fee-for-service system, who can increase their incomes by increasing the amount of care. The Kaiser plans are the largest of this type.

A much more common type of HMO plan is the individual practice association (IPA). In IPAs, physicians agree to share costs and premium income. Each physician continues to practice in his or her own office and continues to serve some patients who are not plan members. All IPAs have a system to assure that physicians do not give costly, excessive service. In a typical system each physician negotiates a fee schedule with the plan. After seeing a patient, the physician bills the plan for the agreed fee, but the plan pays only part of the bill, such as 80 percent. The remaining 20 percent is kept in a reserve. If costs are held down, the plan will later distribute the reserve to the physicians. To protect against physicians who might deliver excessive services, a committee of physicians regularly reviews treatment practices of each physician. Joining an individual practice association plan is a more modest departure from the fee-for-service system than joining a group practice plan. Some have both groups and individual physicians. Each HMO brochure describes which of these models it uses, and how you get service.

Some features of HMO plans considered desirable by many consumers are:

  • They generally have systems for doctors to review each other's practices.
  • They eliminate the inconvenience of submitting claims for costs of services.
  • They assure you access to a group of doctors.
  • They prevent a doctor charging more than the plan will reimburse for a procedure.

Some features of HMO plans considered undesirable by many consumers are:

  • The IPA plans often have many participating physicians and hospitals, but rarely a majority of those in the community, and rarely prestigious facilities in other states, such as the Lombardi Center or Mayo Clinic. In contrast, the preferred provider panels offered by the national plans are generally far broader and cover many facilities around the country.
  • The group plans require you to go to one of their office locations except in emergencies. Some group plans have only a few locations. They limit your choice of doctor even further: to those who work for the plan. You will have to give up your existing doctors when you join a group plan. In contrast, IPA plans use doctors in private practice and your physician may well participate in one or more IPA HMOs.
  • Both types of plan impose barriers to obtaining care as rapidly as you might like, such as waits for the next available appointment for “non-urgent” visits or, rarely nowadays, obtaining the approval of a “gatekeeper” primary care physician to see a specialist.

Some features that you may or may not like are:

  • Some HMOs rely very heavily on mid-level professionals such as nurse practitioners and physician assistants.
  • HMOs generally put patients in hospitals less frequently and keep them there for a shorter time than fee-for-service physicians. This is the major reason HMOs usually have lower costs. Several studies have found no overall difference in medical outcomes between HMOs and traditional practice. On the other hand, if you want quick surgery to relieve a painful but not life-threatening problem, you may not want to wait while an HMO tries more conservative therapies.
  • Few HMOs offer the extra benefits to Medicare enrollees that are found in most national plans, although the number that do so is increasing.