HMO (Health Maintenance Organization)

An HMO is a health plan built around a primary care physician (PCP) who acts as the coordinator for all care. You pick a PCP at enrollment, see them first for most issues, and get referrals from them to see specialists. Out-of-network care generally isn't covered at all except in true emergencies.

The tradeoff is price versus choice. HMOs run 10 to 25 percent lower on premium than PPOs because the network is tighter and the PCP gatekeeper reduces unnecessary specialist visits and imaging. Kaiser is the classic vertically integrated HMO — same organization owns the plan, the clinics, and the hospitals. Most other HMOs contract with independent providers but hold them to tight referral protocols. HMOs are common on the individual market and in Medicare Advantage, less common on large-group employer plans (though they're growing again as employers look for cost control). The frustration point for members is usually the referral requirement — needing to wait for a PCP visit before seeing a specialist you know you need.

The takeaway: HMOs work well for people who value coordinated care and a lower premium and don't mind the referral step. They work poorly for people who want direct specialist access or who travel frequently.