The Good, Bad and Ugly HMO

HMO plans have good points and bad points. Ultimately, it’s a personal decision as to what you want.
Health maintenance organization plans (HMO) are what is commonly referred to as a managed care program. Generally speaking, their raison d’être is that maintaining your good health is possible by preventing disease and providing the best of care. If you take this one step further, with good health and working to keep things that way, the rising costs of health care across the nation may be controlled, if not reduced.

When these affordable health insurance plans first came on the scene, those who were enrolled paid a fixed monthly premium to get doctoring from a contracted network of service providers. That network included clinics, hospitals and other health care professionals who’d signed on the dotted line with the HMO. You might want to call this restrictive, because you only have access to just those within the network – period.

Nonetheless, HMOs seem to have their place in the grander scheme of things and have had since about 1973, when President Nixon approved the HMO Act. Those managed affordable health insurance plans were subsidized by the government and because of that, they started to spread their wings and grow. Competition was fierce then because of the subsidy, and thus health insurance companies could offer lower priced “deals.”

It used to be that HMO plans were bought by businesses for their employees because health insurance companies could give an organization a deal with the government subsidy to back them up. These were cheaper than individual health insurance plans. Then, insurance companies started lining up doctors to join an HMO. Evidently, the physicians were told if they didn’t join, the insurance company would find other doctors who would join and then take their patients away. Many doctors joined an HMO to keep their practices viable.

Over time, the insurance companies kept making changes to the doctor’s HMO contracts; things like the requirement to see more patients, offering more services that needed pre-approval and stricter confidentiality agreements. HMOs had their heyday until the end of the 1980s. By then, more and more claims were being denied and members started to leave in droves.

Claims were denied because the insurance companies had unwisely invested their money in real estate deals. With the savings and loan bust, insurance companies lost money. To make it back, they had to deny member claims to retain funds. Put another way, bad investments meant they couldn’t pay member claims, so they denied them. Unfortunately, the denials have continued until today. Although having said that, there is a difference now, in that there are more law firms and attorneys filing cases against HMOs; cases involving medical malpractice, bad faith and wrongful death.

What an eye-opening experience this has been for HMOs; the fact they may be sued when someone dies as a result of them denying coverage for necessary treatments, for denying valid claims and for med mal on the part of one of its physician members.

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