What is an HMO?

Choosing the right health plan can have a major impact on your healthcare costs, provider access, and overall experience. With many types of health insurance plans available, understanding how each option works can help you make a confident decision. A health maintenance organization (HMO) may be a good fit if you’re looking for affordable coverage and a coordinated approach to care.

In this article, we'll cover how HMOs work and how they compare to other health plans.

In this blog post, you'll learn:

• The pros and cons of HMO health plans.
• How an HMO compares to a PPO, EPO, and POS.
• How an HRA can help you pay for individual health insurance premiums

How HMOs work

An HMO is a type of health insurance plan that provides healthcare services to its members through a specific network of doctors, hospitals, and other healthcare providers. HMOs emphasize preventive care and typically require members to choose a primary care physician (PCP) who acts as the first point of contact for most health concerns. The PCP is responsible for providing general medical services and coordinating any additional necessary care.

Key characteristics and workings of an HMO include:

• Network of providers: Members are generally required to receive care from a specific network of healthcare providers, except in emergencies. The HMO establishes this network for services to control costs and ensure quality care.
• Referrals required for specialists: If members need to see a specialist, they typically require a referral from their primary care provider. This gatekeeping approach helps coordinate and manage care while also controlling costs.
• Focus on prevention: HMOs emphasize preventive care services, aiming to prevent illnesses before they occur. This includes regular check-ups, screenings, and vaccinations.
• Cost structure: HMOs typically have lower premiums and out-of-pocket costs than other types of plans. This makes HMOs a more affordable option for many individuals and families.

Advantages of HMOs

KFF¹ found that 12% of covered workers enrolled in HMO plans in 2025. Remodel Health’s 2026 National ICHRA Report, which combines data from Remodel Health and PeopleKeep members, found that 45% of customers’ employees enrolled in an individual HMO plan, the most popular choice.

Pros of HMO plans include:

• Lower out-of-pocket costs. This type of health plan often has lower monthly premiums and predictable copayments compared to many other plan types.
• Simplicity in choosing providers. When you sign up for an HMO plan, you pick a PCP to serve as your main healthcare contact. Your primary physician oversees your general healthcare, manages your treatment, and provides referrals for specialist visits when necessary.
• Coordinated care. Due to their healthcare provider network, HMO members often have clear guidance on where to seek necessary care. Plus, with your PCP as your healthcare advocate, you can build a close relationship that may lead to more personalized and consistent care.

Disadvantages of HMOs

Although HMO plans offer appealing benefits, there are potential drawbacks you should consider before choosing to enroll.

Cons of HMO plans include:

• Restricted choice of healthcare providers. You can only use in-network providers if you want your HMO to cover the cost of your care. If you see a medical provider who's not on your HMO's list of doctors, you're responsible for the entire medical bill.
• Specialist care requires referrals. If your PCP doesn't refer you to an in-network specialist, your HMO won't cover the cost of your visit. Additionally, you may not be able to get in-network care from your preferred specialists.
• Potential for limited healthcare coverage while traveling. If you're outside your network for care and need treatment, your HMO plan covers it if it's a medical emergency. But your policy specifies what's considered an emergency. If your situation doesn't meet the criteria, you have to cover the healthcare bill yourself.

Is an HMO right for you during Open Enrollment?

Open Enrollment is an important time to review your health insurance options and decide whether your current plan still meets your healthcare needs. If you’re comparing plans for the upcoming coverage year, an HMO may be a good fit if you’re looking for affordable coverage, predictable costs, and a coordinated approach to care.

Before choosing an HMO plan during Open Enrollment, consider:

• Your preferred doctors and hospitals. Because HMOs typically require members to use in-network providers, it’s important to confirm that your preferred doctors, specialists, and healthcare facilities are in the plan’s network. Receiving care outside of the network may result in higher costs or no coverage, except in emergency situations.
• Your healthcare needs. If you frequently visit specialists or manage ongoing health conditions, review the plan’s referral requirements and care coordination process. HMOs typically require members to choose a primary care physician (PCP) who provides referrals for specialist care.
• Your budget. HMOs are often among the most affordable health plan options, with lower monthly premiums and predictable copayments compared to many other types of coverage. If keeping healthcare costs manageable is a priority, an HMO may be worth considering.
• Your prescription needs. Before enrolling, review the plan’s prescription drug coverage to ensure it includes your current medications.

How much does an HMO plan cost?

Value Penguin found that an HMO plan costs an average of $480 per month², but this number varies depending on several factors, such as your age³.

Comparing HMOs with other health insurance options

Now that you've familiarized yourself with HMOs, let's see how they compare to other health plans. While HMOs beat other plan types in price, they may lack in healthcare coverage and flexibility.

HMO vs. EPO plan

Exclusive provider organization (EPO) plans cost slightly more than HMOs on average. They offer coverage only for in-network providers, except for emergency care. If you go out of network, you'll pay the full cost of treatment, just like with an HMO. However, EPOs don't require primary care doctors. You can also see specialists without a referral, which makes it easier to get the medical care you want without added delays. According to our 2026 National ICHRA Report, EPOs are the second most popular plan type, after HMOs, among our customers.

HMO vs. PPO plan

Preferred provider organization (PPO) plans are the most common type of plan on the group market. While PPOs cost more than HMOs, they offer greater flexibility. With this type of plan, you can typically visit both in-network and out-of-network providers, although out-of-network care usually comes with higher costs. Additionally, you can consult specialists without needing a referral.

Learn more about how these plans compare.

HMO vs. POS plan

Point of service (POS) plans provide coverage for both in-network and out-of-network care. But, similar to a PPO, you pay more when you visit a doctor outside the network. Like an HMO plan, a POS plan requires members to pick a primary physician and seek a referral for specialist visits.

Cost of an HMO vs. other health plan types

The table below highlights how these health plans compare in terms of average monthly premiums, according to data from ValuePenguin.

Does an HMO health plan work with an HRA?

More employers are starting to offer health reimbursement arrangements (HRAs) instead of traditional health insurance coverage. This allows them to reimburse employees for the cost of their individual health plans instead of buying a group plan for them.

If your employer offers you a stand-alone HRA, such as the individual coverage HRA (ICHRA) or qualified small employer HRA (QSEHRA), you can submit your qualifying individual HMO monthly payments for reimbursement.

If your employer’s plan design allows it, you can also receive reimbursement for more than 200 types of eligible expenses, including:

• Doctor visits
• Prescription drugs
• Over-the-counter medication

To receive reimbursement from your employer, you need to submit proof of health coverage and your receipts for eligible expenses. If your employer uses PeopleKeep by Remodel Health to administer their HRA, you can submit your documents through the software. Our team of experts reviews your documents and lets your employer know when they're approved for reimbursement.

Additionally, you can enroll in individual coverage, such as an HMO, right from your PeopleKeep account during Open Enrollment.

Conclusion

With several types of health plans to choose from, it's important to understand the intricacies of each one. Overall, HMOs aim to provide efficient and cost-effective care for their members. However, the trade-off for lower costs is reduced flexibility with doctors and specialists. If these limitations don't bother you, an HMO is an affordable way to maintain your health and well-being.

This blog article was originally published on May 7, 2025. It was last updated on August 13, 2026.

References

1. KFF 2025 Employer Health Benefits Survey
2. ValuePenguin: HMO Plan Basics
3. Forbes: How Much Does Health Insurance Cost?