What is a 'health maintenance organization' (HMO)?

A health maintenance organization (HMO) is a type of managed care health insurance plan that requires members to receive their healthcare services from a specific network of providers. The essence of an HMO is to promote preventive care and manage healthcare costs by limiting the selection of healthcare providers and facilities that members can use. Members of an HMO typically must choose a primary care physician (PCP) who coordinates their care and refers them to specialists within the network as necessary.

The structure of an HMO encourages the use of in-network providers, which often results in lower out-of-pocket costs for members compared to out-of-network care. This model emphasizes the importance of primary care and preventive services to manage health and reduce the need for more extensive medical care later.

In contrast, other options describe features or qualities that do not align with the fundamental principles of an HMO. For example, requiring a second opinion refers to a different process that may not be exclusive to HMOs, while allowing freedom to choose any provider is more characteristic of preferred provider organizations (PPOs). The notion of providing emergency services only does not encapsulate the comprehensive care focus of an HMO but rather suggests a limited scope of service. Thus, the defining characteristic of an HMO relates directly