The History of HMO Plans

Introduction:As time went on, the Insurance companies added
Health Maintenance Organization Plans - HMO Plansmore and more rules each time the doctor's
for short - are a type of managed care program.contract was renewed. The popularity of the
The idea behind managed care programs is thatHMO Plans meant that the majority of their
maintaining good health will be achieved bypatients had HMO plans so they accepted the
preventing disease and providing quality care. Bynew conditions. New terms included seeing more
maintaining good health, it is believed thatpatients, more stringent confidentiality
escalating health care costs can be controlled.agreements, and more services requiring
When HMO Plans were first introduced, memberspre-approvals.
paid a fixed, prepaid monthly premium inUp until the 1980's most members agreed that
exchange for health care from a contractedHMO's were a great health plan. However, by the
network of providers. The contracted network ofend of that decade, faced with mounting numbers
providers includes hospitals, clinics and health careof denied claims, members began to sour on the
providers that have signed a contract with theHMO Plans.
HMO. In this sense, HMOs are the most restrictiveWhat led to the increase of denied claims? It
form of managed care plans because theywasn't a result of the claims themselves; it was a
restrict the procedures, providers and benefits byresult of bad investments by the insurance
requiring that the members use these providerscompanies.
and no others.During the real estate boom, the insurance
History:companies thought it would be a good idea to
HMOs were intended to take health care in a newinvest in real estate deals. Unfortunately, when
direction. They were designed by the governmentthe savings and loan industry crashed along with
to do away with individual health insurance plansreal estate values, insurance companies began to
and to make affordable health insurance availablelose money. These losses resulted in their coming
to everyone. At that time employers wereup short to cover the claims of their HMO
purchasing individual health insurance plans for theirmembers.
employees ~ a costly expense that many wereThus began the practice to deny the claims of
starting to forego.the HMO Plan members. The insurance companies
The Health Maintenance Organization (HMO) Actdenied claims on the basis that they were too
was approved by President Nixon in 1973. Theexpensive or medically un-necessary. At that
managed health care plans were subsidized by thetime, members and their doctors did not fight
government and the new HMO-type systemsthese denials and because the insurance company
began to grow, typically organized by businessesgot away with the denied claim process so well,
and community groups eager to make health carethey have continued to do this as part of their
available to their workers and members at costsoperating procedure.
they could better afford. This subsidy createdHowever, a new concept has sprung up in recent
deals from the insurance companies to lure theseyear ~ HMO Law.
businesses to buy these new discounted low costThere are now lawyers and law firms dedicated
health plans for their employees instead of theto bringing cases against HMO's. These claims
costly individual health plans.include wrongful death, bad faith and medical
Feeling the power of the government behindmalpractice. This means that an HMO can be sued
them and the frantic desire of employers to enrollwhen a person dies as a result of the HMO
their employees in these new HMO Plans,denying coverage for necessary medical
insurance companies began to apply pressure totreatment; for the denial of valid claims; and for
doctors to join an HMO. Doctors were told that ifmedical malpractice on the part of one of its
they didn't join, the insurance company would findphysicians.
doctors who would join and they wouldAdditionally, individual states are tightening up their
effectively take all their patients away. Thus,laws governing HMO Plans.
doctors ended up joining an HMO so they wouldIn future articles we will discuss how HMO's work,
not lose their patients and subsequently theirthe types of HMO Plans, the cost of the plans
entire practice.and the future of the plans.