Medicare HMO Plans: Breaking Down the Benefits in Detail

What Are Medicare Advantage HMO Plans?

Medicare Advantage, also known as Medicare Part C, is a health insurance plan offered by private insurance companies and regulated by Medicare. There are several types of Medicare Advantage plans, including health maintenance organization (HMO) plans.

Medicare Advantage HMO plans generally require covered individuals to seek healthcare services from doctors, hospitals, pharmacies, and other healthcare providers within the plan’s network. Exceptions apply for out-of-area urgent care, emergency care, and temporary out-of-area dialysis. These plans also typically require you to have a primary care provider and receive referrals before receiving specialist care.

Understanding Health Maintenance Organizations (HMOs) for Medicare Advantage

Medicare Advantage HMO plans offer the same coverage as Original Medicare and may also provide extra benefits, such as vision, hearing, and dental coverage, wellness benefits, and more. Many Medicare Advantage HMO plans also include Medicare Part D prescription drug services.

Other types of Medicare Advantage Plans, such as preferred provider organizations (PPOs), allow participants to receive in-network services at a discount or go out-of-network, typically with an additional out-of-pocket cost.

Key Features of Medicare HMO Plans

Medicare Advantage HMO plans:

• Require participants to seek services from in-network providers, with limited exceptions
• Typically require a primary care provider
• Typically require a referral to receive specialist care
• Moderate network size
• Typically lower-cost premiums when compared to other types of MA plans

Except in certain emergency and urgent situations, Medicare Advantage HMO plans require covered participants to stay within the pre-approved network. If you choose an out-of-network provider, facility, or pharmacy, you may be responsible for the cost of the services you receive.

Eligibility Criteria

To purchase a Medicare HMO or any other Medicare Advantage plan, you must already be enrolled in Original Medicare (Part A and Part B) and live in the plan’s service area. The plan must also be accepting new participants, and you must be within an applicable enrollment period.

What Do Medicare Advantage HMO Plans Cover?

HMOs offer at least the same coverage and services as Medicare Part A and Part B. This includes inpatient hospital care, surgeries, skilled nursing facilities, lab tests, and home health care. They also cover services provided by doctors and other health care providers, outpatient care, mental health care, ambulance services, and durable medical equipment. Generally, you can expect your Medicare HMO to cover medically necessary and preventative services.

Your Medicare Advantage HMO plan may include Medicare Part D prescription drug coverage. However, not every Medicare HMO includes drug coverage. It’s essential to check the details of the specific plan you’re considering. 

HMOs may also include extra benefits not covered under Original Medicare, such as hearing aids, glasses, dental services, gym memberships, and more.

Medicare Advantage HMO Plans vs. Other Types

Before choosing a Medicare HMO, it’s essential to understand your options. There are several other types of Medicare Advantage plans, each with its own unique features. Here’s a look at a few common plan types and how they compare to an HMO.

Medicare HMOs vs. PPO

Unlike a HMO, a preferred provider organization allows participants to receive healthcare services from doctors, facilities, and providers outside the plan’s network, although typically at an additional cost. These plans also do not require you to have a primary care provider or receive referrals for specialist care.

A PPO may offer you additional flexibility in choosing your healthcare providers. However, this comes at a cost. The premiums for Medicare PPOs are relatively high when compared to the premiums for Medicare HMOs.

Medicare HMOs vs. PFFS

A private fee-for-service (PFFS) plan is a type of Medicare Advantage plan that agrees to pay medical providers a set rate for various healthcare services. These plans also determine how much participants must pay for their covered medical costs.

Some PFFS plans have networks, while others do not. However, unlike a HMO, participants can seek care from any provider that accepts the plan’s payment terms, has not opted out of Medicare, and agrees to treat them. PFFS plans do not require a primary care provider or referrals for specialist care.

Medicare HMOs vs. SNP

A special needs plan (SNP) is designed for Medicare recipients with specific diseases or health care needs. These plans custom-tailor their benefits, drug coverage, and provider choices based on the specific needs of the groups they serve.

SNPs can be HMOs, PPOs, or HMO point-of-service (HMO-POS) plans. An HMO SNP requires covered individuals to stay within the plan network, while a PPO SNP allows for out-of-network services. An HMO-POS SNP allows you to seek services outside the network or see a specialist without a referral but with an additional out-of-pocket cost.

Medicare HMOs vs. HMO-POS

An HMO-POS plan is a Medicare HMO that also combines features of a point-of-service (POS) plan. This can provide participants with additional flexibility.

Under the HMO benefits of the plan, you choose a primary care provider (PCP) from your plan’s network. Your PCP oversees your care and provides you with referrals for specialists. The POS portion of the plan allows you to choose providers and facilities outside of the network and receive specialist care without a referral. However, this is covered at the POS benefit level, which is less than in-network coverage, requiring you to pay more out-of-pocket.

Medicare HMOs vs. MSA

A Medicare Medical Savings Account (MSA) combines a high-deductible Medicare Advantage plan and a medical savings account used to pay for various health care costs.

Medicare deposits funds into your MSA, and you can use these funds for medical and healthcare expenses, including those not covered by Medicare. This differs significantly from an HMO since it allows full freedom regarding healthcare providers, facilities, and services. Medicare MSAs typically do not have a network, allowing you to receive services from any Medicare-eligible provider.

Benefits and Drawbacks of Medicare Advantage HMO Plans

Many people choose Medicare Advantage HMO plans for their lower premium costs, but these plans are not suitable for everyone. Before purchasing a Medicare HMO, consider these important benefits and potential drawbacks.

Benefits

• Lower out-of-pocket costs: Typically, HMOs have lower copayments, coinsurance, and deductibles when compared to traditional Medicare plans.
• Coordinated care and personalized attention: HMOs require a primary care provider who coordinates your healthcare needs and can provide personalized attention.
• Comprehensive coverage options: These plans provide comprehensive coverage that includes preventative care, doctor’s visits, and hospital stays. Many also offer extra benefits not covered by Original Medicare, such as dental, hearing, and vision coverage.
• Prescription drug coverage: Many HMOs include Medicare Part D prescription drug coverage, which can result in significant savings for covered individuals who regularly take prescription medications.
• Health and wellness programs: Many HMO plans also include wellness programs, which can help you stay healthy and manage chronic medical conditions.

Drawbacks

• Limited choice of providers: Participants must choose from the HMO’s network of doctors, facilities, pharmacies, and other healthcare providers, which can limit your options. This may particularly be an issue if your preferred provider is not in-network.
• Referrals required for specialist care: Typically, HMOs require a referral from your primary care provider before you can see a specialist. This can be inconvenient if you need specialized care or you want to see a preferred specialist.
• Out-of-network services may not be covered: Healthcare services received outside of the plan’s network may not be covered except in emergencies or other specific circumstances. This can be a problem for those who live in rural areas or travel frequently.
• May have restrictions on certain treatments and procedures: Some HMOs require prior authorization before receiving certain treatments and tests. They may also have restrictions on approved treatments, tests, and medications.
• Extra benefits may come at an additional cost: While many HMOs offer extra benefits like dental, hearing, and vision services, there may be an additional cost.

Your Care Network with Medicare Advantage HMO Plans

Since Medicare Advantage HMO plans require participants to seek healthcare services from in-network providers, facilities, and pharmacies, it’s important to understand how Medicare HMO care networks work. This can help you optimize coverage and limit potential exposure to unexpected medical expenses.

Why Is It Better to Use In-network Care?

One of the primary benefits of using in-network providers is the potential to save a significant amount of money. A Medicare HMO plan negotiates lower prices with in-network providers, so you typically pay less than if you received the same service out-of-network or without health insurance.

HMOs typically also hold their participating providers to a certain standard, which may help ensure you receive quality health care. In addition, providers bill the plan directly, ensuring you will not have to pay costs other than your predetermined deductible and copay. If your service requires coinsurance, the insurance company bills you for this predetermined percentage at a later date.

How Do Medicare HMO Plans Cover Out-of-network Care?

HMOs typically do not cover services provided by out-of-network providers or facilities. However, exceptions are made for emergency care, out-of-area urgent care, and out-of-area dialysis.

If you seek medical care outside your plan’s network and an exception does not apply, you may be responsible for paying the entire medical bill out-of-pocket.

How to Find In-network Care

To find a doctor, facility, pharmacy, or other healthcare provider within your plan’s network, contact your plan’s customer service department directly by phone or check the plan’s website. You can also reach out to the provider and ask if they are a part of your plan’s network.

The Costs of a Medicare Advantage HMO

There are several cost components involved in a Medicare Advantage HMO. This includes:

• Premiums: The amount you pay your plan provider for your coverage, regardless of whether you have covered expenses. When you enroll in a HMO, you continue to pay your Medicare Part B premiums ($164.90/mo. in 2023) and may have additional premiums for your Part C coverage. 
• Deductibles: The amount you’re responsible for paying towards your covered medical expenses before your plan begins making payments.
• Copays: A set dollar amount is required for each service rendered. For example, a plan may have a copayment of $20 for each doctor’s visit or $10 for prescription medications.
• Coinsurance: The percentage of covered medical expenses you’re responsible for paying after meeting your deductible. For example, you may own 20% of your medical bill.
• Out-of-network fees: When receiving care from an out-of-network provider, you may be required to pay the entire cost of service. A Medicare HMO with a point-of-service (POS) component may cover out-of-network services but charge additional out-of-pocket costs.
• Out-of-pocket maximums: Medicare HMOs must set an annual limit to your out-of-pocket spending. In 2023, this limit is $8,300. However, some plans may have lower maximums. 

See It in Action

To truly understand how Medicare HMO billing works, it’s helpful to review an example. 

Assume you’re covered by a Medicare Advantage HMO, and you need to see a specialist. Since these plans require a referral, you must visit your primary care provider first.

If your primary care provider charges $150 and you have a remaining deductible of $100, you need to pay the full deductible first. Then, any required copayment or coinsurance is applied. Suppose your plan requires a $20 copayment for doctor’s visits. In this case, the total out-of-pocket cost for your visit with your PCP is $120.

Once you receive your referral, you can visit the specialist. Assume the specialist charges $200, and your plan’s copayment for a specialist visit is $30. Since you’ve met your deductible, you don’t owe a balance other than your $30 copayment for this visit. The specialist’s office charges you the $30 copayment at the time of service and bills your plan directly for the $200 visit.

How to Select a Medicare Advantage HMO Plan

When comparing Medicare Advantage HMO plans, it’s important to look at the plan’s network to ensure you’re comfortable with the available options. Make sure there are enough in-network providers conveniently located near your geographic location. If you already have a relationship with a preferred provider, facility, or pharmacy, confirm that they’re included in the plan’s network.

Also, consider the plan’s out-of-pocket costs — including the premium, copayments, coinsurance, and the plan’s annual out-of-pocket maximum — to ensure it fits within your budget. 

Get the Most Out of Medicare HMOs

Carefully evaluating your options before choosing a Medicare Advantage HMO plan can help you choose one appropriate for your needs and budget. However, plans can change yearly, and your needs may also vary. To continue getting the most out of your HMO plan, keep a close eye on the following:

• Your plan’s network: This may change as providers leave or are added, making it necessary to check for updates periodically.
• Authorization requirements: Ensure you understand whether and when your plan requires you to receive prior authorization for procedures, tests, or medications. Failing to do so could result in you paying higher-than-expected medical bills.
• Annual notice of change: Each September, look for your plan to send you a Plan Annual Notice of Change (ANOC), which provides an overview of changes to your plan’s coverage, costs, and more. Changes included in the ANOC go into effect in January of the following year.

If changes to your plan negatively impact you, this could indicate that it’s time to re-evaluate your options.

Putting It All Together

Medicare Advantage HMO plans offer the same coverage as Original Medicare (Part A and Part B). They may also include Medicare Part D prescription drug coverage and other benefits such as vision, hearing, and dental coverage.

These plans have a network of doctors, facilities, pharmacies, and other healthcare providers and have negotiated discounted service costs. Medicare HMOs do not cover services received from out-of-network providers, except in certain urgent and emergency situations. For this reason, it’s important to carefully consider a plan’s network, out-of-pocket costs, and other features before selecting.

Also, keep an eye on your plan’s Annual Notice of Change, so you know about changes that may impact your costs or healthcare options. Sometimes, changes may make it necessary to re-evaluate your plan options before the next applicable enrollment period.