A health maintenance organization, or HMO, signs up doctors and hospitals into a network.
Employers pay a set fee per employee enrolled in the plan.
HMOs require its members to choose a primary care physician who performs basic health checkups and approves visits to other physicians. They generally only cover the expense of member visits to doctors and hospitals that are part of the network. Visits to nonparticipating doctors must be paid directly by the employee. This gatekeeper system represents both the best and the worst of HMOs. While this structure helps minimize costs for employers, it can be unpopular with some employees who currently use doctors outside the HMO network, since they must switch physicians to receive coverage.