The History of HMO Plans


HMO Plans, also known as Health Maintenance Organization Plans (or HMO Plans) are managed care programs. Managed care programs are designed to maintain good health by providing quality care and preventing diseases. It is possible to control rising health care costs by maintaining good health.

HMO Plans were initially introduced in order to provide health care services from a network of contracted providers. Members paid a monthly fixed premium. HMOs have a contracted network of providers, which includes hospitals, clinics, and other health care providers who have signed a contract. Because they limit the providers, benefits, and procedures available, HMOs can be considered the most restrictive type of managed care plan.


The HMOs were created to change the way that health care is delivered. The government created them to eliminate individual health insurance plans and make affordable health insurance accessible to all. Employers were buying individual health insurance plans for employees at that time – a costly expense many were beginning to forgo.

In 1973, President Nixon approved the Health Maintenance Organization (HMO), Act. The government subsidized managed health plans and HMO-type systems grew. They were often organized by community groups and businesses who wanted to make affordable health care accessible to their members and workers. These deals were made by insurance companies to attract businesses to purchase these low-cost, discounted health plans for their employees rather than the expensive individual plans.

Insurance companies started to pressure doctors to sign up for HMOs, recognizing the power of the government and the desperate desire of employers to have their employees enroll in these new HMO Plans. The insurance companies told doctors that if they did not join, they would find doctors who would and then they would take all their patients. Doctors joined an HMO to protect their patients, and their entire practice.

The Insurance companies began adding more rules to each doctor’s contract renewal. HMO Plans were so popular that most of their patients had them, so they agreed to the new terms. The new terms allowed for more patients to be seen, stricter confidentiality agreements and more services that required pre-approval.

HMO’s had been praised by most members up until 1980. Members began to lose faith in HMO plans after the onset of the new decade.

What caused the rise in denied claims? The increase in denied claims was not due to the claims, but rather bad investments made by insurance companies.

Insurance companies believed it was a smart idea to invest in real-estate deals during the boom. Insurance companies started to lose money when the savings and loan market crashed, along with real estate prices. They were unable to pay the claims of HMO members due to these losses.

This was the beginning of denials of claims by HMO Plan members. Insurance companies refused to pay claims because they were too costly or not necessary for medical reasons. Members and their doctors didn’t fight the denials at that time. Because the insurance company was able to get away with this denied claim process so well they continue to do it as part of their operation procedure.

HMO Law, however, is a brand new concept that has emerged in recent years.

HMO’s are being represented by lawyers and law firms. These cases include medical malpractice, wrongful death and bad faith. An HMO can be sued if a person is killed as a result of the HMO’s refusal to cover necessary medical treatment, for denial of valid claims, or for medical malpractice by one of its doctors.

Individual states are also tightening their HMO plans laws.

We will be discussing how HMOs work, which types of HMO plans are available, their cost, and what the future holds for the plans in future articles.