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HMO guide


A health maintenance organization (HMO) is a type of health plan that provides care to members through a network of doctors, hospitals, and other providers. The providers in an HMO’s network have agreed to treat HMO members at a discounted rate. This allows the HMO to control costs, so out-of-pocket costs are generally lower in an HMO than in other types of health plans.

How HMOs work

HMOs contract with doctors, hospitals, and other health care providers within specific geographic service areas. To be a member of an HMO, you must live or work in its service area. You must use providers in your HMO's network. There are exceptions for emergency care or if a doctor you need isn’t in the network.

To learn whether an HMO is available in your area, call our Help Line at 800-252-3439 or visit our website.

Your primary care physician

When you join an HMO, you must choose a doctor to oversee your care. This doctor is called your primary care physician, or PCP. Your HMO will give you a list of doctors to choose from.

If you need to see a specialist or another doctor, you must usually get a referral from your PCP. You don’t need a referral for emergency care or obstetrician/gynecologist visits.

Learn more: Care options and costs

Prescription drugs and step therapy exception requests

Each HMO has a list of prescription drugs that its doctors may prescribe. If a drug isn’t on your HMO’s list, your doctor may prescribe a similar drug. Most HMOs must cover any prescription drug that your doctor prescribes for a chronic, disabling, or life-threatening illness, even if it's not on the list.

If an HMO drops a drug you’re taking from its list, it must continue to cover the drug until your plan’s next renewal date.

Some HMOs use step therapy for prescriptions. Under step therapy, your doctor will first prescribe a lower cost drug that is less risky. If that drugs isn't effective, then they will "step up" to a more expensive and riskier drug. Your doctor may ask for an exception to step therapy.

Coverage for mental health conditions and substance use disorders

HMOs must cover mental health conditions and substance use disorders in the same way they cover medical or surgical services. HMOs may not make it harder to get treatment for mental health conditions or substance use disorders. If you think your HMO is making it hard to get treatment, file a complaint with us.

Learn more: Health insurance: 5 things you may not know

HMO costs

What you pay

  • Premiums are monthly fees you pay to participate in the HMO. If you belong to an HMO through your job, your employer usually takes your premium from your paycheck each month. Some employers might pay all or part of your premium.
  • Copayments are fees you pay each time you get a covered health service. For example, you might have to pay $25 when you go to the doctor and $15 when you fill a prescription. You’ll also have a copayment if you go to the emergency room or see a specialist. The amounts vary by plan. HMOs may not ask you to pay more than 50% of the total cost of services. If your copayments add up to more than 200% of what you pay in a year for premiums, the HMO can’t charge you a copayment for the rest of the calendar year.
  • Deductibles are what you must pay out of pocket before your health plan will pay. Copayments count toward your deductible, but premiums don’t.

Federal law limits the amount you have to pay out of pocket in a policy period (usually one year). In 2020, the maximum out-of-pocket limit is $8,150 for an individual plan and $16,300 for a family plan. Once you reach the limit, you won't have to pay copayments for the rest of that policy period. You still must pay premiums, and the premiums don’t count toward the out-of-pocket limit.

Learn more: How to save money at the doctor

What the HMO will pay

HMOs pay the difference between your copayment and the cost of your health care. For example, if your HMO requires a $20 copayment for a doctor visit and the doctor’s rate is $80, you would pay the $20 copayment, and the HMO would pay the remaining $60.

Doctors and hospitals in the plan’s network may bill you only for copayments. They may not bill you for covered services that the HMO didn’t pay or only partially paid. For example, say the doctor’s normal rate for an office visit is $100, but the doctor has agreed to a rate with the HMO of $75. You would pay your $20 copayment, and the HMO would pay the remaining $55. The doctor may not bill you for the $25 difference between the normal rate and the agreed rate.

If you get care from a doctor or hospital outside the HMO’s network, you’ll have to pay the full cost of the care yourself, except in these situations:

  • You went to an emergency room for a medical emergency. (When your condition is stable, you might have to tell your HMO within a certain amount of time that you’re receiving emergency care.)
  • You got care at an network hospital and weren’t offered a doctor that was in-network. You need a covered service that isn’t available from doctors in your network.
  • You have a point-of-service option. This allows you to go to out-of-network doctors if you’re willing to pay more of the cost.

HMOs generally must protect you from bills from out-of-network providers for emergency care. These are called balance bills or surprise bills. If you get a balance bill from an out-of-network provider, call your HMO.

Learn more: How Texas protects consumers from surprise medical bills

HMO members usually don’t have to file claims or wait for reimbursement. But sometimes, you might have to pay for services when you get them. For example, an out-of-network emergency room might require you to pay for your care up front. You’d then submit a claim to your HMO for reimbursement.

Learn more: Understanding an explanation of benefits

Choosing an HMO

When deciding whether to join an HMO, there are several things you should consider.

First, make sure that there’s an HMO in your area. You’ll have to live or work in an HMO service area to join. To search for HMOs by county, visit our Data Lookup page. Select "Company Licensing" to find the "HMO by county search." Also visit our Listing of HMO Profiles. If you need help, call our Help Line at 800-252-3439.

Remember that while your overall costs might be lower in an HMO, your choices of doctors and hospitals might be more limited. You must usually use only doctors and hospitals in your HMO’s network.

Also consider the HMO’s customer service record. You can learn an HMO’s complaint history by calling our Help Line or by using the Company Lookup feature on our website.

Ask the HMO or your employer’s benefits coordinator these questions:

  • Are my doctors in the HMO’s network?
  • Which hospitals and specialists are in the network?
  • What will my expenses (premiums and copayments) be?
  • What is the maximum amount I'll have to pay out of pocket?
  • Do I have to pay a deductible for health care services?
  • Is the plan a regular HMO plan or is it a more limited consumer choice health benefit plan? If it’s a consumer choice plan, what services are excluded? Does the plan provide all the coverage I need?

Learn more: Need health insurance? How to find a new health plan now. | Watch: Are you suddenly needing health insurance?

HMO report cards

The National Committee for Quality Assurance (NCQA) is an independent health care monitoring organization that accredits HMOs. Each year, NCQA issues a report card evaluating HMO performance. To learn more about an HMO, call NCQA at 888-275-7585 or visit its website at

The Texas Office of Public Insurance Counsel issues two annual reports that compare and evaluate HMOs in Texas:

  • Comparing Texas HMOs includes results of a survey asking members to rate their HMOs, the quality of care they receive, and their doctors. This report also provides the number of customer and doctor complaints against HMOs.
  • Guide to Texas HMO Quality compares the quality of care delivered by HMOs in the state.

For more information, call 512-322-4143 or visit

You can view financial reports and complaint data for HMOs online.

Denials of services, treatments, or medications

HMOs will pay only for services, treatments, and prescription drugs that are medically necessary. The process they use to decide whether something is medically necessary is called utilization review. This is usually done before you receive a service.

HMOs must have a process for you to appeal decisions to deny coverage for a treatment or service. You may also appeal an HMO’s decision to deny a prescription drug because it’s not on the approved list.

If you lose your appeal, you can ask for an external review by an independent review organization (IRO) to review the denial. The HMO must comply with the IRO’s decision. If you have a life-threatening condition or need a prescription drug or intravenous infusions, you don’t have to go through the HMO appeal process. You may ask for an immediate review by an IRO.

You can ask for an external review if the HMO decides that the covered service or treatment isn’t medically necessary or is experimental or investigational. You can’t ask for an IRO review if your HMO denied the treatment because the HMO doesn’t cover it.

Your rights in an HMO

HMOs must have a process to resolve complaints. They may not cancel or retaliate against an employer, doctor, or patient who files a complaint or appeals an HMO decision.

HMOs may not prevent doctors from talking to you about your medical condition or available treatment options. They also can’t prevent doctors from discussing the terms of your health plan with you, including how to appeal an HMO’s decision. HMOs may not reward doctors for withholding necessary care.

If an HMO doesn’t pay or only partially pays for a covered service, network doctors and hospitals may not bill you for the amount the HMO didn’t pay. If you think a doctor or other health care provider has billed you inappropriately, talk to your HMO. You may also call our Help Line to learn your options.

Texas law requires HMOs to have adequate personnel and facilities to meet their members’ needs. HMOs also must make health care services available within a certain distance of your home and workplace. The law also requires HMOs to:

  • Allow referrals to out-of-network doctors and hospitals when medically necessary services aren't available within the network.
  • Allow members to change a PCP up to four times a year.
  • Pay for emergency care if not getting immediate medical care could place your health -- or the health of your unborn child if you're pregnant -- in jeopardy. If you get emergency treatment at a hospital outside the HMO’s network, you may be transferred to a network doctor or hospital after your condition is stabilized.

Filing a Complaint

If you have a problem with an HMO, first file a complaint through the HMO’s complaint process. If you can’t resolve your problem with the HMO, we might be able to help.

We help people resolve complaints about HMO claims, billing, enrollment, and appeals. Use our Online Complaint Portal to file a complaint online or call our Help Line at 800-252-3439.

Questions? Call us at 800-252-3439.

Last updated: 7/18/2023