Health Maintenance Organizations or HMOs are managed care organizations that issue a form of health insurance coverage through doctors, hospitals and other health providers that have a contract with them. In 1973, the HMO Act required employers with at least 25 employees to provide federally certified HMO options. HMOs follow a set of guidelines for health care that is provided through their network of providers. In this model, providers contract with an HMO to have more patients and receive in return discount for services.
HMOs gain an advantage over traditional insurance plans by managing the health care of their patients and thereby reducing services that are not necessary. Medical needs must initially go through someone who authorizes referrals to doctors or specialist if necessary. Emergency medical care does not require this authorization.
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