Health Maintenance Organization Essay

465 WordsSep 2, 20122 Pages
A health maintenance organization (HMO) is a healthcare system that assumes or shares both the financial risks and the delivery risks associated with providing comprehensive medical services to a voluntarily enrolled population in a particular geographic area, usually in return for a fixed, prepaid fee. In other words, an HMO arranges for the delivery of medical care and provides, or shares in providing, the financing for that medical care. Historically, HMOs were called prepaid group practices, although they were formed as corporations. Most state laws require an HMO to be organized as a corporation, rather than a partnership or other legal entity. Further, most HMOs must be licensed in the states in which they are incorporated and must comply with statutory requirements for HMOs in each state in which they conduct business. An HMO may be owned or sponsored by many different types of corporations, and may be for-profit or not-for-profit. Owners or sponsors of HMOs include a variety of types of organizations. The Act also required employers to offer mandatory dual choice provisions, which we discussed previously. Many HMOs pursued federal qualification because the Act provided federally qualified HMOs access to employers in their markets. Federal financial assistance, in the form of grants and loans, was made available from 1973 until 1981. In 1995, federal law eliminated the dual choice requirement for employer-sponsored healthcare. Because of the elimination of dual choice provisions and the exhaustion of federal grants, there are fewer incentives now to form a federally qualified HMO. Federal qualification is still important for Medicare and large employer contracts, however. Health maintenance organizations are heavily regulated at both the federal and state levels to ensure HMO solvency and member access to quality medical care. For example, an HMO may have

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