The principal sponsor of the federal HMO Act was Sen. Edward M. Kennedy (MA).

[3] Health Maintenance Organization (HMO) is a term first conceived of by Dr. Paul M. Ellwood, Jr.[4] The concept for the HMO Act began with discussions Ellwood and his Interstudy group members had with Nixon administration advisors[5] who were looking for a way to curb medical inflation.

[7] It provided grants and loans to provide, start, or expand a Health Maintenance Organization (HMO); removed certain state restrictions for federally qualified HMOs; and required employers with 25 or more employees to offer federally certified HMO options IF they offered traditional health insurance to employees.

The Act solidified the term HMO and gave HMOs greater access to the employer-based market.

To become federally qualified, the HMO must meet these requirements: A Health Maintenance Organization (HMO) is a managed care plan that incorporates financing and delivery of an inclusive set of health care services to individuals enrolled in a network.