HMOs often require members to select a primary care physician (PCP), a doctor who acts as a gatekeeper to direct access to medical services but this is not always the case.
Some HMOs pay gatekeeper PCPs set fees for each defined medical procedure they provide to insured patients (fee-for-service) and then capitate specialists (that is, pay a set fee for each insured person's care, irrespective of which medical procedures the specialists performs to achieve that care), while others use the reverse arrangement.
When HMOs were coming into existence, indemnity plans often did not cover preventive services, such as immunizations, well-baby checkups, mammograms, or physicals.
Although out-of-pocket costs are reduced for consumers, controlling for other factors, the plans do not affect total expenditures and payments by insurers.
[4] Some[5] have asserted that HMOs (especially those run for profit) actually increase administrative costs and tend to cherry-pick healthier patients.
Though some forms of group "managed care" did exist prior to the 1970s, in the US they came about chiefly through the influence of President Richard Nixon and his friend Edgar Kaiser.
In 1910, the Western Clinic in Tacoma, Washington offered lumber mill owners and their employees certain medical services from its providers for a premium of $0.50 per member per month.
Also in 1929 Dr. Michael Shadid created a health plan in Elk City, Oklahoma in which farmers bought shares for $50 to raise the money to build a hospital.
These prepaid plans burgeoned during the Great Depression as a method for providers to ensure constant and steady revenue.
The federal government was slow to issue regulations and certify plans until 1977, when HMOs began to grow rapidly.
In 1971, Gordon K. MacLeod developed and became the director of the United States' first federal HMO program.
In the network model, an HMO will contract with any combination of groups, IPAs (Independent Practice Associations), and individual physicians.
Since 1990, most HMOs run by managed care organizations with other lines of business (such as PPO, POS and indemnity) use the network model.
[9] State and federal regulators also issue mandates, requirements for health maintenance organizations to provide particular products.
The Employee Retirement Income Security Act (ERISA) can be held to preempt negligence claims as well.
ERISA does not preempt or insulate HMOs from breach of contract or state law claims asserted by an independent, third-party provider of medical services.