What happen to individual California HMO health insurance plans?

ACA UPDATE:  The HMO model has been re-invigorated by Covered California with new options available which you can quote here.

You can always run your California HMO quote here:

HMO history before the ACA law

There was a time when HMO's looked to be the dominant type of plan on the California health insurance market and for good reason.

They offered very rich benefits (relative to the indemnity plans on the market) at much lower cost.

To paraphrase the cheesy sales pitchman, "Is that something you would be interested in?".

The number of enrollees on this new type of "managed care" plan exploded on the both the individual and group health insurance plans across California with the most saturation in more populated areas.

Oh, have things changed.

Let's take a quick look at how the HMO revolutionized the health insurance market in California, what has occurred since, and what Health Reform means for these plans.

Let's step backwards and see what was happening when HMO or Health Maintenance Organizations came on the scene.

In the 80's, you primarily had indemnity plans

Indemnity plans are pretty straight forward. As long as the medical expense is covered by the plan, the plan pays according to the benefits.

There was no concern for networks. This worked well for decades but the 80's put a stop to that.

Medical cost inflation spiraled out of control primarily due to new diagnostic technology and increased utilization.

Managed Care was the answer and the lead candidate was the new HMO.

You can access the online HMO California application here:

SO what is an HMO?

Essentially, an HMO is when doctors in a certain geographic area group together with a specific relationship with health insurance carriers.

Essentially, the California health carriers will pay this group to provide health care to all HMO enrollees within that group (usually called an IPA for Independent Provider Association or PMG for Primary Medical Group).

This was the revolutionary design change behind HMO's...the doctors where financial responsible for providing medical care to the HMO enrollees.

If they gave out too much or excessive care, they would lose money as a group.

There was a built in mechanism to provide cost effective care directly at the doctor's level.

This was also the root of much of HMO's flack over the years.

It was definitely more structured and strict in terms of accessing care.

This did however allow for low costs and rich benefits albeit with more control over health care decisions. So what happened?

If you look at the individual family California health insurance market, the HMO plans had been completely priced out of the market.

They make no sense now and this trend started during the last decade as the HMO's were faced with more regulation (translated as less ability to keep down costs) and increased utilization of services.

The rates exploded. If you run your individual health quote here, you'll find that the HMO's are double to triple the mid-level PPO plans and they still have deductibles built in.

It's hard (if not impossible) to justify the cost.

There are still competitive HMO plans available on the group market but they have also been trending up so that won't last long.

In fact, it will be interesting to see how the HMO model fares Jan 1st 2014 with Health Reform.

We have a suspicion that the cost containment and narrow networks of HMO's will be alive as well as that's the only thing the carriers can control any longer.

In the mean time, PPO's are the way to go on the individual family health market in California.

Related Pages:

Difference between HMO and PPO
 

You can run your California HMO Health Plan Quote here to view rates and plans side by side from the major carriers...Free.

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