HMOs: an alternative - health maintenance organizations

New Mexico Business Journal, July, 1990 by Pat Woods

HMOs: An Alternative

THE ACCUMULATED COST OF health care in New Mexico -- as in virtually all other areas of the nation -- is enough at times to cause severe indigestion, if not outright cardiac arrest.

It's likely why 80 percent of New Mexicans with some form of health insurance are under what is called a type of "managed care," including Medicare and Medicaid.

And a lot of that "managed care" is the choice by many companies to opt for Health Maintenance Organizations (HMOs) to contain costs while providing adequate benefits to employees.

New Mexico, incidentally, has the second highest proportion of population under "managed care" in the nation, just behind Minnesota.

HMOs are big business these days and growing in the Land of Enchantment.

Health care costs across the nation will swell to over $540 billion this year. That's about 12 percent of the national income.

That's why employers and employees are taking a hard look at what these dollars will or won't buy and new ways to cut costs.

HMOs started in the 1920s, but the real growth began in 1973 with passage of the Federal Health Maintenance Organization Act. This requires larger employers providing health insurance to also offer the option of an HMO to their employees.

Nationwide there are 591 HMOs, with an enrollment of 14 percent of all people who carry health coverage. Growth has more than tripled in the past nine years and is predicted to hold a 25-30 percent market share in the next five years.

HMOs offer a managed care system for health coverage. This means a group of medical professionals provide health care services to patients (members) for a prepaid fee.

Emphasis is on preventive care, education and cost containment through health care monitoring and review by specialists analysts. Members pay a small co-payment when services are rendered for treatment or pharmaceuticals. There are no claim forms to submit or deductibles to pay.

Employers and employees share the burden of premium payments each year, with costs usually less than indemnity, or traditional, insurance programs. Participating medical professionals represent all health care fields and specialties.

HMOs generally fall into three categories: private practice, group model or mixed model. Private practice means an HMO will contract with individual physicians or groups of physicians for services delivery. The group model places physicians directly on salary in connection with a clinic or hospital. Mixed models have a combination approach using physicians in private practice as well as physicians on staff.

Another form of HMO is a Preferred Provider Organization, PPO, which allows members to use preferred providers who offer discounted contracts for services to the insurer. The result gives members flexibility in choice, but with some loss of the comprehensive benefits found in traditional HMOs.

If a business signs up with an HMO, each employee will choose a primary care physician. That is, everyone is allowed to have one doctor who sees that person. This is typically a family physician, but it could also be an internist or pediatrician.

If a patient needs medical help from another doctor, such as a specialist, the primary care physician will refer the patient to a doctor in that specialty who is also contracted to provide services under the HMO. Many HMOs also allow women to choose a gynecologist in addition to a primary care physician.

HMOs usually pay the physicians through a system of fee-for-service, or through capitation. Fee-for-service means the doctor gets paid a separate payment for each service performed. Capitation means doctors are paid on a flat monthly basis, based on the number of patients who choose that doctor.

The HMOs listed below are the largest in the state of New Mexico. Each company has similar basic services in the area of general health care, such as doctor visits, hospitalization, emergency care, wellness medicine. Member handbooks for an explanation of benefits carry complete listings of benefits, which is not possible to do here.

The best way to obtain complete information and an explanation of how a plan works is to call an individual health maintenance organization and ask how it works.

The state's largest HMOs are FHP, FirstSource, Health Plus, Lovelace and Qual-Med. Lovelace is the state's oldest and largest HMO, while Qual-Med is the oldest private practice HMO. Each system offers variations on the same theme of comprehensive health coverage.

FirstSource is owned by Blue Cross/Blue Shield of New Mexico. It currently has 13,000 members in Bernalillo, Valencia, Torrance, Sandoval, Santa Fe, Socorro, Los Alamos, Mora and San Miguel counties.

Plans for expansion into other areas of the state are underway, although those areas have not been determined yet.

FirstSource is an Individual Practice Associations type of HMO, which uses private and group practice physicians who contract with FirstSource to care for patients.

Services include primary and specialized care, hospitalization, wellness benefits, emergency care, urgent care, preventive medicine, physical therapy, occupational therapy, rehabilitation, pharmaceutical and psychiatric care, laboratories, X-rays, vision and hearing checks for minors, genetic testing, family planning, home health care and chiropractic care.