The History of HMOs
A Health Maintenance Organization, or HMO, is an insurance plan available in the United States that links groups of consumers to a network of doctors. The consumers combine their buying power to lower the price of health care that they pay to the HMO, while the HMO pays the doctors for their services.
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Birth of HMOs
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The first place to offer the HMO model of health care was the Western Clinic in Tacoma, Washington. There, lumber mill employees were able to take advantages of the clinic's services in exchange for a per month premium. The first official HMO was the Ross-Loos Medical Group, which was established in 1929 in Los Angeles to provide health care for L.A. city employees.
Rise of the HMOs
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HMO use steadily increased during the great depression and through the middle part of the twentieth century as insurance benefits were offered as an incentive to employees, as an alternative to raises, and to ensure a steady revenue stream to physicians.
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Decline of the HMOs
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Through the 1960s and 1970s, the utilization of the HMO began to decline.
Government Intervention
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Due to the decline of the HMO, the United States government stepped in to rescue the industry. The result was that the U.S. Department of Health and Human Services passed the HMO Act. This act gave grants to companies that wanted to start or expand an HMO, removed state restrictions on federally-certified HMOs and required employers with 25 or more full-time employees to offer HMO options. As a result of this last provision, the HMO began to grow rapidly.
HMOs Today
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In 2008, managed health care enrollment was estimated at approximately 65 million members nationally. This is down from an all time high of 80 million people in 1999. The reason for this decline is the growth of alternatives to managed health care and overall consumer dissatisfaction with managed health care. However, due to government regulation, incentives and employer interest, the HMO industry remains healthy and the future outlook for the industry is strong.
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