California Life and Health Insurance Practice Exam 2025 – Complete Test Prep

Health Maintenance Organizations (HMOs) are designed to provide comprehensive health coverage at a lower cost by controlling healthcare expenses and directing member care. One of the key characteristics of HMOs is the limitation of provider choices. Members are required to select a primary care physician (PCP) from the HMO network, and this PCP coordinates all healthcare services.

By limiting the network of providers, HMOs can negotiate better rates and manage patient care more effectively. While this may restrict member access to specialists and other healthcare providers outside the network, it is intended to streamline care and reduce overall healthcare costs. This network arrangement supports the preventive care focus of HMOs, ensuring that patients receive appropriate and timely treatments, while also controlling unnecessary expenditures.

The other choices highlight features that differ from the standard HMO model, such as higher out-of-pocket costs, which are typically associated with plans having less provider restriction, or open access plans, which allow members to see any providers without referrals.