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HMO Insurance Coverage for Drug and Alcohol Addiction Treatment

Written by: Goeffrey Andaria, Mental Health Writer

Reviewed by: Dr. Carl Williams, Ph.D., LCADC

Drug and alcohol addiction treatment are usually expensive for most, so it's crucial to understand if your HMO health insurance plan covers such costs.

Drug and alcohol addiction is a significant issue in the United States, affecting millions of people. According to SAMHSA Report, 162.5 million (58.7%) people aged 12 or older had consumed alcohol, tobacco, or an illicit drug at the time of the study. However, despite the high drug and alcohol use, only about 6.7 million (4.1%) received treatment.

Though stigma makes it difficult to seek treatment, lack of money is the main reason people don't get help. According to NCBI, the estimates for drug and alcohol treatment ranged between $11,411 for outpatient treatment and $28,256 for inpatient programs without Medical-Assisted Treatments. To that end, it's crucial to have a comprehensive insurance plan to ensure your addiction treatment is covered. This post looks at all you need to know about HMO insurance coverage.

What is HMO insurance coverage?

Deductibles, out-of-pocket payments, and co-pay for HMO insurance plans

Does HMO insurance cover drug and alcohol addiction treatment?

Advantages and disadvantages of HMO insurance plans

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What To Know About Your HMO Insurance

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Co-Insurance

Deductibles

Co-Payment

Typically, co-insurance percentage range from 20% to 40%, and the insurance company clears the rest.

The amount you pay out-of-pocket for treatment before the health plan starts helping with payments.

Co-pay is a fixed amount you must clear (usually when you receive treatment) for covered treatment services.

What is HMO Insurance Coverage?

HMO is an acronym for Health Maintenance Organization. This medical insurance plan provides drug and alcohol addiction treatment services at a fixed monthly or annual fee through a network of healthcare practitioners and facilities under a contract. The contracts allow medical facilities and practitioners to provide lower insurance premiums since they have the advantage of clients directed to them.

Health Maintenance Organizations have been around for nearly half a century. HMOs began in 1973 when President Richard Nixon signed the Health Maintenance Organization Act. The law defines an HMO as a "public or private entity organized to provide supplemental health services to its members." It also helped expand managed health care and boost competition within the medical insurance market, helping the public access affordable health care.

Both state and federal governments regulate HMO plan providers. Your state of residence plays a huge role in regulating HMOs or health service plans through The McCarran-Fergusson Act, which gives states the power to regulate insurance. That said, the federal government still maintains some oversight in HMOs through the Federal Insurance Office, which monitors all aspects of the insurance sector, and the Center for Consumer Information and Insurance Oversight oversees insurance agencies.

Deductibles, Out-of-Pocket Payments, and Co-Pay For HMO Insurance Plans

Individuals or families under an HMO insurance plan must pay a monthly or annual premium to gain access to medical services within the organization's health practitioners and facilities. However, you are only limited to receiving medical care from providers within the network. Though HMOs don't cover out-of-network services, some exceptions include emergency care and dialysis. In some cases, individuals under cover of an HMO plan might have to live or work within the network's coverage area.

If you receive urgent care outside your network's coverage area, your HMO provider might cover the expenses. However, if you receive non-emergency out-of-network care, you will have to pay out-of-pocket. This is because the Affordable Care Act of 2020 requires all HMO insurance providers to maintain the maximum out-of-pocket cap, which is 2022 stands at $8,700 for individuals and $17,400 for family plans.

In addition to low premiums, there are no or minimal deductibles with an HMO insurance plan. The deductible is the amount you spend on covered health services before your insurance provider starts covering medical costs. Though there are little to no deductible payments, your insurance provider will charge you a co-pay for each clinical visit, prescription, or test. Co-pay charges tend to be low under an HMO plan, usually at $5, $10, or $20 per service, which minimizes the overall cost of out-of-pocket payments.

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Medically Reviewed:

Dr. Carl Williams Ph.D., LCADC

Rolling Hills Recovery Center

Expert Contributor

Dr. Williams presently serves on the board of Directors for two non-profit service organizations. He holds a Master’s degree in Human Services from Lincoln University, Philadelphia, Pa, and a Ph.D. with a concentration in Clinical Psychology from Union Institute and University. In Cincinnati, Ohio. He is licensed to practice addictions counseling in both New Jersey and Connecticut and has a pending application as a practicing Psychologist in New Jersey.

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Does HMO Insurance Cover Drug and Alcohol Addiction Treatment?

For most people, the HMO insurance plan provides coverage for drug and alcohol addiction and rehabilitation treatment as one of the EHBs. However, the amount of coverage for rehab treatment will vary from client to client. It will also depend on the rehab treatment facility, the type of program enrolled, and the specific services received. For example, the HMO insurance plan might cover all or at least part of the costs of the following:

Co-occurring mental health treatments.
Drug detox services.
Therapy and treatments like cognitive behavioral therapy, neurofeedback, and others.
Medications.
Inpatient and outpatient rehab.
Partial hospitalization programs.
Intensive outpatient programs.

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Advantages and Disadvantages of HMO Insurance Plans

Before selecting any medical insurance plan, you need to weigh the pros and cons of each policy before you commit to any HMO plan. Here are some of the most common advantages and disadvantages of HMO programs.

Advantages of HMO Plans

The first and most crucial advantage of HMO insurance plans is their affordability. You have to pay a fixed monthly or annual premium lower than other standard forms of health insurance. Additionally, HMO plans come with little to no deductibles, and co-pay charges are typically lower than other plans. As a result, out-of-pocket payments will also be lower, and the billing tends to be less complicated.

Chances are also high that you will deal with the insurance provider itself. This is because you have to choose a Primary Care Provider (PCP) who will be responsible for managing treatment and care. The PCP authorizes and authenticates treatment, including making referrals for special services unique to you. Generally, the level of care under an HMO plan is of higher quality because it encourages people to get annual physicals and seek treatment early.

Disadvantages of HMO Plans

The main disadvantage of HMO plans is that you are limited in how you can use the plan. You have to choose a primary health provider who will be responsible for your treatment needs and is part of your provider's coverage network. This means you will cover any treatment costs provided by a doctor or facility outside the network, even if there are no contracted facilities in your area. Additionally, there are particular conditions you have to meet for several medical claims, such as emergencies.

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Choosing a health insurance plan can have long-lasting financial consequences. You can receive high-quality medical attention with the right plan without emptying your savings. You also have to find a plan whose network covers health facilities and practitioners within your area.

Residents of New Jersey and the surrounding areas can receive HMO coverage for drug and alcohol rehab treatment at Rolling Hills Recovery Center. Different insurance providers work with our facility to provide coverage for individuals struggling with addiction. By joining our rehab programs, you'll join a community of people willing to undertake the discipline to bring about lasting change committed to managing addiction and placing it into remission.