Today's HMO: Not Your Grandfather’s (or Your Father’s) HMO Part 1

Health care has gone through a number of changes in the past few years. The government, health insurance companies and health care companies have all worked hard to control the rising cost of health care. Our growing and aging population coupled with the fact that many of us have unhealthy lifestyles has made it a more difficult problem to tackle.

But, this isn’t the first time health care costs have been a concern. In fact, it’s been a case of “same song, next verse” for many years.

While the cause of rising health care costs has changed throughout the years, one thing remains the same: “managed care” is a proven solution.  Let’s take a look at the history of the ideal managed care model, known as the health maintenance organization (HMO).

The Making of HMO: Then and Now
In the Beginning:  As early as 1929, Baylor Hospital in Dallas, Texas, offered a prepaid plan called the “Baylor Plan” to the Dallas Independent School District to cover hospital care for about 1,500 teachers.1 This plan allowed teachers to make pre-payments for hospital care for a set number of days, since many could not afford their hospital bills at the time. A few years later, the State Farm Bureau was added to the plan to cover the many farmers in the rural communities of Texas.

(Fun fact: The “Baylor Plan” was the birth of Blue Cross!)1

Other hospitals and clinics in Washington, California and Oklahoma also began to offer prepaid plans to employers in their area. And 10 years later, doctors started creating “medical groups” to offer prepaid plans for care by a set group of doctors.  

(Here’s another tidbit! The first medical group in Texas became Blue Shield.)  

Over the years, more and more employers started buying these prepaid plans. By the late 1940s, Blue Cross and Blue Shield combined and grew to cover the most people in managed care plans (24 million members).

In the 1970s: It wasn’t until the 1970s when this “managed care” model became a national standard. The Health Maintenance Organization Act of 1973 provided federal money to promote HMOs to consumers across the nation.  It also required employers to offer an HMO as an option for employees if they provided other types of health care coverage.

Now: More than 80 million people across the country are enrolled in an HMO, and these numbers continue to grow. In fact, we have more HMO members than all our other plan offerings combined.

Check back next month when I’ll talk about how HMOs work. In the meantime, do you have any questions? Let us know in the Comments!

1 Lone Star Legacy: The Birth of Group Hospitalization and The Story of Blue Cross and Blue Shield of Texas; Samuel Schaal, copyright 1999.

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