Observations and Findings on Ten Federally Qualified HMOs

HRD-79-34: Published: Jan 16, 1979. Publicly Released: Oct 27, 1983.

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Pursuant to the Health Maintenance Organization (HMO) Act, GAO reviewed 14 HMOs, and this report summarizes the observations made concerning 10 of these HMOs in connection with their compliance with organizational and operational requirements. The HMO Act required that HMOs be organized as either a staff model HMO, a group practice model, or an individual practice association model HMO; a combination of more than one of the models, however, could not be used.

All 10 HMOs have provided the specified health services to their members. Open enrollment is now required only for those HMOs that have been providing comprehensive health services on a prepaid basis for 5 years or have 50,000 members, and did not incur a financial deficit in their most recent fiscal year. None of the 10 HMOs studied in this report, however, have met these conditions. Most of the HMOs have very few high-risk, elderly, or indigent members; thus indicating that they are not providing for a broadly representative membership. The Act envisions that HMOs will be able to operate independently without federal assistance after 5 years, but it appears to GAO that only 3 of the 10 evaluated HMOs will become financially independent after the specified period of federal subsidy. HMOs have not relied heavily on the dual-choice requirement to market their plans. The Department of Health, Education, and Welfare (DHEW) lacks specific standards for evaluating quality assurance programs of the HMOs.

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