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An HMO, or Health Maintenance Organization, is defined as a managed care organization that provides health services for a fixed annual fee. This model emphasizes preventative care and requires members to select a primary care physician (PCP) from within the HMO’s network. The PCP coordinates the patient's care and refers them to specialists as needed. Members typically pay a flat monthly premium and possibly small copayments for services, but there is a strong emphasis on using network providers to keep costs low.

This structure aims to streamline healthcare services and promote wellness, making it a significant option in managed care. Because of its focus on a network of providers and planned care, it supports the idea of controlling healthcare costs while ensuring access to medical services for its members. In contrast, traditional insurance policies often allow greater freedom in choosing providers but may not emphasize preventive care as strongly as HMOs do.