Plain version: traditional insurance pays bills after you get care. A health maintenance organization (HMO) handles both the money and the care: members pay a prepaid monthly charge, and the plan arranges their care through its own doctors and hospitals.

In California an HMO is a health care service plan: a person who undertakes to arrange for health care services, or to pay for them, in return for a prepaid or periodic charge (Health & Safety Code §1345(f)). These plans are governed by the Knox-Keene Health Care Service Plan Act of 1975 (§1340), and the Department of Managed Health Care (DMHC) is in charge of those laws (§1341(a)). The Department of Insurance oversees insurers, not licensed health care service plans.

Two HMO words to keep straight: - Subscriber: the person responsible for payment, or whose status (other than family dependency) is the basis for eligibility (§1345(p)). - Enrollee: anyone enrolled who receives services from the plan (§1345(c)). A parent who buys family coverage is the subscriber, and every family member, the parent included, is an enrollee. Beneficiary is a life insurance word, not an HMO word.

Basic health care services a plan contract must generally provide (§1345(b), §1367(i)): - Physician services - Hospital inpatient and ambulatory care - Diagnostic laboratory and radiologic services - Home health services - Preventive health services - Emergency services, including out-of-area coverage - Hospice care Dental care is not on the list; the law treats it as a single specialized area of care.

Prepaid does not mean free at the door. A plan may charge a copayment or deductible for a basic health care service if the amounts are consistent with the cost-sharing limits, reported to the director and disclosed to the subscriber or enrollee (§1367(i)). The same section does not let the director set the rates a plan charges its subscribers and enrollees.