Today’s HMO: Not your Grandfather’s HMO Part I

So many changes have happened these past few years. The government, insurance companies and health care companies have put a lot of effort into slowing the rising cost of health care. As our population grows and ages – and too many of us lead unhealthy lifestyles – it becomes a bigger problem to tackle.

It isn’t the first time health care costs have been a concern needing a huge solution. In fact, it’s been a case of “same song, next verse” for many years. Medicare just turned 50 this year, and that was one of the first “ginormous” undertakings to address -- as a nation -- the health care needs of a whole group of people.

Here’s something you may not know – “managed care” has been the answer time after time. Let’s take a look at the ideal managed care model, known as the health maintenance organization, or 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 Some historians say this plan came about because the hospital needed a better way to plan and staff for all the teachers’ baby deliveries that hit during the summer months. What is more likely is that it was an effort to control the spread of diseases like flu and tuberculosis since teachers were not being able to afford care or miss work. A few years later the State Farm Bureau was added to the plan to cover the many farmers in the rural communities of Texas.

(Here’s a bit of trivia for the day: The “Baylor Plan” was the birth of Blue Cross!)1

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

(And there’s more! 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 melded and grew to cover the most people in managed care plans, with more than 24 million members nationwide.

In the 1970s: It wasn’t until the 1970s when this “managed care” model became a national standard with the passing of a new federal law, the Health Maintenance Organization Act of 1973. The Act 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 coverage.

The number of people enrolled in HMOs dipped in the 1980s with the introduction of other managed care models, but HMOs continued to show strong membership in every state.

Now: More than 80 million people are enrolled in an HMO today nationwide, and those numbers continue to grow. In fact, our company has more HMO members than all our other offerings combined.

Tune in again soon for part II of our History of HMO’s!

Connect with me next month when I’ll share information about how HMOs work. In the meantime, do you have any questions? Anything more you’d like to see? Let us know in the Comments!


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

Anonymous