Final answer:
A Health Maintenance Organization (HMO) is an entity that combines the provision of healthcare insurance and delivery of healthcare services, characterized by an organized system, basic and supplemental services, voluntary enrollment, and fixed prepayments for coverage.
Step-by-step explanation:
Health Maintenance Organizations (HMOs)
In the realm of healthcare insurance and delivery, an entity that fits the description provided would be a Health Maintenance Organization (HMO). Unlike a fee-for-service health financing system where medical care providers are reimbursed based on the individual services they offer, an HMO operates on a prepayment model, where providers are paid a fixed amount per person enrolled. This payment scheme covers all required health services, regardless of the frequency or variety of services each patient actually utilizes. HMOs aim to focus healthcare provider incentives on delivering cost-effective care, and they are often structured to serve members within a defined geographic area. Another key aspect of HMOs is their emphasis on preventative care and health maintenance, and they utilize a network of providers to manage the care of their enrollees efficiently. This contrasts with Preferred Provider Organizations (PPOs) and Accountable Care Organizations (ACOs), each of which operates under different models of care and payment structures.
Adverse selection is a potential issue faced by insurers, where there is an imbalance in the knowledge about risk levels between the insured and the insurer. HMOs seek to mitigate this risk by having predetermined fixed prepayment for members, which also helps in avoiding situations where low-risk individuals forgo insurance due to high costs and high-risk individuals over-utilize it—as it seems more advantageous to them.