Final answer:
Health Maintenance Organizations (HMOs) are insurance plans designed to provide cost-effective and quality healthcare with a focus on preventive care, monitoring, and performance measures.
Step-by-step explanation:
The type of insurance plan that promotes quality, cost-effective healthcare, monitors patients, encourages preventive care, and requires performance measures of physicians is known as a Health Maintenance Organization (HMO). HMOs are structured to provide healthcare with a fixed payment per person enrolled, unlike the fee-for-service systems where providers are reimbursed for each service they perform.
This fixed payment structure incentivizes healthcare providers to focus on efficiency and prevention, as they receive a set amount regardless of how many services are provided. HMOs aim to reduce moral hazard by aligning the incentives of the providers with the goal of maintaining patients' health, rather than increasing the volume of services.