Analysis of Problem Advantages and disadvantages concerning HMOs and PPOs have already been explained, however, understanding the purpose of HMOs and PPOs and how they came about and have evolved will shed light on several of their characteristics. The history, the need, and the evolution of each has influenced managed care so being familiar with background of each will help determine with plan would be best for the employer and the employees. The first HMO that has been documented in history started in the year 1910 in Tacoma, Washington and the name of the clinic was The Western Clinic. For a premium payment of $.50 a month, the clinic offered a variety of services and treatment to lumber mill owners and their employees (Kongstvedt, 2007). The clinic created this type of plan so ensure that they would have a steady flow of patients and by creating a premium, it brought patients back without having to create other strategies to retain patients. This constant flow of patients is where the need of HMOs began. An HMO is “an organization that combines the provision of health insurance and the delivery of health care services” (http://www.rand.org/pubs/rgs_dissertations/RGSD172/RGSD172.ch1.pdf). This is where HMOs have their strength, by providing healthcare services to patients and by providing patients to healthcare providers. Clinics and hospitals favored the idea and wanted to adopt the same concept and create their own original HMOs with the same goal in mind; to create and retain patients. Since this concept of an HMO was fairly new, there was not much government involvement and HMOs began evolving on their own. In 1929, Ross-Loos was the first HMO by a medical group. This group was stationed in Los Angeles, California and for the amount of one dollar and fifty cents, there were about five hundred members enrolled and the cost was to be paid monthly. From there, HMOs gained popularity and began growing in numbers, however, by 1970, the amount of HMOs decreased to no more than forty. In 1973 came the Health Maintenance Organization Act, which forced any company with more than twenty-five or more employees to have federally certified options for their employees. This act increased the popularity of HMOs so much that in 1990’s eighty percent of MCOs were for-profit organizations and also only about sixty-eight percent of premiums were directed towards medical care (http://healthcare.uslegal.com/managed-care-and-hmos/the-hmo-act-of-1973/). This act helped transform HMOs from typical plans were created to establish healthcare relationships to a way to push companies to make a profit. The success after the Health Maintenance Organization Act caused HMO laws to form to help regulate and make sure that patients are still getting proper care and the system would not be strictly profit. Before diving into the evolution of HMOs, another MCO comes into play, which is the preferred provider organization (PPO). With the high success that HMOs were experiencing, employers were now having another option that began to emerge in the early 1970’s and this served as another option when an HMO wasn’t preferred. The PPO gave employers a better way to manage their healthcare costs. A directory of providers is given to the users in the network and from there; benefits are given to those users in the network. The patients have the option of choosing another provider, however, the costs would right at a higher amount. As HMOs evolved, several types of HMO types surfaced and those were Staff Model HMOs, Group Model HMOs, Network Model HMOs, and Independent Practice Association HMOs, which are also known as IPA. Staff Model HMOs are is where the HMO employs healthcare providers on a direct relationship. Those providers are working as employees of the HMO and will work on the HMO network members directly, a great current day example of a staff HMO is Kaiser Permanente. Group Model HMOs is where HMOs have contracts with at least one group practice that provide healthcare services and that group or groups mainly focuses on treating those HMO members. The Network Model HMOs is where HMOs have contracts with at least one group practice that provides health services to a large number of patients who are not currently HMO members. An IPA HMO is a direct contract with physicians or with a group of physicians and those physicians establish a contract with their member physicians to then provide healthcare treatment and services. Concerning different types of PPO plans, there is a PPO basic plan and a PPO standard plan. The basic plan offers basic coverage and because basic plans have a higher co-payment and deductible, the rates are typically lower. This plan is best for a person that is healthy and has a healthy family because the times that it will be used for the individual and/or the family will not be frequent. The PPO standard plan is similar to the basic plan, however it has a higher coverage level amount and the standard plans are more expensive.