Indemnity plans pay a set percentage of health care costs, and while they won't cover all your expenses, they will offer you more control over your health care.
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Long before health maintenance organizations (HMOs), preferred provider organizations (PPOs), and in- or out-of-network providers became common considerations, most people were covered by indemnity health insurance plans. The plans still work in roughly the same way.
An indemnity policy plan outlines a specific percentage of total charges that the insurance company will pay you. This comes out of the amount that health care providers generally charge for a particular service or type of care but may not cover the full amount. You’ll be responsible for paying the rest.
Indemnity health insurance plans are straightforward. Also known as fee-for-service plans, indemnity plans allow you to seek care from any provider or health facility you prefer. The plan identifies a predetermined percentage of the “usual, reasonable and customary” charges for the service or care received. That’s usually 80%, though coverage can differ. You then pay the remaining 20% percent of the fee as coinsurance. You are also responsible for paying any amount that exceeds the usual, reasonable, and customary fee identified by the plan.
In addition to the monthly premium owed for the insurance coverage, there is usually an annual deductible. The deductible needs to be met before the insurance company pays for coverage. Unlike a HMO, you can select your doctor or specialist and go to the laboratory or hospital that’s most convenient or preferred without a referral from a primary care physician (PCP). You also don’t need to get a referral before an appointment with a specialist or preapprovals for any procedure. However, the policy may not cover all procedures.
There are two different types of indemnity plans: traditional indemnity health insurance plans and fixed-benefit insurance plans. The two are very different and offer very different types of coverage:
Fixed indemnity health insurance benefits are paid to you after each specified covered expense has been submitted to your primary insurer and paid. There is no deductible and no requirement that you select caregivers or facilities from a specified network. There is also no enrollment period unless purchased through an employer’s cafeteria plan.
There are several elements of indemnity plans that are very different from HMO and PPO plans. These include:
Choosing health insurance is a highly personal decision, and you should consider how you want to receive care, your medical status, and your budget. Indemnity health insurance is generally one of the costliest options. Still, it provides a degree of control and choice not offered by HMO or PPO plans.
Tammy Burns is an experienced health insurance advisor. She earned her nursing degree in 1990 from Jacksonville State University, obtained her insurance billing and coding certification in 1995, and holds a health and life insurance license in Alabama, Georgia, Iowa, Mississippi, and Tennessee. Burns is Affordable Care Act (ACA)-certified for health insurance and other ancillary, life, and annuity products. She maintains an active nursing license and practices private-duty nursing.
Burns’ background as a nurse, insurance biller and coder, and insurance consultant includes infectious disease, oncology, gynecology, phlebotomy, post operative, family medicine, geriatrics, home health, hospice, human resources, management, billing, coding, claims, fixed annuities, group and individual health and life products, and Medicare. She’s always been driven by a desire to help people, spending more than 25 years as a practicing nurse in hospitals, private doctors’ offices, home health, and hospice. As a nurse, Burns supported patients filing insurance claims with Medicare, Medicaid, and private insurance companies as well as responding to billing questions from confused patients.
Seeing firsthand how unsuspecting patients are frequently confused by an overly complex system they don’t understand led Burns to become an insurance agent and health care consultant, now helping people understand the medical system. Since becoming an insurance agent in 2013, she has worked with some of the largest and most reputable insurance carriers and agencies in the nation, and she has built a large and loyal clientele by way of her commitment to transparency and personalized service.