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Deck: 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.
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 Health Maintenance Organization (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. 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.