What is an Indemnity Plan?

If you’ve ever had insurance through a managed care health insurance plan, you may know the pain of receiving an unexpected doctor’s bill because you went to an out-of-network physician. If you want to avoid having your insurance company dictate which doctors you can and cannot see, you may want to consider the benefits of a fixed indemnity plan.  

An indemnity plan, also known as a fee-for-service plan, is a type of health insurance coverage that reimburses you for your medical expenses based on a pre-determined percentage. Unlike the more commonly known managed care plans, indemnity plans eliminate networks and give individuals more freedom in their health care decisions.

How Does an Indemnity Plan Differ From a Managed Care Plan?

You may not have heard of the term “managed care plan” before, but you might be more familiar with some of the plan types such as Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), or Point of Service plans (POS). While all managed care plans differ in some ways, the common thread is that the plans all involve networks, which are arrangements with specific hospitals, doctors, and health care providers that they will provide services at a reduced rate. 

How Does an Indemnity Plan Work?

With a fixed benefit plan, you are often required to pay for medical services upfront and then submit a claim with your insurance company for reimbursement. 

Depending on which type of plan you choose, it is important to note that your indemnity plan may be subject to: 

• A deductible. The deductible is the amount of money that you pay out before your insurance coverage kicks in.   
• A co-payment. A co-payment is the amount or percentage that you are required to pay after the deductible is met. For example, if you had a service and were billed $1,000 and your deductible was $200, then the balance after the deductible is $800. If you were required then to pay a 20 percent co-payment, then you would be responsible for an additional $160. Your insurance would then cover the remaining balance of $640. 

Fixed Indemnity Health Insurance Pros & Cons

Some of the benefits of a fixed indemnity plan include:

• No restrictions when it comes to choosing your doctors as you are not required to see doctors within your network.
• Referrals are not required to see specialists.
• You are not required to designate a primary care physician. 
• You are not required to see a doctor within a specific geographic area, which may be the case for a managed care plan. 
• Reduced upfront costs. The premiums for indemnity plans are typically more affordable than those for a managed care plan.

Some of the drawbacks of a fixed indemnity plan are:

• When it comes to a fixed indemnity plan vs. major medical plans, major medical plans tend to be more cost-effective in the end. 
• Fixed indemnity plans often involve more out-of-pocket expenses. 
• You may only be reimbursed for the usual, customary, and reasonable rate (UCR). This means that your insurance provider will only reimburse you for an approved dollar amount based on the service you receive. The amount is determined based on how much similar services are within your area. 
• Depending on which type of policy you choose, preventative care may not be fully covered as they are with managed care plans.
• May involve a more significant time investment in researching costs for services and in filing claims.

Is An Indemnity Plan Right for You?

An indemnity plan might be a more cost-effective option for you if you are generally healthy and do not have any pre-existing medical conditions. An indemnity plan can also be a good fit for you if you are seeking a supplement to your existing medical coverage. For example, a hospital indemnity plan can help cover gaps in your medical insurance if you were forced to stay in the hospital. 

When it comes to making an informed choice about your health insurance, it is important to know all of the options that are available to you. If you think an indemnity plan might be a good fit and you want to learn more, contact a licensed health insurance provider today.

At InsureOne, we can help you navigate the insurance maze. Get a free insurance quote online, over the phone, or at one of our locations near you. Don’t wait any longer to get the coverage you need.