All About Indemnity Health Insurance
If you are looking for the greatest flexibility in your health insurance coverage, you should first examine indemnity insurance. The greater flexibility comes with a higher price and the requirement to handle more paperwork on your own.
Fee for Services
An indemnity insurance plan is also called a fee-for service plan. Indemnity plans give you freedom to choose your doctors, allowing you to receive treatment where and from whom you choose. The size of your deductible and the amount of your co-insurance will vary from insurance company to insurance company and within insurance companies according to the level of coverage you purchase. Indemnity plans are likely to require you to pay out-of-pocket for the services you receive. Some doctors require you to pay 100% of the fee up-front. You get the care and then are responsible for filing a claim with your insurance company, in order to be reimbursed. If the treatment you received was covered by the terms of your policy, then you will be reimbursed, after the insurance company accounts for your co-insurance and deductibles.
Comparison to Managed Care
What primarily separates an indemnity plan from a managed-care plan is the presence or absence of a provider network. A managed-care plan comes with a network of health care providers who have arranged with the insurance company to provide their services at an agreed-upon rate. This allows the insurance company to know how much to expect to pay for any given service. Because the insurance company has made prior arrangements with these providers, paperwork is filed directly between the provider and the insurance company. The insurance company pays the provider directly for care, requiring you to pay only a small percentage of co-insurance or minimal co-payment amount out-of-pocket.
With an indemnity plan, on the other hand, there is no network of pre-approved providers. You may choose a provider that charges more than the insurance company expected to pay for a particular service.
For this and other reasons, insurance companies offering indemnity plans give themselves some protection from the medical care choices you may make. They typically charge a higher annual deductible that must be met before they begin paying for your care. They often require you to pay the full cost for the service out-of-pocket and then to file the paperwork of the claim themselves to seek reimbursement for the care. This protects the insurance company from paying for services that are not covered under their plans and also from paying more than what is reasonable for your care. The insurance company may determine a reasonable charge for a service by referring to a table of UCR (usual, customary, and reasonable) figures determined by the average cost billed by providers in a particular area.
One risk of indemnity insurance is that your claim for reimbursement can be denied. Fighting with an insurance company over a claim is no fun. Because you paid up front, you have less leverage. If you have indemnity insurance, it is prudent to check with your insurance provider before you seek treatment, to clarify your level of coverage.
Indemnity insurance costs you more, in general, than a managed care plan. It is a good choice for someone who needs the flexibility of choice of physicians, who often sees specialists, or travels or moves frequently. An indemnity plan does not require you to choose a primary care physician (PCP) or obtain a referral to receive care. In this way, it's one of the easiest plans to use.
One kind of indemnity insurance is catastrophic health insurance. You may want to have insurance only to protect you from potential major costs of hospitalization or intensive treatments. This insurance does not cover basic health care or preventative care, but is vitally important if you have assets to protect. If you have assets, even if you have no other insurance, you should have catastrophic care insurance.
Deciding between an indemnity and a managed-care plan is an individual choice. Like all decisions pertaining to health care and health insurance, the options should be thoroughly researched and carefully considered. Under the right circumstances, an indemnity plan can offer the greatest flexibility in obtaining health care and provide its policy holders the opportunity to be in maximum control of their health care choices.