What Is Indemnity Health Insurance?

The Facts

Indemnity insurance is the oldest type of health plan available. There are three options under indemnity health plans. One option reimburses you a percentage of your bill, usually 80 percent of the total cost. That leaves you with the remaining 20 percent. Another option of reimbursement plan pays the entire cost regardless of the amount of the bill. The third option is an indemnity plan which pays you a specific amount per day for a maximum number of days. Although you don't have a limit when it comes to your health care costs, the reimbursement will never exceed your expenses.

Pros

With an indemnity plan, you don't have to sacrifice a doctor whom you favor for one within a specific network. You don't need referrals to see a specialist of your choice. If you travel a lot, this insurance is a better fit since your benefits will be the same no matter where in the country you seek medical attention. This plan features an out of pocket maximum, which means that once you have paid the specified limit with your own money, the plan calls for the insurer to pay your expenses for the remainder of the year, including coinsurance.

Cons

All the convenience that an indemnity plan offers comes with a price. These plans are more expensive. Indemnity health plans offer a higher deductible to offset the choices of doctors who charge more than what the insurer expects to pay. They would like for the insured to pay the total out of pocket costs before reimbursing them to protect themselves from paying for services that are not covered. All of the paperwork is the insured's responsibility to fill it out correctly and submit it in a timely fashion.

Significance

With managed health care plans becoming popular among Americans due to their cost effectiveness, indemnity plans are painted as a plan for the wealthy. It is built on the fundamental that an insured should control his choices when it comes to health care and not be subjected to options that are in the best interest of costs. Although that argument seems to be losing traction, indemnity plans are still valuable in this country.

Warning

When seeking services under an indemnity health plan, be sure to read the policy disclosures thoroughly. Your policy may not cover a particular service, leaving you to pay the entire bill without reimbursement. Also you are at the doctor's discretion when it comes to paying for their services. Some may help you fill out your paperwork and wait for the insurance company to pay the claim, but others will not give you that luxury and you will have to pay for your services up front.