Indemnity health insurance plans typically provide comprehensive medical coverage for a monthly premium. These are called fee-for-service plans, because bills are paid as charges are incurred. Payment is made either to the health care provider or insured person after services are received. Some indemnity plans may require the insured to pay all costs upfront and then file a claim for reimbursement. Other plans may require participants to pay a copayment at the time services are received, such as $20 per office visit. The health care provider then submits a claim for the remaining costs of covered services.
Indemnity Plan Features
Conventional indemnity health insurance plans also may hold the policyholder responsible for a coinsurance amount, which is a set percentage of specific services. For example, the insurance provider may pay 75 percent of the costs when a policyholder is hospitalized, and the policyholder is responsible for the remaining 25 percent of the bill.
Indemnity plans may directly reimburse the insured person for expenses incurred. Often, the policyholder must first meet a set deductible annually before submitting claims for reimbursement. Typically the doctor's office or hospital staff will submit the claim for the patient if the insurance provider is a recognized and accepted company.
Managed Care Plans
Managed care plans, such as Health Maintenance Organizations, require participants to choose among a select group of health care providers. Members pay a monthly fee upfront and choices outside the HMO network can mean the member must pay the entire costs.
Some managed care plans have indemnity features. PPOs are an example. PPO stands for Preferred Provider Organization and is a group health plan that allows members to select among an affiliated network of doctors and hospitals. When a PPO member goes outside the approved network of providers, costs are typically higher.
One of the main differences between traditional indemnity insurance and managed care plans is the way the insured receives services, particularly from medical specialists. Managed health care plans often require the patient to obtain a referral from a designated primary physician. With traditional indemnity insurance, the policyholder can choose between specialists and change primary physicians if so desired.