Indemnity PPO Insurance Terms

Indemnity plans (also called fee for service plans) and preferred provider organizations (PPOs) are two different kinds of health insurance plans. Indemnity plans do not restrict your choice of doctors and other care providers. They typically reimburse the client or care provider based on a list of covered medical procedures and the usual and customary prices in that area. PPOs are managed care organizations that contract with a limited number of providers in your area. PPO premiums tend to be lower for comparable benefits, but allow less flexibility.

Deductible

• A deductible is the amount you must pay out of pocket in a given year before the insurance company starts to pay benefits. All things being equal, the higher the deductible, the lower the premium.

Coinsurance

• Coinsurance is the percentage of the claim you pay once all deductibles have been paid. For example, with an 80/20 plan, the insurance company pays 80 percent of all covered expenses. You are responsible for the remaining 20 percent, plus your deductible. Your coinsurance, then, is 20 percent.

Copay

• A copay is a charge you pay for each office visit or covered procedure. It is typically a flat rate, often $20 to $50.

Exclusions

• Exclusions are conditions, treatments or medications not covered by the plan. They are typically listed in the exclusion section of the policy. Some policies are issued with exclusion riders, especially where a previous condition represents an unacceptable risk to the insurance company.

Underwriting

• Underwriting is the process of assessing the medical and personal history of an applicant to determine if the individual or group is an acceptable risk to the insurance company, and if so, whether the insured should be charged a higher or lower premium than the standard rate.

Formulary

• The formulary is the list of prescription drugs the plan covers. The plan may provide a different reimbursement for brand-name drugs still sold under a patent than for generic drugs.