Indemnity Health Insurance Definition

Indemnity health plans are one of two main types of health insurance options in the United States, along with managed health care plans. With indemnity health plans, the insureds have the freedom and flexibility to control their own health decisions concerning doctor choices and medical treatments. However, they will have to pay more in premiums, deductibles and other out-of-pocket expenses to take advantage of the plan's benefits.

Facts About Indemnity Health Insurance

• Indemnity health plans are considered traditional health plans because they were the first type of health policies in the United States. It is also a fee-for-service plan, which means the insurers pay for medical services once they have been rendered. Most plans come with an annual coinsurance maximum and once the insured meets this amount, which varies depending on the plan, the insurance company will pay 100 percent of the medical costs for the rest of the calendar year.

Types

• There are three different options available under the indemnity insurance plan. Two of them are reimbursement plans, with one paying a percentage of the medical bill, typically 80 percent while the insured covers the remaining 20 percent, and the other option covers 100 percent of the costs. The third option is the indemnity plan, which pays the insured a specific amount each day for a maximum number of days, which is used for hospital stays, medical expenses and also food and transportation.

Benefits

• Indemnity health plans provide their members with flexibility and more control over their medical options. Individuals and families who are insured by indemnity health plans can visit a doctor of their choice without restrictions on location. Unlike managed health care plans, there are no provider networks where members have to receive their health care to receive maximum health benefits. They also don't have to pick a Primary Care Physician, which is a doctor who is in charge of making the patient's medical decisions.

Considerations

• Those who travel may want to consider covering themselves with an indemnity health plan due to no restrictions on doctor choices. People may also choose these plans if their doctors aren't part of a managed health care network. One of the drawbacks about indemnity insurance plans is the paperwork that the insureds needs to submit for reimbursement. Some physicians may help fill out the claim forms; however, it is the responsibility of the patients to make sure all paperwork is submitted correctly and in a timely fashion. There can be processing delays if this isn't done.

Warning

• Although indemnity health plans provide insureds with choices and flexibility, it is the most expensive type of health plan, according to All Insurance Info. This plan only reimburses the insured for services covered by the insurer. If not, the insured is stuck paying the entire bill. For some procedures, the physicians may require the insured to pay for services upfront and then collect from the insurance company.