What Is Medical Indemnity Insurance?

Medical indemnity insurance is a type of health insurance plan. A medical indemnity insurance plan is also referred to as a reimbursement plan because the insurance reimburses the covered party regardless of the where or with whom the covered party seeks health care services from. Medical indemnity insurance plans are offered by almost all of the major health insurance companies in the United States.

Significance

• A medical indemnity insurance plan offers flexibility to the insured party because it allows him to choose his own health care service providers. This type of plan is also significant because it provides a reduced out-of-pocket cost to the insured party, depending on the type of reimbursement agreement that exists between the insurance carrier and the insured individual.

Limitations

• While medical indemnity insurance plans do offer some flexibility to the individuals who carry these plans, medical indemnity insurance plans also have some limitations associated with them. The limitations exist in the amount of the reimbursement that an insured party can receive to cover medical expenses. Medical expense reimbursement amounts can range from a per day cost and set percentage to the actual costs of the medical expenses.

Benefits

• The benefit amounts for each insurance holder on a medical indemnity insurance plan can vary. Make sure you understand what the benefit payments for your policy are before you obtain the indemnity policy. Benefit amounts are determined using one of three formulas: actual charges, percentage of actual charges or indemnity.

Actual Charges

• A medical indemnity insurance plan with actual charge benefits pay the actual amount of charges you incur for your medical coverage. There is no limit on the amount of the expense, so as long as you have a receipt for the service performed, you will receive a reimbursement for the cost of the medical expense.

Percentage of Actual Charges

• A medical indemnity insurance plan that reimburses a percentage of the actual costs means that you will be responsible for the difference in what the medical expense is and the amount the insurance company will cover. The percentage is typically a set amount, such as 80 percent. If the percentage of actual charges is 80 percent and the medical expense is $100, then the insurance plan covers $80, and you are responsible for paying the difference of $20 (or 20 percent of the actual charges).

Indemnity Reimbursement

• A medical indemnity insurance plan that reimburses by indemnity means that the plan pays a set amount for each day of coverage. Instead of determining your reimbursement amount by the amount of the medical expense, it's a set daily rate of coverage. If the set daily rate exceeds the amount of the medical expense, however, the indemnity reimbursement will only pay the amount of the expense.