| Definition: | | Indemnity health insurance (sometimes called fee for service) is a benefit provided in the form of cash payments rather than services. Within this program a covered person is reimbursed for covered expenses. An indemnity insurance contract usually defines the maximum amounts that will be paid for covered services. This is the traditional form of insurance. | | | | When one typically thinks of indemnity health coverage, one is thinking of the type of plan that does not require “pre-certification” and does not restrict the physicians, drugs or hospitals that will be paid for. This type of insurance usually has higher premiums. | | | | Overview: | | Indemnity insurance plans are the classic plans where few restrictions are in place. It may have a PPO option, utilization review, and case management features; or include a network or other preferred provider restrictions, but will not have an HMO plan. This plan normally provides the flexibility for members to use the providers of their choice and they are able to make independent decisions about the type of care they wish to receive. | | | | The plan can include co-payments, deductibles and maximums; but rarely require case management certification or approvals. Managed care, particularly HMO and capitation, has evolved away from the indemnity method. Yet, many people are still covered under indemnity plans. | | | | Example: | | | An indemnity plan allows members to use any medical provider (such as a doctor and hospital). The member will send the bill to the insurance company who pays part of it. There usually is a deductible, the amount of the covered expenses that must be paid before the insurer begins any reimbursement -- such as $200. This is paid each year before the insurer starts paying. | | | | Once the deductible is met, most indemnity plans pay a percentage of what they consider the usual and customary charge for covered services. The insurer generally pays 80% of the usual and customary costs and the memebr pays the other 20% known as co-insurance. If the provider charges more than the usual and customary rates, the member must pay both the coinsurance and the excess charges. | | | For example, if the usual and customary fee for a medical service is $100, the insurer will pay $80 and the member will pay $20. However, if the doctor charges $105, the member will pay $25. Many fee for service plans pay hospital expenses in full; some reimburse at the 80/20 level as described above. Policies typically have an out of pocket maximum. This means that once a member's expenses reach a certain amount in a given calendar year, the usual and customary fee for covered benefits will be paid in full by the insurer and the coinsurance will no longer be paid. There also may be lifetime limits on benefits paid under the policy. | | | | | | Related Links: | | AHRQ: Questions & Answers About Health Insurance | | Indemnity Health Plan Resources | | What's Indemnity Health Insurance? |
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