Define Indemnity Health Insurance
Indemnity health insurance, otherwise known as fee-for-service, is the oldest form of health insurance in the United States. Unlike managed care, indemnity plans allow the insured to choose his own doctor, though the cost is often higher and requires the insured to pay for services upfront and to seek reimbursement from the insurer. The insured also assumes more of the cost by paying a higher deductible.
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Why Indemnity Plans Are Chosen
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In many cases, a person chooses an indemnity insurance plan because no other option is available. Her employer may not offer a managed care plan, often referred to as an HMO or PPO, or her employer may be a small business that does not have enough employees to qualify for a group plan. Many self-employed individuals take out indemnity insurance because they have no way to obtain group coverage.
Absence of a Network
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Indemnity health insurance differs from other types of insurance, such as managed care, in that the insured is free to pick any health care provider rather than choosing from among those available through a network. This means that the insurance carrier is potentially taking on a larger risk, since there is a chance that the insured might select a provider that charges more for services than the insurer expects to pay.
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Claims Process
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With an indemnity plan, the health care provider normally does not bill the insurance company for services rendered. Instead, the insured pays the provider out of her own pocket, then seeks reimbursement by filing the claim directly to the insurance company. This sometimes protects the insurer from having to pay for a service it does not cover or from paying more than the usual, customary and reasonable charges.
Cost
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Costs to the insured for health indemnity plans are generally higher than for other types of plans because the insured is not constrained by a managed care system and is free to choose her own doctor. This can result in more procedures occurring, which costs the insurer more in benefits paid. Indemnity plans also have higher deductibles and cover only a percentage of a claim, so the insured pays more money out of his own pocket.
Considerations
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For people who have no other coverage available to them, an indemnity plan is better than having no coverage at all. If someone is particular about which primary care physician she sees or wants complete freedom of choice when needing a specialist or selecting a hospital, an indemnity plan may make the most sense.
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