Indemnity Health Insurance Plans
This is the traditional kind of health care policy, also called fee-for-service or a reimbursement plan. Insurance companies pay fees for the services provided to the insured people covered by the policy. This type of health insurance offers the most choices of doctors and hospitals. You can choose any doctor you wish and change doctors any time. You can go to any hospital in any part of the country.
With fee-for-service, the insurer only pays for part of your doctor and hospital bills. This is what you pay:
- A monthly fee, called a premium.
- A certain amount of money each year, known as the deductible, before the insurance payments begin. In a typical plan, the deductible might be $250 for each person in your family, with a family deductible of $500 when at least two people in the family have reached the individual deductible. The deductible requirement applies each year of the policy. Also, not all health expenses you have count toward your deductible. Only those covered by the policy do. You need to check the insurance policy to find out which ones are covered.
- After you have paid your deductible amount for the year, you share the bill with the insurance company. For example, you might pay 20 percent while the insurer pays 80 percent. Your portion is called coinsurance.
To receive payment for fee-for-service claims, you may have to fill out forms and send them to your insurer. Sometimes your doctor's office will do this for you. You also need to keep receipts for drugs and other medical costs. You are responsible for keeping track of your medical expenses.
There are limits as to how much an insurance company will pay for your claim if both you and your spouse file for it under two different group insurance plans. A coordination of benefit clause usually limits benefits under two plans to no more than 100 percent of the claim.
Most fee-for-service plans have a "cap," the most you will have to pay for medical bills in any one year. You reach the cap when your out-of-pocket expenses (for your deductible and your coinsurance) total a certain amount. It may be as low as $1,000 or as high as $5,000. Then the insurance company pays the full amount in excess of the cap for the items your policy says it will cover. The cap does not include what you pay for your monthly premium.
Some services are limited or not covered at all. You need to check on preventive health care coverage such as immunizations and well-child care.
There are two kinds of fee-for-service coverage: basic and major medical. Basic protection pays toward the costs of a hospital room and care while you are in the hospital. It covers some hospital services and supplies, such as x-rays and prescribed medicine. Basic coverage also pays toward the cost of surgery, whether it is performed in or out of the hospital, and for some doctor visits. Major medical insurance takes over where your basic coverage leaves off. It covers the cost of long, high-cost illnesses or injuries.
Some policies combine basic and major medical coverage into one plan. This is sometimes called a "comprehensive plan." Check your policy to make sure you have both kinds of protection.
How is the benefit amount calculated with an indemnity plan?
Different plans use different methods for determining how much you will receive for your medical expenses. Following are descriptions of the most common methods.
- Reimbursement--actual charges. Under this type of plan, the insurer will reimburse you for the actual cost of specified procedures or services, regardless of how much that cost might be.
- Reimbursement--percentage of actual charges. Under this type of plan, the insurer pays a percentage of the actual charges for covered procedures and services, regardless of how much those procedures and services cost. A common reimbursement percentage is 80%. This has the same effect as a 20% co-payment.
- Indemnity. Under this type of plan, the insurer pays a specified amount per day for a specified maximum number of days. Although your reimbursement amount does not depend on the actual cost of your care, your reimbursement will never exceed your expenses.
What Is a "Customary" Fee?
Most insurance plans will pay only what they call a reasonable and customary fee for a particular service. If your doctor charges $1,000 for a hernia repair while most doctors in your area charge only $600, you will be billed for the $400 difference. This is in addition to the deductible and coinsurance you would be expected to pay. To avoid this additional cost, ask your doctor to accept your insurance company's payment as full payment. Or shop around to find a doctor who will. Otherwise you will have to pay the rest yourself
Questions to Ask About Fee-for-Service Insurance
- How much is the monthly premium? What will your total cost be each year? There are individual rates and family rates.
- What does the policy cover? Does it cover prescription drugs, out-of-hospital care, or home care? Are there limits on the amount or the number of days the company will pay for these services? The best plans cover a broad range of services.
- Are you currently being treated for a medical condition that may not be covered under your new plan? Are there limitations or a waiting period involved in the coverage?
- What is the deductible? Often, you can lower your monthly health insurance premium by buying a policy with a higher yearly deductible amount.
- What is the coinsurance rate? What percent of your bills for allowable services will you have to pay?
- What is the maximum you would pay out of pocket per year? How much would it cost you directly before the insurance company would pay everything else?
- Is there a lifetime maximum cap the insurer will pay? The cap is an amount after which the insurance company won't pay anymore. This is important to know if you or someone in your family has an illness that requires expensive treatments.