Individual Health Insurance
Indemnity Health Insurance (Fee-For-Service)
Indemnity health insurance plans are also referred to as "traditional" individual health insurance plans because they are the oldest type of medical insurance policy. Under an indemnity health care plan, the insurance company will pay a percentage of the medical expenses incurred by a plan member. This reimbursement may be made directly to the insured, or to a treating physician or hospital. Indemnity health insurance policies usually offer the greatest freedom in choosing a physician or medical facility because you can usually select any physician you want and make changes without notification to the individual health insurance company. Unlike many other types of health plans, your selection of a health care professional is not limited by geographical boundaries and you can receive the same level of benefits anywhere within the country.
Under a fee-for-service indemnity health insurance plan, the insurance company will pay only a portion of the medical expenses. Most of these plans will have a set deductible amount and then a coinsurance percentage that must be paid by the member. Your receipt of benefits under this type of plan will not begin until you have met the annual deductible, which you choose at the time of enrolling in the indemnity plan. Once your deductible has been met, the individual health insurance company will begin paying the balance of the expenses after your coinsurance payment. For instance, if your plan has a $1,000 deductible with a 25% coinsurance, you will pay 100% of the first $1,000 (the deductible) in medical expenses each year. After you have met this deductible, you will continue to pay 25% of the medical bills and the insurance company will pay 75%.
Not all medical expenses will be covered under the indemnity plan and will not apply to the deductible or to your coinsurance limits. You will need to refer to the plan details for the covered benefits because all indemnity plans will vary on what is covered and what is not. In addition, most indemnity plans have an annual co-insurance maximum, also referred to as your annual out-of-pocket maximum. Once you have met this maximum limit with your coinsurance payments, the insurance company will pay 100% of the medical expenses for the remainder of the calendar year, up to the maximum payable benefits. The maximum payable benefit is disclosed in your policy as the maximum amount that the insurance company will pay for any given year or for the lifetime of the policy.
Because indemnity health insurance plans do not have contracts with all physicians with whom you have access, you may be required to file a claim with the individual health insurance company to receive reimbursement. Some physicians may require you to pay 100% of the bill up front and then collect from the insurance company via a claim form. Other physicians may assist with your claim form and await payment directly from the insurance company. Prior to treatment, you may ask any physician what type of policy they have in working with your insurance company.
There are different types of indemnity health insurance plans. The most common of these is called a catastrophic hospital plan, or major medical insurance policy. These plans are designed to protect you financially in the event of a major illness or injury and may not provide benefits for preventive health care, routine office visits or out-patient lab and radiology.
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