Is an Indemnity Health Insurance Plan a Good Idea?

An indemnity health care plan, also called a fee for service plan, is the oldest of the available types of health insurance plans. An indemnity plan covers your health care expenses at the same rate, regardless of which doctor or hospital you use. An indemnity plan does not use a network like a PPO or an HMO does.

A patient will usually have a high deductible associated with indemnity health insurance coverage. After the deductible has been paid by the patient, an indemnity plan will cover a percentage of medical expenses up to a usual and customary amount that the plan uses for each type of medical expense. If a plan covers eighty percent of usual and customary charges, the patient would pay the other twenty percent until the patient reaches an out of pocket maximum. If charges are higher than a usual and customary amount then the patient would pay the difference.

Fee for service coverage plans used to be very popular, but they are not used as much as they were in the past. Indemnity plans do not have the same kind of incentives to control health care costs that managed care plans such as PPO plans and HMO plans have. As medical costs have increased, more employers have stopped offering indemnity plans to their employees and have only offered managed care plans.

Some people are offered a choice between an indemnity plan and one or more managed care alternatives. Most people who use indemnity plans enjoy the seamless coverage that allows them to choose any provider without checking for network membership. Indemnity plans also provide more coverage for medical tests and prescriptions than many managed care plans provide.

As health care costs keep increasing, most people will be willing to give up some of the freedom of choice that an indemnity plan offers in exchange for the lower out of pocket costs that managed care plans provide. Indemnity plans may go out of existence in the near future.