Indemnity Insurance Plan Information

Deciding on which type of health insurance coverage to carry for you and your family can be challenge. An indemnity insurance plan, also known as a reimbursement plan, is the most common type of health insurance plan offered. Understanding the ins and outs of this type of plan can help you decide whether it's the right type of health insurance plan for you.

Significance

The purpose of an indemnity insurance plan is to allow individuals to choose their own health-care providers and to be reimbursed medical expenses no matter who they choose as a health-care provider.

Limitations

While indemnity insurance plans do reimburse for medical expenses, reimbursement amounts vary. While the doctors and hospitals you can utilize are not restricted, how much of the medical expense your insurance policy covers does have limitations. Reimbursement amounts may be limited under an indemnity plan, which means you may have some out-of-pocket expenses.

Benefits

While other types of insurance policies limit doctors and hospitals to providers on the health insurance carrier's list, an indemnity insurance plan does not have this type of a limitation. As opposed to a PPO, where you are responsible for a certain amount of your medical care depending on whether you see an "in-network" or "out-of-network" provider, and you have a deductible to meet, this is not the case with an indemnity plan. Whatever doctor you see, there is not a difference in cost to you. As opposed to an HMO plan, where you have to see a doctor or visit a hospital on the plan's list of carriers, an indemnity plan removes this factor completely. So, another primary benefit of this type of plan is that it is very flexible and reduces your out-of-pocket expenses.

Actual Charges

Under an indemnity insurance plan that pays actual charges, you will receive a reimbursement for the cost of your medical expenses. An actual charges indemnity insurance plan gives you back the cost no matter how much the expense is.

Percentage of Actual Charges

If an indemnity insurance plan offers reimbursement as a percentage of actual charges, then you will receive a set percentage of the actual medical expenses. Again, the reimbursement is regardless of how much the medical services cost. The most common percentage of actual charges reimbursement is 80 percent. For example, is a medical procedure costs $1,000, the indemnity insurance plan carrier will reimburse you $800 and you are responsible for the difference of 20 percent or $200. This percentage can vary by policy, so check with your insurance provider for specifics on what your percentage of reimbursement is.

Indemnity Reimbursement

With an indemnity reimbursement schedule, the insurance company pays a certain amount of the medical expenses per day and for a certain number of days. With an indemnity reimbursement schedule, the reimbursement amount is not determined by the cost of the medical care, but your reimbursement amount also cannot and will not exceed your expenses.