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Indemnity Plan: Fee-for-Service & Medical Reimbursement Insurance

Meredith Miller | Published: June 14, 2018

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It seems like indemnity plans are the forgotten child when it comes to health coverage. According to the National Conference of State Legislatures, only about 1% of the population enrolls in indemnity health insurance plans.

However, for the people who are looking to take back control of their healthcare, many are turning to indemnity plans. If you are considering an indemnity plan, or just exploring your options, you’ll want to keep reading to find out more about these fee-for-service health insurance plans that reimburse you for medical costs.

What Are Indemnity Health Insurance Plans?

Indemnity plans give you the control when it comes to your healthcare by letting you choose your own medical provider. With an indemnity plan, you have the ability to seek coverage from the doctor, medical facility, or any other eligible medical provider you see fit. The flexibility of indemnity plans is the reason they are often referred to as fee-for-service plans or medical reimbursement plans.

How An Indemnity Plan Works

Unlike managed care plans, an indemnity plan doesn’t limit your coverage to a provider-network and doesn’t require a referral to see a specialist. However, because there are no negotiated rates, indemnity health insurance plans won’t cover all your medical costs even after your deductible has been met.

Fee-for-service plans usually have an annual deductible, along with coinsurance or copays. Meaning, you will have to pay a set minimum towards your medical bills before your indemnity benefits kick in.

Even after your deductible, your indemnity plan will only cover a set percentage or amount of your medical costs. Be careful though, because for the majority of indemnity plans, you will only be reimbursed for the usual, customary, and reasonable rate (UCR) which you can learn more about here, so reimbursement will not always be based on what you pay.

Here’s An Example Of A Fee-For-Service Plan

Let’s take a look at the following example to see just how indemnity plans work.

You enroll in an indemnity health plan that comes with the following benefits (we’re going to ignore the deductible for this scenario):

  • Surgery Reimbursement: $2,000
  • Hospital-Stay Reimbursement: $450
  • Prescription Reimbursement: $50

Not too long after your coverage begins, you come down with appendicitis and get rushed to the hospital. Your medical provider determines that the correct course of action is to operate.

The surgery only lasts a couple of hours and is successful, but the surgeon wants to keep you overnight to make sure there are no complications. The next morning, you get a prescription for pain management from your surgeon accompanied by a breakdown of your bill. You owe:

  • Surgery: $5,000
  • Hospital Stay: $750
  • Prescriptions: $50

Since you are enrolled in an indemnity plan, you will end up paying for most of the costs out-of-pocket. However, because you are covered, you do receive the benefits you are entitled to from your indemnity provider. So, while the total of your bill comes out to $5,800, your benefits will cover $2,500. After all is said and done, you will end up paying $3,300.

What Do Fee-For-Service Plans Cover?

Depending on the company and plan you go with, your coverage will vary. All indemnity plans will outline eligible medical expenses that you will receive reimbursement for, so check your policy guidelines for the most accurate list of benefits.

That being said, indemnity plans will usually reimburse you for most medical services. You will still have access to the same quality coverage you would with managed care plans, but certain benefits, like preventive services, may not be covered in full like they would with HMO, PPO, or POS plans.

Who Is The Target Audience For Indemnity Plans?

The target audience for indemnity plans is anyone who prefers flexibility over comprehensive coverage. If you are relatively healthy and don’t have a medical history or any pre-existing conditions, a fee-for-service plan may actually be the best fit for you. Here is a list of people who would want to consider an indemnity plan.

  • Anyone looking for flexibility when choosing a medical provider.
  • Anyone who does not want to go through the referral process of managed care plans.
  • Anyone who is healthy and qualifies for a tax penalty exemption.
  • Anyone looking for supplemental coverage for specific medical services.
  • Anyone who has a Health Savings Account (HSA) to supplement high out-of-pocket costs.

Are Medical Reimbursement Plans ACA Compliant?

No, indemnity plans are not ACA compliant. When the Affordable Care Act (ACA) was passed in 2010, it required all health plans to meet certain standards known as the minimum essential benefits. Since medical reimbursement plans don’t meet those requirements, you may still be required to pay a tax penalty if your indemnity plan is your only source of coverage. Learn if you will have to pay a tax penalty here.

Types Of Fee-For-Service Health Insurance

Indemnity plans are offered for a variety of different services and combined with your health insurance you may be able to save big. Some of the popular plans include hospital indemnity plans and dental indemnity plans. Here’s how they work.

Hospital Indemnity Plans

Hospital indemnity plans reimburse you for hospital visits. Like a regular indemnity plan, hospital indemnity plans reimburse you for a set dollar amount or percentage of your hospital stay and allow you to choose a medical facility on your own. These plans typically offer coverage for each visit, day, week, or month you are stuck in a hospital.

Dental Indemnity Plans

As you can probably guess, dental indemnity plans allow you to choose your own dentist, and don’t limit you to a provider-network. If you enroll in a dental indemnity plan, you will pay for most visits out-of-pocket, and your indemnity provider will pay set amount or percentage of eligible dental services you receive.

Get Accurate Indemnity Plan Quotes

If you want to explore your indemnity plan options even further, your best bet is talking to an experienced agent who can help you find what’s available in your area. First Quote Health makes it easy to find and compare indemnity plan quotes and more. Start your search here, and get covered today!