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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 each year.
However, for the people who are looking to take back control of their healthcare, many are turning to these medical reimbursement plans as a means of saving money. If you are considering an indemnity plan, or just exploring your options, you’ll want to keep reading to find out more about fee-for-service (FFS) coverage options that reimburse you for medical costs and cost you less than their more traditional counterparts.
What Is An Indemnity Health Insurance Plan?
An indemnity plan is a health insurance option for individuals and families who want to take back control of their healthcare. Also known as medical reimbursement or fee-for-service coverage, an indemnity plan affords more flexibility when it comes to your benefits by allowing you to seek out medical attention from almost any doctor or physician. Then, it will pay a portion or percentage of all the costs you incur.
How An Indemnity Health 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.
Real World Example
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?
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, medical reimbursement plans do not meet the minimum standards required under the Affordable Care Act, but that no longer matters. Starting this year, in 2019, President Trump eliminated the requirement for qualifying coverage.
Between the years 2014 and 2018, all Americans were required to enroll in qualifying health coverage under a provision known as the Shared Responsibility Payment or individual mandate. If you had chosen not to enroll in a plan that met the standards under the ACA, then you would have been required to pay a penalty. Because of the nature of indemnity plans, they wouldn’t have qualified, and you would have needed to pay a penalty if it was your only form of coverage. While you no longer have to worry, the ACA is still around, and there’s still a chance the individual mandate may make a comeback, in which case, your fee-for-service plan would come with a penalty.
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, also known as hospitalization insurance, 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 a set amount or percentage of eligible dental services you receive.
The Pros And Cons
Indemnity medical plans are a great choice for some, but they may not be the right fit for everyone. If you’re considering an FFS plan, it’s important to establish your needs, both health-wise and financially. So, let’s take a look at the pros and cons of indemnity medical insurance plans so you can make a decision that fits your needs.
First and foremost, indemnity health plans offer more flexibility than any other coverage options on the market. It’s what draws so many people to them. You aren’t restricted to a network of providers like you are with HMO or PPO plans. That also means that you won’t have to get a referral from a primary care physician in order to see a specialist.
Another benefit of indemnity fee-for-service plans is their price tag. With the way these plans are designed, you end up saving more money on upfront costs, like your premium, than you would with other coverage options. So, if you’re someone who is healthy without any medical issues in your family, it’s definitely a great option for you. Although, this pro leads us into our first con for indemnity coverage.
Since you pay less money up front, you’ll typically end up paying more in out-of-pocket expenses. The lack of a provider network has its advantages and disadvantages, and the fact that insurers don’t negotiate lower rates is definitely a con of indemnity plans. Also, because you rates aren’t negotiated, there may not be a cap on the amount a medical provider can charge you, and for expensive procedures, you can get stuck with a hefty bill.
Another con of indemnity health insurance is you are responsible for claims. Filing claims can be both a hassle and delicate process. If you aren’t familiar with how claims work, you may end up incorrectly filing for reimbursement, which could lead to larger financial issues.
With indemnity medical plans, you may not have access to certain benefits either. Essentially, FFS works as a sort of fallback plan and only pays out for certain services. For example, you may not have access to important preventive services or checkups, which you may have to pay for completely out-of-pocket, negating any savings you benefited from up front.
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!