Health Insurance Articles

Determining Whether An Indemnity Plan Is Right For Your Family

2010-08-16

When choosing insurance coverage for your family, there are a seemingly countless number of options. An indemnity plan is just one of these potential choices. There are a number of benefits, as well as drawbacks, to such a plan. Considering all of the pros and cons can help you decided whether or not this insurance coverage is for you and your family.

An indemnity (or "fee for service") plan is similar to more traditional managed care plans in that the insured pays a set monthly premium. However, with an indemnity plan, all medical costs are paid out of pocket and then submitted to the insurance company for reimbursement at a later date. Once the deductible amount is hit, the insurer pays a percentage of the costs, while the insured pays the remainder. After the deductible is hit, there may be a co-pay involved.

The primary benefit of indemnity insurance coverage is the freedom to choose any provider. Unlike a traditional HMO or PPO plan, there are no "in-network" providers that the insured must use. This flexibility allows the insured to choose any specialist they like or change doctors without needing to check with an insurance company or worry about paying higher costs for moving outside an approved list of providers. This can be particularly beneficial when the insured wants to remain with their current doctor or wants the freedom to choose a new provider. Additionally, for those that travel extensively or aren't able to consistently visit one provider, an indemnity plan can offer an opportunity to change doctors as needed.

There are no additional or special eligibility requirements for an indemnity plan. Much like other managed care plans, the insurer will look at current health conditions and medical history to determine general eligibility.

There are, however, a few potential drawbacks to consider when choosing an indemnity plan. Under this type of insurance coverage, the insured pays more out of pocket to cover the costs of treatment. Additionally, deductibles are generally higher, and the insured must wait until this deductible is hit before they can expect to be reimbursed for any of their expenses. Because of these additional costs, some larger families choose to use insurance coverage other than an indemnity plan. The insured must be prepared for more paperwork and certain services (particularly some preventative care) may not be covered.

If your family needs the increased flexibility of choosing any provider, then an indemnity plan could be the best choice. While the initial out-of-pocket costs may seem higher, many people who choose an indemnity plan for their insurance coverage find that the options such a plan offers are worth the cost.