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By Brad Stroh
At first glance, an indemnity health insurance plan may seem to hand policy holders the short end of the stick. After all, this type of insurance tends to pay less toward health care claims than a managed-care plan. Additionally, the policy holder generally pays more out-of-pocket and has to deal with more paperwork when it comes time to file a claim.
However, for a great number of people, indemnity is the undeniable way to go. Individuals may choose indemnity plans because they have favored health care providers who are not part of a managed-care network, or because they travel a lot and need the flexibility to seek care away from home, or for any number of other reasons. What makes an indemnity plan the right choice is different from one consumer to the next.
What primarily separates an indemnity plan from a managed-care plan is the presence or absence of a provider network. A managed-care plan comes with a network of health care providers who have arranged with the insurance company to provide their services at an agreed-upon rate. This allows the insurance company to know how much to expect to pay for any given service. It also allows the provider to know to some extent which services will be covered and the corresponding level of coverage. Because the insurance company has made prior arrangements with these providers, paperwork can be filed directly between the provider and the insurance company. The insurance company pays the provider directly for care, requiring the policy holder to pay only a small percentage of coinsurance or minimal co-pay amount out-of-pocket.
With an indemnity plan, on the other hand, there is no network of pre-approved providers. This means the insurance company is taking a greater risk when it comes to a policy holder’s choices of health care providers. The policy holder may choose a provider that charges more than the insurance company expected to pay for a particular service.
For this and other reasons, insurance companies offering indemnity plans give themselves some protection from the choices their policy holders may make. They typically charge a higher annual deductible that must be met before coverage begins. They often require policy holders to pay the full cost for the service out-of-pocket and then to file the paperwork of the claim themselves to seek reimbursement for the care. This protects the insurance company from paying for services that are not covered under their plans and also from paying more than what is reasonable for the care their policy holders are claiming. The insurance company may determine a reasonable charge for a service by referring to a table of UCR (usual, customary, and reasonable) figures determined by the average cost billed by providers in a particular area.
An indemnity plan may sound like a poor choice for a consumer to make, but for the reasons mentioned earlier as well as others, an indemnity plan can be the best choice for some consumers. An indemnity plan does not require its policy holders to choose a primary care physician (PCP) or obtain a referral to receive care. In this way, it’s one of the easiest plans to use. Policy holders seek their health care whenever and from whomever they choose.
Deciding between an indemnity and a managed-care plan is an individual choice. Like all decisions pertaining to health care and health insurance, the options should be thoroughly researched and carefully considered. Under the right circumstances, an indemnity plan can offer the greatest flexibility in obtaining health care and provide its policy holders the opportunity to be in maximum control of their health care choices.
About the Author: Brad Stroh is currently co-CEO of Freedom Financial Network and
Bills.com
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