Indemnity Health Insurance

Is Indemnity Health Insurance Better Than Managed Care Insurance?

Indemnity health insurance (sometimes referred to as a fee-for-service policy) was, at one time, the most popular kind of health insurance. In fact, it was the only kind of health insurance in America. It was out shadowed in the nineties by the introduction of managed care insurance. But many employers still offer indemnity today.

Is Indemnity Health Insurance More Expensive?

Indemnity health insurance is more expensive than a managed care plan on two different levels. First of all, the premiums (the amount of money you pay each month) are higher.

There are several reasons for this. Since it’s not a managed plan (like an HMO), there tend to be more unnecessary procedures…so the insurance companies end up paying more money. As with everything in life, the added expenses get passed along to the end users (the ones buying the insurance). The premiums for indemnity health insurance policies are also higher because managed care plans are more focused on group rates. They generally only provide insurance through large groups (like employers) and contract healthcare providers into a network where they receive lower fees. Without this kind of ‘bulk buying’, the prices are naturally higher.

Indemnity health insurance is also more expensive because it usually covers a smaller amount. With an HMO or PPO, you might pay small co-pays for doctor and hospital visits. Indemnity health insurance usually only covers a percentage of medical bills…and that’s after you’ve met a deductible. Such plans often won’t cover preventive healthcare like check-ups and vaccinations.

Why Would Anyone Choose Indemnity Health Insurance?

There are several reasons someone might choose indemnity health insurance over a managed care plan. The most obvious reason is because sometimes a managed care plan isn’t available. Indemnity health insurance is offered more as an individual plan, or to small businesses when they won’t have enough policy holders to qualify for group rates with an HMO or PPO.

Another reason someone might prefer indemnity health insurance is that it offers more freedom than managed care plans. A person isn’t restricted to a network of doctors and hospitals…they can go anywhere in the country. Someone with indemnity health insurance also doesn’t have to worry about referrals when going to a specialist. In most cases, they don’t need approval from their insurance company.

What Else Should I Know About Indemnity Health Insurance?

As already mentioned, most indemnity health insurance policies have deductibles. This is the amount of money the patient must pay before the insurance company starts covering the costs. You can lower the premium payments by choosing a policy with a very high deductible.

Indemnity health insurance usually only pays a percentage of the medical costs after you’ve met the deductible. Let’s say your deductible is $500 and your policy covers 80% after the deductible. If a hospital visit costs $700, the insurance would pay 80% of $200 ($160).

Indemnity health insurance policies often have out-of-pocket maximums. That is, the maximum amount of money a patient would have to spend on covered procedures within a year. This amount is generally very high, and lowering it would cause higher premiums.

Finally, indemnity health insurance policies only pay the UCR (Usual, Customary and Reasonable fees). They base such fees on what health care procedures cost in your surrounding area. For example, let’s say your hospital visit cost $700, but the indemnity health insurance policy’s UCR is $650. Then the policy would only pay 80% of $150 (remember the $500 deductible) or $120.

So is indemnity health insurance better than a managed care plan? That all depends on your situation…and if a managed care plan is even available.