Are Indemnity Health Insurance Plans Right for Your Company?

Traditional indemnity plans are often are referred to as “fee for service” plans. This is because the insurance company pays a “usual, customary and reasonable” (UCR) amount for covered charges after the insured member pays the deductible and co-payment. The deductible is the amount the member is required to pay before policy benefits are provided (the higher the deductible, the lower your overall plans costs will be).

A co-payment is the amount a member may have to pay after the deductible is met. For example: If the provider charges $800 and you have a $200 deductible, that leaves $600. If your co-payment is 20 percent, you are required to pay 20 percent of the remaining amount, which is $120 (plus the $200 deductible of course). Not all policies are the same, so it pays to check if the insurance company caps the amount a member will have to pay as co-insurance. Once a member reaches the maximum payable, they no longer have to pay the co-insurance. This feature can be a blessing to someone facing a serious medical situation. In addition, check whether preventive services, such as annual exams and routine office visits, are covered, since some indemnity plans do not cover those services. Here are a few advantages and disadvantages of indemnity plans.

Your employees will not be limited when choosing a health provider. They won’t have to worry about network restrictions, because they can select any physicians, hospitals, or specialists they like, as long as the treatment is non-experimental. This is especially important if your employees don’t wish to switch to a different provider or facility. It’s also helpful if you live in an area where your choice of providers or facilities is limited and your employees want to go to different towns for treatment.Indemnity insurance is great for employees who often travel outside their area and might need to see a health care provider when away from their regular doctor. Indemnity health insurance expands their health care options.No referrals are needed; members can see whoever they choose.

While premiums may be lower than traditional health insurance, employees must pay deductibles and co-insurance costs. This can add up, particularly when there is no maximum out-of-pocket to pay.Members must be diligent about searching for the lowest cost before agreeing to treatment. They also should learn upfront how much the company will pay as UCR (usual, customary and reasonable) and whether the treatment is medically necessary.There may be few or no preventive benefits.Members might have to pay bills upfront and settle with the insurance company later.

When considering an indemnity plan, remember there are different types of insurance plans for different medical needs, including hospital/surgery, major medical, and comprehensive (combination of hospital and major medical coverage). Most of these plans provide coverage for hospital stays, outpatient procedures, prescription medications, doctor’s visits and preventive care. For more information about whether an indemnity plan would be a good fit for your company, please contact us.