Indemnity Plans

Traditional Indemnity Health Insurance Plans

By Janet Hunt

Updated February 17, 2021

Health insurance has made some drastic changes over the last few decades, but it is still possible to control your healthcare choices by choosing the right type of health insurance plan. Traditional Indemnity Health Insurance Plans are also referred to as “fee-for-service” plans. It is the traditional type of insurance that was what most health insurance companies offered to insurance consumers before the prevalence of PPO (Preferred Provider Organizations) and HMO (Health Maintenance Organizations).

Types of Indemnity Health Insurance Plans

Different types of traditional indemnity health insurance plans are available to you including:

Hospital and surgery insurance coverage.

Major medical insurance coverage.

Comprehensive coverage—a combination of hospital and major medical plans.

Most Indemnity Health Insurance Plans will provide coverage for hospital stays, outpatient procedures, prescription medications, doctor’s visits, and preventative care.

More Doctor and Hospital Choices.

With a traditional indemnity health insurance plan, you will not be limited to choices of health service providers that are within a preferred provider list or network. These limitations are common with a PPO or HMO plan. With many indemnity plans, there are no referrals needed. Also, many policyholders enjoy the freedom of being able to choose any health care facility or doctor they wish.

Pros & Cons

One of the best advantages of a Traditional Indemnity Health Insurance Plan is the freedom you can choose the health care facility and provider without any restrictions.

One of the downsides to this is that you may have to pay more for your health insurance coverage than if you choose a PPO (Preferred Provider Organization) Plan or an HMO (Health Maintenance Organization) Plan. There may also be more paperwork involved in filing claims. In addition, some preventive care services such as wellness checkups and other routine care may not be covered by a Traditional Indemnity Health Insurance Plan.

One other thing to take into consideration is who is responsible for the balance of the bill the insurance company does not pay. With PPOs and HMOs, many providers have mutual agreements that the patient will not be billed above the pre-agreed fee for a service. The Traditional Indemnity Plans have no agreements with providers, so you may be responsible for paying the balance of the bill the insurance company does not cover.

How It Works

Indemnity health insurance works much like auto insurance in that you will pay your health insurance deductible before the insurance company picks up the remainder of your bill. This deductible amount will vary based upon the specific type of health insurance policy option you chose.

With a traditional indemnity health insurance plan, you will be billed based upon usual, customary and reasonable fees (UCRs). These UCR—fixed fee amounts—are set by the insurer and monitored for necessary changes. They base the fee on the procedure and price ranges in the area. The UCR is the amount that the insurance company will pay for a specific disease, illness or medical procedure.

You will want to check and see if a medical procedure or fee—such as plastic surgery [if for reconstructive or non-cosmetic reasons), maternity, or other procedures—is covered by your particular type of medical insurance before having the procedure performed. In some cases, these procedures must be pre-authorized by your insurance company. If in doubt, give your insurance company a call and talk to a representative.

You will then submit this bill to your insurance company, or in some cases, the health care provider will submit the bill to your insurance company as a courtesy. The insurance company will then pay its portion of the medical bill less your deductible based on the amount of the UCRs covered under your health insurance plan.

If you would like to include others in these important decisions we encourage you to do so. Our video-conferencing technology can bring people together regardless of their location.

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Is It Right for You?

With a traditional indemnity health insurance plan, you will be billed based upon usual, customary and reasonable fees (UCRs). These UCR—fixed fee amounts—are set by the insurer and monitored for necessary changes. They base the fee on the procedure and price ranges in the area. The UCR is the amount that the insurance company will pay for a specific disease, illness or medical procedure.

Of course, no one can tell you which type of plan is right for you. It is an individual choice you will have to make for yourself and for your family based on your unique health insurance needs and financial situation. You may want to sit down with your family insurance agent and discuss the benefits of each type of health insurance plan, so you can make a decision that will give you and your family the best value on a health insurance policy.

A Traditional Indemnity Health Insurance Plan is not right for everyone, but it may be the right choice for you if you want to choose your own healthcare facility and doctor and want the ability to visit a specialist without having to obtain a referral. You also do not have to choose a primary care doctor or obtain services from a preferred provider network. While you could lose some discounts available through an HMO or PPO, you are gaining the freedom to make your own healthcare choices.

What Is Cancer Insurance and do I need it?

The question is: are the premiums you’ll pay for this type of policy worth the peace of mind it provides?

Also, does the coverage justify the cost? And when does it make sense to buy cancer insurance? Cancer insurance isn’t supposed to replace the benefits provided by your primary health insurance. Cancer insurance is supposed to help you pay some of the expenses your basic policy doesn’t cover.

With a traditional indemnity health insurance plan, you will not be limited to choices of health service providers that are within a preferred provider list or network. These limitations are common with a PPO or HMO plan. With many indemnity plans, there are no referrals needed. Also, many policyholders enjoy the freedom of being able to choose any health care facility or doctor they wish.

There are a variety of plans available. Some plans might cover:

Co-pays.

Deductibles.

Hospital stays (especially lengthy ones).

Visits to out-of-network specialists.

Various tests, treatments and procedures.

Travel and lodging when treatment is far away from home.

While some plans may cover some of the above, others will provide a lump sum benefit to be used for whatever you need.

Cancer insurance is a type of supplemental health insurance designed to help with unexpected expenses if you receive a cancer diagnosis. This financial support is typically used as a way to help with some of the medical costs that are not covered under your regular health insurance plan and may also assist with other expenses while you are receiving treatment, such as your mortgage and utilities.

Cancer cont.

At least one provider won't sell you cancer insurance if you’ve been diagnosed or treated for other health issues, too. That includes Hodgkin’s disease, AIDS, AIDS Related Complex or if you’ve tested positive for HIV.

Not only is it costly to double up on health insurance coverage, but it can be a waste, too. Especially if cancer insurance covers the same ground as your basic health plan.

If you have an average risk of developing cancer, you may want to rely on your basic health plan rather than cancer insurance.

Cancer insurance doesn’t make sense for everybody. 

If you’re enrolled in Medicare, MedSup could be a better option than cancer insurance.

Don’t assume that duplicate coverage will provide you with double the benefits.

Instead, find a cancer insurance policy that fills in the gaps left open by your basic health plan. 

Critical illness insurance may make more sense than cancer insurance.

If you would like to include others in these important decisions we encourage you to do so. Our video-conferencing technology can bring people together regardless of their location.

Let's Talk