UPDATED: APRIL 19, 2023 | 1 MIN READ
If you don’t have health insurance, fixed indemnity plans may help you pay medical bills with a cash benefit. But these insurance products may not be for everyone and should be considered carefully. Let’s break down a fixed indemnity plan, what it involves, and whether it’s worth purchasing.
What is a Fixed Indemnity Plan?
A fixed indemnity plan is supplemental health insurance coverage and is sometimes also known as a fee-for-service plan. It’s not a form of health insurance and doesn’t take the place of a traditional health insurance plan. Like a health insurance plan, these plans feature a monthly premium.
When you’re injured, hospitalized, or need medical care, these plans help you with fixed payments in a pre-determined dollar amount for your medical costs.
Traditional fixed indemnity plans paid a fixed amount that didn’t change. Today, some plan sellers vary their payment based on the healthcare service, such as a doctor visit or prescription. You see your doctor or any other medical provider, then file a claim with your insurance agency for your payout.
Unlike with a traditional insurance plan where your provider bills the insurance company, you file a claim with the indemnity provider, then receive a payout.
Why Choose a Fixed Indemnity Plan?
After the Affordable Care Act (ACA) passage, these plans decreased in popularity. However, a fixed indemnity plan may help with healthcare costs, especially if you don’t visit the doctor often. If you have an emergency and don’t have health insurance or a minimal plan, you can alleviate the costs of your medical bills and replace lost income with a fixed indemnity plan.
Benefits and Disadvantages of Fixed Indemnity Health Plans
Unlike traditional healthcare insurance plans, you typically don’t worry about deductibles, coinsurance, or copayments with a fixed indemnity plan. You may purchase these plans anytime; there’s no Open Enrollment period.
Your insurance company only covers your medical bills once you reach your deductible, so a fixed indemnity plan may help you cover your out-of-pocket costs for medical expenses.
With this supplemental insurance, you can choose your doctor or hospital without worrying about staying within a network like your health insurance plan.
You can also use your fixed benefit payment to cover a service your health insurance covers and reduce the amount owed to the provider.
These plans can come with several disadvantages as well. Because these plans don’t adhere to the ACA’s guidelines for insurers, they don’t have to cover expenses for pre-existing conditions, nor do they need to provide minimum essential coverage.
Some plans may cover preventative care. However, it varies by company. Unlike ACA plans, indemnity health insurance doesn’t guarantee essential health benefits coverage. Indemnity plans may also lack prescription benefit coverage, unlike major medical insurance. You may find an indemnity plan with a deductible as well.
Is a fixed indemnity plan good for replacing health insurance?
A fixed indemnity is not recommended in place of your health insurance. It’s best used as a supplement to a major medical plan as a way to reduce your out-of-pocket costs for healthcare services.
Once you file a claim and receive your cash payout, you can apply the money to your medical bills. The cash benefit may help, especially if your insurer only covers part of the medical service.
Limits and Exclusions
In addition to a lack of coverage for essential health benefits and preventative care, your fixed indemnity plan may feature limits, even if you suffer a critical illness. The disclaimer or terms and conditions for your plan may include limited emergency room visits and hospital stays.
These often feature lifetime benefit limits, a maximum the plan pays for your healthcare costs. Signing up for a fixed indemnity plan may require pre-screening, and companies may deny enrollment.
Who Should Choose a Fixed Indemnity Plan?
You may choose a fixed indemnity plan for several reasons, especially if you have major medical insurance. You may want additional health insurance protection.
A student may benefit from a fixed indemnity plan for when they’re away at school, and their parent’s health insurance features a limited network.
Healthy individuals without chronic conditions and prescriptions may also benefit from a fixed indemnity plan, especially if they use it as an emergency cover if they break a bone or have a sudden illness. Medicare recipients may use indemnity plans to fill the gap between Medicare’s coverage options.
Before you purchase a fixed indemnity plan or any healthcare plan, you should make an informed decision by looking at the fine print, including benefits, exclusions, and limits.
Are fixed indemnity plans underwritten?
Yes. They feature medical underwriting.
What does limited fixed indemnity insurance mean?
A limited fixed indemnity insurance plan features lifetime and annual limits.
What is an example of an indemnity plan?
One form of an indemnity plan is hospital indemnity insurance. These plans pay you a certain amount, such as $200, each day you stay in the hospital. The amounts, limits, and terms vary by company.
Is an indemnity plan worth it?
Depending on the indemnity coverage, payout amount, premium, and any limits or exclusions may be worth it.
What are some disadvantages of an indemnity type insurance plan?
Indemnity plans differ from traditional healthcare plans. They don’t follow the guidelines of the ACA and aren’t required to cover women’s health services, any of the ACA’s essential health benefits, or pre-existing conditions.
Some plans may also limit how much they cover preventative care, while others may not. Indemnity plans aren’t meant to pay all of your medical bills, and sole reliance on a fixed plan may lead to hefty medical debt. Indemnity plans may also lack prescription drug coverage.
What is a deductible?
A deductible is an amount you must pay before your health insurer starts to cover your medical bills.
What is the difference between a limited fixed indemnity insurance plan and a traditional indemnity plan?
Traditional indemnity plans pay a percentage of medical care costs but the these features a set amount, no matter how much the medical service costs.
What are the benefits of a fixed indemnity plan?
These plans may not feature deductibles, coinsurance, or copayments. You can purchase a plan anytime without waiting for an enrollment period, and you choose your doctor or hospital. If you lose income while in the hospital or sick, an indemnity plan can help replace it.
What is the difference between indemnity and reimbursement plans?
A reimbursement plan pays a patient’s actual care costs, while the indemnity plan pays a daily or monthly benefit.
What is a guaranteed cost plan?
A guaranteed cost plan is an insurance plan with a fixed or flat payment for a period regardless of any losses during a policy term. Employers commonly use it with worker’s compensation.
Find Alternatives to Indemnity Plan Health Insurance
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