Indemnity Insurance Plans

Health insurance plans can be broadly divided into two large categories:

• Indemnity Plans (also referred to as "reimbursement" plans)
• Managed Care Plans.

Indemnity Plans
An indemnity plan reimburses you for your medical expenses regardless of who provides the service, although in some cases your reimbursement amount may be limited. The coverage offered by most traditional insurers is in the form of an indemnity plan.

How is the benefit amount calculated with an indemnity plan?
Different plans use different methods for determining how much you will receive for your medical expenses. Following are descriptions of the most common methods.

Reimbursement--actual charges
Under this type of plan, the insurer will reimburse you for the actual cost of specified procedures or services, regardless of how much that cost might be.

Reimbursement--percentage of actual charges
Under this type of plan, the insurer pays a percentage of the actual charges for covered procedures and services, regardless of how much those procedures and services cost. A common reimbursement percentage is 80%. This has the same effect as a 20% co-payment.

Indemnity
Under this type of plan, the insurer pays a specified amount per day for a specified maximum number of days. Although your reimbursement amount does not depend on the actual cost of your care, your reimbursement will never exceed your expenses.