What is indemnity insurance?

What is indemnity insurance

A fixed indemnity plan is one that pays a predetermined amount of money for any qualified medical services you receive. So, for example, if your plan specifies a $50 per day benefit for X-rays and you break your arm and have to get an X-ray, you are paid $50 from your plan.

Because the benefit is preset and paid out regardless of what the total bill for the qualified service might be, fixed indemnity insurance is sometimes called fixed benefit insurance or fee for service insurance.

If it doesn’t help me avoid the tax penalty, why would I want indemnity insurance?

All health insurance plans have out-of-pocket costs you, the insured, have to pay. It might be:

  • A deductible, an amount you have to pay before insurance will pay benefits
  • A percentage of covered expenses you have to pay even after you’ve met your deductible, what’s called coinsurance
  • Or a fixed fee, a copay, that you owe for a particular medical service
What is indemnity insurance

Regardless, your health insurance plan comes with costs built in that you are responsible for paying.

Fixed indemnity insurance is designed to be a supplemental plan that helps with some of those costs by paying you a set amount of money for certain qualified expenses. Then you can apply that money to help pay down a deductible or cover a copay or coinsurance amount, whatever you want.

In short, it can help you manage the out-of-pocket costs that inevitably come with your medical insurance plan.

Does having fixed indemnity insurance fulfill my requirement to have health insurance?

No. A fixed indemnity plan is not an Affordable Care Act (ACA), or Obamacare, health plan.

It is not major medical insurance and does not provide the mandated coverage necessary to avoid a penalty under the ACA. It does not provide coverage for all the essential health benefits outlined in the ACA. Unlike an ACA plan, it will not provide coverage for expenses resulting from any preexisting medical conditions. Read your plan carefully to see what is and what isn’t covered.

Fixed indemnity insurance provides limited benefits. It pays a certain amount per covered service up to a calendar-year maximum.

How are the benefits paid?

In cash directly to you.

You’re familiar with your major medical insurance plan, which pays for all or a percentage of covered expenses after you meet certain deductibles, copays or out-of-pocket costs. And often, the payments the insurance company makes for you are made directly to health care providers. You see them later on in an explanation of benefits form.

Indemnity insurance payment works differently. It pays you a certain predetermined amount for health care expenses specified in the plan. There are no deductibles to meet. You simply submit a claim for a qualified expense, and you are paid the amount the plan specifies for that service. The money is fixed and comes directly to you to use as you want.

Steps in Using Indemnity Insurance

Choice of monthly benefit amounts and period lengths

1. Qualified Medical Expense Performed

2. Submit Claim

3. Get Paid Directly

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When can I make a claim?

As soon as you receive a receipt for a qualified expense. Simply submit that receipt along with a completed claim form, and you will be paid the preset amount for that qualified expense.

Do I have to pay anything before plan benefits are paid?

Beyond what you pay to have the plan, what the insurance company calls your premium, no. Fixed indemnity insurance has no deductible or copay you have to meet first. If you have a covered expense, just submit your claim and your receipt and your benefit is paid directly to you.

If my health insurance plan covers an expense, will I still get the benefits from my indemnity plan?

Yes, you will.

This is called a coordination of benefits issue, when the coverages from two separate insurance policies overlap. With your fixed indemnity insurance, there is never a coordination of benefits conflict. It pays the fixed benefit for the covered expense regardless of whether another insurance plan you have is also paying toward that same expense.

Can I see my own doctor? Do the plans have network requirements?

Fix Indemnity Plans Have No Network Requirements

Yes, you can see your own doctor. No, you don’t have to stay in a particular network of doctors or providers. You are paid a fixed amount for certain services, so where you get those services is up to you.

Fixed Indemnity insurance has no network limitations

Important: Your fixed indemnity plan won’t have network limitations, but your major medical plan often will. To get the most coverage out of your insurance, keep your main health insurance plan’s network in mind.

2 This is a supplement to health insurance and is not a substitute for the minimum essential coverage required by the Affordable Care Act (ACA). Lack of major medical coverage (or other minimum essential coverage) may result in an additional payment with your taxes.

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