These types of plans help protect you from unexpected medical expenses. Learn more.

1. What is indemnity insurance?
2. How does a fixed indemnity plan work?
3. How are indemnity plans different from traditional health care plans?
4. What is hospital indemnity insurance?
5. Are there specific plans that hospital indemnity insurance plans work best with?
6. What is a hospital and doctor fixed indemnity plan?
7. Do you have to stay in network with a fixed indemnity plan?
8. Do fixed indemnity plans follow the same rules as Affordable Care Act (ACA) plans?
9. What are the benefits of a fixed indemnity plan?
10. What are the limitations of fixed indemnity plans?
11. What should you look for when comparing fixed indemnity plans?

Health insurance coverage is important to have regardless of how young or healthy you may be. But chances are it won’t cover you for everything.

For example, you may have a traditional health insurance plan through your employer that doesn’t cover your dental or vision needs. You may also have out-of-pocket costs, which can add up.

To help protect yourself from unplanned medical expenses, you can buy insurance that’s designed to supplement — not replace — your comprehensive health insurance. It’s called supplemental insurance, and you’ll have to pay extra for it.

One helpful type of supplemental insurance that you might come across is called indemnity insurance. What do those plans do, and why might it be a good idea to get one? Find out below.

A supplemental plan, such as fixed indemnity insurance, could extend your coverage beyond your traditional health insurance plan. Explore your indemnity plan options now.

What is indemnity insurance?

Indemnity insurance — which you might also see called fixed indemnity insurance, fixed benefit insurance or fee-for-service insurance — pays a fixed amount for covered health services. It can help you avoid any surprise medical bills down the road.

With indemnity insurance, no matter what the total bill for covered services may be, the benefit amount doesn’t change. For example, a plan may pay $30 for an office visit. You would receive $30 whether the office visit costs $300 or $500. Even if you have no out-of-pocket costs, you will still receive $30.

An indemnity plan pays you money independent of other health care coverage you might have. Most plans pay on “first dollar.” That means that if the service is covered, you receive cash to use as you see fit. So, you are free to decide what to do with that money. Just remember: If you assign your policy benefits to a hospital or any other provider of health care services, benefits will be paid to the provider.

If you receive the money, for example, you may use the benefit payments to:

• Pay down your health insurance plan’s deductible or copayments (a deductible is the amount you pay before your insurance pays its portion for covered services, while copayments are fixed amounts you pay for covered services)
• Pay for nonmedical expenses, such as your rent or mortgage if you miss work and lose income due to a medical issue

It’s worth reiterating that indemnity insurance is not a replacement for traditional health insurance. It helps supplement the health insurance plan you already have.

How does a fixed indemnity plan work?

A fixed indemnity plan works similarly to short-term disability insurance in that the money you receive is meant to replace lost income, not to pay your whole medical bill. You may receive a payment that’s more than or less than the amount billed. The idea is to get you — or in some cases, your provider — cash in hand.

Claims may be processed in the following way:

1. You have a qualified medical service.
2. You or your provider submit a claim.
3. The insurance company pays you or your provider the fixed amount.

How are indemnity plans different from traditional health care plans?

An indemnity plan is not designed to provide comprehensive health care coverage. It is intended to help you deal with the added financial needs that come with unexpected medical expenses.

With a traditional health plan, you or the provider submits a claim to the insurance company for a covered medical service. Typically, once you meet your deductible, a comprehensive health insurance plan pays for a covered service based on the total cost of service allowed under the plan. For example, if it’s an in-network provider, it will be at a prenegotiated discounted rate. You pay any required out-of-pocket costs, such as copays and coinsurance.

With an indemnity plan, the total cost doesn’t matter. It also doesn’t matter if your comprehensive health insurance covers the service. You could, for instance, receive $20 for a generic prescription from the indemnity plan even if you only pay a $10 copay when you fill the prescription using your health insurance. You simply receive money based on the fixed amount per service. Let’s look at a couple of scenarios. (The people and events depicted here are fictional and do not represent actual cases.)

1. Lydia has a very sore throat but no regular doctor, so she goes to an urgent care facility. The provider tests her for strep throat and prescribes antibiotics when the test comes back positive. Her fixed indemnity plan pays:

• $150 for the urgent care visit
• $75 for an outpatient lab test
• $20 for a generic prescription

That’s a total of $245. She then files a claim separately with her health plan.

2. Thomas wakes up at night with severe stomach pain and goes to the emergency room. He has emergency surgery for appendicitis. (That’s “when your appendix becomes sore, swollen, and diseased,” and in almost all cases must be removed.1) Thomas’s fixed indemnity plan pays him:

• $500 for the emergency room visit
• $75 for the diagnostic ultrasound (a type of imaging test that uses sound waves to see inside the body)
• $5,000 for the surgeon
• $1,500 for the anesthesiologist (a type of doctor that specializes in pain management during surgery)
• $3,000 for a 1-day stay in the hospital
• $20 for a generic prescription for pain meds

That comes out to a total of $10,095. He then files a claim separately with his health plan.

What is hospital indemnity insurance?

Hospital indemnity insurance — also called hospitalization insurance or hospital insurance — pays benefits to you or your provider if you need to spend time in a hospital. That could be for planned or unplanned reasons, or for other medical services, depending on the policy.

A hospital indemnity insurance plan also helps cover out-of-pocket expenses you might have to pay for a hospital stay, such as deductibles, copayments and nonmedical costs. In some cases, it may even cover outpatient surgical procedures.

The way the payment part works is that you fill out a claim form and submit it with documentation of qualified expenses you may have incurred while in the hospital.

Then either you or your provider — if you have assigned benefits — will get a check. That’ll be for a predetermined lump sum for the fixed amount of your selected benefit.

Hospital stays can get expensive fast. Learn how hospital indemnity insurance can help. Start by entering your zip code to check availability in your area.

Are there specific plans that hospital indemnity insurance plans work well with?

Yes. Hospital indemnity insurance plans may work best with a high deductible health plan, or HDHP. That’s a type of insurance plan that has a higher deductible than traditional health plans. With HDHPs, although your premium may be lower, you’ll end up paying more out-of-pocket costs before your insurance company pays the rest for covered services.

The reason these plans pair so well together: A hospital indemnity plan may help cover those out-of-pocket costs. It also works well if you spend time in a hospital and most of your providers are out of network.

What is a hospital and doctor fixed indemnity plan? 

A hospital and doctor fixed indemnity plan is a type of supplemental insurance plan that pays you or your provider a fixed amount for each medical service covered by the plan, subject to limitations and exclusions.

For example, your doctor may order an X-ray if they suspect you broke a bone after a fall. If your plan has a $50 per day benefit for X-rays, the plan will pay you $50. Covered medical services could include:

• Hospitalizations
• Lab work
• Doctor’s office visits
• Prescriptions

Do you have to stay in network with a fixed indemnity plan?

No. Fixed indemnity plans typically don’t restrict you to a specific network of providers. Depending on the policy, though, you may save money by seeing in-network providers. (In-network providers have previously agreed to accept a discounted rate.) If you have coinsurance, which is a percentage you pay for a covered service, you’ll pay less because the total will be lower. Keep in mind, though, that your traditional health plan may require you to stay in network.

Do fixed indemnity plans follow the same rules as Affordable Care Act (ACA) plans?

No. Affordable Care Act plans are required to cover a certain number of “essential” benefits, such as preventive care and mental health services. And they’re also required to cover anyone, no matter whether they have a preexisting condition, such as diabetes or cancer.

A fixed indemnity plan, on the other hand, doesn’t follow those same rules. For example, a fixed indemnity plan might not cover preexisting conditions for the first year. Remember: It’s a supplement — not a substitute — for the “minimum essential coverage” (also called qualifying health coverage) that federal law requires.

Examples of ACA-compliant plans typically include things like employer-based plans. Depending on what state you live in, you may also have to pay a penalty on your tax bill for not having comprehensive medical coverage or other minimum essential coverage.

What are the benefits of a fixed indemnity plan?

Some of the benefits of a fixed indemnity plan include:

• You don’t need to wait to fulfill your deductible. Most benefits start right away.
• You can typically enroll at any time during the year. Unlike with ACA plans, you don’t need to wait for an Open Enrollment Period or for there to be special circumstances, such as getting married or having a child, to sign up.
• You can see any provider you want — though if you do see an in-network provider, you may save money. Keep in mind, though, that your traditional health plan may require you to stay in network.
• Your covered benefits may even increase the longer you hold the policy.
• You still get paid even if your health insurance plan also covers a service.

What are the limitations of fixed indemnity plans?

As with any insurance plan, it’s important to read the fine print, found in the policy. That’s so that you understand the coverage limitations. Here are some examples:

• Some services, such as preventive or wellness services, may have a waiting period before they’re covered.
• Preexisting conditions may not be covered during the first 12 months of coverage.
• Typically, there are maximum caps set for different medical services. For example, a policy may pay for only 4 x-rays per calendar year.

What should you look for when comparing fixed indemnity plans?

The amount you’ll have to pay monthly (aka your premium) is a great starting point. But it’s also important to look closely at what’s covered and what the benefits are.

Hospitalization and surgery benefits vary from plan to plan, so you’ll want to estimate what you might have to spend if you were to be hospitalized or need to have surgery. For example, rather than paying a set amount per surgery, a plan may have different tiers of surgeries and pay more for more complicated procedures. A plan may also cover a second opinion when you’re considering surgery. In addition to a daily hospital payment, a plan may pay an extra daily benefit if you’re in intensive care or critical care.

Want coverage that extends beyond your major medical or health insurance plan? A supplemental plan, such as fixed indemnity insurance, could be the answer. Learn more now, or call a licensed insurance agent at 1-844-211-7730 to discuss your options.

Sources:

Johns Hopkins Medicine. “Appendicitis.” Retrieved from https://www.hopkinsmedicine.org/health/conditions-and-diseases/appendicitis Accessed July 9, 2024

Compliance Code:
51737-X-1124