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Health insurance can be categorized into two very broad categories: indemnity vs. managed care health plans.
Indemnity
An indemnity plan, also known as a “fee-for-service” plan, gives you the freedom to choose what providers and hospitals you choose to go to. The insurance company would then be responsible for a portion of the charges.
How Does It Work?
You can see any doctor of your choosing, without a referral, under an indemnity plan. And even if you feel like you want to go to a specific doctor, your insurance company will not make you choose a primary care doctor. This plan may also require you to pay upfront for services and file a request for reimbursement.
There will most likely be an annual deductible you have to pay before the insurance company will begin to pay your claims. After you meet your deductible, the insurance company will pay your claims at a percentage of the “usual, customary and reasonable rate” (UCR) for the service you receive. The UCR is going to be the amount that providers in your area usually charge for any particular service.
Managed Care
Managed care plans are a type of health insurance. In order to provide care at a lower cost, these plans have contracts with various health care providers and medical facilities. Each plan’s network is made up of certain providers, and those rules determine how much of your expenses the plan will pay for.
There are three types of managed care plans.
Health Maintenance Organization (HMO)
An HMO is the least expensive form of managed care plans. Once you join, you pay a fixed monthly premium. There are also small fees for doctor visits and prescriptions. Each plan provides its own list of doctors and hospitals and you may only choose a primary care physician (PCP) from that list. Usually, there is no coverage outside of the network.
Preferred Provider Organization (PPO)
PPOs are pretty similar to HMOs in that there is a fixed monthly fee and co-payments for doctor visits. The main difference is that there are more choices in providers. If you wanted to receive care outside of your network, the PPO will cover expenses but at a smaller percentage. Giving you more choices on providers is a benefit, but it makes the PPO the most expensive managed care plan.
Point of Service (POS)
POS medical plans have the lowest costs when compared to HMOs and PPOs. You would choose a PCP within a network. That physician would then become the “point of service”, and they can refer them outside the network but with limited coverage. A POS plan has the individual fill out their paperwork and keep track of their receipts.
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We hope this information on indemnity vs. managed care health plans is helpful.
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