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| Traditional Indemnity Insurance |
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In the past 20 years, so many insurance plans have evolved that it is difficult to draw a dividing line between them anymore. Rather, it is helpful to see them as two ends of a continuum of options: On one end of this continuum is traditional indemnity insurance (fee-for-service), or unmanaged care. On the opposite end are the most managed types of organizations, called Health Maintenance Organizations (HMOs).
Traditional indemnity insurance was common before the advent of Managed care and the drive to control healthcare costs. Indemnity plans are as simple as they sound. They reimburse medical providers for each service you receive on a case-by-case basis. With an indemnity plan, you can use any medical provider (such as a doctor and hospital). You or they send the bill to the insurance company, which pays part of it. Usually, you have a deductible, the amount of the covered expenses you must pay each year before the insurer starts to reimburse you.
Once you meet the deductible, most indemnity plans pay a percentage of what they consider the cost of covered services. The insurer generally pays 80 percent of the usual and customary costs and you pay the other 20 percent, which is known as coinsurance. If the provider charges more than the usual and customary rates, you will have to pay both the coinsurance and the excess charges.
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