The ABCs of Indemnity Care Plans

The most popular type of health insurance coverage for many years was the Indemnity Care Plan. But because medical costs have soared out of reach, this is no longer the case. More people these days have Managed Care Plans, not necessarily by choice, but rather because these are the plans offered by their employers.

Freedom To Choose

The main difference between Indemnity Care Plans and Managed Care Plans is the freedom to choose any medical care provider. The patient is not required first to receive a referral from his primary care physician, nor must the medical care professional be listed among a contracted network of providers. Those who choose Indemnity Care Plans can visit the best-known and respected specialists, and the hospitals with the best reputations for care.

Higher Out-Of-Pocket Costs

With that freedom, of course, comes a price. Participants usually end up with higher out-of-pocket expenses. After a participant receives medical care, a bill for the doctor's services is forwarded to the insurance company.

The insurance company then refers to its list of "reasonable and customary" charges for those services to determine how much it will pay. Of that amount, the insurance company will typically pay 80%, while the remaining 20% becomes the responsibility of the patient. In many instances, especially when care is provided by top-notch institutions or professionals, the amount billed for the medical services will exceed "reasonable and customary" charges. When this happens, the patient is responsible for paying his percentage PLUS the difference.

Those who choose Indemnity Care Plans also have to pay a premium and an annual deductible.

PPO: A Little Less Cost, A Little Less Freedom

When it comes to Managed Care Plans, a PPO or Preferred Provider Organization is the plan that most nearly matches an Indemnity Care Plan. With a PPO, participants have a wider network of providers from which to choose. Their costs will be lower if they choose a medical professional within the PPO network.

Participants still have the option of going outside the network, but when they do, their out-of-pocket expenses will be higher. Before the insurance company will contribute towards these costs, the person will first have to satisfy a deductible. Once that amount is met, the insurance company will pay a smaller percentage of the overall costs than it would pay had the participant chosen an "in network" medical service provider.

In comparison, which type of plan is better -- an Indemnity Care Plan or a Preferred Provider Plan? That depends entirely on the individual. Those who can afford the higher costs and who place a high value on the freedom to choose their doctors usually choose Indemnity Care Plans. A PPO is probably best for those who want some freedom of choice, but who need to closely monitor medical costs.