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Indemnity Plans

Straight Cover - Reimbursed

Indemnity plans are often referred to as 'fee for service' plans, and allow recipients to choose the health care service provider of their choice. The insurer would then share the cost or indemnify the recipient according to the terms of the policy.

Most individuals with health insurance coverage were covered by indemnity plans until the 1970's, and in this type of plan a deductible is agreed to between the insurer and the recipient, where the recipient is to pay for medical expenses up to a specified amount, after which the insurance cover would take effect.

The extent to which the insurer would indemnify the recipient at this point would depend on the preset coinsurance amount, which is usually expressed as a percentage of the cost of medical bills and reflects the amount of contribution the recipient will make toward the cost of the health care service. When medical expenses become unusually large, the policy will dictate a specific amount after which the coinsurance is dispensed with and the recipient is fully indemnified.

Choose Your Own Doctor

The largest attraction to indemnity plans is that due to the medical profession relying on a certain relationship of fiduciary proportions, individuals often prefer to retain their right to choose their specific health care provider, and will be prepared to pay for the flexibility and freedom this bestows.

Studies have shown that particularly with patients who require regular preventative health care and monitoring, this imperative treatment is most likely when the patient retains the choice and comfort of their own physician.

While estimates of this nature are to be interpreted with caution, there is strong evidence to suggest however, that the typical indemnity health insurance plan actually propagates more extensive use of limited health resources and also drives the price of health care upward with increased demand.

Indemnity plans in California predominantly exist to offer the choice of a health care professional, and to indemnify the recipient of health care services. These types of plans rarely engage in preventative treatment unless this represents a choice on the part of the policy holder, and is sustainable under the policy. As opposed to managed care, the promotion of health is not a major part of an indemnity health care policy.

The predominance of employment based health care has seen increasing number of employers preferring to offer a more limited choice of health care plan to their employees, by virtue of the fact that they receive reductions in cost if alliances are formed within which large group insurance can be purchased from insurers.

The insurers tend to offer plans other than indemnity plans, in order to retain more control over where their money is spent and in turn, to form alliances themselves with certain health care professionals in order to provide cost effective health care services to their policy holders.

Examples of this are seen in the corporate measure taken by some large insurers that provide health care facilities, health care professionals and also health care insurance. The careful monitoring of costs makes this strategy an extremely lucrative business model and has seen the profits of some judicious market players soar during the price increases of health care in the past 7 years.

This practice has been a well worn tradition in the American health care industry since the 1930's when the American Medical Association first attempted to take Americans away from government insurance plans and provided professionally controlled indemnity plans to attract policy holders to participate in voluntary health insurance.

The development of indemnity or fee for service plans appears to have been superseded by the onset of managed care plans in the 1980's, and so has given way to the accumulation of further corporate profits in an increasingly competitive international economy.


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