Health Insurance Plans: Indemnity v. Managed

When you are comparison-shopping for a health plan that will suit you, your family, and your budget, there is an almost overwhelming amount of information that you have to think about. What kinds of benefits do you want in your plan? What health care insurance provider do you prefer? How much coverage can you really afford?

To help answer these questions, it’s vital that you have a strong grasp on the two basic kinds of health care plans that exist: the indemnity plan and the managed care plan. While these two plans have lately been overlapping, forced to by the competitive market, they are still essentially two, distinct choices.

So how does the health care you will get from each compare?

An Indemnity Plan

What is it?

An indemnity plan is also referred to as a “fee-for-service” plan. With this kind of coverage, you will be able to choose the doctors and hospitals that care for you. The insurance company will pay a percentage of the bills (typically 80%), but only after you meet your yearly deductible payment.

What are the advantages?

With an indemnity plan, you have a lot of freedom – if you want control over what hospitals and doctors are involved in your care, then this is your plan.

What are the disadvantages?

It’s expensive! With deductible payments, coinsurance, and several other charges, you will have to take care of a certain amount of the financial burden of your health care.

A Managed Care Plan

What is it?

There are three kinds of managed care plans. The Preferred Provider Organization (PPO) enables you to have more choice of doctors – but not as much as with an indemnity plan. It is more expensive to be picky (there are copayments, etc), but you can still choose a doctor who is not preferred under the plan, and pay less. The Health Maintenance Organization (HMO) establishes a basic copayment right from the start, but there is no deductible. You only have a choice of the HMO doctors; otherwise you will have to pay for every medical cost out of pocket. A Point-of-Service (POS) is a hybrid version of both an HMO and an indemnity plan, in which you will have a bit more freedom financially to seek care outside of your POS network.

What are the advantages?

Managed care plans are much less expensive than indemnity plans and the many different types that have evolved over the years now allow for a certain amount of flexibility in what health care provider you use.

What are the disadvantages?

For the most part, you will have to pay a hefty amount of money – probably a lot more than you can afford – to use a doctor or hospital that is outside your plan’s network.

What do they have in common?

Both plans have a premium, or monthly payment. As well, expect various service fees and copayments in any plan.

Depending on your budget, personal health care needs, and general preferences, there is a health plan that is just right for you. Make sure to establish exactly what your priorities are from the get-go, so you can properly weigh the pros and cons of each option.