Glossary: Indemnity Coverage
Indemnity health insurance is one of the oldest types of health insurance plans--offered well before the dawn of HMO and PPO coverages. Today, only a few carriers still offer indemnity health insurance.
Under an indemnity plan each individual family member must meet a deductible before the carrier begins to pay for claims. After the deductible, each member is responsible for co-insurance to a specific "stop loss." (For example, after a deductible of $1,000.00, the plan pays at 80% to a stop loss of $10,000. Your total out of pocket limit would be $11,000.00--a $1,000.00 deductible + a maximum of $10,000.00 coinsurance. A hospital bill, or annual bills, would have to meet or exceed $51,000.00 to reach your maximum out of pocket. You would pay $1,000.00 deductible + (20% of $50,000.00 = $10,000.00) for a total of $11,000.00.)
Indemnity health insurance plans remain popular because they give total freedom of choice to participants in choosing health care providers. The drawback is that they are usually expensive, and PPO plans offer similar freedom of choice in their out-of-network benefit packages.