Fixed-indemnity insurance is a form of health coverage that helps offset the payments of costly medical expenses as a substitute for income if you cannot work for medical reasons. Fixed-indemnity insurance is not regulated under the ACA. It thus does not require coverage on essential health benefits, may discriminate based on pre-existing conditions, and does not require a cap on annual out-of-pocket spending.
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What is Fixed Indemnity Health Insurance
Fixed-indemnity health insurance is a type of health plan called hospital indemnity insurance. Fixed indemnity is different from traditional health insurance in several ways. For example, payments are made to the health consumer throughout an individual hospitalized or experiencing severe illness.
Hospital indemnity insurance can be helpful to Americans that don't have enough savings to cover unplanned medical bills. The average three-day hospital stay is $30,000 out-of-pocket, but indemnity insurance can help reduce the burden of a significant medical event. Your reimbursement amount depends on the level of coverage you choose, based on the intensity of your medical needs.
What Is Covered Under Fixed-Indemnity Insurance
Coverage under fixed-indemnity health plans varies widely, and some may appear as traditional health insurance plans, although they are not regulated under the ACA. As a result, these plans are not required to cover all essential health benefits and may discriminate based on pre-existing conditions. These plans offer an additional layer of coverage for major illnesses and injuries, with reimbursement amounts varying depending on the intensity of the medical care required. While coverage varies with each plan, indemnity coverage typically offers:
- Daily Hospital Confinement
- Diagnostic Outpatient Care (MRI, Lab Testing, X-rays)
- Intensive Care Unit (ICU) Coverage
- Daily Anesthesia
- Outpatient Radiology or Chemotherapy
- Surgical Procedures
- Emergency Room Visits
- Some Preventative Care (Mammogram, Colonoscopy, etc.)
What Is Not Covered Under Fixed-Indemnity Insurance
Typically, fixed-indemnity plans will not pay benefits for medical needs contributed by a pre-existing health condition. A plan defined a pre-existing condition as an illness, injury, or condition that medical advice, diagnosis, care, or treatment had previously been recommended to or received by an individual within 12 months prior to the effective date of the insurance policy. Similar exclusions and limitations apply across fixed-indemnity plans relating to the following:
- Cosmetic services
- Pregnancy or childbirth (except for complications)
- Routine well-baby care of a newborn infant
- Infertility treatment
- Sexual reassignment surgery
- Experimental or investigational treatments
- Services performed by an immediate family member
- Injuries sustained while participating in extreme sports (parachute jumping, hang gliding, skydiving, bungee jumping, etc.)
- A loss occurring before the policy effective date or soon thereafter the termination of the policy
- Acts of war (intentional self-inflicted bodily harm, participation in a riot, or attempt to commit a felony)
- Active service in armed forces or related auxiliaries
- And more
Benefits of Fixed Indemnity Insurance
An appealing feature of these types of plans is that they typically do not require a deductible or coinsurance to be met prior to receiving reimbursement for care, and they offer lower monthly rates in comparison to traditional insurance. Costs for indemnity plans can be more affordable than traditional insurance.
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A fixed indemnity health plan only pays a set amount of money toward a service it specifically covers, so it is not subjected to network restrictions. As opposed to standard health insurance, there aren’t concerns about whether a provider is in-network versus out-of-network. The same reimbursement benefit applies regardless to the facility you choose for care,
Fixed Cash Benefit
A fixed cash benefit payout is money provided directly to you by your fixed indemnity health provider to pay for specific illnesses or injuries covered under your policy. A direct deposit is made to you rather than payment going directly to your health care provider. Although, with many fixed-indemnity plans, you can still request the cost to go to a healthcare provider or choose the direct deposit to cover whatever medical expenses you see fit.
Eligibility for Fixed-Indemnity Insurance
Eligibility may vary depending on the plan provider and the state. Eligibility for a fixed-indemnity plan provider stipulated that one may be considered beginning at age 18 until age 64 (in most states). Children are eligible to be added to their parent’s plan until the 26th birthday of the child - similar to that of ACA-regulated health plans. Fixed-indemnity providers may also determine eligibility based on pre-existing conditions.
The Cost of Fixed-Indemnity Health Insurance
According to Forbes, hospital indemnity insurance premiums range from $50 to $400 a month. The premium is based on your age, sex, geographic location, and deductible amounts but also depends on the insurance company. Whether your premium is cheaper than traditional health insurance may depend on the type of indemnity plan you choose. Plan types vary with regard to the pay-out amount at the time of care. The costs may be cheaper than standard health insurance depending on the plan, but doesn’t cover everyday and preventative care and instead offer assistance on major medical, and infrequent events, such as surgery and longer hospital stays.
Fixed-indemnity plans give you the flexibility to choose your provider without worrying about whether a provider is in-network. There are no additional charges for going “out-of-network.”
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Fixed-Indemnity Health Insurance Frequently Asked Questions (FAQs)
If you are considering a fixed-indemnity health plan to help with the expenses of your medical needs, consider the following questions to determine whether these types of plans are right for you.
What is the difference between fee-for-service plans and Fixed (Hospital) Indemnity insurance?
The term indemnity is a form of compensation to protect against damages and or loss. While hospital indemnity or fixed-indemnity, as described above, is not a form of health insurance regulated by the ACA. Fixed-indemnity plans are to be utilized as supplemental income or payment for major medical needs but often get confused with Fee-for-Services (FFS) plans, also categorized as being a type of indemnity insurance.
Fee-for-Service plans are another form of indemnity where a doctor or other health care provider is paid for each particular service rendered, essentially rewarding medical providers for the volume and quantity of services provided. There has been a shift away from FFS plans towards value-based models, but can still be found in the marketplace.
When can someone enroll in fixed-indemnity insurance?
Because fixed-indemnity insurance is not regulated by the Affordable Care Act (ACA), these plans are not subject to the Open Enrollment time period or any Special Enrollment Period for qualifying life events. You can enroll in fixed-indemnity plans at any time, but keep in mind that your policy may not take effect for 30-60 days depending on the services you are seeking immediately.
What are essential health benefits?
Fixed-Indemnity health plans are not subject to ACA regulation, and thus, are not required to cover the 10 essential health benefits that regulated Marketplace plans are required to cover. These essential health benefits include:
- Ambulatory patient services
- Emergency services
- Pregnancy, maternity, and newborn care
- Mental health and substance use disorder services
- Prescription drugs
- Rehabilitative and habilitative services and devices
- Laboratory services
- Preventative and wellness services
- Chronic disease management
- Pediatric services that include oral and vision care
Fixed-indemnity plans are a form of an unregulated health insurance model that provides direct payment to you rather than a healthcare provider. These plans are not required to cover all the essential health benefits and may deny an enrollee based on pre-existing conditions. These plans help offset the costs of major medical events
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