Traditional coverage (indemnity insurance in other words) is perhaps the earliest form of health insurance. It is essentially a fee for service coverage where you need to pay every time you visit a specialist or avail any other services. A schedule stated in the policy says whether the insurance company in question will offer full coverage or just part of it. The highlight of a traditional indemnity plan is that it lets the member have maximum freedom of choice. Despite managed care plans like Preferred Provider Organizations (PPO’s) and Health Maintenance Organizations (HMO’s) spread all over the health insurance scene today, traditional plans still have takers who prefer flexibility and freedom over affordability.
You can divide indemnity coverage into two halves- one consisting basic coverage and the other major medical coverage. Basic coverage usually involves office visits, services from specialists, hospital care and surgical care. These are the areas a traditional indemnity plan starts covering at the initiation. Since basic coverage is not limitless, it gets exhausted after extensive usage. It is at this juncture that major medical coverage comes to good use. Major medical coverage is aimed towards the payment of expensive medical bills and is considered ideal only when it is a case of accident or chronic illness.
Another variety of traditional indemnity is comprehensive major medical coverage. This type of traditional plan combines characteristics of both basic coverage and major medical coverage. An increasing number of employers are offering comprehensive major medical insurance these days. Such coverage is also available from associations. Amongst all the available types, major medical plans have gained popularity amongst commoners who do not have huge medical costs but stay in the anticipation of a massive accident or illness.
The highlight of a traditional indemnity plan lies in the fact that the member can choose from participating providers or non- participating ones as per his wish and convenience. While availing the services of physicians and hospitals in- network the concept of ‘UCR’ works. ‘UCR’ refers to usual, customary and reasonable fees that in- network providers charge. This is because this part of the coverage is limited to basic medical requirements where no bulky medical expenses can be shouldered. Beyond this point, members of traditional indemnity plans are charged higher for services they avail.
Another peculiarity of indemnity plans consist of the limits they set. All such policies work strictly on a schedule and the latter states the cost coverage the insurance company is ready to offer. In most cases, these schedules are seen to lapse before long and members end up shouldering more than they had bargained for. In simpler words, the margin between what the insurance company pays as coverage and what the providers charge increases. In fact, it is for this lack of dependability that traditional indemnity plans are increasingly becoming uncommon amongst policyholders.