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What is a Fixed-Indemnity Health Plan?

What is a Fixed-Indemnity Health Plan?

Posted Jan 20, 2017 by Jenifer Dorsey

Making Sense of Hospital Indemnity Insurance

Sometimes, just as you are getting a grasp on major medical plan lingo and how the coverage works, you come across yet another health insurance term you don’t quite understand. Let’s say, for instance, fixed-indemnity plan.

It can be easy to dismiss such coverage as unnecessary because, to be perfectly honest, trying to understand it makes your head hurt. However, a fixed-indemnity plan could be something that helps you save money on out-of-pocket healthcare costs this year, so we’d like to help you make sense of it.

Let’s start by looking at the core definitions. You already know that in this context, a plan is a group of specified health benefits. As for the terms fixed and indemnity:

Fixed[1] = established; settled; set

Indemnity[2] = protection or insurance against loss, damage, etc.

Put it all together and here’s a basic explanation:

A fixed-indemnity health plan pays set benefit amounts for covered healthcare services related to illness or injury, thereby providing some financial protection against unexpected medical expenses.

Fixed-indemnity plan benefits apply to a specific duration (e.g., number of days, weeks, visits) and the amount remains the same regardless of the actual cost of those services (e.g., $X per day, week, visit).

Fixed-indemnity plans are commonly referred to as hospital indemnity plans because they typically cover medical expenses resulting from hospitalization, surgery, chemotherapy and radiation services.

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How it works, an example

Sue is admitted to the hospital with pneumonia and stay for three days – the condition is not pre-existing. She has a fixed-indemnity plan with a $0 per injury or illness deductible.

Here is how her plan benefits might look on paper[3] – keep in mind, this is only for Sue’s fixed-indemnity plan, not her major medical plan:

 

Sue’s covered benefits  Amount
Daily inpatient hospital confined benefit  $6,000 ($2,000 per day x 3 days)
Doctor visits while hospital confined benefit $150 ($50 per day x 3 days)
Benefits payable before per injury or illness deductible $6,150
Less per injury or illness deductible $0
Total benefits paid $6,150

 

This is only an example and actual benefits will vary by plan and circumstances.

 

View more examples

 

Fixed-indemnity plans ≠ major medical plans – here’s the difference

It is important to understand that fixed-indemnity plans are standalone policies that do not coordinate with your other health insurance coverage. Fixed-indemnity or hospital indemnity plans are not the same as major medical insurance and do not replace major medical insurance (aka, Obamacare plans), which means they are not subject to the Affordable Care Act. Unlike major medical insurance, they:

  • Do not include essential health benefits or covered preventive services as outlined by the ACA
  • Do not qualify as minimum essential coverage, which means they do not fulfill the individual shared responsibility provision and will not prevent you from owing a tax penalty (i.e., individual shared responsibility payment)
  • Are not guaranteed issue, which means you can be denied coverage based on your health history

However, fixed-indemnity plans do:

  • Include inpatient and outpatient benefits that help you pay for covered out-of-pocket healthcare expenses related to hospitalization, surgery, chemotherapy and radiation services
  • May include critical illness benefits for conditions such as cancer, heart attack, stroke and more
  • Allow you to enroll at anytime of year; there is no specified open enrollment period

If you are looking for extra financial protection against unexpected, high-cost healthcare, then a fixed-indemnity plan may be worth adding to your household’s annual benefits.

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[1] Webster’s New World College Dictionary. “Fixed.” Accessed January 17, 2016.

[2] Webster’s New World College Dictionary. “Indemnity.” Accessed January 17, 2016.

[3] The benefit examples shown are intended for illustrative purposes only. These examples do not contemplate the provider’s actual charges for services rendered nor the full extent of the covered person’s out-of-pocket costs.

HOSPITAL FIXED INDEMNITY
This is not qualifying health coverage (“Minimum Essential Coverage”) that satisfies the health coverage requirement of the Affordable Care Act. If you don't have Minimum Essential Coverage, you may owe an additional payment with your taxes.

  • Also, the termination or loss of this policy does not entitle you to a special enrollment period to purchase a health benefit plan that qualifies as minimum essential coverage outside of an open enrollment period. 
  • This product includes a pre-existing condition exclusion provision.

About The IHC Group
Independence Holding Company (NYSE: IHC) is a holding company that is principally engaged in underwriting, administering and/or distributing group and individual disability, specialty and supplemental health, pet, and life insurance through its subsidiaries since 1980. The IHC Group owns three insurance companies (Standard Security Life Insurance Company of New York, Madison National Life Insurance Company, Inc. and Independence American Insurance Company) and IHC Specialty Benefits, Inc., which is a technology-driven insurance sales and marketing company that creates value for insurance producers, carriers and consumers (both individuals and small businesses) through a suite of proprietary tools and products (including ACA plans and small group medical stop-loss). All products are placed with highly rated carriers.

IHC Specialty Benefits, Inc.
IHC Specialty Benefits, Inc., doing business as Health eDeals Insurance Solutions is a full-service marketing and distribution company that focuses on small employer, individual and consumer products. Health eDeals markets products via general agents online, telebrokerage, advisor centers, private label and directly to consumers. For more information about Health eDeals visit http://www.HealtheDeals.com.