Private indemnity insurance is a type of medical coverage obtained through a private source, as opposed to a publicly funded program like Medicare. An individual can purchase private indemnity insurance on his or her own or through an employer. These types of insurance plans reimburse an individual for visiting any doctor or medical provider.
Private Indemnity Insurance Programs
Many employers utilize a type of private indemnity insurance program called a PPO because it tends to be cheaper than other insurance programs due to limitations on program and network options. The extent of reimbursement coverage for any type of private indemnity program is usually set out in a summary plan description (SPD). The SPD is essentially the “playbook” for how any particular private indemnity insurance program works.
About Summary Plan Descriptions
Before purchasing or using private indemnity insurance, you should review the fee services or expenses out-lined in the SPD. Because of the “fee for service” nature of these plans, private indemnity insurance programs typically have deductibles. Deductibles require the insured to pay medical charges up to a certain amount before the health insurance company will cover any remaining charges. They also often have co-pays, which require the insured to pay some portion of the bill when they visit a doctor, fill a prescription, or go to the emergency room. Even though the model of private indemnity insurance programs overlap with managed care insurance programs, indemnity programs are structured more as reimbursement programs, whereas managed care companies pay medical providers directly.
Other Information Outlined in a Summary Plan Description
The SPD may also outline limitations on your selection of health care providers. When a private indemnity insurance
program offers a more limited choice of health care providers, is it is typically referred to as Preferred Provider Plan. Your choices may be restricted to health care providers who are members of the sponsoring insurer's Preferred Provider Organization, or PPO. If you use a doctor who is not on the list (or in the PPO), you are “going out of network.” Most PPO’s will reduce your level of services, coverage, or reimbursement claims when you use a provider who is out of the network.
Because the SPD is the playbook for the private indemnity insurance organization, you should frequently review any specialized rules regarding notice, referral, reimbursement, and claim submissions. For example, if you want to see a specialist for your allergy condition, the private indemnity insurance company may require you to first visit with your regular doctor and obtain his referral and recommendation to see the specialist. If you don’t consult with your regular doctor first, you may be denied coverage, which means that you will not be reimbursed for the expenses associated with your allergy specialist visit.
Reading the fine print is critical to maximizing the benefits of a private indemnity insurance plan. The failure by a policyholder to submit a claim for reimbursement properly or in a timely manner can result in denial of the claim.
Like other types of insurance programs, private indemnity insurance programs are regulated by state and federal laws. They have specified duties to an insured and the policyholder. If you think your private indemnity insurance organization is wrongfully or willfully denying you coverage, consult with a consumer attorney to review the enforcement actions available in your state.