Understanding Fixed-Indemnity Health Insurance - GoodRx (2024)

If you’re looking into health insurance options, you may come across a fixed-indemnity plan. Is this limited-benefit supplemental coverage worth buying? It depends on your needs and whether you can afford the premium.

What is an indemnity health insurance plan?

Indemnity health insurance is supplemental insurance that pays you for a covered medical event. This benefit can help you pay for out-of-pocket costs and nonmedical expenses not covered by traditional health insurance. An indemnity plan doesn’t offer comprehensive coverage. It’s designed to complement —not replace — your primary health insurance.

What is fixed-indemnity health insurance?

Fixed-indemnity health insurance is one type of supplemental insurance with limited benefits. It will pay a specific amount for a covered medical service or event.

Your benefit is a form of income replacement. Because it’s fixed, you’ll know how much to expect for each covered medical event. But the amount you receive for a treatment or a service may not cover all of your out-of-pocket costs, such as your deductible and coinsurance.

One type of fixed-indemnity insurance is hospital indemnity insurance, which pays you a set amount if you’re admitted to the hospital. You could receive $200 a day, for example, while you’re in the hospital.

Fixed-indemnity insurance is different from traditional health insurance. It’s not comprehensive, and it’s not bound by Affordable Care Act (ACA) essential health benefits requirements.

How does a fixed-indemnity plan work?

Fixed-indemnity coverage works differently from primary health insurance. A fixed-indemnity plan pays you directly. You file a claim for a covered event and receive a preset benefit amount — no matter how much your treatment costs. Sometimes, your healthcare professional will file the claim and receive the payment directly.

Fixed-indemnity health insurance doesn’t have a deductible, so you can usually collect your payment right away. Insurance companies call this first-dollar coverage. Your plan may also offer discounts on healthcare services.

What does a fixed-indemnity plan cover?

A fixed-indemnity plan covers specific medical events. For instance, one plan has broad coverage that includes screenings such as mammograms and colonoscopies as well as hospital stays, lab tests, and ambulance trips. After you start paying premiums, you may have a waiting period for parts of your coverage.

Pros and cons of fixed-indemnity health insurance

If you’re considering fixed-indemnity health coverage, examine the plan carefully so you know what you’re getting. Then you can weigh the pros and cons. Here are some things to consider:

Pros

• No uncertainty about benefit amounts

• First-dollar coverage means no need to meet a deductible

• No need to wait for open enrollment — you can enroll or cancel anytime

Cons

• Doesn’t cover all 10 essential health benefits as defined by the ACA

• Limits your annual and/or lifetime benefit

• Doesn’t fully cover bills in case of a major medical event

Who is a good fit for fixed-indemnity health insurance?

Fixed-indemnity insurance may help people who have medical coverage but want additional protection for out-of-pocket costs.

What to know before you buy

Fixed-indemnity plans don’t meet ACA coverage standards and aren’t sold on health insurance marketplaces. That’s why it’s crucial to know all the benefits of the plan you’re considering.

Besides a plan’s benefit amounts, you should be very clear about:

• When the coverage period begins and ends

• What medical events are covered

• Which medical costs are not covered

• Annual and/or lifetime benefit caps

Compare the cost of a premium with the expected benefit. Would you have the same amount of cash for your expenses if you put the premium money in a savings account?

Finally, compare the plan’s payout benefit with healthcare pricing. These benefits usually don’t cover all costs associated with medical events.