Fixed Indemnity Plan


August 31, 2017

A fixed indemnity plan pays a fixed amount for covered services, and those payments are made directly to you as the insured. There is usually no deductible as there would be with major medical plans. This ancillary product is often referred to as “fee-for-service” because it has a fixed benefit for expenses.

What is a Fixed Indemnity Plan?

In the insurance industry, indemnity is when one party, in this case the insurance company, agrees to compensate another party, you, for damages or losses due to specific medical problems as long as you pay premiums. A fixed indemnity plan pays you a set amount of money per illness covered under the plan. For instance, you may get $100 for a diagnostic test if it’s covered. Because health insurance companies define their own fees and services, payment amounts and coverage vary among insurers.

Choosing Healthcare Providers

One of the benefits of fixed indemnity plans is that you can choose your own healthcare providers. Under a fixed indemnity plan, you are not required to remain within a network, so you don’t need a referral to visit a specialist or get a second opinion. This isn’t the same as major medical insurance. Instead, it’s a benefit that pays you, the patient, in cases of covered illnesses or injuries. It doesn’t matter who you see because the benefit is paid directly to you.

Differences from Managed or Major Medical

A fixed indemnity plan is different from regular (major medical) health insurance. These plans are ancillary products, meaning they’re extras that you can add to your major medical coverage to help you cover out-of-pocket medical costs. If you have a $200 emergency room copay with your major medical coverage, for example, and you have a fixed benefit that pays you $100 for emergency room visits, then that cuts your out-of-pocket burden in half.

Fixed indemnity plans do not meet the criteria for health insurance coverage under the Affordable Care Act. Therefore, if your only health insurance is a fixed indemnity plan, you’ll face an IRS penalty at the end of the year. There are advantages to adding a fixed indemnity plan to your coverage lineup, but you do need to be aware that it’s not the same as regular health insurance. You can be denied based on pre-existing conditions, it doesn’t count as minimum essential coverage and it won’t cover many of the same benefits that major medical does. Choose this product as a supplement, not a replacement.