14.3.1: Indemnity Plan
The oldest type of health insurance plan allowed for the insured person to visit any doctor - including primary care physicians and specialists. The doctor would then bill the insurance company for any visits or procedures done, the insurance company would pay the portion outlined in the plan, and then the doctor would bill the patient for the remainder. This type of insurance plan is also known as a fee-for-service model, and although it used to be the most common type of employer-sponsored healthcare plan, it is almost non-existent today. The problem with this fee-for-service model is that neither the doctors nor the insurance companies were incentivized to control costs and avoid any unnecessary “utilization” or medical procedures. In fact, doctors are incentivized to do just the opposite - perform as many tests and procedures as they could justify, thereby making more money from treating each patient. Similarly, insurance companies could simply pass on the high costs to employers by increasing premiums year over year. Since the 1990s, these plans have become untenable for most employers and beneficiaries (who could be charged large balance-bills), and so very few health insurance organizations offer indemnity plans (Shi & Singh, 2017).