Fixed Indemnity: What Is It and Why Is It Important?

fixed indemnity

It’s no secret to agents and brokers that there’s a high level of uncertainty when it comes to the individual health market. It is not uncommon for agents and brokers to approach the individual health insurance market with caution as details surrounding the future of the ACA unfold.

Due to this uncertainty, agents and brokers who primarily write major medical plans may find themselves exploring alternative or additional products to offer clients. According to ThinkAdvisor.com, changes to the ACA may result in altered or lessened restrictions for things like supplemental health products. Additionally, if the federal government decides to discontinue mandating that individuals obtain health coverage, employers may consider dropping their major medical coverage, allowing supplemental health benefits to then fill the gaps left in major medical coverage. So, what would this change mean to agents and brokers? What should you do while waiting for the final decision on health care bills?

It helps to first understand your options and do your research on supplemental health products. One product in particular we recommend you learn more about? Fixed indemnity products.

BenefitsPro defines fixed indemnity products as supplemental health insurance products with pre-determined lump sums to pay for certain medical expenses, regardless of how much the provider charges.

Because the benefit is preset and paid out regardless of what the total bill for the qualified service might be, it may also be called “fixed benefit insurance” or “fee for service insurance,” as pointed out by UHC (UnitedHealthcare). Given that all health insurance plans have out-of-pocket costs, (i.e. deductibles, coinsurance, or copays), the consumer can utilize their fixed indemnity plan that pays a predetermined amount of money for any qualified medical services.

While fixed benefit insurance pays a certain amount per covered service, it’s important to remember that the benefits provided are limited. Here are a few things it does not cover:

  • It is not major medical insurance.
  • It does not provide the mandated coverage necessary to avoid penalty under the ACA.
  • It does not provide coverage from expenses resulting from any preexisting medical conditions.

Why does GoHealth suggest you consider a fixed indemnity product? A few reasons:

  • Something is better than nothing: ACA instability, the lack of carriers, and the new Short Term limitations imposed on April 1st, 2017 have left few options for consumers to purchase. Fixed benefits are making a strong push into the individual market, and in some cases, may be the only thing available to provide coverage to consumers if they don’t qualify for a SEP (special enrollment period).
  • Affordability: Fixed benefit plans are a more financially beneficial option in some cases (even when factoring in a potential tax penalty), and as we all know, the number one thing on consumers’ minds when purchasing insurance is cost!
  • Access to healthcare network: Everyone wants to be first in line and no one wants to wait. Have you ever been to the ER without insurance? Not only will costs skyrocket without any type of insurance (no network discounts), but you will be deprioritized based on the fact that you don’t have insurance. Hospitals and doctors know what they will be paid if a consumer has an insurance card, while it’s a more of a gamble if they don’t. Fixed benefit plans give you the access you need to ensure health services within a timely manner.
  • Simplicity: Fixed benefit plans are laid out very simply compared to a standard major medical policy with deductibles and coinsurance. If you go to the doctor, the plan pays $X if you get hospitalized, and the plan pays $Y for each day. It is very easy for a consumer to grasp how the plan works!

Are you interested in offering fixed indemnity products? Or perhaps want to learn more about how these products can benefit your clients while also expanding your portfolio? GoHealth is happy to answer your questions! Email bizdev@gohealth.com today to learn more.

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