Kids and Health Care: Traditional, Indemnity Insurance
If you have indemnity insurance (the "old-fashioned," non-HMO kind), the mechanics of paying for medical care aren't so different than paying cash. Essentially, you pay the insurance premiums every month, so that the company takes over paying most of your medical bills when you go to the doctor or a hospital.
That most is a critical word.
After you've been treated, you or your doctor submits a claim to your insurance company for reimbursement. You will only receive reimbursement for the covered medical expenses listed in your plan.
Services that are covered under your policy are generally reimbursed for some -- but not all -- of the cost. Many policies pay 80 percent of the costs; you are responsible for paying the rest. In most circumstances, the doctor's office or hospital will bill you for the balance.
The portion of the covered medical expenses that you pay, the other 20 percent, is called co-insurance. It's different than (and usually exists in addition to) the deductible, which is a small amount that you pay directly to the doctor or hospital in advance of the insurance indemnity coverage.
A key caveat to indemnity coverage: Insurance companies usually limit their 80 percent coverage to usual, customary and reasonable (UCR) fees. These fees -- which vary slightly by geographic location and medical specialty -- are standards kept by the insurance industry as a way to limit particular doctors from overcharging patients with insurance.
Many fee-for-service plans pay hospital expenses in full, so be sure to check with your plan provider.
While indemnity policies allow for maximum flexibility, they leave you on the hook for out-of-pocket expenses. To compensate for this, most indemnity policies have an annual out-of-pocket maximum. When out-of-pocket expenses reach a pre-set amount in a given calendar year, the UCR fees for benefits covered by the plan will be paid in full by the insurance company and you no longer pay the co-insurance. (However, you still have to pay deductibles and, if your doctor bills more than the UCR fees, you may have to pick up that part of the tab.)
Many policies place lifetime limits on benefits. When shopping for a plan, it's smart to look for a policy whose lifetime limit is at least $1 million. If the limit is lower than this, you or your kids could run through the coverage if you have major health problems for several years.
