Merritt Personal Lines Manual: Traditional Coverage versus Managed Care

Indemnity plans existed before the rise of HMOs, PPOs and other types of managed care plans. However, indemnity plans -- with their focus on flexibility -- aren't very effective at controlling costs. In the early 1990s, indemnity plans lost their leading position in the U.S. health coverage market. Starting in 1993 or 1994 (depending on which survey the insured believes) more Americans got their health coverage through managed care plans.

Still, indemnity plans are the standard by which American health care plans are measured. They remain the main alternative to managed care systems; even though they're mostly the choice of larger corporations and wealthier individuals.

The conventional wisdom -- within the medical profession and among consumers -- is that people with traditional indemnity insurance get better treatment. And, most importantly, the traditional plans give policyholders the assurance that any decisions a health care provider makes are squarely in the patient's best interest.