9.2 Classification of Healthcare Plans

Indemnity (Reimbursement) Plan: An indemnity plan allows the insured to select any physician or hospital without the need for referrals or a designated primary care provider. Under this type of plan, the insured typically pays for medical services at the time they are received and then submits a claim to the insurer for reimbursement. The insurer reimburses the insured according to the policy's benefit provisions, up to the amount of covered expenses incurred. Indemnity plans are most commonly offered through commercial insurance companies.

Service Plan: A service plan pays benefits directly to health care providers rather than reimbursing the covered individual. Individuals enrolled in these plans are commonly referred to as subscribers, and they pay a premium or subscription fee for coverage. Service plan providers include organizations such as Blue Cross and Blue Shield, Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and Point-of-Service (POS) plans. These plans may operate on a prepaid basis or through contractual agreements with health care providers who accept negotiated fees for services rendered.

Self-Insured (Self-Funded) Plan: A health plan in which an employer, association, or union assumes the financial responsibility for paying claims directly from its own funds, rather than purchasing insurance coverage from an insurance company. In this arrangement, the organization bears the risk of claim payments, although it may contract with an insurer or third-party administrator to handle administrative services such as claims processing.