In what way are preferred provider plans and indemnity plans similar?

Preferred provider plans and indemnity plans share a commonality in that they both pay for healthcare services on a fee-for-service basis. This approach means that providers are compensated for each individual service rendered to the patient, allowing for more flexibility and control over the services that patients receive. In both types of plans, when a member receives treatment, the provider bills the insurance company, and then the insurer pays a set percentage of the cost, leaving the member responsible for any remaining balance.

The other potential similarities do not accurately characterize both types of plans. Capitation, where providers are paid a set amount per patient regardless of the number of services provided, only applies to certain managed care plans and is not a feature of traditional indemnity plans. The requirement for referrals for specialist care typically applies to managed care plans like Health Maintenance Organizations (HMOs) more than it does to indemnity plans or preferred provider organizations (PPOs). Lastly, while some preferred provider plans might offer broader networks, indemnity plans have traditionally provided more extensive nationwide coverage without such restrictions. Thus, it is the fee-for-service payment structure that aligns these two plan types effectively.