Illinois Health Insurance Practice Exam

What does the term "Indemnity" mean in the context of health insurance?

1. Payment in advance

2. Reimbursement

3. Discounted premiums

4. Free medical samples

The correct answer is: Reimbursement

The term "Indemnity" in the context of health insurance refers to reimbursement. This concept involves the insurance company compensating the insured for the costs incurred during medical treatment, up to a certain limit as outlined in the policy. Essentially, the insured pays for medical services upfront and then submits a claim to the insurer for reimbursement based on the coverage provided. In indemnity plans, there is often more flexibility regarding the choice of healthcare providers, which contrasts with managed care plans that might restrict provider choice. This kind of plan focuses on compensating insured individuals after they have received care, rather than providing payment directly to the healthcare provider at the time services are rendered. The other options do not align with the established definition of indemnity in health insurance. Thus, reimbursement is indeed the correct interpretation of the term in this context.