Arizona Life and Health Practice Exam

A preferred provider plan and an indemnity plan are similar in what way?

1. Both require referrals for specialist care.

2. Both pay on a fee-for-service basis.

3. Both limit the choice of healthcare providers.

4. Both cover preventive care at 100%.

The correct answer is: Both pay on a fee-for-service basis.

Both preferred provider plans and indemnity plans operate on a fee-for-service basis, which means that they reimburse policyholders for the costs of covered medical services. In both types of plans, the insurance provider pays a portion of the costs incurred by the insured for medical services rendered, and the insured is responsible for any remaining balance, which is often a deductible or coinsurance amount. In preferred provider plans, while there is generally a network of preferred providers that participants are encouraged to use for higher reimbursement rates, the fundamental principle of paying for services rendered aligns with how indemnity plans operate. Indemnity plans tend to provide greater flexibility, allowing patients to see any healthcare provider they choose, typically at a higher out-of-pocket cost if not using preferred providers. Understanding this similarity is critical as it highlights how both plan structures facilitate access to healthcare services while also influencing consumer behavior regarding provider selection and healthcare costs.