What method of paying health policy benefits is based on a predetermined fixed rate for medical services?

The indemnity approach is characterized by an arrangement where the insurer pays a fixed amount for specific medical services, regardless of the actual costs incurred. This method establishes predetermined benefit levels for various services, ensuring that policyholders know well in advance what they will receive for different medical treatments or procedures. Under this approach, consumers often have the freedom to choose their healthcare providers without being restricted to a network, and they are paid a set amount even if the costs of services exceed that amount.

In contrast to the fee-for-service model, which reimburses patients based on the actual cost of each service rendered, the indemnity approach simplifies the payment structure for both insurers and insured by providing clearly established benefit amounts. Meanwhile, capitated payment systems provide a fixed amount per patient enrolled in a health plan, which can often lead to cost savings for insurers, but this is distinct from the indemnity model as it links payment directly to patient enrollment rather than specific service payouts.