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

• A. Both fee-for-service
• B. Both capitation-based
• C. Both require referrals
• D. Both have no network

Answer: (A)

Both plans use a fee-for-service payment approach, meaning providers are paid for each service rendered rather than receiving a fixed amount per member. In an indemnity plan, you or the provider submit a claim and the insurer reimburses a portion of the billed charges. In a preferred provider plan, services are also paid on a fee-for-service basis, typically with the plan negotiating discounted rates for in-network providers and reimbursing a portion of those charges. This distinguishes them from capitation, where a provider is paid a set amount per enrolled person, and from plan features that rely on referrals. So the shared feature is the fee-for-service payment method.