What type of payment structure does a medical expense policy provide if it pays a flat $200 a day for each day of hospitalization?

A medical expense policy that pays a flat $200 a day for each day of hospitalization exemplifies an indemnity payment structure. In this model, the insured receives a predetermined amount of money, regardless of the actual expenses incurred during the hospitalization. The flat daily rate means that, for each day the insured is hospitalized, they receive a fixed benefit, which provides financial security against the costs associated with hospital stays.

This type of payment structure differs from fee-for-service, which reimburses based on the specific fees charged by healthcare providers and requires the insured to be billed directly for services. Capitation is a payment arrangement where providers are paid a fixed amount per patient, often in a managed care context, irrespective of the number of services provided, which is not the case here. Coinsurance involves sharing costs between the insurer and the insured after a deductible is met, leading to variances in out-of-pocket expenses based on the incurred costs. In contrast, the flat daily payment of an indemnity policy ensures that the insured knows exactly what they will receive for each day spent in the hospital, providing predictability and ease of claim processing.