Question

A medical expense policy states that it will pay a flat $200 a day for each day of hospitalization. The policy pays benefits on what basis?

a) Reimbursement basis
b) Scheduled benefit basis
c) Indemnity basis
d) Fixed benefit basis

Answer 1

The medical expense policy pays a flat $200 a day for hospitalization on a fixed benefit basis. This means it pays a predetermined amount regardless of the actual hospital costs incurred. The correct option is D.

Step-by-step explanation:

The medical expense policy described pays a flat $200 a day for each day of hospitalization. This type of payment is known as a fixed benefit basis, because it pays out a predetermined amount regardless of the actual costs incurred.

It differs from reimbursement basis, which would pay back actual incurred expenses, and from a scheduled benefit basis, which might pay different amounts for different types of services.

An indemnity basis typically refers to payment made for losses suffered, but in the context of health insurance, it is often synonymous with a fixed benefit where the insured is paid a set amount per day of hospitalization or per service, without need to account for the actual expenses.