Final answer:
Hospital indemnity policies often limit benefits for mental and nervous disorders by having caps on coverage, reduced monetary benefits, and extended waiting periods, influenced by the perceived higher risk and costs associated with mental health treatments.
Step-by-step explanation:
Hospital indemnity policies often contain certain restrictions and limitations for coverage related to mental and nervous disorders. These limitations can manifest as caps on the number of covered days for inpatient care, lower monetary benefits compared to physical health conditions, or extended waiting periods before benefits kick in. The coverage for mental health care is generally less comprehensive due to the higher risk that these conditions pose and the potential for more extended treatment periods. Moreover, the stigma surrounding mental illnesses and the historically variable costs associated with their management play a part in these restrictions.
For example, in a fee-for-service health financing system, mental health services might incur significant charges, and so indemnity policies may limit payments to prevent excessive costs. Additionally, the concern of adverse selection can cause insurers to be more cautious, as individuals with a higher risk of mental health issues may be more likely to seek extensive coverage. Consequently, hospital indemnity policies may be designed to cushion the financial risk for the insurance providers by limiting the benefits for mental and nervous disorders. These restrictions can have a profound impact on access to medical facilities for those most in need.