Fee-for-Service Insurance
Fee-for-service or indemnity plans are the type of health insurance policy recognized by most Americans. In this well-known model, your health insurance provider pays part of the fee for agreed health services by reimbursement after you submit the relevant claim forms. Fee-for-service typically offers wider choice in terms of doctors and hospitals, but may end up costing more than PPOs or HMOs.
Freedom of choice
The choice provided by fee-for-service plans is one of its biggest selling points. Most plans will allow you to choose any hospital and doctor for your health requirements, with the freedom to change at any time. This greater flexibility means you are not restricted to a list of contracted doctors, and is also beneficial in emergencies. Assuming the health services you require are included in your fee-for-service scheme, the insurance provider will pay for a portion of your medical fees no matter where in the country you are treated.
What you pay
Premium: Your insurer charges a monthly fee known as a premium; you pay this in order to benefit from the insurance plan.
Deductible: Added to this cost, most policies include a deductible, which is a set amount you need to pay each year towards your own health expenses before receiving assistance from the provider. For example, a typical plan might include a $200 deductible for each member of your family. If you have a family insurance plan, a further ‘family deductible’ may be introduced to reduce your costs. Some expenses do not count toward the deductible, so it is important to check the policy.
Coinsurance: When you reach the stated deductible for the year, the health insurance provider shares the bill with you, usually paying a majority of the costs. They calculate what they consider to be the ‘usual and customary charges’ for a given service, and generally pay 80% of this amount, while you pay 20% known as coinsurance. If the doctor or hospital charges more than the covered ‘usual and customary charges,’ you will have to pay the usual coinsurance plus the excess.
Claim forms
To let the insurance company know your expenses and the amount they need to pay, you might need to fill out claim forms. Your doctor’s office may do this for you depending on the service, and the forms should be sent to the insurer. With fee-for-service plans you are responsible for knowing your medical expenses, so it is crucial to keep records of receipts for all medical services and costs. In this way you can make successful claims.
Caps
These insurance schemes usually have a ‘cap,’ which is the highest amount you will need to pay in any given year. The cap acts as an assurance that you will not be bankrupted in the event of spiralling health care costs. To calculate the cap, the insurance provider adds your deductible to your coinsurance, and when they reach a certain collected total (between $1000 and $5000, for example) the insurer will cover all excess costs for services agreed in their policy. The cap does not take your premium into account, which must be paid regardless.
Check the coverage
When researching any specific fee-for-service policy, check carefully which services the insurer will cover. Many such policies are notoriously short on preventative health care coverage (e.g. doctors’ visits, immunizations) and certain child care. The coverage offered will also depend on whether you choose the basic or major coverage option, or a combination of the two ’ a comprehensive plan. Ideally you need both types of protection.