Fee-for-Service Health Insurance

Fee-for-Service also known as Indemnity Plans are the traditional form of health insurance. If you buy a Fee-for-Service plan, you will be able to choose a health care provider anywhere in the country, and the insurer will pay for most of the services rendered. You have to carefully read your insurance policy to determine which services are covered.

When a service is covered by your policy, you will usually be reimbursed for only part of the cost. How much you’ll get depends on the specific policy provisions, on coinsurance and on deductibles. Here’s how it works:

Each year of the policy you pay a certain amount of money, typically about $250, known as “deductible”. After you spend the deductible, your insurer reimburses you for each doctor visit or hospital stay during the year, up to a certain percentage of the cost. However, not all of your health expenses count toward the deductible. You have to check the insurance policy to find out which ones are covered. Generally, the higher deductible you choose, the lower monthly premiums you pay.

After you meet your deductible for the year, the insurer starts paying part of your “reasonable and customary” medical expenses. Usually you pay about 20 percent and the insurer pays about 80 percent. Your portion is called "coinsurance". If your medical provider charges more than what is considered “reasonable and customary” though, you’ll have to cover the difference in addition to the coinsurance.

With a Fee-for-Service plan you are responsible for keeping track of expenses. For each medical service received, either you, or the service provider, have to submit a claim to your insurance company for reimbursement.

Most fee-for-service plans have an out-of-pocket maximum: the most you will have to pay for medical bills in any one year (for your deductible and your coinsurance). After you reach the out-of-pocket maximum, the insurer will cover 100 percent of your “reasonable and customary” medical expenses. Your monthly premium doesn’t count toward the out-of-pocket maximum.

Your fee-for-service policy may have a lifetime limit on the benefits paid. Look for a policy whose lifetime limit is high enough.

In general, fee-for-service insurance offers more flexibility in exchange for higher expenses and more paperwork.

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