Hassle-Free Health Coverage: Fee-For-Service Plans
Fee-for-service coverage generally assumes that a medical provider (usually a doctor or hospital) will be paid a fee for services rendered. The term refers to the way doctors are paid...regardless of who pays. Paying cash-that is, unreimbursed out-of-pocket expenses-for medical treatment is a fee-for-service arrangement. However, most people don't pay cash for their medical care. Traditional health insurance- what insurance companies call indemnity coverage- is a fee-for-service arrangement.
With fee-for-service insurance, you choose the doctor you want to see; and you can choose a different doctor for any reaons, any time you feel like it. After you've been treated, you or your doctor submits a claim to your insurance company for reimbursement. You will only receive reimbursement for the covered medical expenses that are listed in your plan.
Services that are covered under your policy are generally reimbursed for some-but not all-of the cost. Many policies pay 80 percent of the costs.
(For a sample list of covered expenses and/or examples of non-covered expenses, turn to page 41 of Chapter 3.)
With some variation, fee-for-service policies reimburse bills for a percentage of a reasonable service charge. (This amount is derived by the prevailing cost of a service in a geographic area.) The portion of the covered medical expenses that you pay, the other 20 percent, is called co-insurance.
Sometimes a doctor will charge more than a reasonable amount for a service. If this is the case, you'll end up paying the difference out of your own pocket.
Example: If the reasonable charge for a service is $100, your insurer will probably pay $80 and you would pay $20. But if the doctor charged $105, you would have to pay $25.
Many fee-for-service plans pay hospital expenses in full, so be sure to check with your plan provider.
Deductibles are the amount of the covered expenses that you must pay each year before your insurer will reimburse you. These can range from as little as $100 to $300 per year per person to $500 or more per family. Generally, the higher the deductible, the lower the premiums, which are the monthly, quarterly, or annual payments for the insurance.
Most policies have an out-of-pocket maximum- when your covered expenses reach a certain amount in a given calendar year, a reasonable fee for the benefits that are covered on your plan will be paid in full by your insurer and you no longer pay the co-insurance. However, if your doctor bills you more than the reasonable charge, you may still have to pick up some of the tab.
In addition to the out-of-pocket maximum, many policies place lifetime limits on benefits. When shopping for a plan, it's smart to look for a policy whose lifetime limit is at least $1 million. If the limit is lower, you could run through the coverage if you had major health problems for several years.
