Health Care Choices - Fee-for-Service (FFS) Health Insurance

Also called indemnity insurance, Fee-for-Service (FFS) insurance is the "original" health insurance plan. As recently as 25 years ago, most Americans had FFS (indemnity) health insurance coverage. That has since changed as managed care insurance plans dominate the market today.

Fee-for-Service health insurance plan is the simplest, most straightforward of all the health policies. It offers the most flexible choice of doctors and hospitals, as you can choose any doctor you want and go to any clinic or hospital anywhere in the country. As its name suggests, Fee-for-Service insurance only pays the health care provider when services are rendered.

Under a Fee-for Service health plan, you and your insurance company share the costs of your health care. Your insurance only covers a portion of your medical expenses. You pay the balance out-of-pocket, typically in the form of a deductible and co-insurance.

Annual Deductible
Under this plan, you are responsible for a paying a deductible each year. The deductible is a fixed dollar amount of money that you have to pay out of pocket before the insurance coverage begins to pay on your medical bills. It is an annual amount that applies per person covered on the policy, and it applies each year of the policy. There is, however, a maximum amount of deductible you will have to pay each year.

For example, if you have a $500 "per person" deductible, and 5 family members are covered on the policy, the maximum "family" deductible will typically be $1,500. This means that once 3 family members have paid out their $500 deductible, no other deductible will apply for the rest of the year, for coverage on any family member. This may vary from company to company, so be sure to verify the specifics with your insurance agent.

Co-insurance
Fee-for-Service plans typically pay 80% of the covered medical bills, leaving 20%, which you pay out of pocket. The percentage that you are responsible for is called "co-insurance." There are some plans that cover hospital charges in full, separate from the doctor's charges.

Stop loss protection
Fee-for-Service policies generally have a cap on the total dollar amount you are required to pay for covered medical expenses. This provision is called a "stop loss." It is, basically, the maximum amount you must pay out-of-pocket in any given year. The insurance company will then pay 100% of the medical expenses beyond this cap.
Say, for example, your policy has 80% coinsurance and a $1,000 stop-loss. This means that, once you have paid your deductible, you are responsible for 20% of all your medical bills, up to $1000. The insurance company pays anything over and above this amount. Some policies will even include your deductible in the stop loss amount. It is important to note that only medical costs that are covered under the policy apply toward your deductible and co-insurance.

Basic and Major Medical Coverage
You have a choice between two different types of Fee-for-Service health insurance coverage: basic and major medical. Basic coverage applies to regular medical expenses such as doctor visits, hospital expenses, emergency care, x-rays, surgery, and prescription medicines. Major medical picks up where basic coverage leaves off, footing the large medical bills that basic does not cover. This usually applies for serious injuries or illnesses. You can get a comprehensive coverage that combines both basic and major medical in one policy.

When you have Fee-for-Service insurance, you need to keep track of your own medical bills, receipts and expenses. You will have to fill out claim forms and submit these to the insurance company to get the doctor's bill paid. Your doctor's office may sometimes take care of this for you.

Reasonable and Customary charge
It is very important to know that there may be a difference between the actual charges your doctor may bill you, and the allowable charges the Fee-for-Service company is willing to pay. The Fee-for-Service calls this amount it is willing to pay the "reasonable and customary charge." Doctor fees for a specific medical service may vary from one geographic area to another; the "reasonable and customary charge" is based on a consensus of what most doctors or hospitals charge for the same procedure. So your dentist may charge you $400 to extract a tooth, but if the Fee-for-Service company considers it a $350 job, that is all it will pay. You will be responsible for the balance.

Pros
*Fee-for-Service plans are not as restrictive as managed care plans in terms of benefits and health providers. You can get your medical care from any doctor or hospital.
*You do not need to get a referral before going to a specialist
*Whe you travel or have an emergency, you do not have to worry about being "out of network".

Cons
*Fee-for-Service plans are generally more expensive than either HMO or PPO plans.
*In addition to your monthly payments, you have the added expense of your co-insurance and your deductible.
*There is a lot more paperwork involved when you have Fee-for-Service coverage.
*Fee-for-Service plans do not offer comprehensive coverage, and generally do not cover preventive care.