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Fee-for-Service and Indemnity Plans

Fee-for-service health insurance (also called "indemnity insurance") is the traditional health care system under which the insurance company pays physicians and hospitals a set amount for each unit of service. Offering the most flexibility, fee-for-service insurance usually allows the covered individual to seek medical services wherever he or she pleases, without being restricted to a particular network of providers.

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Costs for Fee-for-Service health insurance plans include:

• a monthly premium.
  
  
• an annual deductible before insurance payments begin.
  
  
• coinsurance, a percentage (typically 20 percent) of further medical and prescription costs after the deductible has been paid.

Most fee-for-service plans have a "cap," beyond which the covered individual will not be responsible for any more out-of-pocket expenses. A fee-for-service plan typically limits coverage to "medically necessary" treatments and to the "usual, customary, and reasonable" fees for each procedure, as determined by the insurance company. It is possible that there will be a difference between what the doctor or hospital charges and what the insurance company considers "reasonable." Sometimes, this means that the covered individual winds up paying more than he or she expected.

There are three kinds of fee-for-service coverage:

• basic protection pays normal medical expenses and, if hospitalization is required, the costs of a hospital room; some hospital services and supplies, such as x-rays and prescribed medicine; and the cost of inpatient or outpatient surgery.
  
  
• major medical insurance takes over where your basic coverage leaves off, covering the bulk of the bills in the case of a lingering illness or serious injury.
  
  
• comprehensive insurance combines basic and major medical coverage into a single plan.

Under a fee-for-service health insurance plan, some services may be limited or not covered at all. When considering this kind of plan, it is important to ask about preventative health care coverage such as immunizations and well-child care.

When considering a traditional fee-for-service insurance plan for your small business, you should ask such questions as:

• how much is the monthly premium?
  
  
• what is the deductible?
  
  
• what is the coinsurance rate?
  
  
• what is the maximum annual out-of-pocket expense?
  
  
• does the policy cover prescription drugs, out-of-hospital care, home care, and other important services?
  
  
• are there limitations on pre-existing conditions under the policy?
  
  
• is the health policy non-cancelable or guaranteed-renewable?

Request a quote from a carrier offering Fee-for-Service plans in your area >>