Fee-for-Service Plans
Fee-for-service
coverage is advantageous in that it allows you to choose
your own doctor or hospital. After you receive medical services,
then a claim is submitted by you or your doctor (hospital)
to your insurance company for reimbursement for the medical
expenses that are "covered" under your policy.
Reimbursement and Coinsurance
A medical service that is covered under
the policy will provide reimbursement for most - but seldom
all - of the cost. How much the policy will reimburse
depends on the provisions of the policy on coinsurance
and deductibles. The part of the medical expenses which
are "covered" under your plan that you are required
to pay is called "coinsurance."
There are some variations, but Fee-for-Service
policies usually reimburse medical bills at 80% of the
"reasonable & customary
charges "(the prevailing cost
of a medical service in a certain geographic area).
You then are obligated to pay the other 20 percent - your
coinsurance.
One of the negatives of Fee-for-Service
policies is if your doctor or hospital charges more than
"reasonable & customary" fee as determined
by your insurance company ... then you will be required
to pay the difference. So for example, if a medical service
cost is expected to be $100 by your insurance then it
will reimburse 80% or $80 and you pay your coinsurance
of $20. But even if your doctor charges $120 for the service,
your insurance company will still only pay 80% of $100.
You will have to pay the difference.
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A deductible is the amount
of "covered" expenses that you are obligated to
pay on an annual basis before your insurance company has
to start reimbursing you. Deductibles range from $100 to
$300 per year per individual, or $500 or more per family.
So what this means ... is that your insurance won't pay
anything until your medical bills begin to exceed the yearly
deductible. Generally, the higher the deductible, the lower
the premiums, which are the monthly, quarterly, or annual
payments that you pay for your insurance policy. A lower
deductible such as $100 has a higher premium than a $1000
deductible. It's up to you to decide what kind of deductible
and premium is best for you before you buy an insurance
policy.
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Deductibles vary according to plans. An average
deductible is about $250 per person, yet it can be lower or
much higher depending on the premium. Some deductibles can
be as high as $10,000 in order to have low premiums. Family
insurance deductibles are usually about 3 times the average
individual deductible. Generally speaking, the higher the
deductible, then the lower the premiums. Premiums (if you
don't know) are the monthly or quarterly payments that you
the consumer pay for the health insurance plan. They are not
included in your annual deductible expenses.
Other things about Fee-for-Service plans
Fee-for-Service insurance policies usually have
an out-of-pocket maximum expense. This means that when your
"covered" expenses exceed a certain limit in a calendar
year, then the "reasonable & customary fee"
for your covered benefits will be fully paid by the insurance
company. If your doctor bills are higher than what is considered
the "reasonable & customary charge", then however,
you may still be required to pay a portion of the medical
bill.
Some Fee-for-Service policies have caps or "lifetime
limits" on the benefits that are paid. Try to find a
"lifetime limit" on a policy that is more than $1
million. Just one major illness or a long hospital stay could
use up a small lifetime limit easily. You wouldn't want to
worry about medical bills during a health crisis!
(Advice - READ policies of healthcare plans
carefully before buying!)
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