Medical Coverage Plans - Fee for Service

Fee-for-Service Plans

The Fee-for-Service approach is a bit more of an ala carte plan. Under this model of a medical

coverage plan, the patient picks and chooses which care items occur as provided on a fee basis. There

is a much more flexible availability of care professionals and care locations under this approach.

However, many of the costs involved are shared with the insurance company only paying for a partial

amount of the expense involved. In addition, there is a base premium the patient must pay which

provides a floor of revenue for the insurance company to rely on. The assumption here is that the

majority of members will pay the premium and receive no service much of the time, which offsets those

patients who require services.

In addition to the copayments and premiums, the patient also has to pay for a deductible, dependent on

the amount of coverage to be provided. A deductible is essentially a threshold amount that must be paid

by the patient out of pocket first before the insurance company pays any expense at all.

If the coverage is more for emergency and life-threatening conditions but the premium cost is low, the

deductible may be very high, $2000 for example per incident. Alternatively, if the deductible is low, say

close to $100 per incident, then the premium per month could be much more. Both are ways the

insurance company makes sure it recovers revenue to offset costs.

Most fee-for-service plans don’t set up deductibles per incident. They are instead set up as an amount

that must be paid in aggregate for the year before the insurance company takes over any other costs

that occur during that time period. So, in many cases, the deductible is usually set to be enough to

cover visit costs and prescriptions for small issues, keeping the insurance company out of the business

of paying for small aches and pains.

To prove your payment of your deductible amount, many insurers will require you to provide

documentation. Retaining your receipts for visits and medicine purchases as allowed carries this proof

of burden. Anecdotal statements rarely provide sufficient support.

In addition to the above savings measures, insurance companies will also often place a life-time or

universal cap on certain high expense categories or the individual in a fee-for-service managed care

plan. This limit can be influenced by how many family members are on the plan with you and your pre-

existing conditions. It may also be influenced by awareness of your having more than one coverage

plan in place. This can happen sometimes with two spouses both working and under a family plan with

each other’s employer, for example.

Fee-for-service plans don’t necessarily limit every aspect. In some cases it makes sense for the insurer

to allow certain procedures without limitation. Many times these are preventative treatments such as

vaccines, maternity care, and pediatric check-ups.