Types of Policies
There are two major types of Health Insurance Policies, Fee for Service and Managed Care.
Fee for Service
Fee For Service is sometimes known as Traditional or Indemnity insurance
and, as the name implies, pays a set amount (fee) for each type of claim (service). This amount is called the Reasonable and Customary charge and is the prevailing cost of a medical service in a geographic area, but not always exactly what your doctor charges.
Additionally, these policies commonly pay only a percentage of the total bill, the most common is 80%, which leaves 20% for you to pay. So if you go to the doctor for a boo-boo, and the Reasonable and Customary charge is $100, the insurer will pay $80. If your doctor billed you for $100, you will pay $20, but if your doctor billed you for $110, you will pay $30.
Managed Care plans are known under many different names, most common are Health Maintenance Organizations (HMO), Preferred Provider Organizations (PPO), and Point of Service plans (POS). Almost all of these plans use managed care techniques to keep costs down and provide appropriate care. Doctors and facilities are often contracted to provide services at a discounted rate, and they may be required to follow set guidelines and procedures.
In a typical HMO, if you go to the doctor for a boo-boo, no matter how minor or serious it is, you will have to pay only the copayment amount. There are many variations of these plans and each insurance company may have their own plan names. We’ll discuss more about the differences in coming pages.