What’s another name for traditional or fee-for-service insurance?
Gain clarity on a fundamental health insurance structure. Understand its terminology, defining features, and how it functions.
Health insurance provides financial protection by covering a portion of medical expenses. It helps individuals manage the costs associated with healthcare services, which can include doctor visits, hospital stays, and prescription medications. This article clarifies the concept of traditional or fee-for-service insurance, explaining its core mechanism and the various terms used to describe it. Understanding this type of plan can help individuals make informed decisions about their healthcare coverage.
Defining Fee-for-Service Insurance
Fee-for-service (FFS) health insurance is a payment model where healthcare providers receive a distinct fee for each service they perform. A separate charge is generated for each office visit, test, or procedure. Payments are specifically tied to the quantity of services provided, rather than a bundled or fixed amount for overall care.
Under this model, the insurance plan either directly pays the medical provider or reimburses the policyholder after a claim is filed for covered expenses. Policyholders pay an annual deductible, which is the amount they must spend out-of-pocket before the insurance coverage begins to pay. After the deductible is met, coinsurance applies, meaning the policyholder pays a percentage of the service cost, and the insurer covers the remainder. An out-of-pocket maximum caps the total amount a policyholder will pay in a year for covered services, including deductibles, copayments, and coinsurance, after which the insurer pays 100% of eligible costs.
Common Names for Fee-for-Service Insurance
Traditional or fee-for-service health insurance is known by several names. One common alternative is “indemnity insurance.” This term highlights that the insurance policy provides financial protection or compensation against a covered loss, meaning the insurer indemnifies the policyholder for medical costs.
Another frequently used term is “traditional health insurance.” This name reflects that FFS was the predominant and customary form of health coverage for many years before the widespread adoption of managed care plans. Similarly, “conventional health insurance” is also used to describe these plans, emphasizing their long-standing and established nature in the healthcare landscape.
Key Characteristics of Fee-for-Service Plans
Fee-for-service plans offer distinct characteristics that differentiate them from other health insurance models. A primary feature is the freedom policyholders have to choose any licensed doctor, specialist, or hospital without network restrictions. This means individuals are not limited to a specific group of providers.
Policyholders also do not need referrals from a primary care physician (PCP) to see specialists. This provides direct access to specialized medical care. In many cases, the patient may pay the provider directly for services and then submit a claim to the insurance company for reimbursement, although direct billing to the insurer is also common. The insurer’s role in FFS plans involves processing and paying claims based on the services provided, rather than managing or coordinating the patient’s care pathway.