Senate Insurance Committee Informational Hearing



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Fee-for-Service

This type of coverage generally assumes that the medical provider (usually a doctor or hospital) will be paid a fee for each service rendered to the patient. With fee-for-service insurance, a patient can go to any doctor and the patient or doctor or hospital submits a claim to the insurance company for reimbursement. Patients only receive reimbursement for "covered" medical expenses, and when a service is covered, the patient can expect to be reimbursed for some, but generally not all, of the cost. How much is received depends on the provisions of the policy on coinsurance and deductibles.


The portion of the covered medical expenses paid by a patient is called "coinsurance." Although there are variations, fee-for-service policies often reimburse doctor bills at 80% of the "reasonable and customary charge." This is the prevailing cost of a medical service in a given geographic area. The patient pays the other 20% which is called the coinsurance.

However, if a medical provider charges more than the reasonable and customary fee, the patient will have to pay the difference. For example, if the reasonable and customary fee for a medical service is $100, the insurer will pay $80. If the doctor charged $100, the patient will pay $20. But if the doctor charged $105, the patient will pay $25.


Deductibles are the amount of the covered expenses that must be paid each year before the insurer starts to reimburse the patient. These might range from $100 to $300 per year per individual, or $500 or more per family. Generally, the higher the deductible, the lower the premiums, which are the monthly, quarterly, or annual payments for the insurance.
Policies typically have an out-of-pocket maximum. This means that once expenses reach a certain amount in a given calendar year, the reasonable and customary fee for covered benefits will be paid in full by the insurer. If the doctor bills more than the reasonable and customary charge, the patient may still have to pay a portion of the bill. And Medicare limits how much a physician may charge the patient above the usual amount. There also may be lifetime limits on benefits paid under the policy.

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