Long before managed care plans like HMOs came to dominate the health insurance landscape, traditional health insurance was the de facto standard. Also known as indemnity or fee-for-service health insurance, traditional health plans typically offer the most choice of doctors and hospitals; they require no utilization reviews, provider pre-certification, or specialist referrals. With traditional health insurance, you can visit any doctor or healthcare provider, change providers at any time, and enjoy national coverage. You will pay a premium for this type of freedom, as traditional plans are more costly than managed care plans for both individuals and employers than managed care plans. Many of these policies also require underwriting. In other words, a medical background and lifestyle check will be conducted to determine if your plan enrollment will be accepted and if any pre-existing condition riders will be attached to your policy.
Traditional Health Insurance Costs
With traditional health insurance, the insurer pays your bill after treatment has been rendered. Some plans require that participants pay providers upfront and submit the proper insurance claim forms for reimbursement. More commonly, providers submit claims directly to the insurer and plan participants pay a
copay ("coinsurance") at the time of treatment. The insurer typically pays a percentage of the total bill (generally 50 to 80 percent). As a plan participant, you will be responsible for certain out-of-pocket expenses including all provider fees up to the amount of your deductible, copayments, fees for services not covered by your policy, and fees above what the insurer deems reasonable and customary for your treatment. Reasonable and customary fees are determined by the insurer based on the average for treatment in your area. For example, if the average cost for a yearly physical is $250, and your provider charges $450, the insurer will only pay up to $250 and you will be responsible for the difference.
Traditional plans put a cap on what the insured must pay in any given year ("out-of-pocket maximum"). Once your payments for covered healthcare reach the cap, the insurer will pay 100 percent of allowable costs. Premiums are not included in calculating out-of-pocket maximum. Deductibles also may not be included, depending on your plan structure. Insurers also place a cap on the amount they will pay out over the life of the policy ("lifetime maximum").