Understanding Health Insurance

By: Lee Ann Obringer & Melissa Jeffries

Indemnity Insurance

Fee-for-service (FFS) insurance, or indemnity, is the traditional insurance plan -- much like your grandparents had. You can get basic coverage, which includes doctor visits, hospitalization, surgery and other medical expenses. For serious illness or injuries, you can get major medical, which pays the big bills when basic coverage has run out. Comprehensive coverage combines basic and major medical. This type is typically what's offered in employer-sponsored group health plans.

FFS plans allow you to go to the doctor, clinic or hospital of your choice. You pay the bill and then submit forms for reimbursement by your insurance company. There are a few requirements, however, before you get to the reimbursement stage.



Before you get reimbursed for anything, you must have already paid the full deductible amount for the year. Deductibles are usually around $250 for an individual, but they can be as high as $10,000. The higher the deductible, the lower the premium. If you're a very healthy person and don't have any potentially dangerous hobbies, you can get away with a really low monthly premium by choosing a higher deductible. However, you'll have to live with the realization that you might have to pony up a big chunk of cash in the event you get seriously sick or injured.

What's Typically Covered?

No plan covers everything, so you have to read the policy to ensure that it meets your needs. In many cases FFS plans focus on treating health problems rather than preventing them. Therefore, these plans don't usually cover annual check ups and other "well" doctor visits you might have. Families in particular can rack up a lot of expenses just in annual physicals and check ups. FFS plans may also limit the number of days you can stay in the hospital and still receive coverage.

Pros and Cons

FFS plans are typically more versatile than other types of plans. Being able to go to any physician is a big part of that versatility. Additional benefits include not having to get referrals before going to a specialist and not worrying about being "out of network" in the event of an emergency illness or injury when traveling. The drawback is that they can be more expensive for those that tend to use preventative health measures.