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Advantages and Disadvantages of Traditional Health Insurance

Traditional health insurance as people have known for years involves fee-for-service or indemnity coverage. With this type of coverage, policyholders have the option of choosing the doctor, hospital, and other healthcare providers preferred. In addition, if the policyholder for this type of health insurance were to need care from a medical specialist, no referral would be required. This means that the insurance company would not have the right to make the determination whether care from a specialist was needed or not.

While the fee-for-service coverage appears a great option, people that have this type of health insurance know all too well that it is not always what it appears to be. Typically, a traditional type of health insurance policy would involve the patient paying a higher level of out-of-pocket expenses then what would be covered with managed care plans. In addition, deductibles are usually extremely high and once the deductible was paid, the insurance company would be responsible for 80% of the medical bill.

Health insurance has been a subject of strong debate for years with most consumers believing in the freedom of seeing the doctor of choice. However, even if a person could see the preferred doctor, the amount paid by the health insurance company would be based on a specific formula. In this case, insurance companies consider rates of other physicians in the same geographical area to find an average.

Therefore, the amount paid would only be for expenses deemed “reasonable and customary” based on the average cost of other doctors. For instance, if a patient were to see a doctor that charged $200 for a visit, the health insurance company would look at other like doctors in the same area to get an average of what they would charge for the same service. If the average ended up at $160, the insurance company would only pay 80% of that amount. The remaining $32 would be covered by the patient’s deductible and anything left over would be the responsibility of the doctor.

Traditional health insurance premiums are typically higher than that of other plans. Even deductibles are higher, falling anywhere between $400 and $1,300 depending on the insurance company, the policy, and the policyholder. In addition, the amount covered with a traditional health insurance policy would be based on the person’s specific health problem. In fact, some long-term illnesses would have harsh restrictions applied.

People trying to find affordable health insurance would need to spend time and effort in looking at all options. Employers are trying to make coverage more affordable for employees but they too have their hands tied. However, when comparing the cost of health insurance offered by an employer versus what a person would buy on his or her own company offered policy is typically more affordable.

The good news is that today, it has become a serious issue within the government in that people need proper healthcare and without insurance, this is simply not possible. Therefore, companies are working hard to come up with solutions that would make it possible for a greater number of people to have health insurance coverage. People need to remember that when it comes to insurance, no one policy is a “one size fits all.” While options might be more affordable for employees using employer’s plans, it would still be worth investigating other possibilities, looking at different companies, policies, and coverage options.

For individuals that are starting a new job, it would be recommended for them to consider not just current healthcare concerns but future needs as well. Usually, larger corporations offer various types of long-term care or disability and while the employee might think it unnecessary, planning could save them tremendous heartache down the road. Of course, people are going to purchase health insurance they can afford but if possible, consumers should try to go with the highest level of coverage if possible.

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