What type of payment system do commercial insurance plans typically use?

Commercial insurance plans typically utilize a fee-for-service payment system. In this model, healthcare providers are reimbursed separately for each service or treatment provided to the patient. This approach allows for flexibility in treatment options, as providers can recommend and bill for various tests, procedures, and consultations as required based on the patient's needs.

Fee-for-service payment systems incentivize providers to deliver more services since reimbursement is tied to the volume of care rather than the quality or outcomes. This can lead to increased access to care for patients, as providers are compensated for each individual service rendered.

In contrast, prospective payment systems set fixed rates for services before they are provided, while retrospective payment systems reimburse providers after services are rendered based on the actual costs incurred. A concurrent payment system, although less common, refers to payments being made in correlation to ongoing services rather than in a retrospective or predetermined manner. These alternative systems do exist but are not typically characteristic of how commercial insurance operates, which leans more towards the fee-for-service model.