Send as SMS is off but still being sent as SMS

Hi, I've turned off Send As SMS but I did a test to send a message to a number that is not an iOS device and it still sent it as a regular SMS. I checked my usage on Verizon and it does show it counted as a text message thus costing me money.
What happened? I know when I first got the iPhone 4S, it worked i.e when attempting to send to a non iOS device not having iMesaage, it warn and didn't send it. But now it appears to be broken. I'm on latest iOS firmware.

Thanks for the response. That makes sense.
But is there an explanation why then when I send to a known iOS device with iMessage and having the send as SMS off, it still sent as SMS?
Over the weekend, my wife text me (her setting is ON) and it was showing up as green. She was surprised since I have told her that she has to watch out for the blue/green color when we first got the phone. Immediately I respond and it was also green back to her. All the previous text messages were in blue between us.
I restarted my phone and iMessage then worked as expected i.e showing blue when I try to message her.

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