Usual, Customary, and Reasonable Charges
In the insurance world, a popular phrase considers whether or not a particular fee charged by a physician, dentist, or other health professional is "usual, customary, and reasonable," or "UCR". As a consumer, it's important to understand these terms, since they can affect insurance reimbursement and additional out-of-pocket charges that you might have to pay. The following tips provide useful information about "UCRs".
- Usual: A charge is considered "usual" if it is a physician's usual charge for a procedure.
- Customary: A charge is considered "customary" if it is within a range of fees that most physicians in the area charge for a given procedure (often measured at a specific percentile of all charges submitted for a given procedure in that community).
- Reasonable: A charge is considered "reasonable" if it's usual and customary or if it's justified because of special conditions.
Traditional (or Indemnity) Insurance
- Most traditional insurance plans reimburse physicians and dentists according to the UCR rate.
- You may be responsible for your coinsurance plus any amount over the UCR rate that your doctor charges.
- Different insurance companies "set" their UCR rate at different percentiles; they also may use different methods and databases to determine UCR's, as there is no universal standard or regulatory guidelines for determining the calculation.
Ask your insurance company at which percentile they set their UCR at (90th percentile will provide more coverage than 80th percentile).
- Example: If your doctor charges $1500 for a certain procedure and your insurance company pays 80% of the UCR (which your health plan determines to be $1000), then you would have to pay 20% of $1000 ($200), plus the $500 over the UCR for a total of $700.
- Note that most plans will not apply the portion of charges exceeding UCR towards your deductible or annual out-of-pocket maximum.
- Ask your doctors if they will waive payment for the part of their fee that falls above the UCR rate as determined by your health insurance carrier.
Managed Care (including PPOs and Point of Service Plans)
- Most managed care programs contract with a network of doctors for reimbursement at specified rates.
- If you go to in-network providers, who have contracted with your health plan to provide services at a negotiated rate, then you won't have to worry about UCR's for covered services.
- Ask your health plan if their contract with your physician allows your doctor to bill for any other charges beyond copayments. Typically, the patient is only responsible for a predetermined copayment or a percentage of the contracted rate for in-network providers.
Be aware that if your plan covers out-of-network services, it will still only pay a percentage of the UCR rate. If your provider bills more than the UCR rate (as your health plan determines it), you will be responsible for both your coinsurance and any amount above the UCR rate. Additionally, if you have an out-of-pocket maximum, the amount that you pay for services above the UCR rate will not apply.
- Here's an example: You receive services from an out-of-network provider and the plan reimburses 60% of the UCR rate. The provider bills $2,000, but the UCR rate is $1,000. The plan would pay 60% of $1,000, or $600. Your coinsurance is 40%, which is $400. This $400 would apply to your annual out-of-pocket maximum. However, since your health plan determines that the UCR rate is $1000, you would be responsible for the rest of the bill, which is $1000. So you would have to pay $1400, but only $400 will apply to your annual out-of-pocket maximum.
- To help keep your costs to a minimum, ask your providers if they are willing to accept the UCR rate as payment in full. If they agree, ask for something in writing to confirm this.
- Also, some plans will provide information about their UCR rates, if you give them the procedure (CPT) code and your provider's zip code before getting treatment. This can avoid unexpected surprises for people using out-of-network benefits.
Traditional Medicare (Parts A and B)
- Medicare approved charge: the amount Medicare approves for payment to a physician.
- For doctors who accept Medicare assignment, Medicare typically pays 80% of the approved charge and the patient pays the remaining 20%.
- Doctors who do not accept Medicare assignment may bill Medicare patients for an additional amount beyond the 20% copayment, not to exceed 15% of the Medicare approved charge.
Make sure that you familiarize yourself with your health insurance plan's explanation of benefits and coverage. This may help prevent reimbursement misunderstandings, which could leave you paying for more than what you had expected.
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