Health Insurance: Frequently asked questions

Jun. 30, 2006

You've run into a practice known as "usual, customary, and reasonable" (UCR), which is one way indemnity health insurers determine how much of a claim they will pay. As the name says, these charges are essentially the "going rate" that health care providers in your area charge.

A "usual fee" is the amount regularly charged for a specific procedure. A "customary fee" is a fee that falls within the range of fees that most doctors in the area charge. And a "reasonable fee" is one that is justifiable considering extraordinary circumstances or unusual conditions involved, such as a very difficult procedure.

Let's say, for instance, that you're billed $500 for a treatment by your doctor. When your health plan gets your claim, it will determine what the usual, customary, and reasonable charge is for that service. If it says the UCR is only $450 and reimburses your doctor that much, your doctor's office might bill you for the difference.

One thing you can try to do is ask your health care providers whether they will accept your health plan's UCR charges before you have the treatment. In many cases, they will agree (not always, though). Or find a provider who will.

If you receive a statement from your health plan provider stating a procedure was considered "unreasonable," it may be possible to appeal the ruling if your doctor can provide additional information to the health plan showing what was done and why the additional charge was required. Check with your employee benefits provider for the appeal process for your plan.

As for finding out what is considered UCR, you can try asking your health plan for a written explanation of how it has determined those rates. You can also try contacting insurance regulators in your state for help. If they don't have the information themselves, they can point you to someone who can help you. Unfortunately, it's the kind of data that may not be readily available, since each company has its own method of determining UCR.

Your health plan might use a slight variation of the usual, customary, and reasonable charges practice, such as "usual and customary" or simply "reasonable." Check your membership agreement to see how your plan works.

In general, managed care plans, such as HMOs and preferred provider organizations (PPOs), do not follow UCR procedures because their contracted health care providers have agreed to predetermined fees. In fact, many states prohibit doctors and other health care providers from "balance billing" patients — billing them for the difference between the doctor's usual charge and the negotiated fee the health plan actually pays. (Some states also refer to this as a "hold harmless" law.)

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