Usual, Customary & Reasonable Fees

Are Sometimes out of the Ordinary

Have you ever submitted a claim to your insurance company for medical treatment, only to receive a letter from them stating the charge submitted was in excess of their usual, customary and reasonable fees? If so you're not alone

What is a UCR fee?

Insurance companies establish UCR fees. Here's how they do it.

A "usual" fee is the fee that an individual physician most frequently charges for a specific medical procedure.

A "customary" fee is the fee level determined by the administrator of a medical benefit plan from actual fees submitted for a specific medical procedure.  This fee establishes the maximum benefit payable for that procedure.

A "reasonable" fee is the fee charged by a physician for a specific medical procedure that has been modified by complications or unusual circumstances.

Therefore, it may differ from the physician's usual fee or the benefit administrator's customary fee.

The concept of using UCR fees to determine how much to reimburse patients covered by medical insurance for specific treatment was introduced by the insurance industry in the early 1960s.

How are UCR fees determined?

UCR fees are influenced by the fees physicians charge in various geographic areas and by the population size. Usually, heavily populated areas, where the cost of living is higher, have higher medical fees.

The Health Insurance Association of America (HIAA), an organization of 380 health insurance companies, surveys physicians every six months on their fees. The fee survey helps insurance companies set UCR fees.

However, insurance companies are not legally required to use HIAA's fee survey or anyone else's information when setting UCR benefit

levels.  In fact, reimbursement calculations by insurance companies are unregulated and uncontrolled.

How about UCR fees that don't cover all costs?

UCR rates may be outdated.  Despite HIAA's attempts to update fee data to keep up with changing information. It may take up to two years for physicians to return HIAA's fee surveys, for HIAA to complete the data, and for member insurance companies and subscribers to receive it.

Geographic differences may not be fairly taken into account when insurance companies set UCR rates. While boundaries are commonly set according to zip code, insurance companies are free to create boundaries as they choose. They may split a state in half or lump several small communities together to determine one boundary.  If a large city and a small town are considered to be within the same boundary, large discrepancies in fees would exist.

UCR fees widely vary among carriers.  The Washington State Dental Association conducted a survey of 41 carriers on how they determine UCR fees; 28 responded. The data indicated that no two carriers use the same UCR definition. Carriers use different methods and different time frames to determine UCR rates. Customary fee determination made by carriers for the same procedure in the same city at the same time differed by as much as 136 percent.

What accounts for the difference in physicians' fees and UCR rates?

In addition to the limitations of UCR fees, any difference between the fee charged and the benefit paid is due to limitations in the patient's medical benefit contract.