Usual Customary and Reasonable (UCR)
What Is Usual Customary and Reasonable (UCR)?
Usual, customary, and reasonable is how the insurance companies determine health care prices and your out-of-pocket expenses after insurance if needed. Wilbur Cohen added usual customary and reasonable costs (UCR) to the Social Security Act of 1965, with the idea to keep prices in competition and regulate healthcare. These reasonable charges vary by location and service, so if you change your address, policies, or insurance companies, your covered costs can change too. Since each company has their own rules and regulations regarding customary and reasonable fees, it’s unknown how often they update or alter their lists to coincide with cost of living or inflation.
Insurance companies monitor the average fees for doctors, medical services, and general healthcare related services in each area to determine what they’ll consider a reasonable charge. When your claim comes in, they use your local data to define reasonable charges. If they determine your services exceed the reasonable fees for the area, they might pass the additional cost to you. It’s a good practice for you to read your policy to determine when you might incur additional fees, ask your provider questions, and ask your doctor’s office for a list of fees.
Usual customary and reasonable charges can also apply to prescriptions. The published rates are what uninsured patients pay at the pharmacy and for what pharmacies bill the insurance companies. While a pharmacy can provide you with prescriptions beneath the outlined cost, your insurance company won’t pay more than what they determined reasonable fees for medications.
- Actual Charges—the amount your physician charges you for a service
- UCR Charges—the amount your insurance will pay for a service
- Copayment—the amount you pay at the doctor’s office
- Coinsurance—a percentage you are required to pay, if applicable, for a service.
Standard Doctor’s Visit
Your doctor charges $250.00 for a visit. The usual customary and reasonable fee covers $200.00 of the bill. You have a $20 co-pay. Your total due is another $30.00. How did this happen? The doctor charged more than what the insurance company deemed usual common and reasonable for your area and you are responsible for the extra cost.
Out-of-Network Visit Example
One example is if you treat with an out-of-network doctor. You should also make sure your policy covers or reimburses for out-of-network too. The insurance company might not cover 100% of the costs—regardless of usual customary and reasonable charges—or they may cover $0 depending on your policy. This example uses a 60/40 insurance plan.
- Out-of-network doctor’s fees $1,000
- UCR $400.00
- 60% paid by your insurance company ($240.00)
- 40% paid by you ($160.00)
- $600.00 remains on the bill’s balance and the responsibility is yours.
You will have paid $760.00 to see an out-of-network doctor.
You could avoid additional fees by using an in-network doctor instead. In some cases, an insurance company will cover more for an out-of-network visit or treatment if no in-network doctor is available to you for that particular service. It is still your responsibility to receive preauthorization and pay any differences.
Insurance companies also use UCR when determining the classification of certain medicines and their allotted copay. This is why you might pay a higher copay for some medications than others, such as a name brand vs. generic drug. If you’re using an out-of-network pharmacy, or out of state, you might be required to pay more too because the fees are based on where the services take place and what the policy covers is based on where you live.
How to Find Usual Customary And Reasonable Rates
Few insurance companies list what falls under their reasonable charges online. The same goes for doctors, hospitals, and other medical service providers. The easiest way is to call your insurance company and simply ask.
Doing the research yourself is the best way to find out whether you will be paying extra. Start by calling your doctor and asking for their rates. Be sure to ask about any tests and ask for the appropriate billing codes. The more specific you can be, the better the odds of having no surprises. Once you have your list, call your insurance provider and ask about the reasonable charges for each service. Compare the numbers. If the usual and reasonable fees paid won’t fully cover your visit, call other doctor’s offices to see their rates. If they’re charging less than your doctor’s office, bring it to their attention and they might lower their fees.
If you do find yourself having to pay more than you originally determined, remember that insurance companies do have appeal processes.