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 quot;usualquot; fee is the fee that an individual physician most frequently charges for a specific
A quot;customaryquot; 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 quot;reasonablequot; 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
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UCR rates may be outdated.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
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.