Why Do Insurance Companies Use a UCR Fee Structure to Pay Claims?

How It Is Determined

• Usual and customary rates are determined by averaging the fees charged by a cross section of physicians in the same geographic location for a particular procedure. This average is then set as the maximum rate your carrier will pay for that procedure in your area.
  
  

Why It Is Used

• Physicians who participate in either preferred provider organizations (PPOs) or health maintenance organizations (HMOs) agree to set fee schedules for their services in return for the carrier "steering" more patients toward their practice. They are also prohibited from balance-billing the patient for the discounted amount.
  
  Physicians who do not participate in either a PPO or HMO are free to charge and collect whatever they feel is appropriate for their services. To ensure that what those physicians are charging is commensurate with what their peers are charging for the same services, carriers use usual and customary rates to control health-care costs.
  
  

How It Is Used

• Carriers normally will reimburse a certain percentage of the maximum usual and customary rate, also known as a percentile. This can range as low as the 60th percentile (60 percent) to as high as the 90th percentile (90 percent). If your physician bills $150 for a procedure and your carrier determines that the maximum usual and customary rate is $100, the carrier might reimburse between $60 to $90 for that procedure.
  
  

What It Means For You

• Since your carrier may not cover the complete cost of the procedure billed by your physician due to the usual and customary calculation, your physician may choose to balance-bill you for the difference. This can mean paying more out of pocket for your health care.
  
  

What You Can Do

• The easiest was to avoid your claims being subject to usual and customary rates is to see a physician who participates in your carrier's PPO or HMO. If you do not wish to do this, you can call several physicians' offices to see if they will divulge their normal billing rate for the service you are to have done so you can comparison shop. Or you can contact your carrier to see if the carrier will divulge its usual and customary rate for the procedure so you can further comparison shop. This is proprietary information, and neither your physician nor your carrier is required to reveal it.