If you’ve ever been surprised by a medical bill, you’re not alone. Sometimes that surprise happens because your insurance company didn’t cover some or all of what your doctor charged for a medical procedure because it didn’t meet their “UCR,” or “usual, customary, and reasonable” rate.
Insurance companies use the UCR method to decide how much they will pay for an out-of-network medical service based on what a majority of other doctors in a geographic area charge. If your doctor bills above the insurance company’s UCR rate, they may not agree to cover it all, charging you a UCR fee to pay the rest.
If you use an in-network provider, and you have a managed care plan like an HMO, PPO, or POS, you don’t really have to worry about UCR fees. That’s because those providers have already negotiated with your insurance company and agreed to accept the UCR rate as their full payment. Sometimes, though, you may need to use an out-of-network provider, or you may have an indemnity plan (which is rare). That’s why it’s good to know how UCR fees work and how to avoid them if you can.
What does UCR stand for?
UCR stands for usual, customary, and reasonable, and it defines how insurance companies decide if what a medical provider charges for a procedure is equal to or less than the maximum amount they think should be charged.
Here is how insurance companies define the usual, customary, and reasonable criteria:
Usual: A charge is considered usual if it matches what an individual medical provider typically has charged patients in the past for the same or similar procedures or services.
Customary: A charge is customary if it’s within a range of fees that most other medical providers in a geographic area charge for the same or similar procedures or services.
Reasonable: A charge is considered reasonable if it meets both the usual and customary criteria or if it’s a special circumstance. That might include a rare or very difficult procedure.
What does Usual, Customary, and Reasonable mean?
How insurance companies come up with their UCR charges can be a bit of a mystery, but most set their UCR charges at the 80th percentile. That means that 80% of the medical providers in a given area charged equal to or less than the insurance company’s UCR rate.
Here’s how it works when it comes to how much they cover. Let’s say you tear your meniscus while jogging and you have surgery to repair it. You use an out-of-network surgeon who bills $6,000 for the procedure. But your insurance company’s UCR charge for that procedure is $5,000. If your insurance company typically pays 80% of your medical expenses before you meet your deductible, they would cover 80% of your bill up to $5,000. They would not cover the $1,000 above their UCR rate, which means you may need to pay the $1,000 UCR fee, in addition to your 20% coinsurance of the $5,000 UCR rate.
In many cases, insurance companies don’t count the money you pay above a UCR rate toward your deductible or out-of-pocket maximum. This means, if you regularly use out-of-network doctors, you could wind up paying a hefty amount in medical bills.
The good news is that most insurance plans, such as HMOs or PPOs, come with a large network of providers, including doctors, hospitals, labs, and therapists. If you stay in that network, you won’t pay a UCR fee.
Medicare has its own version of UCR rates known as Medicare allowable charges. Any provider who agrees to participate in Medicare also agrees to accept the Medicare allowable charge rate as their full payment from the insurer. But some doctors who are non-participating providers can turn around and bill you for the difference. To help prevent that from happening, ask doctors if they accept Medicare assignment, which means they won’t ask you to pay the balance of a bill. You will, however, still have to pay your deductible and coinsurance.
Some Medigap, or Medicare supplemental plans, may also help pay for excess physicians charges.
What is considered a UCR fee?
There aren’t very many regulations that determine how insurance companies decide their usual, customary, and reasonable rates. Many use their own data to determine what local doctors are charging for procedures. Legally, though, insurance companies must tell you how they came up with a rate if you ask.
There are some basic rules, though, that insurance companies follow to decide if a charge is usual, customary, and reasonable. The charge is consistent with what the medical provider has charged in the past (usual), it fits the range that other area doctors are charging (customary), and it either meets both the usual and customary criteria or it’s a special circumstance (reasonable). If the insurance company thinks your medical provider’s charge doesn’t meet that criteria, they will only agree to pay the UCR rate, and you could have to pay the rest, which is the UCR fee.
Can you avoid paying UCR fees?
The best way to avoid paying UCR fees is to use in-network providers. Sometimes, though, that’s unavoidable. If you know in advance that you’ll be using an out-of-network provider, ask the doctor how much they will bill for the procedure or service. Then ask your insurance company what their UCR charge is for that procedure. You may be able to get your doctor to agree to accept the insurance’s UCR charge as payment in full.
You also may be able to get your insurance company to pay more than the UCR rate if the doctor writes a letter explaining why they had to charge more for a certain procedure. It’s also possible your insurance company may agree to adjust your bill post-procedure if you can show that multiple other doctors in the area charge a similar amount to what your doctor billed.
Do UCR fees apply to prescription drugs?
Fortunately, when it comes to prescription drugs, it’s not common to have to worry about UCR fees. That’s because the UCR charge for prescription drugs is the amount someone without insurance would pay for a drug. This is also referred to as the “cash price.”
The good news is that SingleCare can help you save on your prescriptions—no matter your insurance status. We believe everyone should be able to afford their medications. Start searching for your drugs on singlecare.com. You could save up to 80%.