Usual, Customary and Reasonable (UCR)
Reimbursement Rates
Background
The phrase “usual, customary, and reasonable” (UCR) refers to the base amount that third-party payers (including insurance carriers and employers) generally use to determine how much will be paid, on behalf of an enrollee, for services that are reimbursed under a health insurance policy or health plan. Generally, payment for health care services is based on UCR rates: most coverage is only a percentage of what is determined to be UCR and therefore what is approved under the terms of the contract. For example, if the plan covers 80 percent of UCR charges and the enrollee is responsible for the remaining 20 percent, the plan will actually pay 80 percent or less of what is charged by the provider. As a result, the enrollee will be responsible both for the remaining 20 percent and for the difference between what is charged by the provider and what the plan considers UCR.
The main issues with UCR reimbursement rates are how they are calculated and how they are disclosed. ERISA (the federal Employee Retirement Income Security Act) does not disallow the use of UCR rates, nor does it regulate how UCR rates are determined. However, according to ERISA, plan enrollees who wish to appeal reimbursements that are based on what the plan considers usual, customary, and reasonable have a right to be given the information that can be used to determine how the UCR was derived and that the charge was in excess of UCR.
The U.S. Department of Labor (DOL) Advisory Opinion 96-14A discusses disclosure of UCR schedules. Despite the position of many plans that information related to the calculation of usual and customary rates is proprietary, this Advisory Opinion states otherwise. According to the Opinion, “…studies, schedules or similar documents that contain information and data, such as information and data relating to standard charges for specific medical or surgical procedures, that, in turn, serve as the basis for determining or calculating a participant's or beneficiary's benefit entitlements under an employee benefit plan would constitute ‘instruments under which the plan is...operated.’ Thus, it appears that the schedule of ‘usual and customary’…would be required to be disclosed to participants and beneficiaries in accordance with section 104(b)(2) and 104(b)(4) of ERISA.”
In addition, the claims procedure rules under ERISA in Section 2560.503-1(g)(1)(v)(A) state that when a plan uses a specific internal rule or protocol, this must be disclosed in the explanation of benefits (EOB) and must be provided free of charge if requested.
Related Information
FAIR Health Inc. has two websites where consumer advocates and consumers can learn the usual and customary charges for medical procedures in their area, as well as how much Medicare pays for those services. The organization was established in 2009 as part of the settlement of an investigation by New York State regarding the health insurance industry's methods for determining out-of-network reimbursement. It was alleged that insurers created a conflict of interest when they determined "usual, customary, and reasonable" (UCR) charges for out-of-network services based on data controlled by the industry, in this case, a database operated by Ingenix, Inc., a subsidiary of UnitedHealth Group. The settlement agreements required insurers to help fund a new transparent, independent, nonprofit-owned and operated database. FAIR Health was formed to take over and improve the database and to improve its transparency, objectivity, and reliability.
An article summarizing the case Medical Association of Georgia v. Blue Cross & Blue Shield of Georgia, Inc.
To see information about UCR charges from the health insurance industry side, see the links below:
Ingenix is a data management company that offers cost management products, including UCR. The company is currently under scrutiny for setting inaccurate pricing data, which have then been used by insurance companies to underpay patients for out-of-network services. New York Attorney General Cuomo has recently reached settlement agreements with UnitedHealth, Aetna, and MVP Health Care, who used the Ingenix database to determine out-of-network reimbursement rates. The settlement agreement requires these companies to provide money toward establishing a new transparent, independent, nonprofit-owned and operated database. More information about these settlements and the new database can be found here.
America’s Health Insurance Plans (AHIP) is the national association that represents more than 1,000 member health insurance companies. Their Web site allows users to search for companies that provide claims cost management services.
Insure.com, a Web site with links to more than 200 insurance companies, has a link to the article “Sickened by Doctor Bills? How to Haggle for a Lower Price.”
Medical Review Institute of America, Inc. is a company that provides, among other services, fee quotes for medical and dental procedures, for medical supplies, and for outpatient facility charges (through its National Fee Data/Phone Fee Service).
