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Usual and Customary Fee's

If you have any type of Indemnity/traditonal policy you have probably heard the words usual and customary after submitting a claim. Medequote feels it is very important for you to understand the term usual and customary when purchasing an Illinois health insurance plan. If you have ever had a claim payment reduced due to Usual and Customary provisions, you know this can be an unwelcome surprise. Most, if not all, insurance companies pay claims based upon the Usual and Customary fee allowance (also called Reasonable and Customary fee or Usual and Customary and Reasonable fee). The information listed below explains Usual and Customary Fees and how you can appeal unsatisfactory claim settlements.

What are Usual and Customary Fees?

The Usual and Customary fee is defined as the charge for health care that is consistent with the average rate or charge for identical or similar services in a certain geographical area. To determine the Usual and Customary fee for a specific medical procedure or service in a given geographic area, insurers often analyze statistics from a national study of fees charged by medical providers, such as the data base profile set up by the Health Insurance Association of America (HIAA). Some insurers compile their own data using their own claim information. The insurers use these statistics to chart a range of fees for each geographical area in which services are provided. Then, when you submit your claim for a specific treatment or procedure, the insurer pays all or part of the claim, depending on whether the amount of the claim is within the Usual and Customary allowance.

For example, an insurer may determine that it will pay Usual and Customary fees falling below the 80^th percentile of the fee range. If you have a tonsillectomy in Bloomington, Illinois and your medical provider charges a fee for a tonsillectomy that is higher than what 80% of the providers charge in that region (according to the insurer's usual and customary fee schedule), the plan will exclude coverage for the amount over the 80^th percentile and that amount will be your responsibility. If your provider charges a fee that is below what 80% of the providers in the region charge for a tonsillectomy (according to the company's usual and customary fee schedule), your claim will not be reduced. Remember, your coinsurance amount is calculated after the Usual and Customary fee is determined. Therefore, if your policy pays 80% for the tonsillectomy, the benefit will be 80% of the usual and customary fee, which is calculated at the 80^th percentile in our example.

When an insurer disallows a portion of a charge as being in excess of the Usual and Customary allowance, it means only that the charge is in excess of the standard the company used to determine Usual and Customary. Providers are free to charge whatever fee for service they choose. Your insurance coverage is designed to provide benefits up to the plan's Usual and Customary percentile and is priced accordingly.

How are Usual and Customary Fees Regulated?

Currently in Illinois, there are no laws or rules regulating the compilation and use of Usual and Customary fee schedules. Insurers are allowed to develop their Usual and Customary fee schedules and determine the percentile upon which they are going to process claims. Your policy should contain a definition of Usual and Customary and explain how claims will be paid. However, policies seldom tell you the percentile of Usual and Customary upon which your claims will be calculated.

How To Appeal a U & C Reduction

If you receive a reduction on a claim due to Usual and Customary provisions within the policy, you may appeal the determination. Insurers are aware that fees charged by providers are affected by such factors as medical complications and underlying medical factors that may not be apparent by looking at the claim. To appeal a Usual and Customary determination, you should ask the treating provider to write a letter to the insurer explaining any extenuating circumstances or medical complications, as well as provide all pertinent medical records and operative reports. Many times an insurer will adjust the benefit after receiving additional information that justifies the higher charge.

You may also wish to contact other providers in your geographic area and ask what they charge for the procedure in question. If the fee charged by your provider is equal to or less than what other area providers charge, the company may review that information and make a favorable adjustment, depending upon the percentile they use for Usual and Customary fee determinations.

You may also contact the Division of Insurance for assistance. Although they cannot require a company to pay additional benefits, they can request that they review the claim and give it their full consideration.

Give us a call at 800-391-7469 if we can be of any assistance.