The use of reasonable and customary charges isn't found in all insurance plans. Instead, these charges are generally applied to fee-for-service plans as well as out-of-network visits in PPO and POS plans.
In fee-for-service plans, or indemnity insurance plans, you have the freedom to pick which doctors or hospitals you want to use, but the insurance company only pays a certain percentage of the bill. In these plans, the insurance company will usually pay 80 percent of the reasonable and customary charge of your medical service. Therefore, you're required to pay the additional 20 percent of these charges. This amount is known as coinsurance. However, if there's a discrepancy between what your provider charges and what your insurance plan is willing to pay, then you'll be responsible for even more of the bill.
For example, if your doctor charges $125 for which the insurance company's reasonable and customary charge is $100, the insurance company will only pay 80 percent of the $100, or $80. Thus, you will be responsible for the remaining 20 percent of the bill in addition to the balance above the customary charge, or $45 total in this example.
In point of service (POS) and preferred provider organization (PPO) plans, reasonable and customary charges don't influence your bill if you stay within the plan's network. When staying in network you're often only responsible for a co-pay. And depending on the service, a deductible. Otherwise, the insurance company agrees to pay 100 percent of the provider's bill. The insurance company is willing to do this because when a provider is in an insurance company's network, he or she has agreed to set fees for a given service. Therefore, an insurance company knows what your service will cost and eliminates the need to apply reasonable and customary charges.
However, once you go out of an insurance company's network, this arrangement is canceled. Therefore, in order to avoid paying high fees and to keep their overall costs in order, insurance plans will apply reasonable and customary charges to a given medical services you receive out-of-network. Normally, the percentage paid by the insurance company for an out-of-network fee is 80 percent of the reasonable and customary charge. In addition, before you can enjoy an out-of-network benefit, your deductible usually needs to be met, no matter what the service.
If you want to avoid getting stuck with an unreasonable or noncustomary charge, you may have to make a few calls, namely:
- Call your doctor. While insurance companies usually don't divulge the amount they consider customary or reasonable, physicians may not either. Before you agree to a treatment or service from your health care provider be sure to ask how much it's going to cost.
- Once you have the price your doctor charges for a given service, call your insurance company to find out if that's above what it's willing to pay for that service. Some companies, like United Healthcare, provide this type of information on their website, where customers can use what's called a treatment cost estimator tool.
- If you've called both the provider and insurance company and are still not satisfied with the answers, do a little research on your own. Get the appropriate medical name or, better yet, the diagnostic code for the service you're interested in, and start calling other providers in your community. If you're finding a large difference in the price between what your doctor quoted and what they're quoting, call your doctor back to see if you can negotiate a price closer to your insurance company's reasonable and customary charge. If however, you find that other doctors in your area are quoting similar prices, call the insurance company with these findings. Some insurance plans may be willing to adjust your bill.