To be deemed reasonable and customary, a charge must be in line with the average charge of the same medical procedures throughout your specific medical community. This community includes physicians, hospitals, laboratories and other providers involved in your care.
Unlike most aspects of health insurance, there are very few regulations for insurance companies when determining what they consider reasonable or customary. In fact, only a few states even define what constitutes the terms "reasonable, usual and customary" and even fewer have regulations on the methodology used in determining these charges. Some insurance companies use statistics found in national studies of your geographic area in order to determine reasonable and customary charges. These studies include the fees charged by medical service providers such as doctors and hospitals. However, in some cases, insurance companies determine these charges using information compiled by themselves and regulated by no one.
No matter how they gather the information, insurance companies then chart the statistics from a given area in order to get an idea of an appropriate range for a fee for different services. A common determination of reasonable and customary charges is those charges that fall in the 80 percent range of all providers in a given area. For example, if your doctor charges a fee for a procedure that's above the charge of 80 percent of the providers in that region, then you'll pay the difference between your doctor's bill and the amount the insurance company is willing to pay.
And while a definition of the terms may be easily found in your policy, the actual method of determining a reasonable and customary charge, along with the percentage of this charge they will pay, is usually not included. Legally, insurance companies must tell you how they determine the charges and how much is charged for a given service. While it varies by state, many states require the insurance companies to comply with this request within 30 days. Some good questions to ask your insurance company are how often they update their reasonable and customary charges, the exact geographic area included in determining your charges, and a general description of how these charges are determined.