Define: "Reasonable and Customary Fee"
The average fee charged by a particular type of health care practitioner within a geographic area.
"The fee charged for a certain specified procedure by a particular type of health care provider practicing within a specified geographic area. Insurance companies often use "reasonable & customary fee" to define the amount they will cover for a particular procedure. If your doctor charges more than the "reasonable & customary fee" you may be responsible for paying the additional amount out of your own pocket."
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 80th 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 80th 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 80th percentile in our example.
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