Usual, Customary, and Reasonable (UCR)

What is UCR?

UCR shows the average amount charged in your geographic area for a medical service based on the standard charge. Insurers sometimes use UCR data to determine the allowed amounts, also called negotiated rates. The term is particularly important when it comes to health insurance. UCR typically only applies to out-of-network prices.

If you’re going to an out-of-network provider, we recommend you call beforehand and ask what their prices are for the service you’re receiving, then compare that to your insurance UCR for the same. If you look around, you’ll likely be able to find a provider who charges at or less than the UCR rate.

How is this used?

Insurers use UCR to determine the allowed amount of a procedure or service. For instance, if a hospital charges significantly above the UCR for a particular service, the insurer might set the allowed amount at the UCR price point for more fair billing. This means that UCR plays a key role in the out-of-pocket costs for policyholders, since the bigger the gap between the charge and the UCR, the more the policyholder might be liable to pay.

Most insurers use the benchmark point of approximately the 80th percentile when calculating their UCR. That means that 80% of providers in the given geographical region charge less than or equal to the UCR.

FAQ

Why is it Usual, Customary, and Reasonable? Why not just one of the three?

Each word plays a specific role. Think of it as concentric circles: the innermost circle is the “usual,” which refers to the exact average price of a particular service. The middle ring is the “customary,” which refers to the range of prices. The outer ring is the “reasonable,” which refers to how far outside the customary pricing range a cost can be stretched before it becomes unjust. Put together, the insurer decides what a price is that falls best into all three categories.

What is the UCR fee?

Technically, there is no such thing as a UCR fee. However, when this phrase is used, the UCR fee refers to the surplus cost that you have to pay out-of-pocket when the provider charges more than the UCR, also known as balance billing.

Does UCR apply to prescription drugs?

UCR typically does not apply to prescription drugs.

Conclusion

We hope this article answered all of your UCR questions! At Fairdoc, we are here to inform you, assist you, and answer all your questions. If you have any inquiries for us, feel free to reach out, and stay tuned for future articles!