Reasonable and Customary Fees

It is common practice for medical insurance plans to pay benefits for the services of non-participating providers based on usual and customary allowances. The usual and customary allowance is determined based on a review of the claim data for a particular health service provided by peer physicians within a specific community or geographical area.  The collection and standardization of the information for usual and customary allowances is done by varying organizations such as CMS (Centers for Medicare and Medicaid Services) and Ingenix, both of which are widely used within the health care industry for all populations.  The University of Missouri medical programs (Choice, CAT, and RIM) use the data provided by CMS for all claims that require a usual and customary determination – the CMS standard is used both for the active and retiree employee population.  If the CMS usual and customary is not available for a particular service or treatment, then the amount payable will be 65% of billed charges.

How can I determine what my financial obligation will be for services?

You are responsible for paying the amount applied to your deductible, your coinsurance and the difference between what the doctor charges and the usual and customary allowances.  For non-network claims the usual and customary allowance is applied first, and then your deductible and coinsurance are applied. Therefore, in addition to your applicable deductible, coinsurance and/or co-payment, you are responsible for any amount above the usual and customer allowance for that particular service. Only the usual and customary allowances are applied to your deductible and out-of-pocket maximum.

Example #1 (assumes annual deductible has been satisfied): If your doctor charges $1500 for a certain procedure and your plan pays 80% of the U&C charges (which CMS determines to be $1000), then you would have to pay 20% of $1000 ($200), plus the $500 over the U&C for a total of $700.

For this example the participant pays:For this example the plan pays:
$500 (provider charged more than U&C allowance)
$200 (coinsurance) $800 (80% of U&C allowance)
$700  Total amount of pocket


Example #2
(assumes nothing previously applied toward annual deductible): If your doctor charges $1500 for a certain procedure and your plan pays 80% of the U&C charges (which CMS determines to be $1000), then you would have to satisfy your deductible ($250) and would be responsible for 20% of remaining charges after deductible $750  ($150), plus the $500 over the U&C for a total of $900.

For this example the participant pays:For this example the plan pays:
$500 (provider charged more than U&C allowance)
$250 (deductible)
$150 (20% coinsurance) $600 (80% of U&C allowance after deductible)
$900 Total amount of pocket


Example #3
(assumes deductible has been met and there is no CMS established U&C allowance): If your doctor charges $1500 for a certain procedure and there is no CMS established U&C allowance, then the total amount allowed by the plan would be $975 (65% of billed charges) and the plan would pays 80% of the allowed amount($780), then you would have to pay 20% of $975 ($195), plus the $525 over the allowed amount for a total of $720.

For this example the participant pays:For this example the plan pays:
$525 (amount above 65% of billed charges)
$195 (20% coinsurance) $780 (80% of amount allowed by the plan)
$720 Total amount of pocket

Reviewed 2012-04-13.