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Ask The Insurance Decoder

Lynne Lucio

By Lynne Lucio

Q.  My insurance company pays my medical charges based on something called reasonable and customary rates.  What are they and how are these rates determined?—Maribeth K., Camarillo, CA

A. Understanding reasonable and customary rates are confusing—even the acronyms are perplexing—so we’ll start with those.  Reasonable and customary is generally referred to in the industry, as R&C or U&C (for usual & customary) and UC&R (for usual, customary and reasonable) and they all basically mean the same thing.  To find the maximum amount eligible for payment most health insurance companies use rates supplied by companies that perform independent surveys.  The annual surveys are conducted to determine procedure code charges based on the provider’s zip code.  In some cases, large insurance carriers may determine UC&R rates based on the volume of statistical information they hold in their own databases.  Because the surveys are geographical in nature, the UC&R varies from area to area.  For example, setting a broken leg costs more in New York City than it does in a little town in the Midwest.   Insurance companies use rates linked to a specific zip code to determine how much they will pay for a particular procedure.  Then, insurance companies generally pay claims at a certain percentage of the UC&R.  As a rule, the 80th or 90th percentile is used to calculate how much will be paid—the process works something like this.  If 10% of physicians within a specific geographical area charge more than $90 for a particular procedure and 90% of the physicians charge $90 or less, the maximum covered amount would be $90 for the procedure, which is the “eligible” amount.   Then the percentile that the insurance company uses for payment is calculated and subtracted from the allowable—the remaining amount becomes the payable amount.   Depending on the type of plan an individual has, amounts over the insurance company’s allowable may be the patient’s responsibility.

ASK The Insurance Decoder © Copyright 2012, Lynne Lucio.  All rights reserved.

Lynne Lucio, the author of The Insurance Decoder:  How to Maximize Your Health Insurance Benefits, Minimize Out-Of-Pocket Expenses and Stay One step Ahead of Your Insurance Company, has been a health insurance professional for over 20 years.  As an insurance insider, Lynne learned how to decipher the medical claims labyrinth and developed the specific and practical knowledge of the claims process.  Throughout her career, Lynne has shared her expertise with thousands of insured consumers, helping them resolve complicated health claims while showing them how to take full advantage of their health insurance benefits.  The depth and breadth of Lynne’s knowledge of the topic encompasses not only the claims process but also the laws that influence and regulate health coverage, including ERISA, COBRA, FMLA, USERRA, HIPAA and others.  Lynne provides consulting services to covered individuals and writes about health insurance issues on (  For more information, or to submit your own health insurance related questions, contact Lynne at  Your question may be answered in a future column.

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