You call your insurance company to ask about your dental benefits. The representative at XYZ Insurance Company tells you that your insurance pays at 100% of usual and customary rates for preventive services. “Great,” you think to yourself, and happily schedule an examination and cleaning with your dental office. Six weeks after your services, you receive a small bill from your dentist. Your insurance company said they would pay at 100%. Why are you getting a bill?
Well, the answer lies in explaining what “usual and customary rates” means. The term usual and customary rate, or UCR, refers to the dollar amount set by your insurance carrier as reasonable for a service. This may also be referred to as the “allowed amount” or “reasonable and customary” amount. There are numerous names for what essentially is the insurance company’s allowed fee schedule.
Let me give you an example of how an insurance carrier’s usual and customary rates could lead to a balance from your dentist that you didn’t expect. Let us say your provider charges $100.00 for a routine prophylaxis (cleaning) and your insurance company has a usual and customary rate of $95.00 for that service, and covers at 100% of the UCR. After your policy pays at 100% of their UCR, you are going to be left with a $5.00 balance. Why? Because they only allow $95.00 for that service, and paid at 100% of that amount – not the doctor’s charge.
How about another example with a more costly service. To make numbers simple, let’s suppose your dentist recommends it is time for an onlay to replace an existing filling. You are advised by your dental office that the onlay will cost $1000.00. Your insurance company informs you that they will pay at 50% of usual and customary rates for the service. You might expect that since you were advised of 50% coverage for an onlay, it would result in $500.00 out of pocket on your part. But, let us also pretend your insurance has set an allowed amount of $900.00 for an onlay. This means that the dental insurance will pay at 50% of $900.00, resulting in a payment from insurance of $450.00, and an out of pocket due from you of $550.00. Your insurance will only pay at 50% of their usual and customary rate, which differs from what the doctor’s actual charge for the onlay.
If your doctor is contracted with your insurance plan, usual and customary rates will not negatively affect you. A doctor who is “in network” with your insurance has a contracted set of fees with your carrier, and any charge that goes above that contracted amount is adjusted by the provider. So, if you were seeing a contracted provider in the example above insurance would pay $450.00 for the onlay, you would pay $450.00 for the onlay, and the doctor would write off $100.00 as the insurance contract states that the service can cost no more than $900.00.
If your dentist is not contracted with your insurance, don’t panic. I have seen thousands of claims over the years where the fee that a non-contracted doctor charged for a service was well within the insurance carrier’s usual and customary rate, meaning the patient gets the full benefit allowed by the plan. In most cases when a doctor’s charge is above the allowed amount, it’s not by a great margin. As long as your dental plan allows you to see a doctor out of the network, which most do, the fact that your doctor is not contracted with your plan will not make a significant difference in your out of pocket, in many cases.
The biggest difficulty for your dental provider, or more specifically the staff member who bills insurance, is knowing the UCR for the hundreds, if not thousands, of insurance plans they run across. If a doctor is not contracted with a plan, then the insurance company is typically not willing to share what their allowed amounts are for services. You might think that usual and customary rates are about the same from company to company, but that is not the case. I have even seen different allowed amounts for different insurance contracts under the same insurance carrier. I have never been able to determine a rhyme or reason to how each insurance company determines what they think is “reasonable” for a service. From the research I have done, it seems there is very little regulation in regard to how insurances set their usual and customary rates, and the methodology differs from company to company. Some insurance companies use statistics found in national studies of your geographic area, while others use data they have compiled themselves. No matter the method used, it is very useful to know your insurance policy UCR, but it may be difficult information to obtain.
At White Dental Studio we try our very best to estimate your insurance benefits as accurately as possible, but it is not a perfect science. We work with the information provided by your insurance, but cannot know what we are not told or given. Ultimately, insurance is billed by your dental provider as a courtesy, and it is the responsibility of the patient to know their benefits.
Usual and customary rates are a concept that is foreign to many. It’s often thrown out as a disclaimer when you contact your insurance company about benefits. But, it is sometimes ignored because, to those outside of the insurance or medical fields, the term doesn’t mean much. However, it is a very important concept to understand when it comes to estimating insurance coverage. Usual and customary rates, along with your yearly maximum (see my previous blog, Dental Insurance: Understanding Your Maximum), deductibles and frequency limitations are all important things to consider when budgeting for dental treatment. I hope this blog has been helpful in understanding the concept of usual and customary rates. Please continue to check back for more blogs to help you work through the world of dental insurance!
Written by: Erin Englehart, office manager at White Dental Studio in Ashland, OR
Other blogs written by Erin to check out:
Dental Insurance: Understanding Your Maximum
Should I Purchase Dental Insurance? The Answer Might Surprise You.