Debunking 'Usual and Customary'

As both a practitioner and consumer of health care services, I have always found insurers' concept of UCR-"usual, customary and reasonable"-to be one that defies logic. Even the most astute reader of fine print will not find out what UCR means in an individual policy, except possibly as a phrase appearing in the glossary.

The main problem with UCR reimbursement rates is the secrecy with which they are calculated.

Estimates suggest that around 70 percent of the nation's insured families are enrolled in health plans that allow visits to out-of-network providers. Patients typically assume that the insurer will pay a set percentage, usually 80 percent of the actual charge, if they are in an indemnity plan or go out of network.

In these cases, however, the insurer usually only pays the percentage of what the company determines is "usual, customary and reasonable." That UCR rate may be lower than the actual charge. If it is lower, the patient is obligated to pay the difference.

This "culture" of billing in health care is different from any other product-where else does someone buy a product or service and really have no idea what it will end up costing them?

Happily, thanks to New York Attorney General Andrew M. Cuomo, this "great black box" in the insurance industry is about to be opened. Cuomo announced in late October the creation of a new, national database to help determine how much insurance companies should reimburse patients who see out-of-network providers, including occupational therapists. The announcement is part of a settlement reached over the last year with more than a dozen insurance companies.

The settlement resulted from a class-action suit in which the plaintiffs contended that true reasonable and customary charges for certain procedures were substantially higher than insurance companies had been allowing. According to the New York Times, Cuomo's investigation found that the industry database's determination of "reasonable and customary" had been fostering unfairly low assessments of the actual prevailing fees (ww.nytimes.com/2009/10/28/business/28insure.html).

The result: for more than a decade, consumers were being shortchanged hundreds of millions of dollars. In large part this was because the existing database had been operated by Ingenix, which is owned by United Health/Oxford, a large insurance company. Exposing and putting a stop to this obvious conflict of interest will go a very long way to establishing fair pricing for services. Reimbursements to consumers will actually increase as a result "because the reimbursements were artificially deflated," said Cuomo. The settlement means that the insurance industry will stop using this current database as soon as a new one is created.

The new database will be created by a new, nonprofit company called FAIR Health (derived from Fair and Independent Research). Syracuse University will lead the research network along with SUNY Buffalo, Cornell University, the University of Rochester and SUNY Upstate Medical University. This network hopes to establish fair pricing by determining how much insurance companies should reimburse for "reasonable and customary" rates.

The goal is also to increase the amount of information available to consumers regarding how much their own providers charge for services and compare it with information from other local providers. Consumers will soon be able to check a Web site to see what an insurer is likely to pay before they choose to see an out-of-network provider. As part of the settlement, the insurance industry will have to pay about $100 million to help finance the new company, but will have absolutely no input in how FAIR Health is run or the recommendations it makes.

Nancy-Ann DeParle, director of the White House Office of Health Reform, told the New York Times, "This is an important step forward for consumers, who too often are unable to penetrate the secrecy and bureaucracy of insurance companies." This is also a first step toward stopping insurers' "de-valuing" of medical services.

Iris Kimberg, MS PT, OTR, has worked in the non-clinical aspect of therapy for the past 30 years. She is the founder of New York Therapy Guide (www.nytherapyguide.com). Iris now enjoys sharing her expertise field through workshops, seminars and private consultations. She can be reached at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .