Usual and Customary

Usual and Customary (sometimes UCR — Usual, Customary, and Reasonable) is a methodology some health plans use to set the allowed amount for out-of-network services when there's no negotiated contract. The plan looks at what providers in a given geographic area typically charge for the service, picks a percentile (often the 60th, 70th, or 80th), and uses that as the allowed amount. Anything above it is the member's responsibility unless a law prevents balance billing.

The math frequently disadvantages the member. UCR databases have historically been built from provider-submitted charges, which trend upward year over year and vary wildly by facility type. A UCR at the 70th percentile might set the allowed amount at $1,400 for a service the provider billed at $4,000, leaving the member with $2,600 in balance-bill exposure. The FAIR Health database (a nonprofit created after a New York attorney general investigation into insurer-owned UCR databases) is now the most widely used independent source. The No Surprises Act replaced UCR with a "qualifying payment amount" tied to median in-network rates for many situations, but UCR still shows up on scheduled out-of-network care and in some state-regulated contexts.

The takeaway: if a plan uses UCR for out-of-network care, ask which database and which percentile in writing before assuming out-of-network coverage will protect you. The gap between UCR and billed charges is often larger than members expect.