Reasonable and Customary Reimbursement Limits

Dec 08, 2014

Most, if not all, group insurance plans contain “reasonable and customary” limits (R&C) to determine the range or maximum allowable amount eligible for certain health services and supplies. As such, further clarification and insight into R&C is worth noting as it may impact any out of pocket costs to the plan member.

In simplest terms, reasonable and customary refers to the maximum allowable amount that an insurance carrier will reimburse on a particular service or item. This amount usually reflects the typical fee and or cost associated with a particular service or product in a specific geographical region. The amount may differ from carrier to carrier and from year to year.

Reasonable and customary limits may apply to many components of the extended health and dental benefits, but they are often most noticeable in paramedical services (chiropractor, physiotherapist, massage therapist, etc) and prescription medication. On the paramedical front, many provider associations do publish a fee schedule or suggested fee schedule for their practitioners. However, practitioners are not held to these guidelines, and the charges may vary substantially. For example, if you are charged $100 per visit by an acupuncturist, and your plan’s reasonable and customary limit is $85, the reimbursed amount would be $85, less any deductibles or coinsurance. The remainder amount of $15 would be out of pocket. Therefore, the amount reimbursed does have the potential to be much less than the actual charges of the service.

For prescription drugs, the manufacturer’s list price is subject to the pharmacy’s “mark-up” and is at the insurance carrier’s discretion. The range in “mark-up” can be staggering depending on the province and the different pharmacies.

It may be a challenge for the plan member to know the reasonable and customary limits, as few insurance carriers post their allowable limits. These limits do change periodically and without notice. While many service providers and suppliers charge less than the reasonable and customary limits set by the insurance carriers, having the limits “off-the-record” or unpublished does allow for a more competitive environment on fees. To limit out of pocket costs, plan members should know how reimbursement levels are determined and to ask the right questions.

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