Reasonable and Customary Charges

Example

“Dr. Smith charged $500 for the procedure, but the insurance company only paid $350 because that was the reasonable and customary charge for that treatment in the local area.”

Memory Tip

Remember 'R&C = Right and Common' - the right price that's commonly charged in your area.

Why It Matters

Understanding reasonable and customary charges helps patients avoid surprise medical bills and choose cost-effective healthcare providers. It also explains why going out-of-network often results in higher out-of-pocket costs, as patients may be responsible for charges above the R&C amount.

Common Misconception

Many patients believe their insurance will pay whatever amount their doctor charges, especially if the treatment is covered. In reality, insurance companies typically only pay up to the reasonable and customary amount, leaving patients responsible for any excess charges, particularly with out-of-network providers.

In Practice

Susan needs an MRI that her out-of-network radiologist charges $2,000 for. Her insurance company determines the reasonable and customary charge for MRIs in her area is $1,200. With her 80% coinsurance, the insurance pays $960 (80% of $1,200), not $1,600 (80% of $2,000). Susan owes $240 as her 20% share plus the additional $800 above the reasonable and customary amount, totaling $1,040 out-of-pocket.

Etymology

The phrase evolved from legal concepts of 'reasonable' compensation and 'customary' practices, establishing standards based on what is both fair and typical in a given market.

Common Misspellings

Related Terms

More in insurance

Other insurance terms you should know

See Also