Reimbursement Basis

Example

“The health insurance policy uses usual and customary charges as its reimbursement basis, meaning it will pay what doctors typically charge in your area for similar procedures.”

Memory Tip

Remember 'BASIS = How they BASE what they pay you' - it's the foundation for calculating your payout.

Why It Matters

Understanding your policy's reimbursement basis helps you predict out-of-pocket costs and choose appropriate coverage limits. Different reimbursement methods can result in significantly different payouts for the same loss, affecting your financial recovery after a claim.

Common Misconception

People often assume insurance always pays the full amount of a bill or loss, but the reimbursement basis determines the actual payment. Many don't realize that 'usual and customary' basis might pay less than what their doctor actually charges, leaving them responsible for the difference.

In Practice

Dr. Smith charges $300 for an office visit, but the insurance company's reimbursement basis uses usual and customary rates of $200 for that area. With a 20% coinsurance, the insurance pays $160 (80% of $200), leaving the patient responsible for $140 ($40 coinsurance plus $100 above usual and customary). If the policy used actual charges as the reimbursement basis, the patient would only owe $60 (20% of $300).

Etymology

From 'reimburse,' derived from Latin 're-' (back) and 'imburse' (to put in a purse), literally meaning 'to put money back in the purse.' The term emerged in commercial insurance in the mid-19th century.

Common Misspellings

Related Terms

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See Also