A major medical policy pays covered charges based on the usual, customary, and reasonable (UCR) amount. A provider charges $500 for a service for which the UCR amount is $350. How is the $150 difference handled?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A policy that reimburses on a UCR basis limits the amount payable to the usual, customary, and reasonable charge for the service in the geographic area. The insurer pays its share, such as 80%, of the UCR amount after the deductible, and the insured is responsible for the remainder of the actual charge. If the provider bills more than the UCR amount, the insured owes the difference above UCR, which is called an excess charge or balance billing by a non-participating provider. This is why using in-network or participating providers matters: they agree to accept the approved amount as payment in full, eliminating the excess charge.
Why the other options are wrong
- B) The UCR clause caps the insurer's payment at $350; the insurer is not obligated to pay the provider's full $500 charge.
- C) The provider is not required to accept the UCR amount unless it has a contract with the insurer, such as a participating provider agreement.
- D) Medicare secondary payer rules relate to Medicare beneficiaries with other coverage and are irrelevant to a private UCR-based policy.
Memory hook
UCR puts a price cap on the bill; anything above the cap is the insured's excess charge.