What does "Usual & Customary" mean?

February 12, 2025

By Martine G. Brousse (not AI!)

"The Medical Bill Whisperer"™

Patient Advocate, Certified Mediator

AdvimedPro

“Usual & Customary” is a common term used in Healthcare. What does it mean exactly? How is it calculated and how can you save money from it? Let’s explore.

A. Definition and Meaning

1. Definition: It is the equivalent of “Reasonable & Customary”, and shows up as “allowed amount” or “allowance” on your Explanations Of Benefits ("EOB")

2. Meaning: It is the $ value that your insurance plan gives to every service or item rendered to you by a medical provider

3. When a Plan provides benefits, the reasonable cash value of each service rendered will be deemed to be both an “Allowable Expense” and a benefit paid.

B. How is it calculated?

1. In Network providers/services:

· This is easy: the “U&C / allowance” is the fee agreed upon by contract between a medical provider and the insurance plan.

· The “U&C / allowance” is considered “payment in full” by both provider and insurance, and serves as the beginning number to figure out insurance payment and member liability.

· The difference between the amount billed by the provider and the “U&C / allowance” is a discount to you, and a write off for the provider.

2. Out of Network providers/services:

· “U&C / allowance” becomes the amount that the insurance plan either deems to be the “fair value” of the service, or what legal mandates force it to consider “fair value”

· any amount over the “allowance” or “Usual & Customary” value is the patient’s financial responsibility. There is no discount.

· the “U&C / allowance” fair value is usually established by insurance plans as a number calculated by the plan’s actuaries, or a % of the amount billed, or a portion of what the In Network allowance would be. It can also can be based on the Medicare fee schedule and even another insurance network’s fee schedule.

· Special authorizations or one-time financial agreements between plan and a provider can change the “U&C / allowance” on a one-time exception basis

· Legal mandates such as the No Surprise Act force insurance companies to calculate Out of Network “U&C / allowances” based on In Network rates for: Emergency services, OON services rendered at In Network facilities and Air ambulance trips

· Terms of Policy may force a higher “U&C / allowance” under specific circumstances including delayed or denied Access to Care or Continuation Of Care, as we’ll see below.

C. Look at your Explanations Of Benefits (“EOBs”)

1. In Network EOBs will list:

· The provider’s status as “in network” or “participating”

· The EOB should show a “discount” if the billed amount exceeds the “U&C / allowance” value

· There should be $ 0.00 listed as “not covered” or “not a covered benefit”.

2. OON Network EOBs will list:

· The provider’s status as “out of network” or “non-participating”

· The EOB should show NO “discount" if the billed amount exceeds the “U&C / allowance” value

· There will be $ listed as “not covered” or “disallowed”. This is your liability, and reflects the portion of the bill that your insurance will not cover at all.

· There should be $ 0.00 listed as “not covered” or “not a covered benefit”.

D. What to know…and do

1. The bad news is that members have NO control or authority over “U&C / allowance” values, whether per contract, legal mandate or not2. The other bad news is that OON services always cost more: “U&C / allowance” + lower insurance reimbursements = higher patient liability.

3. However, the No Surprise Act forces OON services to be paid at the higher In Network “U&C / allowance”

4. The No Surprise Act also forces OON providers to accept the In Network “U&C / allowance” as payment in full, even if there is no contract in place

5. Special circumstances can force OON services to be paid at the higher In Network “U&C / allowance”:

There are no available, competent, trained, experienced In Network providers.
Continuation Of Care applies: it is your Right as a patient to continue ongoing treatment/service, with the same medical provider, under the same terms of coverage and payment, when that provider’s status changes from In to Out of Network under a new plan, or through cancellation of contract
Denied or delayed Access to Care: your Patient’s Right to timely access to medical care, regardless of medical need, location, circumstance or network limitations, as set by State or Federal standards.

6. If your EOB shows a processing error or failure to abide by legal mandates or terms of policy, or if your OON provider fails to give you a written cost estimate and notification of no-contract status, you may be able to file an appeal to force additional payment from your insurance, or get a rebate from the office.

Martine Brousse was a long-time Billing Manager for Physicians before switching to the side of patients in 2013. The move has allowed her to apply her deep expertise and vast experience of the intricacies of resolving all types of medical bill and claim payment issues in ways that directly and positively impact her clientsʻ finances.