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What does UCR in health insurance mean?

Daniel Walker
Licensed Insurance Agent for 15 Years

UPDATED: Mar 19, 2020

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The lowdown...
  • The widely accepted usage of UCR represents the usual, customary and reasonable standard.
  • The insurance industry uses UCR for setting insurance coverage for medical services.
  • UCR helps set uniform pricing for medical services.
  • UCR can help insurers determine the allowed amount for a claim.
  • Consumers that use their plan’s network providers usually pay no UCR fees.
Payers frequently use the UCR standard when making decisions on fair prices for medical services. The usual, customary, and reasonable price is the amount paid in a particular geographic area for a medical service, or a similar medical service.

This practice protects insurers and puts consumers at risk for unexpected costs. UCR is the main ingredient in setting the allowed costs on any claim. The allowed cost is the most a payer intends to pay for a given service.

Make sure to compare costs with our free insurance comparison tool above!

Insurance Cost Sharing

AdobeStock_56187535-1600x1600After reaching the deductible threshold, consumers expect to get cost sharing in the percentage agreed in the insurance contract. Many insured consumers get an unwanted surprise when they have to pay more than the expected percentage of coinsurance.

The cause of the unwanted payment may be the UCR fees. The paragraphs below describe the relationship between UCR, allowed costs, and consumer payments.

Actual Charge

Every service has an actual charge. The medical care or equipment provider states the amount it bills for the service or benefit. Each medical provider sets prices according to their business priorities. Typically, prices are sensitive to demand in a local area.

Allowed Amount

The allowed amount is a decision by the insurer as to the maximum it will pay for a service or benefit. Insurers base the allowed amount on many factors, but the main factor is the UCR for the time and geographic area. Once the insurer decides on the allowed amount, it will pay the cost sharing percentage up to the allowed amount.


AdobeStock_53254338-1600x1600The co-payment is a small standard fee that goes with a type of service. For example, an office visit has a typical $20 co-payment. The copay is not a percentage value of the service, it is a small charge that helps the insurer with profits, and tends to reduce unnecessary demands for a service.


Once past the deductible, the insured must pay part of the costs of each covered benefit until they reach the deductible maximum or the out-of-pocket limit. Coinsurance is a percentage that must be 40 percent or less for qualified health plans.

Allowed Amount

Insurers can set the maximum they will pay for a benefit, and this can be substantially less than charged to the customer’s account. The result is a balance for the consumer to pay despite having insurance coverage of the benefit. The unpaid balance comes on top of any coinsurance payments the customer must make.

Balance Billing

The advantage of using network providers include the absence of balance billing. Network or preferred providers do not use balance billing, rather, they accept the agreed or allowed amount for their services.

Defining Reasonable Fees

Insurance companies seek to avoid risks and reduce their costs. UCR fees contribute to lower costs. UCR fees put limits on insurance company exposure for cost sharing. Insurance payers consider a fee reasonable if it meets all of the below-listed criteria.

  • The fee is reasonable if, under the circumstances, it is for a medically necessary benefit or service.
  • In the geographic area, doctors usually charge a fee for the service.
  • In the geographic area, the fee falls in a range that doctors usually charge.

UCR and Allowed Amount

Dollarphotoclub_103413467 (1)-1600x1600 (4)Insurance companies survey fees charged by geographic area. These are the basic UCR fees. When presented a claim from a subscriber, the insurer considers the claim with reference to the UCR figures for the area and period. If the charge seems out of line with UCR, the insurer may deny the claim in part.

The insurer uses UCR to define an allowable cost. The allowable cost is the upper limit of the insurance company payment, and the customer will have to pay any remaining balance.

The Policy Guides the Process

The UCR fees depend on many factors, and the insurance policy outlines the circumstances. Consumers must be aware of the network factor because network distinctions mean a lot in UCR situations. Policies may deny all or part of the claims when subscribers use outside network providers. Using network providers may result in no UCR charges.

Policyholders also lose credit towards deductible and out-of-pocket limits when using outside medical service providers.

Using the EOB

The explanation of benefits or EOB is a document insurers provide to explain their action on each claim for payment. When the insurer denies or reduces the claimed amount, it explains the workings of the policy contract on the particular situation. The EOB is a valuable tool for consumers for the below-listed reasons.

  • The EOB reveals actual practices and can guide future dealings with the insurer.
  • The EOB provides guidance on interpreting the specific policy.
  • The EOB can also guide comparison shopping for coverage in future years.

UCR and Consumer Costs

AdobeStock_65469436-1600x1600UCR can define the framework for insurance company payments for the policyholder’s benefit. In a period of rapid price changes, the allowed costs can fall below the actual charges and consumers may get balance billings. The balance billings do not count as out-of-pocket costs for the purpose of the out-of-pocket limit.

Out-of-Network Spending

Some policies cover out-of-network billing; policies often pay a lower rate of cost sharing for out-of-network providers. HMO-type policies usually pay nothing and PPO-type policies pay a reduced level of cost sharing. Without out-of-network coverage, the consumer must pay the actual billing price. With out-of-network coverage, the consumer pays the UCR rate for the service. If the allowed costs leave a balance, then the consumer must pay the balance.

UCR Plays a Key Role in Costs

UCR can cause additional costs for consumers as it is a device that protects insurance companies against paying possible excessive fees. Many consumers do not expect balance billing and the possibility that their policy will not cover all or substantially all of a fee.

Comparison shopping is a great way to save on medical costs. Particularly when using medical services outside of a plan’s network, consumers should consider benefits carefully. Consumers should assess the possibility of balance billing and local area pricing when selecting a medical service provider.

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