What is an insurance plan's "UCR" fee?
How are benefits calculated?
While reading through some types of dental insurance policies, you'll run across term "UCR fee." The letters "UCR" stand for the words "Usual, Customary and Reasonable."
Insurance companies use URC fee schedules as a way of controlling their expenses. You're more likely to encounter their use with indemnity (traditional) and possibly Preferred-provider (PPO) dental insurance plans.
When do UCR fees come into play?
A company's UCR fee schedule is referenced every time a claim is submitted. The wording found in most policies is one where the insurer will pay a set percentage of the cost of a procedure (like 80% of the cost of a filling) based on the dentist's actual fee or the insurance company's UCR fee for that procedure, whichever is less.
How are UCR fees calculated?
Insurance companies create a UCR fee for a specific dental procedure by way of tallying all of the fees that have been submitted as claims for that service within a particular geographic area (like by city, zip code, or grouping of zip codes).
After collecting this information, the UCR fee is then set at a value where a certain percentage (often 80 or 90%) of all of the fees that have been tabulated are less.
An example of how UCR-based benefits are calculated.
As an example of how all of this works, take the situation where you have a tooth that needs a dental crown and your dental plan states that it will pay 50% of the cost.
Your insurance company will already have collected fee information from dentists in your area that have placed dental crowns for other plan members. And from this data, let's say the insurance company determines that 90% of these dentists charge $1000 or less. Based on this information the dental insurance company decides to set its UCR fee for dental crowns at $1000.
» Scenario #1: Your dentist charges less than the UCR fee.
Now, take the example where the fee that your dentist charges for dental crowns is comparatively less than most surrounding dentists. Let's say that their fee is $800.
If so, when the insurance company determines your benefits for the placement of your crown, they will pay 50% of $800, which is $400. You would then pay your dentist the outstanding $400 out of your pocket to pay off your bill.
» Scenario #2: Your dentist charges more than the UCR fee.
But what if the fee that your dentist charges is higher than neighboring dentists, say $1200? In this case the dental insurance company will only pay 50% of their $1000 UCR fee, which is $500.
That means that your coverage will only pay $500 of your dentist's bill and you will be responsible for the remaining $700. That's a pretty big difference when compared to the first situation.
If your dentist charges more than your policy's UCR fee, it doesn't mean that they're over charging.
It's important for you to understand that if a dentist's fee is higher than a dental insurance company's UCR fee it doesn't necessarily mean that they're overcharging. This is because you don't know how the URC fee was calculated.
For example, what was the cut-off level for the range of submitted fees (90%, 80%, even less)? What cities/areas were used for the calculation? How up-to-date were the fees that were compiled?
These are just a few of the factors that could create a bias. And, in reality, there is wide fluctuation and no regulation in how a dental insurance company calculates their UCR fees. It would be hard to know if a company's calculations did or did not accurately reflect those fees charged by dentists in a specific area.
UCR fees seem like a win-win for insurance companies.
The use of UCR fees seems like a rigged advantage for insurance companies and maybe it is, maybe it isn't. It's easy to see how having low UCR's can create a financial advantage for them. But, at the same time, it's obvious why a company would need to utilize some type of mechanism that can help it to control expenses.
Control your own out-of-pocket costs by being aware.
It's important for you to have a general idea of how your dentist's fees compare to your dental plan's UCR fee schedule. (Simply ask your dentist's front-office staff or other people who have the same plan and use your same dentist.) As discussed above, a mismatch can seriously affect your out-of-pocket expenses, especially when some types of dental procedures are performed.
If your dentist's fees don't compare favorably with your plan's UCR fees, you might ask other plan members what their experiences have been with their dentist. You may find that this is a universal problem with the policy in general.
If your dentist does seem to have comparatively higher fees across the board, you might ask yourself what's unique about them. Does their training, manner, experience or expenses associated with providing their services justify their higher fees? If so, then the cost is well worth it. If not, then possibly it's time to shop around for another dentist.