October 26, 2019
co-pays, deductibles, Health Insurance, preferred allowance, preferred providers, Usual and customary charges
International students while buying health insurance often get confused with terms like ‘usual and customary charges’ and how they differ from ‘preferred allowance’.
In this blog, Student Cover tries to explain what is meant by usual and customary charges and how they differ from ‘preferred allowance.
Whenever one gets treated in a hospital or a medical provider, he or she is expected to pay an amount fixed by that hospital for a particular service, treatment or medical procedure. However, these amounts vary from one medical institution to another which creates a problem for health insurance providers to determine the amount that they should reimburse the patient for such treatment.
Therefore, in order to address this issue, health insurance companies promise to reimburse the patients the amount that they have determined as the ‘usual’ and ‘customary’ charge after thoroughly analyzing the fee charged by other similar medical providers (like hospitals) for similar service, treatment or medical procedure in that geographical area or region.
Illustration: If the surgeon’s fees for surgery to remove kidney stone in a hospital located in D.C area happens to be $5,000 (assumptive figure), then Health Insurance company would analyze the fee charged by other surgeons in that area or region. If on analysis, it is found that a large section of the surgeons (over 80 percent) charge $4,000 or less, the usual and customary charge would be $ 4,000. The patient would be reimbursed a percentage of $4,000 as per insurance terms and conditions. The remaining $1,000 would have to be borne by the patient.
While both usual and customary charges and preferred allowance rates are already fixed by the health insurance companies, there is a difference between the two.
Student Cover plans such as SC Plus and SC Elite pay 80% and 90% of the preferred allowance when the treatment undertaken in preferred provider as compared to 70% of usual & customary charges when the treatment is undertaken in out-of-network providers.
To conclude, it is more cost effective for an insured person to get treated in a medical provider which falls under the category of preferred provider (In-network provider) as against out-of-network provider.
Disclaimer: The content of the following article is based on the personal research of the writer. Readers are advised to go through the policy documents of health insurance plans and exercise discretion while purchasing them. Student Cover will not be held liable for any wrongful interpretation of the content of this article.
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