Understanding Reasonable & Customary Limits for Health & Dental Claims
By Sarah Mitchell
February 8, 2022
Ever submit an insurance claim through your group benefits plan in Canada and not get reimbursed how you expected? Was your explanation of benefits filled with insurance jargon that didn't help clear up why you weren't reimbursed?
It's possible that your product or service was subject to reasonable and customary limits. In this blog, we will help you understand what these limits mean to you and your pocketbook.
What are Reasonable and Customary Limits?
A reasonable and customary limit, also known as an R&C, is a set maximum amount that an insurance carrier will reimburse for a specific product or service. R&Cs can vary from province to province because they are typically defined as what a person without private healthcare coverage would pay for that product or service in their respective province. By considering this and consulting published fee guides by associations of practitioners where applicable, each insurer then establishes their own maximums.
Important note: Insurers may choose to use R&C limits provided by professional associations and/or their own underwriting practices.
How R&Cs Work by Product/Service
Reasonable and customary expenses vary by the product or service claimed, so let's explore more about how they are determined. Below are some examples using a patient named Michael, and to keep things straightforward we are going to say Michael has 80% coverage for all the benefits in his plan.
Each province has a dental association that publishes an annual fee guide that insurers may use to set their R&Cs.
The 2021 British Columbia Dental Fee Guide suggests that the fee for a new patient limited examination be $54.40.
Michael became a new patient at a B.C. dentist and was charged $65.00 for his limited examination. Since the R&C for this service is $54.40, Michael will only be reimbursed for 80% of $54.40 which is $43.52. This means that Michael will then pay $65.00-$43.52= $21.48 out of pocket.
Prescription Drug R&Cs
The cost of prescription medication is made up of three components:
Drug ingredient cost is what the pharmacist had to pay to buy the drug
Pharmacy markup is any amount above the drug ingredient cost charged by the pharmacy
Dispensing fee is the professional fee the pharmacist charges to fill the prescription
Individual pharmacies set their own markups within R&C limits established by their respective provincial government. To learn about your home province's markup policies, explore the Markup Policies in Drug Plans breakdown by the Government of Canada.
Michael usually gets his prescription filled at Pharmacy A where the total cost is $25.00 including drug cost and dispensing fee. His plan reimburses 80% of drugs (which equals $20) so he then only pays $5 out of pocket.
One day Michael chooses to get his prescription filled at Pharmacy B because it's closer to where he lives. He is surprised when the same prescription costs $31.00 at this pharmacy (80% of $31 = $24.80), not the usual $25.00. He then pays $6.20 out of pocket instead of $5.00.
Important note: Since each pharmacy controls their markup and dispensing fees, it is likely that prescription costs will vary from pharmacy to pharmacy. To control costs and avoid any surprises, it's good to shop around (see resources below) and ask what the dispensing fee is before committing to one pharmacy to ensure you get the best price.
Quick Tip: You can request a prescription fee breakdown from your pharmacist if it's not included on the receipt so you can see how fees are being charged.
Paramedical claims for services provided by various practitioners, including but not limited to: chiropractors, massage therapists, physiotherapists, counselors, and naturopaths, have reasonable and customary expenses established by province.
R&Cs are generally determined by the most frequent amount charged by practitioners in that province and by the insurer's underwriting guidelines (so R&C's can vary).
The insurer of Michael's benefits plan has set an R&C of $60.00 for a massage with 80% reimbursement.
Michael is charged $70 by his registered massage therapist. Michael will only be reimbursed 80% of the R&C amount of $60.00 (which equals $48) so he will have to pay the balance: $70.00 - $48.00 = $22.00 out of pocket.
Resources to Research Health Costs
To help you with your research, here are some resources we found:
Reasonable and customary expenses are an important part of understanding your benefits plan and how you will be reimbursed when making a claim. In order to take full advantage of your benefits plan, be sure to explore the R&C limits in your respective province and shop around for products and services with the best price.
Is Simply Benefits your benefits provider? Are you looking for more information about the reasonable and customary expenses associated with your benefits plan?
Additional Employee Resources
If you're an employee looking for help to better understand your group benefits plan, check out these resources:
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