A reasonable and customary fee is the amount that your health plan determines is the normal range of payment for a specific health-related service or medical procedure within a given geographic area. If the charges you (or your doctor) submit to your health plan are higher then what the health plan considers normal for the covered service, then your health plan may not allow the full amount charged to you.
Reasonable and Customary fees are often used for dental procedures and were common when most people had major medical, or indemnity health insurance. Most Americans who have health insurance are enrolled in some type of managed care plan (such as a PPO or HMO) and are not subject to reasonable and customary fees.
If you are in a PPO and go out of network, you may have to pay coinsurance, which usually is about 20%. Sometimes you also may have to pay an additional amount based on the reasonable and customary fee. For example, you have gone out-of-network for a minor surgical procedure. The doctor charges $1500 for the procedure, but the health plan has determined that the reasonable and customary fee is $1000. Your health plan will then pay the doctor $800 and you pay $200 coinsurance. The doctor may also send you a bill for the remaining $500. Depending on where you live, your state insurance laws, and contractual arrangements between providers and health plans, may determine how much you will have to pay.