What does UCR mean? How does it work? How do I really explain a UCR dental plan to a client or a member? Our SecureCare team often receives questions about the dental insurance term, UCR.
The Term UCR is an Abbreviation
UCR stands for Usual, Customary and Reasonable which is a term used to describe the typical or prevailing fees a dentist charges for dental procedures. The UCR charges are the “retail” fees a dentist has established for his or her practice that a member would pay if he or she did not have dental insurance and paid the full fee for the dentist’s services.
When does a Dental Insurance Plan use UCR?
The term UCR, Usual, Customary and Reasonable is used by PPO dental insurance plans to describe how they reimburse non-contracted or out-of-network dentists for covered services performed, since these out-of-network dentists have not agreed to be reimbursed according to the PPO dental insurance plan’s in-network fee schedule.
On the other hand, the term UCR is not used when referring to how contracted or in-network dentists are reimbursed, because those contracted dentists have already agreed to be paid according to the PPO dental insurance plan’s in-network fee schedule.
How does a Dental Insurance Plan Use UCR?
PPO dental insurance plans pay non-contracted or out-of-network dentists based on the actual fees charged by dentists in the area (ie. zip code) where a plan member has dental services. Because of how UCR non-network payments to the dentist are calculated, PPO UCR reimbursements are generally higher than for other types of non-UCR dental plans.
For example, a PPO UCR dental plan may pay non-contracted dentists based on what 90% of the dentists are charging for a service (ie. crown, implant) in the area where a member’s dentist is located.
We would then say that a dental insurance plan is paying 90% of UCR for dental services billed by the non-contracted dentist. Or another way to say it is that the dental insurance plan is paying the 90th percentile of UCR. This means that the PPO dental insurance plan is paying at a reimbursement rate roughly equal to what 90 percent of the dentists are charging in the zip code area where the member had services done.
It is very important to understand how a PPO dental plan is determining the 90th percentile. Some plans do not follow the protocols outlined here of using dentist fees purely from the zip code where services are done. Certain PPO UCR plans may dilute the UCR by including lower dentists’ fees from less expensive zip codes when figuring UCR. By doing this the plans are using an aggregate UCR when paying a claim, therefore reducing the PPO dental plan’s claims payments and increasing members out-of-pockets costs or balance billing. SecureCare, for example, uses the pure UCR outlined previously and not an aggregate.
How does a Dental Insurance Plan Know the UCR Fees?
If a PPO dental insurance plan is paying out-of-network or non-contracted dentists at UCR rates, then the PPO dental plan needs to know what the UCR reimbursement rates are ahead of time. This is important so that the PPO dental plan can appropriately set the dental insurance product premium and program the claims logic in the PPO dental plan’s claims system to properly adjudicate the claims from out-of-network dentists.
So, how does a PPO UCR dental insurance plan know what the dentists’ prevailing fees are for every zip code in the United States where a plan may receive a dental claim? That’s a lot of zip codes and information to compile.
Fortunately, there are third-party companies that provide a UCR survey service to PPO UCR dental insurance plans. For many years third-party vendors, such as electronic claims clearinghouses, have been compiling the prevailing dentist fees or UCR fees for every zip code in the country using a variety of means to collect the data.
Today, these third-party UCR fee compilers can get a lot of the dentist fee information from electronic claims clearinghouses that store the dental fee information. Once the third-party UCR compilers have the raw UCR data, they organize the data by along a number of data points, including zip code, American Dental Association (ADA) procedure code and by the dentists’ fees.
By organizing the dentist fees from highest to lowest within in an ADA procedure code and zip code area, the third-party UCR compilers are able to determine what 90%, 85%, 80%, etc, of the prevailing dentist fees are in every zip code area in the United States.
How do Dental Insurance Plans Get the UCR Data?
Once the third-party UCR compilers have organized all the UCR fees into a useful database, then the UCR fee data now becomes a product that PPO UCR dental insurance plans can purchase from the third-party compilers. UCR data purchased from third-party compilers is generally the best way to get accurate UCR fee data that will benefit plan members.
Dental PPO insurance plans can purchase the UCR fee data with a subscription from the third-party compilers and receive the UCR information electronically and on a regular basis. The PPO UCR plans then load the UCR fee data for every state and zip code in the U.S.
Once loaded, the dental PPO UCR plan is ready to receive and pay claims from any non-network dentist in the U.S. The PPO UCR plan claims adjudication system will know by the zip code of the dentist submitting the claim and the ADA procedure how to process the benefit payment and generate the EOB to the member and dentist.
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