How Reasonable & Customary Impact Claims Reimbursement
Do you know what the term “Reasonable and Customary” (R&C) means in relation to your group benefits plan? Here’s how it’s defined and why it’s important to you.
Health expenses
R&C limits refer to the maximum amount eligible for reimbursement for a specific health service in your geographical area. Each insurer establishes their own R&C limits for Extended Health Care expenses using prior claims history, published recommended fees and competitive analysis. Reasonable and customary limits help protect plans from fraudulent activity and excessive charges.
For example:
- A plan member submits a chiropractor expense for $120.
- The R&C limit for this expense is $110 in their location. This is the most that a claim of this type can get reimbursed for.
- They are covered for 80% of paramedical expenses through their plan.
The reimbursement is calculated as follows:
- $120 x 80% = $96 covered on the plan
- The plan member pays the remaining $24 out of pocket.
- If the plan member has a Health Spending Account, the out-of-pocket amount can be claimed through the HSA.
Another example:
- A plan member submits a massage expense for $130.
- The R&C limit for this expense is $110 in their location. This is the most that a claim of this type can get reimbursed for.
- They are covered for 80% of paramedical expenses through their plan.
The reimbursement is calculated as follows:
- $150 x 80% = $120, but the RC limit is $110
- The plan member will be reimbursed $110
- The plan member pays the remaining $40 out of pocket.
- If the plan member has a Health Spending Account, the out-of-pocket amount can be claimed through the HSA.
Dental coverage
In addition to R&C, each provincial dental association publishes an annual dental fee guide, which insurers use as the R&C limits guideline for dental claims.
Prescription medication
The cost of prescription medication consists of three components: the ingredient cost, the pharmacy markup and the dispensing fee.
Ingredient cost markups are determined by individual pharmacies within legal maximums. To protect your plan from high costs, your group benefits plan verifies that prescription drug ingredient cost and the mark-up fall within the R&C limits established for the jurisdiction.
Dispensing fees can vary widely from pharmacy to pharmacy. Some provinces require pharmacies to outline their dispensing fee on the prescription receipt and nearly all provide the dispensing fee amount to the insurer when submitting the claim.
Some non-prescription expenses purchased using a pay direct drug card, such as diabetic test strips, are subject to R&C quantity limits.
When expenses submitted are higher than the R&C limit, the expense will be adjudicated at the R&C limit for that product or service.
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.
Carrier Schedules
Wondering What the R&C Limits are For Your Benefits?
Click on the Carrier name to download their schedule:
- Desjardins
- Canada Life
- Blue Cross
- Benefits by Design
- RBC
- Equitable myFlex
- Manulife
- Simply Benefits
- Honeybee/Greenshield – not published
- Sun Life – not published (but see below)
Resources
- Additional Resources:
- Government of Canada – Dispensing Fee Policies in Public Drug Plans.
- The Lumino Health app from Sun Life enables you to search pharmacy dispensing fees (plus other health provider costs) by location.
- BC: Shop and compare brand drug costs, generic drug costs and pharmacy dispensing fees in British Columbia, visit Pharmacy Compass to search by drug name and location.
- Alberta: View pharmacy services and fees.
- Saskatchewan: Saskatchewan Drug Plan Overview (with maximum dispensing fee).
- Manitoba: Price Comparison of Commonly Prescribed Medications in Manitoba
- Ontario: View Drug Dispensing Fees.
