【Secret Weapon for Claim Denials】Will insurance companies cover medical expenses no matter how high? Understanding "reasonable and customary" charges

In recent years many "full indemnity" medical insurance plans have appeared on the market, boasting annual coverages of tens of millions and lifetime limits with no caps — which sounds very attractive to consumers. Although medical insurance products advertise "all-inclusive", "full indemnity", and "full coverage", and set very high annual or lifetime limits, this does not mean the insured will receive full compensation in every circumstance.

A policyholder who underwent a craniotomy had the insurer deem the charges not to meet "reasonable and customary" fees and refused to fully reimburse the medical costs, leaving the policyholder to bear roughly HK$240,000. Previously, we discussed "medically necessary"; this time we'll explain "reasonable and customary", both of which can be claim-denial tools for full indemnity medical policies. 

Even if you have "full reimbursement" medical insurance, that does not mean the insured can accept any medical procedure without regard to cost. According to the Insurance Complaints Bureau’s 23/24 annual report, Mr Ho underwent a left posterior occipital craniotomy at a private hospital¹, with total expenses of about HK$750,000, of which the attending surgeon charged HK$580,000 in surgeon’s fees. After review, the insurer only reimbursed about HK$500,000, refusing to cover the remaining approximately HK$240,000 of doctor’s fees, on the grounds that those fees were not "reasonable and customary." Mr Ho then lodged a complaint with the Insurance Complaints Bureau.

After investigation by the Bureau’s complaints committee, and based on the Hospital Authority’s fee references, similar surgery costs ranged from HK$88,300 to HK$110,600. The insurer, referencing public hospital charges and industry data, considered that reimbursing HK$340,000 to the attending surgeon exceeded three times the reference fees. Taking into account the complexity of the surgery and the doctor’s expertise, the Insurance Complaints Bureau ruled that the insurer’s decision to invoke the "reasonable and customary" clause was appropriate. 

In medical insurance, related hospital and medical charges must be "reasonable and customary" (also known as "generally reasonable", in English "Reasonable and Customary"), meaning they should not exceed the customary charge levels for providing that medical service locally. The purpose is to avoid the potential risk of excessive medical billing and to help insurers control costs.

This principle applies to people in similar circumstances (for example, of the same gender and similar age) receiving similar treatments: charges must not exceed the general charging range of local medical service providers. Insurers determine reasonable charges based on multiple sources, including fees from private hospitals and medical institutions, the Hospital Authority’s published fee schedule for private medical services, industry statistics, and the insurer’s internal claims records. If a claim amount exceeds the "reasonable and customary" range, the insured may need to bear the difference themselves.

With the introduction of new medical insurance plans in the market, insurers now provide comprehensive coverage for most medical expenses and no longer set limits on payout amounts for individual benefit items, instead reimbursing the reasonable and customary charges charged by hospitals and doctors. As a result, disputes involving "reasonable and customary charges" have gradually increased. How to define the standard for "reasonable and customary charges" has long been controversial, leading the Insurance Complaints Bureau to receive a large number of related cases in recent years. Different medical institutions or doctors may charge significantly different fees for similar services, and actual costs are influenced by various factors, such as the type of surgery, required time, complexity, the patient’s condition, the doctor’s reputation, and the professional techniques and equipment used during the operation.

In recent years, the government has attempted to increase transparency of medical charges; the public can view the Hospital Authority website’s reference charges for private medical services². In addition, insurers also refer to internal data and claims records to determine “reasonable and customary” charges.

To prevent policyholders from exceeding their budgets, 10Life suggests that in non-emergency admissions, policyholders should first ask their attending physician about the expected charges for the required medical procedures and services, and then apply to the insurer for pre-approval before admission. When making a claim, if the insurer refuses to cover part of the medical fees on the grounds of “reasonable and customary,” the policyholder can try to find out what data the insurer used to define “reasonable and customary” charges, then ask the attending physician for the reasons behind any additional medical fees (above the insurer’s definition of “reasonable and customary”), and then appeal to the insurer. 

There are many medical insurance products on the market, and consumers can easily be overwhelmed and confused. Want someone to help explain complicated policy terms so you can understand the coverage of different products? Feel free to contact 10Life insurance advisers on WhatsApp.

Further reading: 【Secret Weapon Against Denials】Medical Insurance "Full Reimbursement" — Does it cover everything? The "Medically Necessary" clause you must know

Note: 
1. Insurance Complaints Bureau case analysis P.58-59 
2. Private medical service fees
3. Last updated: March 19, 2025 

This English version of this article has been generated by machine translation powered by AI. It is provided solely for reference purposes. In the event of any discrepancy or inconsistency between this translation and the original Chinese version, the Chinese version shall prevail.