Yes, many quilters do charge by the square inch, and the rate is based primarily on the type of quilting being done (overall meander, pantograph, edge-to-edge, custom, etc.). Some quilters also have a minimum charge, which may have been a factor in this price.
I think the bottom line, though, is whether you are pleased with the work when you get your quilt top back. If not, then no price is reasonable. If you are - which is the most likely scenario - then it's worth every penny!