Allowed Amount
The maximum amount your insurance plan will pay for a covered service, also called the negotiated or contracted rate.
What is Allowed Amount?
The allowed amount (also called the eligible expense, payment allowance, or negotiated rate) is the maximum amount your health insurance plan considers reasonable for a covered service. Your cost-sharing (deductible, copays, coinsurance) is based on this amount, not the provider's billed charge.
For example, if a doctor bills $500 but your insurance's allowed amount is $300, your cost-sharing is calculated on $300. With in-network providers, the provider accepts this as full payment. Out-of-network providers can bill you for the difference (balance billing).
The allowed amount is determined by contracts between insurance companies and providers. These negotiated rates are often significantly lower than the "list price" you'd pay without insurance, which is one of the main benefits of being insured.
Frequently Asked Questions
How is the allowed amount determined?
Insurance companies negotiate rates with in-network providers. For out-of-network care, they typically use a percentage of Medicare rates or usual and customary charges.
Can the allowed amount be more than the bill?
No. The allowed amount is always the lesser of the billed amount or the plan's maximum payment for that service.
Do I pay based on the bill or allowed amount?
Your cost-sharing (deductible, coinsurance) is based on the allowed amount, not the billed amount.
Related Terms
In-Network
Healthcare providers who have contracts with your insurance plan to provide services at negotiated rates.
Out-of-Network
Healthcare providers who don't have contracts with your insurance plan, usually resulting in higher costs.
Balance Billing
When an out-of-network provider bills you for the difference between their charge and what insurance pays.
Coinsurance
The percentage of costs you pay for covered healthcare services after meeting your deductible.
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