Why is the allowed amount lower than the billed amount?

In-network providers agree prices with insurers in advance. The billed amount is the provider’s list price; the allowed amount is the agreed price.

Do I pay the difference between billed and allowed?

Not for covered services from an in-network provider — that difference is written off. Out-of-network providers may balance-bill in some situations, which federal rules limit for emergency care.

Is the allowed amount the same as the negotiated rate?

Yes. HealthCare.gov says the allowed amount may also be called the eligible expense, payment allowance or negotiated rate.

ALLOWED AMOUNT

What is the “allowed amount” on an EOB?

The allowed amount is the most your health plan will pay for a covered service — the price it has agreed with in-network providers. Your deductible, copay and coinsurance are all worked out from it, not from the provider’s billed charge.

Why it’s confusing

Two prices appear side by side and look like they should be the same. The billed amount is the provider’s list price; the allowed amount is the agreed price. The gap between them can be large, and people worry they will be asked for it.

The term also goes by other names. HealthCare.gov lists “eligible expense”, “payment allowance” and “negotiated rate”, so it can be hard to spot on your EOB.

How to read it

Find the allowed amount column. Everything to its right — plan paid, deductible, coinsurance, what you may owe — should add up to it.

Look for a discount or adjustment column too. That is usually the difference between billed and allowed. For an in-network provider covering a covered service, that difference is written off; a preferred provider may not balance-bill you for it.

For an out-of-network provider the picture can be different: the plan still pays based on its allowed amount, but the provider may not have agreed to accept it. Billing you for the difference is called balance billing, and the No Surprises Act limits it for emergency care and some other situations.

What it does not mean

That the allowed amount is what you pay. It is the total agreed price, shared between you and the plan.
That the billed amount minus the allowed amount is owed by you, when the provider is in-network.
That the same service has the same allowed amount everywhere. It depends on the plan and the provider’s contract.

Where you’ll see it

Insurance EOBs, sometimes headed “allowed”, “plan allowance”, “eligible amount” or “negotiated rate”.
Claims details in insurer apps.

Questions worth asking

Ask your insurer

Was this provider in-network for this claim?
What allowed amount was used, and how was my share worked out from it?

Ask the provider

Has the insurer’s adjustment been applied to my account?

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Common questions

Why is the allowed amount lower than the billed amount?: In-network providers agree prices with insurers in advance. The billed amount is the provider’s list price; the allowed amount is the agreed price.
Do I pay the difference between billed and allowed?: Not for covered services from an in-network provider — that difference is written off. Out-of-network providers may balance-bill in some situations, which federal rules limit for emergency care.
Is the allowed amount the same as the negotiated rate?: Yes. HealthCare.gov says the allowed amount may also be called the eligible expense, payment allowance or negotiated rate.