Allowed Amount

Insurers usually negotiate how much they will pay for the costs of covered health care services with physicians, hospitals, and other health care providers in the health insurance plan’s network of health care providers. These negotiated amounts are known as the “allowed amount,” and sometimes the “eligible expense,” or “negotiated rate.” Health care providers participating in a plan’s network agree to accept these payment amounts when a person covered by the plan uses their services. The cost-sharing charges the enrollee owes (for example, a 20% coinsurance rate) are based on this allowed amount. If an enrollee uses a provider that is not in the plan’s network, the overall charge could be higher than the allowed amount. And the enrollee may be required to pay the excess, a practice known as “balance billing.” A provider participating in the enrollee’s plan network cannot balance bill the enrollee.