Allowed Amount Definition

The Allowed Amount in the healthcare industry refers to the maximum sum that an insurance company will pay for a covered healthcare service. This amount is also known as the “approved amount” or “negotiated rate.” It is determined based on the contract between the healthcare provider and the insurance company. When a healthcare provider submits a claim for a service, the insurance company reviews it and determines the Allowed Amount.

This figure may be less than the provider’s billed charge, reflecting the agreed-upon rate for that specific service. The patient may still be responsible for a portion of the Allowed Amount, depending on their insurance plan’s cost-sharing requirements, such as deductibles, co-payments, and co-insurance. Any difference between the provider’s charge and the Allowed Amount cannot be billed to the patient if the provider is in-network with the insurance plan. This ensures that patients benefit from reduced out-of-pocket expenses for covered services.