Why are the charge and allowable charge different amounts?
Asked by: Harold Kozey | Last update: May 6, 2025Score: 4.4/5 (4 votes)
What is the difference between the charge and the allowable charge?
Difference Between Allowable Charge and Actual Charge
It is predetermined and agreed upon between the payer and the provider, usually through contractual agreements or fee schedules. On the other hand, the actual charge refers to the amount that the healthcare provider bills for a particular service.
What is the difference between charged amount and allowed amount?
When a provider bills you for the difference between the provider's charge and the allowed amount. For example, if the provider's charge is $100 and the allowed amount is $70, the provider may bill you for the remaining $30. A preferred provider may not balance bill you for covered services.
Why is the allowed amount higher than the billed amount?
This difference has nothing to do with what the provider bills. It is entirely due to the rates negotiated and contracted by your specific insurance company. The provider MUST bill for the highest contracted dollar ($) amount to receive full reimbursement.
Can a provider charge more than the allowed amount?
For example, if the provider's charge is $200 and the allowed amount is $110, the provider may bill you for the remaining $90. This happens most often when you see an out-of-network provider (non-preferred provider). A network provider (preferred provider) may not balance bill you for covered services.
Health Insurance Explained: Allowed Amount
What is the term for the difference between the billed amount and the allowed amount?
When a provider bills you for the difference between the provider's charge and the allowed amount. For example, if the provider's charge is $100 and the allowed amount is $70, the provider may bill you for the remaining $30.
Why am I being charged more than my copay?
Non-Covered Services: Some medical services or prescription medications may not be covered by your insurance plan. If this is the case, you will be responsible for the full cost of the service or medication, which may exceed your copayment.
How do insurance companies determine allowed amounts?
(Note: insurers determine allowed amounts based on what they deem the going rate for the service to be. They call these “usual, customary, and reasonable fees.”)
What if I need surgery but can't afford my deductible?
In cases like this, we recommend contacting your insurance, surgeon, or hospital and asking if they can help you with a payment plan. Remember that your surgery provider wants to get paid so they may be very willing to work with you on a payment plan.
Why do hospitals bill more than insurance will pay?
In an effort to survive the healthcare system, hospitals determine how much it costs them to treat a patient with insurance. They then multiply that cost by a factor of two, three or whatever number they think will help bring in enough money to help cover the costs of treating patients who don't have any insurance.
What is the maximum allowable charge?
Maximum Allowable Charge (MAC) — caps payment for services provided by an out-of-network dentist at a scheduled amount, the Maximum Allowable Charge.
What happens if the allowed amount is not given by the insurance carrier?
If your health plan didn't assign an allowed amount, it would be obligated to pay $50,000 for an office visit that might normally cost $250. Your health plan protects itself from this scenario by assigning a "reasonable and customary" allowed amount to out-of-network services.
Do I still have to pay copay after out-of-pocket maximum?
Let's say you have an annual out-of-pocket maximum of $6,000. That means once you've paid $6,000 out of pocket that year for your covered health care, usually including deductibles, copays and coinsurance, your plan will cover any future (covered, in-network) health care services during your coverage period.
Can a Medicaid patient pay out-of-pocket?
Generally, out of pocket costs apply to all Medicaid enrollees except those specifically exempted by law and most are limited to nominal amounts.
What if I can't pay my deductible health insurance?
Your healthcare provider can't waive or discount your deductible because that would violate the rules of your health plan. But they may be willing to allow you to pay the deductible you owe over time. Be honest and explain your situation upfront to your healthcare provider or hospital billing department.
What happens if you get surgery but can't afford it?
Government or Charitable Assistance
Financial assistance programs, sometimes called "charity care," provide free or discounted health care to people who need help paying their medical bills. The Affordable Care Act requires hospitals with 501(c)(3) nonprofit status to have programs to provide this care.
Do you have to pay full deductible before surgery?
In other situations, including a pre-scheduled surgery, the hospital or other providers can ask for at least some payment upfront. But in most cases, a health plan's network contract with the hospital or other medical provider will allow them to request upfront payment of deductibles, but not to require it.
Do you have to pay your deductible if you're not at fault?
It depends on your insurance policy. Some insurance policies require you to pay your deductible even if you are not at fault, while others do not. Reviewing your policy or speaking with your insurance agent to understand your coverage is important.
What is the difference between charge amount and allowed amount?
Allowed amount: what the insurer allows for the service (sometimes shown as an "insurer discount" - i.e., if the billed charge is $50 higher than the insurer's allowed amount, the insurer discount would be $50), Paid amount: what the insurer paid the provider.
What is the insurance 5% rule?
In each insurance year you can withdraw up to 5% of the premium paid into your policy without a gain happening in that year. An insurance year begins on the anniversary of the date of your policy was taken out and ends on the day before the anniversary in the next year, except in the final insurance year.
How do insurance companies know how much to charge?
Insurers base the premiums they charge on insurance company rates that are filed with and approved by the California Department of Insurance. The rates form the building blocks of the premium you eventually get charged, and include discounts for some risks and additional charges for other risks.
Why do doctors bill more than insurance will pay?
Cash price is the same for everyone. However the insurance company may only honor 50% of the cash price for a procedure. That's why every medical bill has a column for "adjustments". That literally means the insurance is paying some percent less than whatever the hospital/Drs office billed.
Does insurance cover anything before the deductible?
Many plans pay for certain services, like a checkup or disease management programs, before you've met your deductible. Check your plan details. All Marketplace health plans pay the full cost of certain preventive benefits even before you meet your deductible.