Health Insurance Articles
What Is An Allowable Charge?
2009-10-14
When receiving explanations of benefits from health insurance companies regarding medical services you have received, sometimes the verbiage used can be confusing. When you open an Explanation of Benefits letter from your health insurance, there will be columns depicting monetary amounts with labels such as Billed Charges, Allowable Charges, and Patient Responsibility. The Explanation of Benefits does not outline where each cost originates; it merely presents a total amount billed.
Billed charges are costs that the hospital or medical provider incurred when performing the medical services. These consist of anything from paying the medical professionals to covering the cost of using the equipment. Allowable charges (also known as allowed charges) will generally be listed right next to the billed charges. Allowable charges are the portion from the billed charges that the medical provider has agreed to accept as payment for the services rendered. This agreement has been worked out between the medical provider and your health insurance plan provider. Depending on the level of coverage your health insurance provides, the allowable charges may differ dramatically from the billed charges. One important aspect to note is that no matter how much the allowable charges differ from the billed charges, you as a patient are not responsible to pay the difference. The allowable charges have become the revised charges for the services rendered.
After the health insurance and medical provider have worked out an allowable charge agreement, you may end up paying even less for your medical services still. Depending on what type of health insurance plan coverage you have, they may pay for everything. Sometimes you will need to pay off a deductible (a yearly base payment amount agreed upon when you chose your health insurance coverage), but if the deductible has been paid, you may not have to pay anything for the services rendered. If you do need to pay for anything, this amount will be listed under the column labeled "Patient Responsibility." This is the total that you are responsible for - your insurance company has already negotiated a lower price with the medical provider and have already paid off what they are authorized to pay according to your insurance plan. The remainder is your responsibility.
Your insurance provider sends the Explanation of Benefits letter, but the outstanding bill will need to be paid to your medical provider. Your medical provider will send a bill to you that should match what the Explanation of Benefits listed. You are responsible for paying the bill to the provider when it arrives. If there is a discrepancy between your bill and the Explanation of Benefits, you will need to call your health insurance provider.
