Key Takeaways:
- The allowed amount is the maximum amount an insurance company will pay for a covered health care service.
- Understanding the difference between in-network and out-of-network coverage is crucial to avoid surprise balance billing.
- The No Surprises Act protects patients from unexpected out-of-network charges for certain services.
Medical billing can often seem like a labyrinth of codes, terms, and figures that only a seasoned professional can navigate. Among the most critical concepts to grasp is the “allowed amount.” This term is central to understanding how much your health insurance will cover for medical services and how much you might need to pay out of pocket.
Let’s dive into the intricacies of what is allowed amount in medical billing and how it affects your healthcare expenses.
The Essence of Allowed Amount
The allowed amount, also known as the payment allowance or eligible expense, is the maximum sum an insurance company will pay for a covered health care service. This figure is a negotiated rate between your health plan and the provider’s office.
When a healthcare provider charges for a service, the insurance companies review the claim and determine the allowed amount based on the service’s covered status and your policy details.
For patients, this means that if the provider bills a higher amount than what the insurance plan deems allowable, the difference may not be covered. This is where the concept of in-network and out-of-network providers becomes significant.
In-network providers have agreed to the plan’s allowed amounts, which usually results in lower costs for patients. Conversely, out-of-network providers have not agreed to these rates, potentially leading to higher out-of-pocket expenses.
In-Network vs. Out-of-Network Coverage
Choosing an in-network provider is one of the most effective ways to ensure that you’re receiving covered services at the negotiated rate. In-network care means that your health insurance has a contract with the provider, which typically includes agreed-upon allowed amounts for various services.
This agreement helps to avoid balance billing, where the patient is billed for the difference between the provider’s charge and the insurance’s allowed amount.
Out-of-network coverage, on the other hand, often comes with higher costs and financial risk for the patient. Out of network providers do not have a predetermined agreement with your insurance company, which means the entire bill might not be covered.
In such cases, the insurance plan will pay a portion based on the maximum amount they allow for the service, and the patient may be responsible for the remainder, often referred to as surprise balance billing.
The Role of Explanation of Benefits (EOB)
After receiving healthcare services, patients typically receive an Explanation of Benefits (EOB) from their insurance company. This document outlines the billed amount, the allowed amounts, what the insurance plan paid, and what the patient is responsible for paying.
It’s a crucial piece of information that helps you understand the costs associated with your medical care and how your payments and reimbursements have been calculated.
The EOB will often show the difference between what the healthcare provider charges and the allowed amount by the insurance companies.
By reviewing this document, patients can verify that the services they received are being billed correctly and that their insurance plan is paying the appropriate amount.
Avoiding Surprise Balance Billing
Surprise balance billing can be a significant financial burden for patients. To avoid balance billing, it’s essential to seek in-network care whenever possible. However, there are situations where you might need care from an out-of-network provider.
In such cases, obtaining a network exception in advance can help mitigate unexpected costs. This is an agreement from your insurance plan to cover services from an out-of-network provider at in-network rates.
Moreover, the No Surprises Act, which took effect on January 1, 2022, offers new protections against surprise medical bills. Under this act, insurance companies must cover emergency services without requiring prior authorization, regardless of whether the provider is in-network or out-of-network, and without imposing higher cost-sharing.
Practical Examples of Allowed Amounts
To illustrate, let’s consider an example. Imagine you visit a provider’s office for a covered health care service, and the provider bills $250. If the negotiated rate between your health plan and the provider is $200, then $200 is the allowed amount.
If you’ve met your deductible, your insurance may cover this entire allowed amount, or you may be responsible for a copayment or coinsurance based on your policy.
In another scenario, if you receive services from an out-of-network provider who charges $250, but your plan’s allowed amount for such a service is $150, you may be responsible for the $100 difference, plus any copayments or coinsurance, unless protected by the No Surprises Act or a network exception.
Final Thoughts
Understanding what is allowed amount in medical billing is crucial for navigating your healthcare expenses effectively. It helps you anticipate potential out-of-pocket costs and take steps to minimize them by choosing in-network providers and being aware of your rights under the No Surprises Act.
Always review your Explanation of Benefits and communicate with your insurance company to clarify any uncertainties regarding allowed amounts and your financial responsibilities.
And for medical billing offices – are you ready to ensure your medical billing is error-free and compliant? Contact Reliance Medical Billing Solutions today at 717-740-2622 or email: info@reliancembs.com and step into a world of billing clarity and security.
Visit Reliance Medical Billing Solutions or call us now to get started!
At Reliance® – Medical Billing Made Simple®
Allowed Amount in Medical Billing FAQ’s
Q: What happens if my healthcare provider charges more than the allowed amount?
A: If your provider charges more than the allowed amount, you may be responsible for the difference, known as balance billing. However, if you’re using an in-network provider, they’ve agreed to accept the allowed amount as full payment, and you shouldn’t be balance billed.
Q: Can I dispute the allowed amount if I think it’s too low?
A: Yes, you can dispute the allowed amount with your insurance company if you believe it does not accurately reflect the cost of the services you received. It’s best to start by reviewing your policy details and speaking with your insurance company’s customer service.
Q: How can I avoid paying more than the allowed amount?
A: To avoid paying more than the allowed amount, try to use in-network providers whenever possible, understand your health plan’s coverage details, and be aware of the protections offered by the No Surprises Act. Additionally, ask for a network exception if you must see an out-of-network provider for a specific reason.