Allowed Amount and Balance Billing (Health Insurance)
An allowed amount is the maximum amount an insurer will pay for a covered health service, the remainder owed by the insured is called “balance billing”.
Allowed Amount Versus No Dollar Limits
No lifetime or annual dollar limits means there is no limit to what an insurer will spend on all care as a whole, but an insurer can limit the amount it will spend on any one specific covered service. An insurer can also limit the amount of times certain services are received, or the amount of times they are received at a specific cost sharing amount. There are however overall rules how much an insurer must pay on average for any given plan (known as actuarial value limits).
How Allowed Amounts and Balance Billing Work (Example)
Your insurer may agree to pay up to $100 for a preventive screening, if you choose a screening that costs $200 you’ll owe the remainder. The difference that will be charged to you is called balance billing.
Balance billing does not typically count toward out-of-pocket maximums or deductibles. So money you pay out-of-network, in premiums, and in balance billing won’t go toward cost sharing in any way.
Why Are Allowed Amounts Important
It’s important to understand the allowed amount for a covered service, this allows the insured to shop around for care. One of the reasons the base costs of healthcare is so high is because both the uninsured and the over-insured tend not to price-compare and shop around for healthcare services. This creates a market that is focused on raising prices rather than competing to offer lower prices.
Are Free Preventive Services Subject to Allowed Amounts?
All services, including “free” services are subject to allowed amounts. Make sure to check with your insurer before assuming a service will be covered in full. Allowed amounts for specific services can often be found on your summary of benefits and coverage. When in doubt check with the insurer directly.