Allowed Amount

The allowed amount is the maximum dollar figure your health plan will recognize for a covered service. It's the number the plan uses to calculate what it pays and what you owe. Anything the provider bills above the allowed amount either gets written off (in-network) or can be charged to you as balance billing (out-of-network in most cases, though the No Surprises Act changed the rules for some situations).

Example from a real EOB I reviewed last month: the hospital billed $8,400 for a colonoscopy. The allowed amount was $1,120. The plan paid $896 and the member owed $224 in coinsurance. That $7,280 gap between billed and allowed is the contractual write-off — it disappears because the provider signed a contract agreeing to accept the allowed amount as payment in full. This is why in-network care is so much less expensive: the write-off is built into the deal. Out-of-network providers didn't sign that contract, so the write-off doesn't happen automatically.

The takeaway: when reading a bill or EOB, the allowed amount is the honest number. Ignore the billed charge — it's a starting point for negotiation, not what anyone actually pays.