What is an “allowed amount” and why does it matter?

The “allowed amount” (sometimes called the “eligible expense,” “payment allowance,” “recognized charge”, or “usual, customary & reasonable rate (UCR) ”) is the maximum dollar figure your insurance company will use as the basis for calculating your reimbursement. If your provider charges more than the allowed amount, your reimbursement is still calculated only on the allowed amount and not what you actually paid.

Allowed amounts are determined by your insurer using a variety of methods. These may include typical charges for a service in your geographic area (e.g. “UCR”), a percentage of Medicare reimbursement rates, negotiated rates with in-network providers, or the insurer’s own internal pricing models. The method used depends on your specific plan and the type of service.

For an independent estimate of UCR rates in your area, you can visit FAIR Health Consumer, a free public database of healthcare costs by ZIP code and procedure. Note that insurers are not legally required to use this database.