Healthy Times

Term to Learn


Allowed Charge
This term explains how your health plan calculates payment of your benefits. The allowed charge is the maximum amount your health insurance will pay a health care provider, such as a doctor or hospital that provides a covered health care service to you.

Paula has a health plan with a $2,000 deductible and 20 percent co-insurance. She just had her first baby. The hospital charges $12,000 for a delivery, but the total charge of her delivery was $10,000 because her health plan and the hospital have a negotiated price. This is called the allowed charge. Because Paula had no other health costs earlier in the year, she still owed her $2,000 deductible. She also had to pay 20 percent co-insurance.

Allowed Charge   $10,000
Paula's Deductible - $2,000
Paula's Co-Insurance
(20% of $8,000)
- $1,600
Paula's Health Plan Pays   $6,400
(Paula Pays $3,600)   $3,600