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.

Example
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.