
Welcome to Part 2 of our 3 part series on Health Insurance. You may have asked yourself before, "Why am I getting a huge bill for a simple service?" While it is not necessarily the most "exciting" topic, understanding the differences between billed amounts and allowed amounts are important to know what you are paying and why!
Why did my doctor bill my insurance $500 for a simple service?!
This can be explained by differentiating between the “Billed Amount” vs the “Allowed Amount.” The “Allowed Amount” applies if you are going to a physician that is IN-NETWORK with your insurance company. An in-network provider has a signed a contract with your insurance company agreeing to your insurance company’s fees instead of the provider’s set fees.
EACH insurance company negotiates their own “Allowed Amounts,” meaning the same exact service performed by the same exact provider could have completely different costs for patients with different insurance companies (BCBS vs Humana vs United Healthcare vs Medicare).
Providers are REQUIRED to set only ONE billed fee schedule which means that they have to set their “Billed Amount” to the amount the highest payer will pay for the service.
Example: A provider’s office is in-network with both BCBS and United Healthcare. In their contract with BCBS, BCBS has set an “Allowed Amount” for an x-ray at $40. In their contract with United Healthcare, United Healthcare has set an “Allowed Amount” for the same x-ray at $80. This difference in “Allowed Amounts” means a few things:
This is why “Billed Amounts” can seem excessive to patients, because different patients are paying different fees for services based on their insurance companies negotiated contract. Check out some scenarios below of how to break these payments down to see what you are paying!
Typical IN-Network Billing Scenario
Service |
Insurance Company |
Billed Amount |
Allowed Amount |
Contractual Write-Off |
Patient Pays |
Low Back X-Ray |
BCBS |
$100 |
$40 |
$60 |
$40 |
Low Back X-Ray |
United Healthcare |
$100 |
$80 |
$20 |
$80 |
Low Back X-Ray |
Humana |
$100 |
$90 |
$10 |
$90 |
Low Back X-Ray |
Medicare |
$100 |
$50 |
$50 |
$50 |
Billing Scenario if Billed Amount is Less Than Allowed Amount
Service |
Insurance Company |
Billed Amount |
Allowed Amount |
Contractual Write-Off |
Patient Pays |
Lost Revenue |
Low Back X-Ray |
BCBS |
$60 |
$40 |
$20 |
$40 |
N/A |
Low Back X-Ray |
United Healthcare |
$60 |
$80 |
N/A |
$60 |
-$20 |
Low Back X-Ray |
Humana |
$60 |
$90 |
N/A |
$60 |
-$30 |
Low Back X-Ray |
Medicare |
$60 |
$50 |
$10 |
$50 |
N/A |
In sum, INSURANCE IS CONFUSING!!! But that’s okay because the experts at Signe Spine & Rehab are here to help you understand. We will continue providing empowering posts about how to understand your health insurance coverage and benefits! We want you to know what you’re paying for and why.
Stay small, ask questions, and use the resources available to you, and you should start to feel more and more comfortable when talking to medical office and facilities about your bills. See you next week for Part 3 of Ask an Expert!