What is the term used to define the amount the insurance carrier utilizes to decide payment for a service?

The term used to define the amount that the insurance carrier utilizes to determine payment for a service is referred to as the "Allowed Amount." This is the maximum amount that a health insurance plan will consider for payment for a particular service or procedure. The allowed amount is significant because it sets the baseline for what the insurance company is willing to reimburse the healthcare provider, and it is usually lower than the provider's total charge for the service.

In practice, when a provider submits a claim for payment, the insurance company reviews the claim based on their established fee schedules and determines the allowed amount for that specific service. This amount may differ depending on various factors including the type of insurance plan, the contractual agreements with providers, and the geographic location of the service. Understanding the allowed amount is crucial for patients, as it directly impacts the amount they may owe out-of-pocket after accounting for any applicable co-pays, co-insurance, or deductibles.