Health insurance claims can be confusing. Many people are caught by surprise when they learn that their health insurance does not pay them back based on the amount they pay for care but the amount their health insurance believes the care should cost. For claims filed via Better, we ensure the math is done right for every claim.

What Are Allowed Amounts?

When you choose to see a doctor that does not accept your insurance, you are going outside of your network. Many insurance policies will pay you back for out-of-network care. However, your health insurance calculates your reimbursement based on their allowed amount or customary and reasonable rate for the care you received instead of the amount you actually paid the doctor. This means your reimbursement might be far lower than you might expect.

American health insurance companies use a coding system called Current Procedural Terminology (CPT) to describe medical care. Anytime you submit a claim, CPT codes are used by your healthcare provider to describe to your insurance the treatment they gave you. For example, if you see a therapist for 60-minutes your bill should list the CPT code 90837.

Your health insurance company sets a price it will pay for each CPT code called an allowed amount. This is the maximum price your insurance will pay for that specific code. The price is specific to your particular insurance policy. Another policy with the same insurance company could set a totally different price. Allowed amounts can vary not only by policy, but also the location of the healthcare provider, their license type, and other factors.

How Does an Allowed Amount Work

When you file a claim with your insurance, they first determine whether the care is covered by your policy. If it is, the claim is then priced. Your insurance will look up the amount they will allow for each CPT code on the bill based on the healthcare provider you saw and other variables. This price is then used to calculate either the amount applied to your deductible or how much money you will be reimbursed based on your co-insurance. If your co-insurance is 50 percent and your deductible has been met, you will be reimbursed 50 percent of the allowed amount set by your insurance, not 50 percent of the amount you actually paid.

As an example, let’s say you file a claim for 60-minutes of psychotherapy and you paid your therapist $180. In the San Francisco Bay Area, the allowed amount for this care could range from $62 to over $300 depending on the policy. If your plan only allows $62 and your co-insurance is 50 percent, you would only be reimbursed $31 for the visit once your deductible was met. Someone with an insurance plan that allows $180 or more for the same care would receive $90.

In general, policies for individuals, such as those sold on the healthcare exchanges and those for small businesses have lower allowed amounts. The highest allowed amounts are generally found with plans offered by major employers or other large entities that are able to negotiate on behalf of the people they insure.

The Black Box

Allowable amounts are difficult to get in advance. When you purchase an insurance policy, the plan is required to clearly explain:

• Deductibles
• Copays
• Coinsurance (the portion you are responsible for outside your network)

However, they do not typically disclose allowed amounts or how your claims will be priced. This means that when these amounts are much lower than the amount you actually paid, you may be caught by surprise.

When you submit your out-of-network claims through the Better app, we tell you how much your insurance allowed for the care you received and can help you understand how this compares to other plans. We commonly catch errors in how claims are priced and work to make sure the correct allowed amount is used to calculate your reimbursement.

Allowed Amounts and Deductibles

Allowed amounts also affect how quickly you meet your deductible. When you go outside your network, your insurance company applies the allowed amount to your deductible, not the amount that you actually paid. This means it will take you longer to meet your deductible than you imagined. If you pay $180 for a 60-minute therapy session and your insurance only allows $66 for each visit it will take you far longer to meet your deductible than you might expect. Only the $66 allowed will be applied to your deductible for each visit. If your deductible is $1,000 it will take 15 sessions to meet your deductible, not the 5.5 sessions if the full $180 was applied.

If you have not been submitting your out-of-network claims, you may still be in luck! You may be able to file all of your claims for reimbursement over two years after the visit, depending on your plan’s timely filing policy.

Price List Resources

Here are some resources that can help you. Medicare publishes their rates online. This tool allows you to find out if your policy is paying you at, above or below the Medicare rate. If you’re above the Medicare rate, then you’re in pretty good shape.

Many of the major health insurance companies including Aetna, United Healthcare, and Cigna offer some form of medical cost calculator. Anthem Blue Cross Blue Shield also offers resources for members in some states. All of these tools require you to register an account and vary in effectiveness, as rated by Consumer Reports.