What term describes the amount the payer approves to pay for a service?

• A. Billed amount
• B. Copayment
• C. Deductible
• D. Allowed amount

Answer: (D)

The key idea is the amount a payer has approved as eligible for payment for a service. This is called the allowed amount. It represents the maximum the insurer will pay for that service, and everything that follows—how much the provider is reimbursed and what the patient owes—often depends on this figure, along with any applicable deductible or coinsurance.

Billed amount is simply the price the provider charges before any adjustments. A copayment is the fixed amount a patient pays at the time of service. A deductible is the amount the patient must pay out of pocket before insurance begins to pay. So, the allowed amount is the correct term because it specifically denotes the insurer-approved payment limit used to determine actual payment to the provider and patient responsibility.