Allowable: It is not what you get paid!

Guest post by trina@integrity

Providers frequently ask the question, "how much do I get paid for XYZ service?"

Unfortunately, it is not as simple of an answer as, "that service pays $250.00." While you can figure out an answer based on the carrier and the provider's contracted fee schedule amount, that answer is still often misunderstood by the provider and their office staff.

The allowable is the maximum amount an insurance plan will pay for a particular service. A contracted provider is entitled to the entire amount of the allowable. However, for a plan to actually pay the maximum allowed amount, all plan conditions have to be met. The insured's benefits are applied to the service and those benefits determine the amount the carrier will pay. Therefore, if the patient's benefits leave them responsible for a portion ( such as a copay or coinsurance) and it is not collected, the provider will not be paid the allowable from the insurance company.

For example, if a service has an allowable of $250.00 by the insurance carrier, but the patient's $500.00 deductible has not been met and is applied to that service, the insurance carrier will not make a payment. If the $250.00 is not collected from the patient, the provider was paid nothing for the service. It's the difference between "paper money", i.e. money you make on paper, and "real money", i.e. money in your pocket.

When you factor in the provider's operating expenses, not only did the provider not make any money in the above example, they likely went in the hole for providing that service! This is why understanding insurance benefits, how they apply in each circumstance, and front-end collections is so important to the success of a practice. In smaller practices, it could be the difference in staying open and have to close the doors.