On an EOB, the billed amount is what the provider charged, and the allowed amount is the most the plan recognizes for that service, usually a contracted rate. The gap is a write-off for an in-network provider. The patient's deductible, copay and coinsurance come out of the allowed amount, and the plan pays the rest.
Billed amount on an EOB: the provider's charge
The billed amount on an EOB is the charge the provider put on the claim for each service line. It comes from the practice's own fee schedule, not from the plan, so the same procedure can carry the same billed amount on every payer's EOB even though each plan allows a different amount.
The CMS guide to the explanation of benefits calls this column provider charges, "the amount your provider bills for your visit." Payers label it billed, charges or amount billed. On an 835 file it is the line item charge amount.
A billing team should treat the billed amount as a check, not a mystery. It should match the charge in the practice management system for that line. When it does not, the plan may have split a line, changed a code or read the claim differently, and the rest of the line will not reconcile until that is resolved.
Two cautions apply. First, a high billed amount does not raise what an in-network plan pays, because the plan pays from its allowed amount. Second, the billed amount is the starting point for the line's arithmetic, so a misread charge throws off every check that follows. The page position of this column and its neighbours is covered in EOB service line columns from billed to paid.
Allowed amount on an EOB: the contracted rate
The allowed amount on an EOB is the maximum the plan will pay for a covered service, before subtracting what the patient owes. For an in-network provider it is normally the rate in the provider's contract with the plan. For Medicare it is the Medicare fee schedule amount. The plan sets it, not the provider.
HealthCare.gov defines the allowed amount as "The maximum amount a plan will pay for a covered health care service," and lists other names: eligible expense, payment allowance and negotiated rate. The CMS EOB guide calls it allowed charges and notes that it may differ from what the provider billed.
The difference between billed and allowed normally carries a code. On the X12 Claim Adjustment Reason Codes list, reason code 45 reads "Charge exceeds fee schedule/maximum allowable or contracted/legislated fee arrangement." Paired with group code CO, contractual obligation, it marks an amount the provider writes off and does not bill to the patient. What each group code means is explained in what CO, PR, OI and PI group codes mean.
The electronic remittance carries the allowed amount too. An X12 answer on claim line balancing in the 835 quotes the implementation guide: "Allowed amount is the amount the payer deems payable prior to considering patient responsibility." It adds that the amount under reason code 45 is not part of it.
How is patient responsibility on an EOB calculated from the allowed amount?
Patient responsibility on an EOB is calculated from the allowed amount, never the billed amount. The plan applies any remaining deductible first, then a copay or coinsurance on what is left, and pays the balance. The sum of those patient amounts is the patient responsibility for the line, marked with group code PR.
HealthCare.gov's glossary sets out the order. A deductible is "The amount you pay for covered health care services before your insurance plan starts to pay." Coinsurance is the percentage of costs "you pay (20%, for example) after you've paid your deductible." A copayment is a fixed amount paid after the deductible, and its example shows a patient who has not met the deductible paying the full allowable amount for the visit instead.
The X12 list gives each piece its own reason code: 1 for the deductible amount, 2 for coinsurance and 3 for the copayment. A line can carry one, two or all three, each with its own amount.
Plans differ on the details. Some apply a copay without a deductible for office visits. Some cover preventive services before the deductible, which the HealthCare.gov deductible entry mentions. The EOB shows what the plan actually applied, so read the PR codes on the line rather than assuming the plan's general design.
Once worked out, the patient share moves from the insurance balance to the patient's account. That posting step is covered in transferring EOB patient responsibility to the patient account.
Deductible, copay and coinsurance lines on an EOB, worked through
Deductible, copay and coinsurance lines on an EOB are easiest to follow with numbers. The two fictional lines below belong to an example patient, Jordan Lee, member ID W00482913, on example claim 7731-0042. Every amount is made up for the example, and the plan design is invented.
Line 1: deductible and coinsurance
| Step | Example value | How it is reached | Code |
|---|---|---|---|
| Billed | $320.00 | The practice's charge | |
| Contractual write-off | $115.00 | Charge above the contracted rate | CO-45 |
| Allowed | $205.00 | $320.00 minus $115.00 | |
| Deductible | $75.00 | The patient's remaining deductible | PR-1 |
| Coinsurance | $26.00 | 20% of the $130.00 left after the deductible | PR-2 |
| Plan paid | $104.00 | $205.00 minus $75.00 minus $26.00 | |
| Check | $320.00 | $115.00 + $75.00 + $26.00 + $104.00 equals the billed amount |
The patient responsibility on this line is $101.00, the deductible plus the coinsurance.
Line 2: copay only
A second example line for the same patient is an office visit under a plan design with a $30 copay and no deductible for office visits. Billed is $140.00, the CO-45 write-off is $48.00, so allowed is $92.00. The PR-3 copay is $30.00 and the plan pays $62.00. The check: $48.00 plus $30.00 plus $62.00 is $140.00.
Two arithmetic checks catch most keying errors. Allowed minus the PR amounts should equal plan paid. Billed minus every adjustment should equal plan paid. If either fails, look for an adjustment that was missed.
Mistakes these lines invite
Three errors come up again and again when staff work these lines by hand:
- Billing the patient the CO amount. The $115.00 on line 1 is the provider's write-off under the contract. Adding it to the patient's balance turns a contractual adjustment into a bill the patient should never see.
- Taking coinsurance from the billed amount. Twenty percent of $320.00 is $64.00, not $26.00. Coinsurance comes from what is left of the allowed amount after the deductible.
- Collecting the copay twice. If the front desk took the $30.00 at the visit, the PR-3 amount on line 2 is already paid. The EOB does not know that, so the account must show the payment before any statement goes out.
Each of these mistakes leaves the line arithmetic intact on the EOB itself, which is why they slip through. The check has to be against the patient account, not only against the page.
Why does paid plus patient responsibility not equal the allowed amount?
Paid plus patient responsibility falls short of the allowed amount when the EOB carries another adjustment that is neither a contractual write-off nor a patient share. The usual causes are a payment by another payer, a reduction the plan applies after the patient share, a withhold, or an amount moved to the provider-level section.
Another payer paid first. When the EOB is from a secondary payer, part of the allowed amount was covered by the primary. The X12 list defines reason code 23 as "The impact of prior payer(s) adjudication including payments and/or adjustments," used with group code OA.
A reduction after the patient share. Medicare applies its sequestration reduction after deductible and coinsurance, under reason code 253, so the payment is a little less than allowed minus patient share. The guide on how to read a Medicare EOB works through that line.
Withholds and penalties. Some contracts hold back part of a payment. Chapter 22 of the Medicare Claims Processing Manual on remittance advice lists "penalty applied" among the adjustment types a remittance explains. Look for a CO or OA line with its own reason code.
Provider-level amounts. An offset of an earlier overpayment may reduce the check without touching the claim line. It sits in the provider adjustment section, not on the line.
When the reason is unclear, a remark code may explain it. Those codes are covered in remittance advice remark codes explained, and the full set of reason codes in the guide to claim adjustment reason codes on an EOB.
Out-of-network EOBs and balance billing: when the allowed vs billed math changes
On an out-of-network EOB, the allowed vs billed math changes because there is no contract. The plan still sets an allowed amount, but the provider has not agreed to accept it, so the gap may not be a write-off. Federal protections limit when a patient can be billed for that gap.
HealthCare.gov defines balance billing as "When a provider bills you for the difference between the provider's charge and the allowed amount," and notes that a preferred provider may not balance bill for covered services. Its example: a $100 charge with a $70 allowed amount leaves $30 the provider may bill. On the EOB, that gap may carry a PR group code instead of CO.
The No Surprises Act narrows this. The CMS fact sheet on rights against surprise medical bills says the rules ban surprise bills for most emergency services, even out-of-network, ban out-of-network cost-sharing above in-network levels for most emergency and some non-emergency services, and ban balance bills for certain services, such as anesthesiology or radiology, from out-of-network providers during a visit to an in-network facility.
For a billing office this means an out-of-network EOB needs a second look before any statement goes out. Check whether the service falls under those protections, and bill the patient only the cost-sharing the EOB assigns. This is a description of what CMS publishes, not legal advice; questions about a specific bill belong with the office's compliance lead.
Patient insurance details collected at intake decide much of this, and the patient intake category covers that paperwork. For offices that key EOB lines by hand, the threshold demo on a fictional EOB shows how Schema Care flags an allowed amount or a PR line it is unsure of for a person to confirm.