# Allowed Amount vs Paid Amount vs Contracted Rate

> What the contracted rate, the allowed amount and the paid amount each mean on a remittance line, why comparing payments to rates produces false alarms, and the one comparison that finds an underpayment.

- Published: 2026-10-07
- Author: RateBench
- Human page: https://ratebench.health/blog/allowed-amount-vs-paid-amount
- This document: https://ratebench.health/blog/allowed-amount-vs-paid-amount.md
- Product (sign up / app): https://app.ratebench.health

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A practice manager opens a remit, sees a 99214 paid at $41, and remembers the
contract says $141. Underpaid by $100? Almost certainly not. A different line
shows 99214 paid at $98 against the same $141. That one might be.

The difference is which numbers you compare. A remittance line carries three
that sound alike, and only one pairing tells you whether the payer honoured
your rate.

## The short version

- **Contracted rate:** what your agreement with the payer says a code pays.
- **Allowed amount:** what the payer priced this particular claim at.
- **Paid amount:** what the payer actually sent you, after the patient's share.

To find an underpayment, compare the **allowed amount** with the **contracted
rate**. Never the paid amount.

## The contracted rate

This is the number in your agreement: the rate exhibit attached to the
contract, or the payer's fee schedule the contract points to, or a percentage
of Medicare. It is the same for every claim for that code under that contract,
until the contract changes.

Most practices can't put their hands on it quickly. The exhibit is years old,
or it says rates follow a schedule nobody kept. Since 2022, the federal
Transparency in Coverage rules have required commercial payers to publish their
in-network rates for each provider, by billing code, and to update them
monthly, so the payer's own statement of your rate is public even when your
copy of the contract isn't. [How to find your contracted rate](/blog/find-your-contracted-rate)
covers all three places it lives.

## The allowed amount

HealthCare.gov defines the allowed amount as the maximum amount a plan will
pay for a covered service, and notes it is also called the eligible expense,
payment allowance or negotiated rate. On a remit it is what the payer priced
this claim at.

You won't usually see a field called "allowed". You see your billed charge and
then an adjustment that brings it down. For an in-network claim that
adjustment is normally **CO-45**: group code CO, contractual obligation; reason
code 45, charge exceeds fee schedule or maximum allowable or contracted fee
arrangement. Billed charge minus CO-45 is the allowed amount. CMS's guide to
reading remittance advice describes a CO amount as one the provider is
liable for, which the patient may not be billed.

## The paid amount

The payer doesn't pay the allowed amount. It pays the allowed amount minus
what the patient owes under their plan, and those amounts appear as
patient-responsibility adjustments, group code PR:

| Code | Means |
|---|---|
| PR-1 | Deductible |
| PR-2 | Coinsurance |
| PR-3 | Copayment |

In a plan with a high deductible, the payer can allow your full rate and pay
nothing at all, because the whole allowed amount went to the deductible. That
claim was paid exactly right.

## One remit line, three numbers

An illustration, with made-up figures, of a 99214 at an in-network office visit
under a contract that pays $141:

| | Amount |
|---|---|
| Billed charge | $200.00 |
| CO-45 (contractual adjustment) | −$59.00 |
| **Allowed amount** | **$141.00** |
| PR-1 (deductible) | −$100.00 |
| **Paid amount** | **$41.00** |

The payment is $100 below the contracted rate, and nothing is wrong. Now the
second line from the opening:

| | Amount |
|---|---|
| Billed charge | $200.00 |
| CO-45 (contractual adjustment) | −$72.00 |
| **Allowed amount** | **$128.00** |
| PR-3 (copayment) | −$30.00 |
| **Paid amount** | **$98.00** |

The payment is higher, and this is the claim worth a look: the payer allowed
$13 less than the contract says. The extra $13 sits inside the CO-45 line, where
it looks like every other contractual adjustment, and the claim closes at a
zero balance like any other.

## Which comparison finds what

| Compare | Against | What you find |
|---|---|---|
| Paid amount | Contracted rate | Mostly deductibles and copays. Flags most commercial claims, especially high-deductible ones. |
| Paid amount | Allowed amount | The patient's share. Useful for collections, not for underpayments. |
| Allowed amount | Billed charge | Your contractual adjustment. Large, normal, and not something to appeal. |
| **Allowed amount** | **Contracted rate** | **Potential underpayments.** |

## When allowed below contracted isn't an underpayment

Before calling a gap an underpayment, rule out the ordinary reasons a claim is
correctly allowed below the base rate for its code:

- **A modifier that changes payment.** Professional or technical component (26, TC), bilateral (50), multiple procedures (51), reduced or discontinued services (52, 53), assistant-at-surgery modifiers (80, 81, 82, AS) and others all reduce the allowed amount by design. Modifiers such as 25 and 59 don't change the rate.
- **Bundling and multiple-procedure edits.** A code bundled into another, or reduced as a second procedure, is allowed below its standalone rate.
- **Place of service.** A facility rate and an office rate for the same code differ. Compare office claims with the office rate.
- **Your charge was below the rate.** Many contracts pay the lesser of your charge and the rate. If your charge is lower, the allowed amount is your charge, and the fix is your own fee schedule, not an appeal.
- **Another payer was primary.** Secondary and coordination-of-benefits claims price differently.
- **The rate changed.** An amendment, or a contract tied to Medicare's annual update, moves the rate on its effective date. Compare each claim with the rate in force on its date of service.

What's left after those checks is worth taking to the payer. The usual first
step is a reprocessing request or appeal citing the contract and the claims;
the AMA publishes a sample claims underpayment letter to start from.

## Doing it for more than one claim

Line by line, this is slow. The practical version works on totals: export
allowed amounts from your practice management system grouped by CPT code,
modifier and place of service, with a claim count, and hold each group against
the rate for that code. A gap that shows up across every claim for a code, at
one payer, is a pattern rather than a one-off, and is both easier to raise and
worth more.

To do it in a spreadsheet, the [underpayment audit
template](/tools/underpayment-audit-template) has the columns and the rules
built in: a $1 tolerance, and payment-changing modifiers set aside.

The honest limit: the comparison is only as good as the rate you compare
against. A contract exhibit can be out of date. A payer's published file
reflects its rates as of that month's file, and a rate the file marks
"derived" is the payer's estimate rather than the contracted figure. When the
two sources disagree, check effective dates first.

---

*The [RateBench underpayment check](/features/underpayments) does this
comparison for you. Upload your allowed amounts by code, with no patient data,
and it holds each one against the rate the payer published for your practice on
your [fee schedule](/features/fee-schedule). It sets aside claims with
payment-changing modifiers, and shows the codes allowed below the rate, the
claims affected and the gap, worst first. It's on every [paid plan](/pricing),
from $99 a month.*

## Common questions

### Is the allowed amount the same as my contracted rate?

It should match it, for a clean claim at your usual place of service with no payment-changing modifier. The allowed amount is what the payer priced this particular claim at; the contracted rate is what your agreement says that code pays. When the allowed amount is lower and none of the usual explanations apply, that is a potential underpayment.

### Why is the paid amount lower than the allowed amount?

Because the patient owes part of the allowed amount: the deductible, coinsurance or copayment. Those appear on the remit as patient-responsibility adjustments (group code PR, reason codes 1, 2 and 3). The payer pays the allowed amount minus the patient’s share, so a lower payment on its own is not an underpayment.

### What does CO-45 mean on a remit?

Claim adjustment reason code 45 means the charge exceeds the fee schedule, maximum allowable, or contracted fee arrangement. With group code CO (contractual obligation), it is the write-down from your billed charge to the allowed amount. It is a pricing adjustment, not a denial, and an in-network practice cannot bill the patient for it.

### Should I compare my payments to my fee schedule to find underpayments?

Compare allowed amounts, not payments. Payments are net of deductibles, coinsurance and copays, so comparing them to contracted rates flags most commercial claims even when nothing is wrong, especially with high-deductible plans.

### When is an allowed amount below the contracted rate not an underpayment?

When a modifier changes what the payer pays (26, TC, 50, 51 and others), when a bundling or multiple-procedure edit applies, when the claim was in a facility setting, when your charge was lower than the rate, when another payer was primary, or when the rate was amended after the date you are comparing against.

## Sources

1. HealthCare.gov. "Glossary: allowed amount". https://www.healthcare.gov/glossary/allowed-amount/
2. HealthCare.gov. "Glossary: deductible". https://www.healthcare.gov/glossary/deductible/
3. HealthCare.gov. "Glossary: co-insurance". https://www.healthcare.gov/glossary/co-insurance/
4. HealthCare.gov. "Glossary: co-payment". https://www.healthcare.gov/glossary/co-payment/
5. CMS, Medicare Learning Network. "Understanding the Remittance Advice for Professional Providers (group codes CO and PR)". https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/Downloads/ICN905367TextOnly.pdf
6. X12. "Claim Adjustment Reason Codes (1 deductible, 2 coinsurance, 3 co-payment, 45 charge exceeds fee schedule)". https://x12.org/codes/claim-adjustment-reason-codes
7. Federal Register / U.S. Departments of the Treasury, Labor and HHS (November 12, 2020). "Transparency in Coverage, final rules (85 FR 72158)". https://www.federalregister.gov/documents/2020/11/12/2020-24591/transparency-in-coverage
8. American Medical Association. "Sample claims underpayment letter". https://www.ama-assn.org/system/files/corp/media-browser/public/psa/claims-underpayment-letter.doc