Disallowance is a contractual adjustment agreed upon by the medical provider and insurance company before a service is rendered.

Disallowance is an adjustment, which is defined by the RBMA Radiology Business Management Association as:

Quotation From the RBMA Receivable Standard Definitions

“Amounts which are never expected to be collected, by virtue of laws regulations, contracts or internal policies applicable to the services provided by the entity.”

In most cases your physician has signed a contract with an insurance company to apply discounted rates for services provided. This discounted rate is the disallowance, or the difference between the actual amount of the procedure and the amount agreed upon by the insurance company and the physician.

Completing this type of contract will give the physician “in network” status.

If you visit a physician that is “in network”, the amount you will be responsible for paying will generally be less than if you go to an out-of-network physician. In some case the insurance company will either pay less or not pay anything for services you receive from non-network physicians.