Contractual adjustment
Updated September 30, 2026
Definition
The amount a provider writes off because of its contract with your health plan. It's the gap between the full charge and the allowed amount, and it isn't part of what you owe.
A contractual adjustment is the part of a charge a provider writes off because of its contract with your health plan. In-network providers agree to accept your plan's allowed amount. The difference between their full charge and that amount is the adjustment. Your bill may call it an "insurance adjustment."
On claim records, this adjustment usually carries the group code CO, for contractual obligation, often with reason code 45. That means the provider absorbs it. An in-network provider can't bill you for that difference on covered services.
For example, say a provider charges $1,000 and your plan's allowed amount is $400. The contractual adjustment is $600. If your plan pays $320, your share is $80. If your bill asks for more than $80, check whether the $600 adjustment is missing. Our guide to comparing a medical bill with your EOB shows where to find each number.
Related terms
Guides that use this term
- GuideMedical bill vs. EOB: how to compare them line by lineYour bill and your EOB should tell the same story. Here's how to compare them in 20 minutes, with a worked example and what to do if they don't match.
- GuideWhy is my medical bill higher than my EOB?Your bill asks for more than your EOB says you owe? See the usual reasons, a worked example, and the steps to get a corrected bill before you pay.
Sources
- Claim adjustment reason codes, X12. Accessed September 30, 2026.
- Balance billing (glossary), HealthCare.gov. Accessed September 30, 2026.
- Reading your explanation of benefits (EOB), Centers for Medicare & Medicaid Services. Accessed September 30, 2026.
This is general information, not legal or medical advice. Rules can depend on your plan and your state. Romi Care isn't an insurer, law firm, collection agency, or government program.