What Is an Out-of-Pocket Maximum?

How Does an Out-of-Pocket Maximum Work?

When you sign up for health insurance, your plan will provide information about your out-of-pocket maximum. This is the predetermined amount that you must pay in a year before all your covered, in-network care will be fully covered.

You pay for medical services throughout the year via:

• Deductibles This is the amount of money you have to spend before your insurance company splits the bill with you.
• Coinsurance This is the percentage of the cost of bills that you share with your insurer after you reach your deductible.
• Copay This is a fee that you pay when you receive a medical service.

All of these costs add up and count toward your out-of-pocket maximum. Once you reach that amount, you no longer have to pay any cost-sharing for in-network covered expenses, but you will continue to pay your premiums.

Example of an Out-of-Pocket Maximum

Let’s say your out-of-pocket maximum is $5,000, your deductible is $1,000, and your coinsurance is 20 percent. Here’s an example of how an out-of-pocket maximum might work for you.

1. First, you pay your deductible, which is $1,000.
2. Then, you pay 20 percent of every medical bill until you reach $5,000 total.
3. Once you reach $5,000, your insurer will pay 100 percent of your in-network covered services for the rest of the year.

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Do All Expenses Go Toward the Out-of-Pocket Maximum?

• Monthly Premiums These are the payments that keep your insurance active.
• Out-of-Network Care These are payments made to a doctor or hospital that your insurance company doesn’t work with. (One exception: Out-of-network emergency care expenses can go toward your out-of-pocket maximum under the No Surprises Act.)

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• Services That Aren’t Covered These include cosmetic surgery and alternative treatments, for example.
• Preventive Care This includes services such as vaccines and yearly wellness visits, which are already fully covered by many health insurance plans under preventive care.
• Additional Costs If a doctor or hospital charges more than the allowed amount for a service, it doesn’t apply toward your maximum.

Different plans have different coverage options, though, so it’s important to check the details of your policy.

Do All Types of Plans Have an Out-of-Pocket Maximum?

• $12,000 for an individual
• $24,000 for a family

Different types of plans also offer different out-of-pocket maximum options.

Individual Plan

With an individual plan, only one person is on the policy. When that individual reaches their out-of-pocket maximum, the insurer will start paying 100 percent of their covered medical costs for the rest of the year.

Family Plan

• Individual Maximum Each person in the family has their own max to hit. Once they reach this amount, the insurer will pay 100 percent of that individual’s covered, in-network care.
• Family Maximum The entire family’s expenses count toward the max. Once the family’s combined spending reaches it, the plan pays 100 percent of covered care for everyone, even those who haven’t met their individual maximum.

HMO vs. PPO