What Is an Out-of-Pocket Maximum?

Out-of-pocket maximums, the most you will pay for healthcare in a typical year, are limits that help you control your healthcare spending.

Out-of-pocket costs are fees you pay for medical care that your health insurance plan does not reimburse. These costs include copayments, coinsurance, and your deductible, all cost-sharing mechanisms built into most health plans.

Out-of-pocket maximums are limits, the most you will pay for healthcare, and sometimes prescription drugs, during the length of your insurance policy, typically a year. The limit does not include your premiums (the monthly amount you pay for health insurance), balance billing for out-of-network providers and cost-sharing, or spending for non-essential health benefits.

Let’s say your insurance plan has a $1,000 deductible and a 20 percent coinsurance fee. Your plan’s out-of-pocket maximum is $6,600. In February, you have a skiing accident and need knee surgery. After surgery, you develop an infection. Your hospital stay lasts two weeks. Your medical bill winds up being $50,000. You are responsible for:

• The first $1,000, your deductible.
• A 20 percent coinsurance fee on the remaining $49,000, or $9,800, up to your $6,600 out-of pocket maximum.

That means your total out-of-pocket cost would be $6,600. Your insurance company is responsible for the rest of the medical bill. If you have other qualified health expenses during the rest of the year, your insurance company is responsible for those bills, too.

Different insurance plans have different out-of-pocket cost limits. Some plans have no out-of-pocket costs limits. Out-of-pocket limits are designed to control your healthcare costs. If your insurance plan has no out-of-pocket limits, you could wind up paying more for your healthcare.

It is very important to understand all of your out-of-pocket costs before you sign up for a health insurance plan. You should always consider all of your anticipated healthcare costs, as well as plan for unanticipated healthcare costs, before choosing a health insurance plan.