What is the out-of-pocket maximum and how does it work?
An out-of-pocket maximum is a cap, or limit, on the amount of money you have to pay for covered health care services in a plan year.
If you reach that limit, your health plan will pay 100% of all covered health care costs for the rest of the plan year. Some of the health insurance plans call it an out-of-pocket limit. A plan year is the 12 months between the date your coverage becomes effective and the date your coverage ends.
If you have dependents on your plan, you may have individual out-of-pocket maximums and a family out-of-pocket maximum. This depends on the conditions of the plan.
How does the maximum payout work?
The costs you pay for your covered health care services count toward your out-of-pocket maximum. This could include costs that count toward your plan’s deductible and coinsurance. Any copays you owe when you visit doctors may also be included.
Here’s an example of how an out-of-pocket maximum might work, depending on the health plan:
- Juana G. has a health plan with a $2,500 deductible, 20% coinsurance, and a $4,000 out-of-pocket maximum.
- At the start of your plan year, you have an unexpected illness. He regularly consults the doctor and various specialists. You must have many medical tests.
- You receive a medical bill totaling $2,500 and pay the costs. This meets your deductible. Because you pay out-of-pocket, it also counts toward your out-of-pocket maximum.
- He continues to see specialists regularly and is due for another round of tests.
- You pay 20% coinsurance and your share of medical costs, while your health plan pays the remaining 80%. Your bill totals $1,500. This also counts towards the out-of-pocket maximum.
- At this point, Jane has spent a total of $4,000 and has reached her out-of-pocket maximum.
- Now, your health plan will start paying 100% of your costs for covered care for the rest of the plan year.
What types of health care expenses count toward an out-of-pocket maximum?
The following are health care expenses that often count toward an out-of-pocket maximum:
- Deductible: These are costs you pay out of pocket that count toward your deductible. Since most plans cover all preventive care costs, these costs are generally for covered in-network care that is not preventive. Some plans may not allow your deductible to count toward your out-of-pocket maximum. Check the details of your plan.
- Coinsurance: Once you meet your deductible, your health plan begins sharing the costs with you. This is your coinsurance. Your share of these costs also counts toward your out-of-pocket maximum.
Are there any expenses that don’t count toward an out-of-pocket maximum?
There are a number of expenses that would not count toward an out-of-pocket maximum:
- Care and services that are not covered: Your health plan may not cover some services. These may include cosmetic treatments, weight loss surgery, and some alternative medicines.
- Costs above the allowed amount: Most plans set an allowed amount for various services. If a doctor or institution charges more than that amount, your plan will not cover that cost. This means it won’t count toward your out-of-pocket maximum either. Be sure to check the details of your plan.
- Out-of-network services and care: Most health plans have a network of doctors. These doctors agree to offer discounted rates to plan customers who use their services. If you visit doctors or institutions that don’t participate in your plan’s network, your costs may not be covered.* What you pay for out-of-network care may not count toward your out-of-pocket maximum. It’s important to make sure the providers are in your plan’s network before you visit them.
- Plan premiums: If you buy a health plan on your own and not through your employer, you generally have a monthly plan premium. This cost does not count toward your out-of-pocket maximum.
- Most preventive care: Many health plans cover most preventive care at 100%, as part of the Affordable Care Act (ACA). These are routine care, like a yearly checkup, some lab tests, flu shots, and some other vaccines, and routine checkups, like a yearly mammogram and colonoscopy. Your health plan pays for these preventive services, so those costs don’t count toward your out-of-pocket maximum.
- Plan deductibles (in some cases): For some health plans, the out-of-pocket maximum may not include costs that apply toward your deductible. Make sure you know the details of your health plan when you choose coverage.