Health Insurance 101: What’s an Out-of-Pocket Maximum?

As bills pile up, you might think the limit does not exist. But it does!

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As you compare health plans at yearly enrollment, you might be checking out the deductible. That’s how much you have to pay before insurance kicks in. However, when you reach the deductible of your health insurance plan, you can’t just assume you’re fully covered and no longer have to pay for health services. For that, you’ll want to look at the out-of-pocket maximum.

Out-of-Pocket Maximum, Defined

The out-of-pocket maximum is the ceiling of what you’d have to pay in a policy year. After that, insurance covers 100 percent of the medical expenses.

Throughout the policy year, you’ll pay “out-of-pocket” costs that count toward this limit. This includes your copayments (set fees for healthcare services) and your coinsurances (set percentages of the total bill). It also includes when you pay full price for a service before you’ve met your deductible.

Wait—How’s That Different From My Deductible?

The out-of-pocket maximum is different from a deductible, which is how much you have to pay for healthcare services before your insurance kicks in. Once you reach a deductible, you generally won’t have to pay full price for health services, depending on what’s covered on the health insurance plan.

Instead, you may only need to pay a copay or coinsurance for the remainder of the policy year after you reach your deductible. By contrast, once you reach your out-of-pocket maximum, then you won’t need to pay anything. At that point, your insurance will generally cover the full bill.

It's also generally much higher than a deductible. At the end of the policy year, both your deductible and your out-of-pocket maximum reset.

Can I Control How Large It Will Be?

Your out-of-pocket maximum ensures that there’s a limit to how much you have to pay for health care in a given year. This reduces the risk that a medical emergency or serious diagnosis would lead to financial ruin.

Different plans offer different limits. If you don’t see what your out-of-pocket max is when enrolling in a plan, talk to a representative for your health insurance company.