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.
After that, your insurance company will cover any other covered medical expenses you have for the rest of the year, no matter how high they are. (If any expenses aren’t included in your health plan, such as acupuncture or in vitro fertilization, for example, they won’t count toward your out-of-pocket maximum.)
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.
- First, you pay your deductible, which is $1,000.
- Then, you pay 20 percent of every medical bill until you reach $5,000 total.
- 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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