If you have health insurance, you may have heard of the “out-of-pocket maximum.” Here’s an overview of how it works, including what costs count and what costs don’t, and what happens once the out-of-pocket maximum is reached.
what is an out-of-pocket maximum?
Simply put, your out-of-pocket maximum is the most you’ll have to pay for covered medical services in a given year. think of it as an annual cap on your health care costs. once you reach that limit, the plan covers all the costs of covered medical expenses for the rest of the year.
Depending on your plan, “covered services” and your maximum out-of-pocket amount will vary. however, by law, the out-of-pocket limit for Marketplace plans cannot exceed a set limit each year. for plan year 2021, the out-of-pocket limit for Marketplace plans cannot exceed $8,550 for individuals or $17,100 for families.
Not all plans have an out-of-pocket maximum, so if this is a benefit you’re interested in, be sure to read the plan details carefully. If you wish, an ehealth-licensed insurance agent can guide you through your coverage options and help you find plans that include this benefit.
benefits of a maximum payout
First, it’s important to understand why you want to have an out-of-pocket maximum on your health insurance plan. this is important because it means that there is a maximum amount of money that you have to pay out of your own pocket. If you get this number right, that means your health insurance company will be responsible for covering all your other expenses. You should always take a look at your plan to see if there is a maximum you will ever have to pay out of pocket.
what costs are used to reach the out-of-pocket maximum?
Even with health coverage, you’ll still have out-of-pocket costs. Not all costs count toward your out-of-pocket maximum, but most cost sharing does. cost sharing is what you pay out-of-pocket for covered medical services and prescriptions.
Here are some costs that are included in most health insurance plans:
- Deductible: Your deductible is the amount you must first spend on eligible medical costs before insurance kicks in and starts paying its share. Generally, any cost that goes toward meeting your deductible also goes toward your out-of-pocket maximum.
- coinsurance: This is a percentage amount you may owe for covered medical services and prescription drugs once you have met your deductible. So, for example, if your coinsurance is 20%, you’ll pay 20% of the total medical bill and your health plan will pay 80%.
- Copayment: Unlike coinsurance, this is a flat rate you can pay for covered health care, usually at the time you receive the service. When you visit the doctor, your plan may have a set copay amount, such as a $40 copay for office visits, that you pay at the time of the visit.
- Premiums: The monthly plan premiums are not included in your Maximum Out-of-Pocket. Even after you’ve reached your out-of-pocket maximum, you’ll still pay your monthly premium unless you cancel your plan.
- non-covered services: Medical services that are not covered will not count toward your out-of-pocket maximum. This could include out-of-network services if your plan requires you to use network providers. you will most likely have to pay these costs out of pocket.
- balance billing: If your provider charges more than the allowed amount that your insurance will cover, you may have to pay the difference.
what costs don’t count toward the out-of-pocket maximum?
Not all of your costs go toward your annual limit, and it’s important to know which ones don’t count. Costs that don’t count toward your out-of-pocket maximum include:
Do I have a copay after the out-of-pocket maximum?
This is a common question that comes up, but it’s easy to answer if you know the technical definitions of these two health insurance terms. A copay is an out-of-pocket payment you make for typical medical costs, like visits to a doctor’s office or a visit to the emergency room. An out-of-pocket maximum is the set amount of money you’ll have to pay in a year for covered medical costs. In most plans, there is no copay for covered medical services after you’ve reached your out-of-pocket maximum. however, all plans are different, so be sure to pay attention to plan details when shopping for a plan. If you’ve already purchased a plan, you can view your copay details and make sure you won’t have to pay any copays after you’ve reached your out-of-pocket maximum.
In most cases, however, once you’ve reached your out-of-pocket limit, insurance will pay 100% of covered medical expenses.
what happens after I reach my out-of-pocket maximum?
You may be wondering if you will continue to have cost sharing, such as copays, once you’ve reached your out-of-pocket maximum.
As mentioned, you may have copays or coinsurance for covered medical services, and these types of cost-sharing expenses count toward the out-of-pocket limit. Once you’ve reached your annual limit, your insurance generally pays 100% of covered medical expenses. therefore, you will not have to pay any more cost sharing for the rest of the year.
what is the difference between a deductible and an out-of-pocket limit?
As mentioned above, your deductible is the amount you pay for covered services before your benefits kick in. In other words, before you meet your plan’s deductible, you pay 100% of covered medical costs.
This deductible amount may vary from plan to plan and not all plans have one. once you’ve met your deductible, your plan begins paying its share of the costs. then, instead of paying the full cost of services, you’ll usually pay a copay or coinsurance for medical care and prescriptions.
See also: Coordination of Benefits | CMS
Your deductible is part of your out-of-pocket costs and counts toward your annual limit. Rather, your out-of-pocket limit is the most you’ll pay for covered health care, and costs like deductibles, copays, and coinsurance go toward reaching it.
If you have further questions about the difference between deductibles and out-of-pocket limits, an ehealth-licensed insurance agent will be happy to help. our trusted agents can also offer advice on how to reduce your out-of-pocket costs by comparing coverage options.
Should I find a plan with a low out-of-pocket maximum?
Given how out-of-pocket maximums work, it might seem like a good idea to find the plan with the lowest annual limit. but the answer is not so simple.
For some people, it makes sense to find a plan with a low deductible and an out-of-pocket maximum. they will quickly reach those amounts and the insurance will cover almost all of the remaining medical costs for the year. If you have high medical costs and you know how much you spend each year, this option might work for you.
But if you’re someone who doesn’t expect to spend thousands of dollars on medical expenses at the beginning of the year, you may not reach your out-of-pocket maximum, regardless of whether it’s high or low.
Plans with low deductibles and out-of-pocket costs are often offset by higher premiums. So if you don’t expect to reach your out-of-pocket maximum before the end of the year, it may be more affordable for you to opt for a plan with a lower premium. There can be many factors to consider, so it may be helpful to speak with a licensed ehealth insurance agent who can discuss your options and find a plan that suits your situation.
How do I find a plan that’s right for me?
Finding a plan that works for you will come down to understanding your priorities, budget, and medical needs. If you need help exploring individual and family health plan options, eHealth’s licensed insurance agents can offer their expertise. simply call us for personalized support today, or start browsing at your convenience using the plan search tool.
Each plan has its own terms and limitations, so be sure to check the official plan documents to understand how that specific plan works. this article is for general education only.