An out-of-pocket maximum is one of the most important numbers to understand when choosing a Health Insurance plan. It limits how much you generally have to pay during a plan year for covered healthcare services when you use providers and services covered under the plan’s applicable rules. Once you reach the applicable out-of-pocket maximum, your health plan generally pays 100% of covered benefits for the remainder of the plan year, subject to the terms of the plan. However, an out-of-pocket maximum does not mean you will never have other healthcare expenses. Monthly premiums, services that are not covered, and certain out-of-network costs may not count toward the limit.
What Is an Out-of-Pocket Maximum?
An out-of-pocket maximum is the most you generally pay during a plan year for covered healthcare services under the plan’s applicable cost-sharing rules. Depending on your plan, the expenses that count toward the limit can include eligible amounts you pay through:
- Deductibles
- Copayments
- Coinsurance
After reaching the applicable maximum, the health plan generally pays 100% of covered benefits for the rest of that plan year. Your specific plan documents determine exactly which expenses count toward the limit.
How Does an Out-of-Pocket Maximum Work?
Imagine a health insurance plan with a $6,000 out-of-pocket maximum. During the plan year, you pay eligible cost-sharing expenses such as:
- $2,000 toward your deductible
- $1,500 in coinsurance
- $2,500 in eligible copayments
If all of these expenses qualify toward your plan’s out-of-pocket maximum, you have reached $6,000. After reaching the limit, the plan generally pays 100% of covered benefits for the remainder of the plan year, subject to the plan’s terms. This example is simplified. Your actual health insurance costs depend on your plan, network, covered services, and applicable rules.
What Counts Toward an Out-of-Pocket Maximum?
For many health plans, eligible cost-sharing expenses for covered services can count toward the out-of-pocket maximum.
These may include:
- Deductible payments
- Copayments
- Coinsurance
However, not every amount you spend on healthcare necessarily counts. Your plan documents should be used to determine what qualifies.
What Does Not Count Toward the Out-of-Pocket Maximum?
Some healthcare-related expenses generally do not count toward an out-of-pocket maximum.
These can include:
- Monthly health insurance premiums
- Services the plan does not cover
- Certain out-of-network expenses
- Amounts above the allowed amount in situations where the plan does not protect you from those additional charges
- Other expenses excluded by the plan
Because exclusions can vary, do not assume every medical expense will reduce your remaining out-of-pocket maximum.
Out-of-Pocket Maximum vs. Deductible
An out-of-pocket maximum and deductible are related but different.
| Deductible | Out-of-Pocket Maximum |
|---|---|
| Amount you generally pay toward covered services before the plan begins paying according to deductible rules | Limit on what you generally pay for covered services during the plan year under applicable cost-sharing rules |
| Usually lower than the out-of-pocket maximum | Generally includes eligible deductible, copay, and coinsurance payments |
| Can be reached before coinsurance applies under many plans | Once reached, the plan generally pays 100% of covered benefits for the rest of the plan year |
For more information, read our guide to health insurance deductibles.
Out-of-Pocket Maximum vs. Copay
A copay is usually a fixed amount you pay for a covered service, while an out-of-pocket maximum is a yearly limit on eligible cost-sharing expenses. For example, your plan might have a $30 primary care copay and a $7,000 out-of-pocket maximum. Each eligible $30 copay may contribute toward the maximum, depending on your plan’s rules. The $7,000 figure is not the amount you pay every time you visit the doctor; it is the applicable annual limit on eligible cost-sharing.
Learn more in our article about health Insurance Copays.
Out-of-Pocket Maximum vs. Coinsurance
Coinsurance is generally a percentage of the allowed amount that you pay for a covered service. The out-of-pocket maximum is the limit on eligible cost-sharing expenses during the plan year. For example, suppose your plan requires 20% coinsurance and has a $6,000 out-of-pocket maximum. If you have an allowed medical expense of $1,000 after satisfying applicable deductible requirements, your 20% coinsurance would be $200. That $200 may count toward your out-of-pocket maximum if it is eligible cost-sharing under your plan.
For a detailed explanation, see our guide to Health Insurance Coinsurance.
Does the Out-of-Pocket Maximum Reset Every Year?
Generally, an out-of-pocket maximum applies to a specific plan year. When a new plan year begins, the accumulated amount typically resets and you begin working toward the new year’s limit. For example, if you reach your plan’s out-of-pocket maximum in December, that does not normally mean you have permanently reached the limit for future years. When the next plan year begins, the plan’s deductible and other applicable cost-sharing amounts generally start over according to the new plan year’s rules. Always check your plan documents because plan years and benefit structures can differ.
Individual vs. Family Out-of-Pocket Maximum
Family health insurance plans can have more than one out-of-pocket limit. A plan may have an individual out-of-pocket maximum for one family member and a separate family maximum that applies to the entire family.
For example, a family plan could have:
| Limit | Example |
|---|---|
| Individual out-of-pocket maximum | $6,000 |
| Family out-of-pocket maximum | $12,000 |
The exact structure depends on the plan. Some family plans use individual limits within the family plan, while others may have additional rules for when the family maximum is reached.
Why the Out-of-Pocket Maximum Matters
The out-of-pocket maximum can help you understand your potential financial exposure if you require significant healthcare during a plan year. For example, someone with a chronic condition, planned surgery, frequent specialist visits, or expensive treatment may want to pay close attention to the out-of-pocket maximum when comparing plans. A plan with a lower monthly premium may have a higher out-of-pocket maximum. Another plan may have a higher premium but a lower potential cost when you need substantial medical care. Looking at both types of costs can provide a more realistic picture of the financial differences between plans.
Does the Out-of-Pocket Maximum Include Health Insurance Premiums?
Generally, monthly health insurance premiums are separate from the out-of-pocket maximum. For example, suppose your monthly premium is $400 and your plan has a $6,000 out-of-pocket maximum. Paying your $400 monthly premium does not normally reduce the remaining $6,000 cost-sharing limit. This distinction is important when estimating your total annual healthcare spending.
Can You Still Pay for Healthcare After Reaching the Maximum?
Yes. Reaching your out-of-pocket maximum does not necessarily mean you will have no healthcare-related expenses at all.
You may still have to pay:
- Your monthly insurance premium
- Costs for services that are not covered
- Certain out-of-network expenses
- Other expenses excluded from the plan’s out-of-pocket calculation
However, for covered benefits subject to the plan’s out-of-pocket maximum, the insurer generally pays 100% after the limit is reached for the remainder of the plan year.
How to Find Your Out-of-Pocket Maximum
You can usually find the out-of-pocket maximum in your health insurance plan’s:
- Summary of Benefits and Coverage
- Evidence of Coverage
- Policy documents
- Insurance company member portal
- Plan comparison information
When comparing plans, look at both the individual and family out-of-pocket maximum if you are purchasing family coverage.
How to Compare Plans Using the Out-of-Pocket Maximum
The out-of-pocket maximum should be considered alongside the other costs of a health insurance plan.
Compare:
- Monthly premium
- Deductible
- Copays
- Coinsurance
- Out-of-pocket maximum
- Provider network
- Prescription drug costs
- Coverage for expected healthcare services
A useful approach is to consider both your likely healthcare spending and the worst-case covered cost-sharing exposure represented by the plan’s out-of-pocket maximum.
Example: Comparing Two Health Insurance Plans
Suppose you are comparing two plans:
| Feature | Plan A | Plan B |
|---|---|---|
| Monthly premium | $300 | $400 |
| Deductible | $4,000 | $2,000 |
| Coinsurance | 30% | 20% |
| Out-of-pocket maximum | $8,000 | $6,000 |
Plan A has a lower monthly premium, but Plan B has a lower deductible, lower coinsurance, and lower out-of-pocket maximum in this example. If you expect to use significant healthcare services, Plan B could potentially result in lower cost-sharing despite its higher monthly premium. But if you rarely use healthcare, the lower premium of Plan A could be more attractive. This is why comparing one number alone can be misleading.
Common Mistakes About Out-of-Pocket Maximums
Thinking the maximum includes premiums
Premiums are generally separate from the out-of-pocket maximum.
Assuming every medical expense counts
Only eligible expenses under the plan’s applicable rules generally count toward the limit.
Ignoring network rules
Out-of-network care may be treated differently depending on your plan.
Confusing the deductible with the maximum
The deductible is only one part of your overall cost-sharing structure. The out-of-pocket maximum represents a broader annual limit on eligible cost-sharing.
Forgetting that the limit can reset
The out-of-pocket maximum generally applies to a particular plan year and can reset when a new plan year begins.
Frequently Asked Questions About Out-of-Pocket Maximums
What is an out-of-pocket maximum in health insurance?
It is the maximum amount you generally pay during a plan year for covered healthcare services under the plan’s applicable cost-sharing rules.
Do premiums count toward the out-of-pocket maximum?
Generally, no. Monthly health insurance premiums are usually separate from the out-of-pocket maximum.
Does the deductible count toward the out-of-pocket maximum?
Eligible deductible payments generally count toward the out-of-pocket maximum under many health plans.
Do copays count toward the out-of-pocket maximum?
Eligible copayments generally count toward the out-of-pocket maximum, subject to the plan’s rules.
Does coinsurance count toward the out-of-pocket maximum?
Eligible coinsurance payments generally count toward the out-of-pocket maximum for covered services.
What happens after I reach my out-of-pocket maximum?
Your health plan generally pays 100% of covered benefits for the remainder of the plan year, subject to the terms and limitations of the plan.
Does the out-of-pocket maximum reset every year?
Generally, yes. The limit usually applies to a specific plan year and resets when the new plan year begins.
Is a lower out-of-pocket maximum always better?
Not necessarily. A lower maximum can provide greater protection against high covered medical expenses, but the plan may have a higher monthly premium or other costs. Compare the entire plan rather than one number.
How PolicyHelpUSA Can Help
Understanding health insurance costs becomes easier when you know how deductibles, copays, coinsurance, and out-of-pocket maximums work together. PolicyHelpUSA provides straightforward educational guides designed to help consumers understand common insurance terms and compare important plan features.
