What is an out-of-pocket maximum and how does it work?

Key takeaways:

• An out-of-pocket maximum, which is also called an out-of-pocket limit, is an upper “cap” on spending available on most health insurance plans. If you have a plan with this feature, once you reach this amount, your health insurance typically pays the billed allowable cost for covered health expenses for the rest of your plan year.
  • For example, if your out-of-pocket max has been met and is $7,000 and you have a surgery that costs $30,000, you’ll only pay $7,000 — and your insurance should cover the rest.
  • Or, if you have ongoing doctor visits, prescriptions, and tests that slowly add up, you might reach your max over several months — and then pay nothing for the rest of your plan year for covered services.
• The costs that help you reach your out-of-pocket maximum include your deductible (the amount you pay for medical expenses before your insurance starts paying), copays (fixed fees for things like doctor visits or prescriptions), and coinsurance (the percentage you pay for care after meeting your deductible). It does not include your monthly premium or any care your insurance plan doesn’t cover. Knowing what counts can help you plan ahead and avoid surprise bills.
• Hitting your out-of-pocket maximum can help protect you from high medical costs. This is especially helpful if you get sick, have an accident, or need a lot of care during the year — since there will be a limit on how much you have to pay, no matter how much care you need.

How does an out-of-pocket maximum work?

Put simply, your out-of-pocket maximum is the highest amount you’ll pay for covered health care in a year. To understand how it works, it helps to know a few key terms:

• Deductible: What you pay for certain services before your insurance helps. For example, if your deductible is $1,000, you pay that first before cost-sharing starts.
• Copayments (or copays): Set amounts you pay for specific services, like $25 for a doctor visit or $10 for a generic prescription.
• Coinsurance: The percentage you pay after meeting your deductible. If your coinsurance is 20%, your plan pays 80% and you pay 20%.

Key point: All the money you spend towards your deductible, and on copays and coinsurance count toward reaching your out-of-pocket maximum.

What services help you reach your out-of-pocket maximum?

To expand on the above, as long as you’re staying in-network with your health insurance plan, many of your out-of-pocket costs for health insurance will count towards reaching your out-of-pocket-limit. Let’s look at some specific examples, below:

Costs that typically count toward your out-of-pocket maximum:

Types of covered cost:	Details:
Prescription Drugs	Costs for medications usually count toward your max. After hitting the max, insurance pays fully.
Hospital Stays	Costs for hospital rooms, surgeries, and procedures typically count toward your max.
Lab Tests and Imaging	Costs for blood tests, X-rays, MRIs, and other diagnostics usually count toward your max.
Outpatient Services	Procedures and therapies done outside the hospital (like physical therapy) count toward your max.
Doctor Visits	Includes visits to primary care providers and specialists. Copays and coinsurance usually apply.
Medical Equipment & Supplies	Expenses for items like wheelchairs, crutches, or durable medical supplies typically count.

What doesn’t count toward reaching your out-of-pocket limit?

Even if you hit your out-of-pocket maximum, there are still some costs you may have to pay. These expenses don’t count toward your max — so they stay separate, and you’ll still be responsible for them no matter what. Here are a few common examples:

• Out-of-network care: Most out-of-pocket maximums only apply to in-network services. If you go out of network, your costs may not count toward your max.
• Non-covered services: If your plan doesn’t cover something (like cosmetic surgery), you’ll pay the full amount.
• Monthly premiums: This is what you pay to keep your plan active. It doesn’t count toward your out-of-pocket max.
• Balance billing: If you see a provider outside your network, they may bill you for what your insurance didn’t pay. That extra amount doesn’t count toward your limit.

Does everyone have the same out-of-pocket maximum?

No — while most health insurance plans have an out-of-pocket limit, the amount varies. The amount you’ll pay depends on the health plan you choose.

The government sets a legal limit on how high your out-of-pocket max can be. For example, in 2025, the most it can be for a plan sold through the Health Insurance Marketplace — the government-run website where people can buy insurance — is $9,200 for one person and $18,400 for a family. But many plans have lower limits.

Here are a few reasons why out-of-pocket maximums can be different:

• Plan type: Some plans have lower out-of-pocket limits but higher monthly premiums.
• Marketplace vs. employer plans: Employer plans may have different limits than government Marketplace plans.
• Individual vs. family plans: Family plans often have both individual and family limits.

So, while there’s a legal ceiling, your specific out-of-pocket maximum will depend on your plan — and it’s a good idea to check that number when comparing your options.

Example: How an out-of-pocket-maximum works

To see how an out-of-pocket maximum works in real life, let’s look at a fictional example. In this case, Emma has a health insurance plan with a $2,000 deductible, 20% coinsurance, and a $7,000 out-of-pocket maximum. This example assumes she’s using in-network providers for covered services, so all her payments count toward that max.

Example: How Emma Reaches Her Out-of-Pocket Maximum

Step:	What happened:	Cost of care:	What Emma pays:	Running total paid:
1	Surgery after a skiing accident	$10,000	Pays full $2,000 deductible on her health plan	$2,000
2	Follow-up doctor visits and physical therapy	$8,000	Pays 20% coinsurance = $1,600	$3,600
3	Monthly prescriptions and continued therapy	$3,500	Pays 20% coinsurance = $700	$4,300
4	More care over time (therapy, copays, etc.)	$13,500	Pays until she hits $7,000 max	$7,000 (max reached)
5	Remaining care for the year	$10,000+	$0 — Insurance covers 100%	Still $7,000

How to find and compare out-of-pocket maximums

When you’re choosing a health plan, it’s important to know what the out-of-pocket maximum is — and how it fits your needs and budget. Here’s how to find and compare this number:

• Check the Summary of Benefits and Coverage (SBC): This document breaks down your plan costs, including the deductible, copays, coinsurance, and out-of-pocket limit.
• Review plan details online: Most sites show the individual and family out-of-pocket max.
• Compare plans side by side: eHealth lets you shop and compare out-of-pocket maximums, premiums, and coverage options from different insurers all in one place. You can also filter by your preferred price range or benefit type.
• Ask a licensed insurance agent: If you’re unsure which plan is right for you, a licensed insurance agent can help explain the details and recommend options based on your needs — including plans with lower or higher out-of-pocket limits.

Understanding this number can help you avoid surprise costs and choose a plan that protects your health — and your wallet.

Frequently asked questions (FAQs) on out-of-pocket maximums

What plans don’t have an out-of-pocket maximum?
Not all health insurance plans include an out-of-pocket maximum, but most do. Plans you enroll in through the Health Insurance Marketplace must have one by law. However, some plans — like older “grandfathered” plans, short-term health insurance, or limited coverage plans (such as dental-only or accident-only) — might not have an out-of-pocket max. Always check your plan details to be sure.

What are the benefits of an out-of-pocket maximum?
An out-of-pocket maximum protects you from very high medical bills. Once you reach the limit, your insurance typically pays 100% for covered in-network care. This gives you peace of mind, helps with budgeting, and ensures you won’t face unlimited costs if you get seriously sick or injured.

Does each person in a family plan have their own max?
Yes. In most family plans, each person has an individual out-of-pocket max, and there’s also a family max. Once one person hits their individual max, their covered care is free for the rest of the year. If the entire family reaches the family max, all members stop paying for covered services.

What happens if I change plans mid-year?
If you switch health plans during the year, your out-of-pocket payments typically don’t carry over to the new plan. You’ll start fresh with a new deductible and a new out-of-pocket max — even if you already paid a lot under your old plan.