How Does My Out of Pocket Maximum Work?

Individual and Family

How Does My Out of Pocket Maximum Work?

Published on April 04, 2018

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If you have health insurance, the most that you’ll have to pay for covered medical services in a year is called your out of pocket maximum. Depending on the plan you have, “covered services” may be different and your out of pocket maximum will vary from that of other plans.

What costs go towards meeting the out of pocket maximum?

It’s important to know what costs you pay out of pocket. Below are some costs that are included in most health insurance plans:

  • Deductible. Your deductible is the set amount of money you have to spend on qualified medical costs before insurance kicks in and starts contributing to your medical costs. Generally, any costs that go towards meeting your deductible also go towards your out of pocket maximum.
  • Coinsurance. This amount comes as a percentage. With most plans, after you’ve met your deductible you and your insurance split the cost of your qualified medical expenses. If your coinsurance is 20%, that means after your deductible is met, you will pay 20% of medical bills and your insurance company will pay 80%.
  • Copayment. Unlike coinsurance, this is a predetermined rate you pay for medical care at the time that you need it. When you visit the doctor or hospital, your plan may have an outlined amount such as $40 for office visits and $250 for a hospital visit that you will have to pay.

The set monthly premium that you pay to be covered by your plan does not go towards your maximum out of pocket costs. Even after you have met your out of pocket maximum, you will continue paying your monthly premium unless you cancel the plan, or change to a new plan during open enrollment period.
Medical services that you pay for, and which aren’t covered by your plan, will not count towards your out of pocket maximum.
The set monthly premium that you pay to be covered by your plan does not go towards your maximum out of pocket costs. Even after you have met your out of pocket maximum, you will continue paying your monthly premium unless you cancel the plan, or change to a new plan during open enrollment period.
Medical services that you pay for, and which aren’t covered by your plan, will not count towards your out of pocket maximum.

Do I have a copayment after out of pocket maximum?

This is a common question that comes up, but it’s easy to answer if you know the technical definitions for both of these health insurance terms. A copayment is an out of pocket payment that you make towards typical medical costs like doctor’s office visits or an emergency room visit. An out of pocket maximum is the set amount of money you will have to pay in a year on covered medical costs. In most plans, there is no copayment for covered medical services after you have met your out of pocket maximum. All plans are different though, so make sure to pay attention to plan details when buying a plan. If you’ve already bought a plan, you can look at your copayment details and make sure that you’ll have no copayment to pay after you’ve met your out of pocket maximum.
In most cases, though, after you’ve met the set limit for out of pocket costs, insurance will be paying for 100% of covered medical expenses.

Does my out of pocket maximum include my deductible?

The short answer is yes. Again, knowing the definitions for both these terms will help in answering questions you have about what’s included in your out of pocket maximum. Your deductible is a dollar amount that you pay out of pocket, after which your insurance company will start contributing to medical costs. Your out of pocket maximum is a total of everything you’ve paid out of pocket for medical services. So if you had a $400 emergency room visit before meeting your deductible, it will help you get close to meeting both that and the out of pocket maximum.

Low out of pocket maximum

Based on the definition of how out of pocket maximums work, it might seem like you always want to go for the plan with the lowest out of pocket max, right? Not for everyone.
For some people it will pay off to have a low deductible and out of pocket maximum. They will quickly meet those amounts and have insurance cover almost all of their medical costs. But if you’re someone who doesn’t expect to spend thousands of dollars on medical expenses early on in the year, you might not meet your out of pocket maximum regardless of whether it’s low or high.  Oftentimes plans with low deductibles and out of pocket costs come with higher premiums. So if you don’t expect to meet your out of pocket maximum before the end of the year, it might be more affordable for you to go for a plan with a lower premium.
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 only for general education.

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