Health Insurance Out-of-Pocket Maximums


When it comes to health insurance, most people understand that if they have a deductible, they are probably going to have to pay that amount first before their health insurer starts to pay anything.  After that, co-payments apply.  Most plans require the insured or plan participant to pay 10% to 30% of the cost of the care after the deductible is met.  Some plans, of course, have a $0 deductible, so co-payments apply at the start.

What most people do not realize, however, is that there is something called an Annual Out-of-Pocket Maximum in every health insurance policy and plan regardless of whether it is an HMO, PPO, or EPO.  This number is way more important than the deductible or co-payment amount because it puts a cap on the amount that the insured has to pay.  There used to also be a cap on the amount that the insurance company had to pay, but those caps known as the lifetime maximum have been removed by the Affordable Care Act.  Previously, most health insurance policies had a $1 million or $3 million lifetime limit.  This limit very rarely came into play and was really more of a marketing gimmick.

The Annual Out-of-Pocket Maximum is vitally important for consumers, though, because it puts a cap on the amount that you have to pay for health care each calendar year.  Once you pay the amount stated in the policy or plan for the Annual Out-of-Pocket Maximum, the insurance company is required to pay 100% of covered medical expenses for the remainder of the year.

So, when shopping for health insurance if you are buying your own policy, one of the most important things to look for is the amount of the Annual Out-of-Pocket Maximum.


Posted on October 29, 2014 .