There are a lot of special terms and long words associated with health insurance: deductible, coinsurance, referrals, prior authorization, and more. Today, we’re going to focus on what out-of-pocket maximum means to you.
Before we get to the out-of-pocket maximum, or OOP max, you should know what goes into out-of-pocket expenses. As you know, most health insurance plans only pay for a percentage of the cost of your doctor/hospital bill.
When I was in high school and started going to doctor’s appointments by myself, at first I was confused as to why I had to hand $10 or $20 to the receptionist before seeing the doctor. Didn’t having health insurance mean I just hand them my card and walk on in? Sort of. The money I brought to the appointment was for the copayment, which is also called an out-of-pocket expense, since I was paying ‘out-of-pocket’ for it. Other out-of-pocket expenses include the coinsurance and deductibles you are responsible for as part of your health plan.
These out-of-pocket expenses can add up quickly, which is why there is a limit to how much you might have to pay out of pocket each year. Your copayments, coinsurance, and deductibles will continue to add up until you reach the out-of-pocket maximum specified by your health plan.
Once you reach the maximum of out-of-pocket expenses for the year, your insurance company will pay 100% of your covered health care costs, up to a preset benefit maximum for the rest of the year (Note: no yearly dollar limits on essential health benefits are allowed for plan years starting January 1, 2014). But remember, the health insurance company only pays for covered medical costs. Things like elective plastic surgery or bariatric surgery may not be covered or count toward your out-of-pocket maximum. Also, premiums, balance-billing for out-of-network providers, or other non-essential health benefits are NOT counted toward your out-of-pocket maximum.
The maximum out-of-pocket cost limit for any individual Marketplace plan for 2014 can be no more than $6,350 for an individual plan and $12,700 for a family plan.
Check your health plan policy for out-of-pocket maximums and for services that are covered by your plan. Also, if your health plan isn’t on the Marketplace, the out-of-pocket maximum doesn’t necessarily have to stay within the $6,350/$12,700 requirement.
As a smart consumer, be sure to take a look at the OOP max when you choose a health insurance plan during open enrollment each year.
For additional explanations of health care terminology, check out our Common Health Insurance Terms and Definitions list on our Member page.