What is an out of pocket maximum?

Health plans generally have what’s called an out of pocket maximum. This feature is like a safety net and can vary from $2000/ year on group plans to $5000 on individual plans. This amount serves as a safety net and if your total out pocket costs (copays, deductibles, co-insurance) for covered benefits reaches your plan’s out of pocket maximum amount, your insurance company will pay 100% of the cost of covered benefits for the rest of the year.

So what does this mean to you? If you have a really difficult year and require lots of medical services you will see a light at the end of the tunnel as far as your out of pocket costs are concerned. Imagine having a 10 or 20% coinsurance of eligible charges under your plan for inpatient hospital care and the average daily hospital stay costing $3000? Those out of pocket costs can add up quickly. Having an out of pocket maximum can put a cap on your out of pocket costs.

If you do not have much in savings, look for a plan with a lower out of pocket maximum limit to help minimize your financial risk in case of a major medical event.