Understanding Maximum Out-Of-Pocket Expenses

When it comes to health care coverage, a lot of people confuse the term “maximum out-of-pocket expenses” with their deductible. They think that when they have met their deductible, they are not liable for any further out of pocket expenses and they may be surprised to get billed later for expenses that they thought were covered. It is worth taking a look at the difference between the two so that you understand maximum out-of-pocket expenses.

Maximum Out of Pocket Expense Basics

Your maximum out-of-pocket expense cap is basically a limit on how much you will need to pay out of pocket for your family’s covered medical expenses over the course of a year. Once you reach the out-of-pocket maximum for your family, your plan covers 100% of your family’s remaining medical expenses for that calendar year. This cap applies to your family’s expenses, not your individual expenses. As an individual, you have a medical deductible which must be met before you co-insurance kicks in. Your co-insurance is usually a percentage of the overall bill, such as 20 percent.

For example: let’s say that you have a deductible of $2000 and an out-of-pocket maximum of $7000. You have a medical emergency which lands you in the hospital, and your bill comes to $9600. After the first $2000, your co-insurance will pick up 80% of the bill, with you paying 20% of the remaining costs. Once you have paid $7000 out of pocket, your insurance company will pay for 100% of any remaining medical bills you and your family may incur over the rest of the year.

How Out of Pocket Expenses Applied

The maximum out-of-pocket expense generally refers to your out of pocket expenses across the entire family. If you and your children have separate individual deductibles, these will count individually against the entire out of pocket expense. Both individual and family deductibles are counted toward the out-of-pocket maximum. Check your terms and conditions to find out what the out-of-pocket maximum is for your family’s policy.