What does "out-of-pocket maximum" mean in health insurance terminology?

The term "out-of-pocket maximum" refers to the maximum amount that an insured individual will have to pay for covered medical expenses within a policy year before their health insurance plan starts to cover 100% of the costs. This limit includes various forms of cost-sharing, such as deductibles, copayments, and coinsurance. Once the insured reaches this maximum limit, the insurance company will pay for all additional covered expenses for the remainder of that policy year without any further cost to the insured.

This concept is crucial for individuals to understand as it protects them from high out-of-pocket costs for healthcare services over time, ensuring that they aren't exposed to endless financial liabilities. It promotes a degree of financial security for policyholders, allowing them to budget for their healthcare expenses more effectively.