What is an "out-of-pocket maximum"?

An "out-of-pocket maximum" refers specifically to the highest amount an insured individual will be required to pay for covered healthcare services during a plan year. Once this limit is reached, the insurance policy typically covers 100% of the remaining costs for covered services. This limit is designed to protect policyholders from excessive medical expenses, providing a sense of financial security in managing healthcare costs.

The concept is fundamental in health insurance as it helps consumers budget for their healthcare expenses, knowing the maximum exposure they could face in a year. In many plans, the out-of-pocket maximum includes expenses like deductibles, copayments, and coinsurance for covered services, but does not include premiums or services that are not covered by the policy. This ensures that individuals are not burdened with limitless expenses should they face substantial medical needs.