Does the Out-of-Pocket Maximum Include Premiums?

An out-of-pocket maximum in health insurance represents the most an individual will pay for covered healthcare services within a specific policy period, typically a year. Once this financial limit is reached, the health insurance plan is generally responsible for 100% of the covered, in-network medical expenses for the remainder of that policy year. Health insurance premiums, however, do not count towards this out-of-pocket maximum.

Understanding Key Health Insurance Terms

The premium is the regular payment made to the insurance company to maintain active coverage, regardless of whether healthcare services are utilized. This payment is typically billed monthly and is necessary to keep the policy in force.

A deductible is the amount an insured individual must pay for covered healthcare services before the insurance company begins to contribute to the costs. For instance, if a plan has a $1,000 deductible, the policyholder pays the first $1,000 of covered medical expenses. Once this amount is met, the insurance plan starts to share the costs of subsequent services.

A copayment, or copay, is a fixed dollar amount paid by the insured for a covered healthcare service at the time of service. This amount can vary depending on the type of service, such as a doctor’s visit, specialist appointment, or prescription refill. Copayments are a form of cost-sharing between the policyholder and the insurer.

Coinsurance represents a percentage of the costs of covered healthcare services that the insured pays after the deductible has been satisfied. For example, with an 80/20 coinsurance arrangement, the insurance plan pays 80% of the costs, and the insured is responsible for the remaining 20%. This cost-sharing continues until the out-of-pocket maximum is reached.

What Expenses Count Towards Your Out-of-Pocket Maximum

Payments for healthcare services accumulate towards the out-of-pocket maximum, offering a financial safety net. The amounts paid towards the deductible are included in this calculation. As individuals pay for their initial covered medical expenses to meet their deductible, these payments systematically contribute to the overall out-of-pocket limit.

Copayments also count towards the out-of-pocket maximum. Each fixed amount paid for doctor visits, prescriptions, or other covered services adds to the total amount that accumulates towards this annual cap. This ensures that these frequent, smaller expenses are factored into the overall spending limit.

Coinsurance payments similarly contribute to reaching the out-of-pocket maximum. After the deductible is met, the percentage of costs that the insured pays for covered services, such as 20% of a medical bill, continues to add up. Federal regulations set upper limits for these maximums; for example, in 2025, the limit is $9,200 for an individual and $18,400 for a family.

Why Premiums Are Not Included in the Out-of-Pocket Maximum

Health insurance premiums are distinct from the costs that count towards the out-of-pocket maximum because they represent the price of having insurance coverage itself. Premiums are a fixed, regular expense, typically paid monthly, that secures access to the benefits and protections offered by the health plan. These payments are required regardless of whether any medical services are utilized during the policy period.

The out-of-pocket maximum, conversely, applies to the costs incurred when actually using healthcare services, such as deductibles, copayments, and coinsurance. These are variable expenses directly tied to medical care received.

Premiums are fundamentally separate, serving as the ongoing cost to maintain eligibility for the coverage that the out-of-pocket maximum then caps. Even after reaching the out-of-pocket maximum and having the insurer pay 100% of covered medical costs, policyholders must continue to pay their premiums to keep their health insurance active. This distinction highlights that premiums are a cost of access, while the out-of-pocket maximum relates to the costs of care.