What Happens When You Hit Your Out-of-Pocket Maximum?

Health insurance plans involve cost-sharing arrangements with an insurer. A financial safeguard, the out-of-pocket maximum, limits how much a person pays from their own funds within a given period. This protects individuals from excessively high medical costs and provides predictability in managing potential expenditures.

Defining the Out-of-Pocket Maximum

An out-of-pocket maximum, or limit, is the most an individual or family will pay for covered healthcare services during a policy year. Once this predetermined amount is reached, the health plan assumes responsibility for 100% of additional qualified expenses for the remainder of that year. This maximum offers a financial safety net, preventing overwhelming medical bills.

Cost-sharing components contribute to this limit. A deductible is the initial amount an individual pays for covered services before their insurance plan begins to share costs. Once the deductible is met, copayments and coinsurance apply.

Copayments are fixed amounts for specific services, like a doctor’s visit or a prescription. Coinsurance is a percentage of the cost of covered services paid after the deductible. All these payments accumulate towards the out-of-pocket maximum.

This limit applies to services from in-network providers and for essential health benefits. Plans set individual out-of-pocket maximums for each person and a family maximum for the group. Federal regulations establish upper limits for these maximums each year. For instance, in 2025, the federal upper limit for an individual’s out-of-pocket maximum is $9,200, and for a family, it is $18,400.

Reaching Your Out-of-Pocket Maximum

Once an individual or family reaches their out-of-pocket maximum, their financial responsibility for healthcare shifts. The health plan covers 100% of the cost for all covered, in-network essential health benefits for the remainder of that policy year. The insured no longer pays deductibles, copayments, or coinsurance for these services.

Services such as routine doctor visits, specialist appointments, prescription drugs, laboratory tests, and hospital stays become fully covered by the plan. This coverage continues until the next policy year begins, providing financial relief. Reaching this maximum offers predictability, as healthcare expenses for the year will not exceed this cap. This is valuable for those facing chronic conditions or serious illnesses.

What Counts Towards Your Maximum

Payments made towards the annual deductible count towards the out-of-pocket maximum. This includes the initial amount an individual pays for covered medical services before the insurance plan begins to share costs.

Fixed copayments for covered services, such as doctor visits or emergency room visits, accumulate towards the maximum. Coinsurance, a percentage of the cost of covered services paid after the deductible, also contributes. These contributions are for covered services from in-network providers.

Most plans include prescription drug costs in the calculation of the out-of-pocket maximum. Review plan documents, as some plans may have separate limits for prescription medications. Only expenses for essential health benefits are considered when calculating progress towards the maximum.

Expenses Not Counting Towards Your Maximum

Certain expenses do not contribute to the out-of-pocket maximum. The monthly premium paid to maintain insurance coverage is one such expense. Premiums are the cost of having the insurance policy itself and do not count towards the maximum.

Charges from out-of-network providers do not count towards the in-network out-of-pocket maximum. Services not covered by the health plan, such as cosmetic procedures or experimental treatments, also do not contribute.

Balance billing amounts, which occur when an out-of-network provider charges more than the allowed amount by the insurer, are not counted towards the out-of-pocket maximum. The difference becomes the patient’s responsibility. Costs for services outside the scope of essential health benefits may not be included.

Tracking and Resetting Your Maximum

Monitoring progress towards the out-of-pocket maximum is helpful. Insurers provide Explanation of Benefits (EOB) statements after medical services, detailing charges and amounts applied towards the deductible and maximum. Many health insurance companies offer online portals or mobile applications to track accumulated expenses. Keeping personal records of medical bills and payments can also assist.

The out-of-pocket maximum resets at the beginning of each new policy year. For many plans, this aligns with the calendar year, restarting on January 1st. Any amount paid towards the maximum in one year does not carry over to the next. Financial responsibility for covered services begins anew with the new policy year.