What Is an Out-of-Pocket Maximum for Health Insurance?

An out-of-pocket maximum in health insurance represents a financial safeguard for policyholders. This limit defines the total amount an individual or family will pay for covered healthcare services within a specific timeframe. It provides a clear cap on spending, offering predictability in healthcare budgeting.

Understanding the Out-of-Pocket Maximum

The out-of-pocket maximum, sometimes referred to as an out-of-pocket limit, is the highest amount a policyholder is responsible for paying for covered healthcare services during a plan year. Once this predetermined limit is met, the health insurance plan typically assumes responsibility for 100% of all additional covered medical expenses for the remainder of that same plan year. This mechanism shields individuals from overwhelming medical costs, particularly in situations involving significant illness or injury.

A “plan year” refers to the 12-month period during which your health insurance coverage is active, starting from the effective date of your policy. This limit is established by each specific health insurance plan, although federal regulations impose an upper boundary on how high these out-of-pocket costs can be. For example, in 2025, the maximum out-of-pocket limit for individual plans on the Health Insurance Marketplace is $9,200, and $18,400 for family plans.

Components That Contribute

Several types of expenses contribute directly to reaching the out-of-pocket maximum. These are typically the costs you pay for covered services before your insurance begins to cover a larger portion of the bill. All money spent on deductibles, copayments, and coinsurance for covered services generally counts toward this maximum.

A deductible is the initial amount you must pay for covered health services before your insurance plan starts to contribute to the costs. For instance, if you have a $2,500 deductible, that entire sum, once paid, moves you closer to your out-of-pocket limit.

Copayments, or copays, are fixed amounts you pay for specific covered health services, such as a doctor’s visit or a prescription refill. For example, a $30 copay for a specialist visit adds to your total out-of-pocket spending for the year.

Coinsurance represents your share of the costs for a covered healthcare service, calculated as a percentage of the allowed amount for that service. After meeting your deductible, you typically pay this percentage, and the insurance plan covers the rest.

Expenses Excluded

Not all healthcare expenses count towards an out-of-pocket maximum. Certain costs remain the policyholder’s responsibility even after the maximum limit is reached.

Monthly premiums, the regular payments made to maintain health insurance coverage, do not count towards the out-of-pocket maximum. These payments are required to keep your policy active, regardless of whether you access medical care.

Costs for services not covered by the health insurance plan are also excluded. This includes procedures or treatments deemed non-essential or experimental by the insurer, such as cosmetic surgery or certain alternative therapies.

Expenses from out-of-network providers typically do not count towards an in-network out-of-pocket maximum. Many plans have separate, often higher, out-of-network maximums. Balance billing, which occurs when an out-of-network provider charges you for the difference between their fee and what your insurance plan pays, also does not contribute to your out-of-pocket maximum.

Impact After Reaching the Maximum

Once an individual or family reaches their out-of-pocket maximum for the plan year, the health insurance plan typically pays 100% of all covered healthcare costs for the remainder of that plan year. This offers substantial financial relief and predictability.

This complete coverage applies to services considered “covered” by the insurance plan and usually received from “in-network” providers. The out-of-pocket maximum ensures that policyholders will not incur additional deductibles, copayments, or coinsurance for covered services once the limit is met.

The out-of-pocket maximum is an annual limit. At the beginning of each new plan year, this limit resets, and policyholders once again become responsible for their deductibles, copayments, and coinsurance until the maximum is reached again. The plan year may or may not align with the calendar year, so understanding your specific plan’s reset date is important for financial planning.