The yearly out-of-pocket maximum is the highest or total amount your health insurance company requires you to pay towards the cost of your health care.
Out-of-pocket expenses are what you pay for health-related services above and beyond your monthly premium. Depending on your health plan, these expenses may include an annual deductable, coinsurance, and copayments for doctor visits and prescription drugs.
The out-of-pocket maximum helps protect you from very high additional costs. In most cases, once you reach your health plan's out-of-pocket maximum, your insurance company will cover 100% of the costs they consider to be medically necessary.
Some health plans do not count all of your out-of-pocket expenses when determining the OOP maximum. For example, your plan may not include your annual deductible and some plans may not include the copays associated with outpatient procedures.
You should get a document called an "explanation of benefits (or EOB) that shows your out-of-pocket expenses as the year goes on. If the numbers don't make sense to you, call your health plan's member services department for an explanation.
Mr. Jones belongs to a Blue Cross Blue Shield PPO in the Midwest that has an annual out-of-pocket maximum of $4000 for his entire family. His out-of-pocket expenses are:
- annual deductible of $1000 for the family
- copayment of $20 of doctor visits in the PPO network
- copayment of $10 for generic medications and $25 to $40 for brand-name medications
- coinsurance of 20% for any services he receives outside the PPO network