Healthcare Defined: Out-of-pocket maximum

Cropped SingleCare logo By | July 11, 2016

Sometimes, healthcare can seem like a whole different language. In this series, we break down some common healthcare terms into plain English.

Out-of-pocket maximum (OOPM) (noun) — The absolute max amount you’ll have to pay for covered expenses in your health insurance plan during a calendar year. “Covered” is an important term as out-of-network or uncovered costs do not apply toward your OOPM.

As far as health insurance terminology goes, “out-of-pocket maximum” is one of the clearer terms out there. But, like everything involving health insurance, it’s important to understand how this feature relates to other cost aspects of your plan like copays, coinsurance and deductibles. Only by understanding all of these terms together can you really appreciate what the out-of-pocket maximum means for your wallet.

Let’s turn to an example.

Your current plan offers a $6,850 out-of-pocket maximum, a $2,500 deductible and 25% coinsurance (meaning your insurer pays 75% of covered costs). It’s January and right at the beginning of your annual insurance plan so you haven’t incurred any healthcare expenses yet toward your deductible when you tear your ACL. You will need to undergo surgery, which is going to cost $25,000 when it’s all said and done. In this example, you’ll pay $2,500 to meet your deductible. At that point, your coinsurance kicks in for the remaining $22,500 and would pay 75%, which amounts to $16,875, leaving you with the remainder of $5,625. But, because your OOPM is $6,850, you’ll only be responsible for paying $4,350 because you will have reached the magic number that is your out-of-pocket maximum. Now, your, insurance will cover 100% of covered expenses for the remainder of the plan year.

With the passage of the Affordable Care Act, insurance plans now must adhere to federal guidelines for out-of-pocket maximums. In 2016, your out-of-pocket maximum can be no more than $6,850 for an individual plan and $13,700 for a family plan before marketplace subsidies.

It’s important to keep in mind that any costs for your premiums do not apply to your OOPM. So when you hit your max, you’ll still be responsible for paying your monthly premiums. Depending on your plan, copays may or may not count towards your OOPM.

At SingleCare, we are still big believers in having insurance to help cover for major costs, but since our service is no cost to you until you use it, we help manage your costs and help you make informed decisions about medical and other expenses.

In the example above, the patient will likely have to undergo several months of physical therapy to help bounce back from the surgery but a plan may have limits on how many physical therapy sessions are covered. Through SingleCare, you’d be able to see the costs of a physical therapy session paid out of pocket and compare costs from different providers after your coverage runs out or even if you don’t have coverage.

[Main image credit: AndreyPopov/Thinkstock]