These days, the healthcare industry uses more jargon than academia does. Keep yourself informed and up-to-date with this layman’s guide to the out-of-pocket maximum.
Few deny that health insurance is complicated, and all the technical words insurance firms throw at us can confusing in a hurry. If you were to take a pop quiz right now, could you explain the difference between an out-of-pocket maximum and coinsurance?
What about a deductible versus a copay? The trouble is that the meanings of all these concepts can matter to our health and our wallets, so you can’t just ignore them — your life might literally depend on it.
Regardless of how you feel about your current health insurance, it’s best to know precisely where your money goes when you purchase a coverage plan. A basic understanding of the lingo can help us advocate for ourselves more effectively, which can make a big difference in the long run.
So what is an out-of-pocket maximum, anyway? The term refers to the highest amount that an insurance customer is obligated to shell out during a policy period, which usually lasts a year, according to BCBSM. This maximum is determined by a number of factors, including how many people are included in the plan (individual or family), and how expensive that plan is.
When the insured party crosses the designated threshold, the insurance company is responsible for covering all further expenses, provided those expenses are from services covered by your plan.
Fortunately, money spent on other components of a healthcare plan — the deductible, coinsurance, and copays — can, if you’re lucky, contribute to the out-of-pocket maximum. However, neither your monthly premiums, nor the costs of healthcare services not covered by your plan to go toward the maximum.
The maximum curbs the financial risk for the client, but also leaves insurers vulnerable to expensive payouts. In order to mitigate this risk, health insurance providers cleverly devise ways to wriggle out of absorbing extra expenses.
These tactics obscure which client payments contribute to the maximum, the amount the health insurance company fronts once you reach it, and where the precise limit actually lies.
Insurance companies usually employ three techniques to save their own hides (while hanging yours out to dry), according to About. By not crediting all insurance costs to the maximum — like the copay, deductible, and coinsurance — companies widen the gap between you and your limit.
HealthPocket conducted a study that found that 38% of privately purchased health plans don’t count the deductible when tallying the out-of-pocket maximum.
While some companies attempt to extend the distance between you and the finish line, others fail to acknowledge that line altogether. Neglecting to keep an eye on healthcare bills could result in the customer overspending.
For example, some plans don’t count prescription drug coinsurance towards the maximum, so customers keep paying for medication, despite having reached their limit.
The last, most complicated method entails divvying up health insurance coverage across multiple out-of-pocket maximums. Typically, companies divvy up the maximums: half of them for prescriptions, and the other half for everything else.
Even though the out-of-pocket maximum should protect the policyholder, companies can use various techniques and loopholes to keep customers in the dark.
Playing It Safe
Unfortunately, in the world of insurance, an out-of-pocket maximum can bleed you dry when it should offer a suture. Unlike their peers in the insurance industry, SingleCare eliminates the confusion around accumulating expenses.
Their straightforward pricing mechanism forecasts the cost of every service, so you can receive care without any surprises attached. After all, you shouldn’t have to be cautious when it comes to healthcare.
(Main image credit: Seattle Municipal Archives/flickr)