In the context of health insurance, the out-of-pocket maximum is simply the largest amount of money that an insured individual has to pay towards the medical cost every year. It is calculated as a total of all the deductibles co-insurance and sometimes co-payments made in a year. After you have reached the out-of-pocket maximum for that year, the health insurance company will now be responsible for 100 per cent of all your health care expenses for that year. However, this is not always the case. The out-of-perfect maximum is meant to protect individuals from huge financial risk that may arise as a result of huge medical bills. Therefore, this risk is passed on to the insurance companies, exposing them to higher risk.
As a result, health insurance companies have come up with creative ways to try and mitigate this risk. You will therefore find a lot of people confused about what counts towards your out-of-pocket maximum and what does not. It is also sometimes difficult to tell what exactly your insurance company pays for after you have reached the out-of-pocket maximum as well as how much this maximum is. In case you are covered using a medical family plan, that is, a plan that covers more than one individual, the out-of-pocket maximum amount will be considerably higher. However, the co-payments and co-insurance that you pay for every member covered in that plan is added up to the out-of-pocket amount.
Imagine you have a plan that covers your three children and your wife. Let us assume that the out-of-pocket maximum required is $10,200 and a deductible of $500. After paying the $500 for a medical bill, it goes to the out-of-pocket maximum and then the plan kicks in, taking care of the rest of the expenses, if any. Every once in a while, a member of the family may need to pay the doctor a visit. Assuming the co-payments and co-insurance payments add up to $700 this time, these will also be added to the out-of-pocket maximum meaning that you will have paid a total of $1200 towards your out-of-pocket maximum.
Now assume that one of your kids has broken their leg playing football. The medical expenses alone are $40, 000, not considering the follow-up care or even more surgery that may be required. In such a case, you will pay only a maximum of 9,000 in terms of deductibles, co-insurance and co-payments. This is because you would have reached the out-of-pocket maximum. Therefore, the insurance company will at that moment step in and cover the rest of the medical bills. As this situation clearly shows, yes, paying $10, 200 is a lot. However, it would be very financially taxing to pay the whole $40, 000 and other additional charges. It is important to note that the monthly payment an individual makes to maintain their health insurance coverage does not count towards the out-of-pocket maximum. In order to be on the safe side, experts recommend that everyone should take a close look before settling on a specific medical plan.