Health insurance policies often contain a lot of terminologies that are new to most people. But, everyone with health insurance needs to read and understand their entire policy. For instance, do you know what an out-of-pocket expense or maximum are?
What is an out-of-pocket expense?
The insured’s “out-of-pocket expense” is the cost that you will have to pay yourself, directly out of your wallet. These usually refer to things like your deductible, co-pay, co-insurance, or any non-covered medical service.
What is an out-of-pocket maximum?
An “out-of-pocket maximum” is the maximum amount of money that the insured will be required to pay in out-of-pocket expenses. When you reach that amount, the insurance company will pay the remainder of the covered health expenses for the rest of the year.
How is an out-of-pocket maximum different than a deductible?
With a deductible, once you reach the maximum amount, any additional expenses will begin to apply to your co-insurance. Co-insurance is when the insured shares the cost of any other health services with the insurance company. This is usually a percentage, like an “80/20” plan, where 80% is the responsibility of the insurance company, and 20% belongs to the insured.
Do all health insurance plans have an out-of-pocket maximum?
The vast majority of plans do, especially with the passage of the Affordable Care Act (ACA). However, some plans not purchased on the market do not include one.
Individual vs. Family out-of-pocket maximums
On some health insurance policies, both an individual out-of-pocket maximum and a family out-of-pocket maximum apply. The ways these differ is that any individual out-of-pocket expenses that exceed the maximum will start to apply to the family out-of-pocket maximum. This includes co-pays and deductibles.
Is it common to meet the out-of-pocket maximum?
It is not all that common for normal, healthy people to meet their out-of-pocket maximum, especially if they usually only see a doctor for annual check-ups. However, people who have a chronic illness or emergency expenses are likely to meet it.
Knowing all about out-of-pocket expenses and maximums can end up saving you money in the long run. It can also help avoid unexpected health-related expenses. Look over your policy today to see what yours are. If it’s not clear, don’t hesitate to call your insurance company to ask. Knowledge is power.