The Ultimate Guide to Maximum Out Of Pocket

It’s on the plan finder and you see it when you enroll – but what does Maximum Out of Pocket mean to your pocket?

Short answer, it means exactly what it says. The Maximum Out of Pocket is the maximum amount you will be expected to pay toward your health insurance for the coverage year.

This one is surprisingly simple – there’s only one ‘complication’ and that is that it refers to covered services. Translation: it only applies to what your insurance plan covers.

 

So, let’s revisit Mary and Billy. As you recall, Mary has a $2500 deductible that she has already met – mostly because she keeps getting in the car with her friend Billy. Billy has a much higher $5500 deductible and his refusal to get driving lessons has already caused him to meet that deductible.

Now, Mary and Billy have different plans that behave differently. Mary’s plan has straight copays for doctor’s office visits and medications. Billy’s has a 20 % coinsurance that pays after his deductible for both his medications and doctor office visits.

Okay, back to our example – first, Mary’s story:

A short while later, Mary is involved in another accident – this time she is driving (we can’t blame Billy for everything, after all!).
The ER visit again costs Mary $200 (her coinsurance for ER visits). But Mary has to spend a week in the hospital as well.
Now, something strange happens.
Mary’s insurance plan requires her to pay a 20% coinsurance after deductible for the inpatient hospital stay. Since Mary’s deductible is already met for the year, Mary should be responsible for 20% of $10,000 which is $2000 – but Mary will actually only have to pay $150.
HUH? What is going on here? Well, now a new player takes the field – the Maximum Out of Pocket.
Let’s total up – Mary has paid thus far:
First Accident  – $300
Second Accident – $2350
Third ER visit – $200
Grand total for the year: $2850
Mary’s Maximum Out of Pocket is $3000. $3000 – $2850 = $150
Mary doesn’t have to pay more than $3000 for her covered services in a coverage year – that’s what the Maximum Out of Pocket does.
Mary won’t have to pay her doctor visit copay when she goes to the doctor – because the maximum out of pocket has been met. As long as it is a covered service Mary will not have to pay any more of her money toward her medical costs this coverage year – nothing at all.
Rehab – Mary pays 0, the insurance company pays 100%.
Doctor’s office visit – Mary pays 0, the insurance company pays 100%.
Medications – Mary pays 0, the insurance company pays 100%.
Et cetera, et cetera, et cetera.
The ONLY exception is Mary’s chiropractic visit – Mary’s plan doesn’t cover chiropractic so Mary will still pay for this herself.
What about poor Billy?
Billy ends up with pneumonia – it’s really not Billy’s year -and another hospital stay.
When last we’d left Billy, he’d paid $5700 in medical costs thus far. Billy is a tough guy and never got his pain prescriptions filled so he’s only paid the hospital.
Now Billy’s hospital bill is a whooping $20,000 – he had a really bad time. What does Billy actually pay?
Well, Billy’s coinsurance is 20 % and 20 % of $20,000 is $4000. Ouch.
But wait a sec – Billy’s Maximum out of pocket is $6500. $6500 – $5700 (what Billy has paid thus far this year) = $800 – and that is all Billy will have to pay for the rest of the year for covered services.
Which is a good thing since he wants to try bungee jumping…

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