Grace Financial Service Associates

What is an Out-of-Pocket Maximum?

To understand what an "out-of-pocket maximum" is you must first understand what a deductible is, and also what coinsurance is. If you are not familiar with what a deductible is or what a coinsurance is, then please see "What is a Deductible?" first, followed by "What is Coinsurance?".

An "out-of-pocket maximum" is set level at which you are no longer responsible for your coinsurance responsibility. It is the same as a cap on your total medical bill expenses. For example, say you have a plan with a $1500 deductible and a 20% coinsurance, you are not only responsible for the $1500 out-of-pocket deductible, but you are responsible for 20% of the remaining bill as "out-of-pocket" costs. That said, if you have a medical bill of $50,000 after a complicated surgery, you will be responsible for your deductible of $1500, and also 20% of the remaining $48,500, or an additional $9700. However, if your plan has an "out-of-pocket maximum" of $7000, then you do not pay one penny more than $7000 despite your coinsurance responsibility. The most you would pay in any medical circumstance is $7000 if your "out-of-pocket maximum" is $7000. (Note: if you are on a 0% coinsurance plan, your out of pocket maximum is exactly the same amount as your deductible because the insurance company pays 100% of all medical bills after the deductible is met. In our example above, the "out-of-pocket maximum" would be $1500 on a 0% coinsurance plan.)

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