What is an out-of-pocket maximum?
Quick answer
An out-of-pocket maximum is the most a health plan member has to pay for covered, in-network care during a plan year. Deductibles, copays and coinsurance usually count toward it. Once a member reaches it, the plan pays 100 percent of covered costs for the rest of that year.
Last updated
Updated · By Robert Breen
Why it matters for a small business
It is the number that answers "what is the worst case?" A member facing surgery wants to know the most they could owe, and the out-of-pocket maximum is that ceiling for covered care. Premiums, out-of-network bills and services the plan doesn't cover generally don't count, which is where many surprises come from.
Office staff who answer benefits questions get this one often, especially late in the year when someone is close to the limit. A reply should give the member's actual maximum and how much they have already paid toward it. This is general information, not insurance advice. Only the plan documents, the carrier and a licensed agent can confirm what counts, so have a licensed professional check any reply about costs.
In a real lesson: Reply Faster to Claim-Status Emails: ChatGPT for Independent Insurance Agencies
A made-up example: a plan has a $1,500 deductible, 20 percent coinsurance and a $4,000 out-of-pocket maximum. A member has a covered $20,000 hospital stay. She pays the $1,500 deductible, then 20 percent of the next $18,500, which would be $3,700. That brings her to $5,200, so the maximum stops her share at $4,000 and the plan pays the remaining $16,000.
Stepthrough has no health insurance lesson. The closest is Reply Faster: Claim-Status Emails, an auto claim at the made-up Stonebridge Insurance Agency. The cap there points the other way. It limits what the carrier pays, not what the client pays: "Rental reimbursement, $40 per day, up to $1,200 per claim," and "If she picks a car that costs more than $40 a day, she pays the difference."
The habit still applies. ChatGPT's first draft dropped the cap, and the check table caught it. Any reply about a maximum should state the exact figure and whose costs it limits.
Try this lesson free or read the step-by-step guide.
Common confusions
Out-of-pocket maximum vs deductible
The deductible is the starting point for cost sharing. The out-of-pocket maximum is the ceiling. Reaching the deductible lowers your share; reaching the maximum ends it for the year.
Out-of-pocket maximum vs policy limit
A policy limit caps what the insurer pays. An out-of-pocket maximum caps what the member pays. One protects the carrier, the other protects the member.
Tips
- Quote the member's in-network and out-of-network maximums separately if the plan has both.
- Say what doesn't count, such as premiums and uncovered services.
- Have AI redo the math in the reply line by line before you send it.
Related terms
More Business terms
Where you use it: free lessons
Frequently asked questions
- Do premiums count toward the out-of-pocket maximum?
- No. The monthly premium is the cost of having the plan, and it is paid whether or not you use care. The maximum usually covers deductibles, copays and coinsurance for covered, in-network services.
- What happens after you reach the out-of-pocket maximum?
- The plan generally pays 100 percent of covered, in-network care for the rest of the plan year. The count resets when the new plan year starts. Uncovered services are still the member's cost.
- Is the out-of-pocket maximum the same as the deductible?
- No. The deductible is usually much lower and is only the first part of what you pay. After it, copays and coinsurance keep adding up until they reach the out-of-pocket maximum.