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Glossary of Health Insurance Terms To Know

Out-of-Pocket Maximum (also known as "Stop Loss" or "Cap")

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An out-of-pocket maximum is the maximum amount of money that you have to pay out-of-pocket for your medical expenses under a policy each calendar year. After you meet your out-of-pocket maximum, then the insurance company will pay 100% of your medical expenses for the rest of the calendar year.

The amounts you pay for each of the following count towards meeting your out-of-pocket maximum:

Your monthly premiums do not count towards meeting your out-of-pocket maximum. 

After you meet your out-of-pocket maximum, then the insurance company will pay 100% of your medical expenses for the rest of the calendar year. 

For example:

  • You have a plan with a $500 deductible, a 80% co-insurance, and an out of-pocket maximum of $4,000.
  • Then you incur a medical bill of $10,500.
  • First, you would pay your $500 deductible.  Then you would be responsible for 20% of the remaining $10,000, which equals $2,000.  So you have paid a total of $2,500 out-of-pocket.
  • Then you incur another medical bill of $10,000.
  • First, you would be responsible for 20% of the remaining $10,000, which equals $2,000.  However, you have an out-of-pocket maximum of $4,000.  And you have already paid $2,500 towards your out-of-pocket maximum and only have $1,500 to spend until you reach your maximum of $4,000.  So, even though you would normally owe $2,000, you only have to pay $1,500.

Then any additional medical expense that you have during the year will be paid 100% by your insurance company, because you have met your out-of-pocket maximum

As with a deductible, keep in mind that the out-of-pocket maximum only refers to covered charges. So:

  • An out-of-pocket maximum does not count charges for items that are not covered under the plan.
  • An out-of-pocket maximum will not consider any payments which exceed Usual, Customary & Reasonable
  • If your policy includes a limit on number of medical tests, or doctor visits, or other services, the excess are not part of the out-of-pocket maximum.

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