What is the "out-of-pocket maximum" in health insurance?

The "out-of-pocket maximum" in health insurance refers to the maximum amount that an insured individual will have to pay for covered services within a policy year. Once this threshold is reached, the insurance company will cover 100% of the remaining costs for covered healthcare services for the rest of that policy year. This provision is designed to protect individuals from excessive healthcare costs and provides them with a financial cap on their potential expenses, thereby offering peace of mind.

This concept is crucial for policyholders, as it helps them budget for medical expenses and ensures that they are not financially devastated by catastrophic health events. It typically includes various out-of-pocket costs such as deductibles, copayments, and coinsurance, but it excludes premiums and other non-covered expenses. Understanding this limit is essential for individuals evaluating their health insurance plans, allowing them to compare how much they might realistically be responsible for in a given year.