Understanding Out-of-Pocket Limits in Health Insurance

What is an Out-of-Pocket Limit and How Does it Work?

An out-of-pocket limit, also known as an out-of-pocket maximum, is a set amount of money that you, as a policyholder, will be responsible for paying toward your healthcare costs during a specific period of time, usually a year. After you reach this limit, your health insurance plan will cover 100% of the allowed amount for covered services for the rest of the year.

For example, let’s say your out-of-pocket limit is $5,000 for the year. If you have medical expenses that total $6,000 during the year, you will pay the first $5,000 of those expenses, and your health insurance will cover the remaining $1,000. This helps you to plan and budget for your healthcare expenses, as you know that you will only be responsible for paying a certain amount each year, regardless of how much healthcare you need.