When choosing a health insurance plan, one of the most important numbers to understand is the out-of-pocket maximum. It acts as your financial safety net and protects you from unlimited medical bills in a year.
Many people focus on premiums or deductibles—but the out-of-pocket maximum determines the worst-case scenario you could face financially.
This guide explains in detail what it is, how it works, what counts toward it, what does not count, and how to use it when comparing plans.
What Is an Out-of-Pocket Maximum?
The out-of-pocket maximum is the most you will pay in a policy year for covered, in-network healthcare services.
Once you reach this limit, your insurance company pays 100% of covered medical expenses for the rest of the year.
Important: This resets every year.
Simple Example
Plan details:
- Deductible: $2,000
- Coinsurance: 20%
- Out-of-pocket maximum: $6,500
If you have major surgery costing $50,000:
You pay:
- First $2,000 (deductible)
- Then 20% coinsurance until your total payments reach $6,500
After reaching $6,500, insurance pays 100% of covered expenses for the rest of the year.
Even if total bills reach $200,000, your maximum payment stays capped at $6,500.
That’s the protection it provides.
What Counts Toward the Out-of-Pocket Maximum?
Generally, the following count:
- Deductible payments
- Copays
- Coinsurance
- Prescription payments
All of these accumulate toward the yearly limit.
What Does NOT Count?
The following usually do NOT count:
- Monthly premiums
- Out-of-network charges (in many plans)
- Non-covered services
- Balance billing from out-of-network providers
This is important because many people mistakenly assume premiums are included—they are not.
Step-by-Step Breakdown Example
Plan:
- Premium: $400/month
- Deductible: $1,500
- Coinsurance: 20%
- Out-of-pocket max: $5,000
Medical events during year:
Doctor visits: $500
MRI scan: $2,000
Hospital stay: $20,000
Step 1: Doctor visits
You pay full $500 (applies to deductible)
Step 2: MRI
You pay $1,000 (remaining deductible)
Deductible now met: $1,500 total
Step 3: Hospital stay
Remaining balance: $20,000
You pay 20% coinsurance = $4,000
But your out-of-pocket maximum is $5,000.
You have already paid $1,500.
You only need to pay $3,500 more to reach $5,000 cap.
Insurance pays the rest.
After that, all covered in-network costs are fully paid.
Individual vs Family Out-of-Pocket Maximum
Family plans may have two limits:
Individual maximum: Each person has a cap.
Family maximum: Total cap for entire family.
Example:
Individual max: $7,000
Family max: $14,000
If one family member reaches $7,000, their costs are fully covered.
If multiple members incur expenses, the family max protects total household cost.
Understanding this structure is important for families.
In-Network vs Out-of-Network Limits
Many PPO plans have two separate out-of-pocket maximums:
- In-network maximum (lower)
- Out-of-network maximum (higher)
HMO plans typically only cover in-network services.
Out-of-network care can significantly increase total cost.
Always verify network status before treatment.
Why Out-of-Pocket Maximum Matters
It protects against:
- Major surgery
- Cancer treatment
- Accidents
- Long hospital stays
- Chronic disease management
Without insurance, a hospital stay can exceed $100,000.
With an out-of-pocket max of $6,000, your exposure is limited.
It’s your financial ceiling.
Comparing Two Plans Using OOP Maximum
Plan A:
Premium: $300/month
Out-of-pocket max: $8,000
Plan B:
Premium: $500/month
Out-of-pocket max: $5,000
Difference in premium: $200/month = $2,400 per year
If you expect high medical costs, Plan B may save you money in worst-case scenario.
But if you expect low medical usage, Plan A may be cheaper overall.
You must calculate:
Annual premium + out-of-pocket max
This gives total worst-case annual exposure.
Federal Limits (2026 Context)
Under federal law, ACA-compliant plans have a maximum limit for in-network out-of-pocket expenses each year.
This cap protects consumers from unlimited medical bills.
The exact number can change annually, but plans cannot exceed federal limits for covered services.
Preventive Care and OOP Maximum
Preventive services:
- Annual checkups
- Vaccines
- Screenings
Are usually covered at 100% and do not require deductible payment.
However, they still count toward your overall plan benefits.
High-Deductible Health Plans (HDHP) and OOP Max
HDHPs have:
- Higher deductibles
- Often higher out-of-pocket maximums
- Lower premiums
Example:
Premium: $250/month
OOP max: $8,500
Lower premium but higher financial risk.
Often paired with Health Savings Account (HSA).
Common Misunderstandings
“If I reach my deductible, insurance covers everything.”
Not necessarily. After deductible, you usually pay coinsurance until reaching out-of-pocket maximum.
“Out-of-pocket max includes premium.”
It does not.
“All expenses count toward it.”
Only covered in-network services typically count.
When OOP Maximum Is Most Important
It matters most if:
- You have chronic conditions
- You are planning surgery
- You are pregnant
- You want protection from financial shock
- You have limited savings
It determines your worst-case scenario.
How to Use OOP Maximum When Choosing a Plan
Follow this method:
- Multiply monthly premium × 12
- Add out-of-pocket maximum
- Compare across plans
Example:
Plan A: Premium = $3,600/year
OOP max = $7,000
Total risk exposure = $10,600
Plan B: Premium = $6,000/year
OOP max = $5,000
Total risk exposure = $11,000
Compare both expected and worst-case costs.
Final Thoughts
The out-of-pocket maximum is your financial protection limit in health insurance. It caps how much you must pay for covered services in a year.
It includes:
- Deductible
- Copays
- Coinsurance
It does not include:
- Premiums
- Out-of-network care (in most cases)
Understanding this number helps you measure financial risk and compare plans properly.
When choosing a health plan, always ask:
“What is the most I could possibly pay in a bad year?”
That number is determined by your out-of-pocket maximum.
Choosing wisely can protect your finances from devastating medical bills.