When comparing health insurance plans, one number that will show up in every summary is the “out-of-pocket maximum”. There may be confusion about what this term means, so we will explain.
Each plan year, health insurance coverage includes items such as deductibles, co-pays or co-insurance, and out-of-pocket maximum. The latter item is what we will discuss. An out-of-pocket maximum is the total amount you will pay during the plan year regardless of medical expenses. Above that published maximum the insurance company will pick up all covered charges.
Here’s an example of how this works:
Let’s take an example of a surgery that will cost $20,000 in a plan year.
Your deductible is $1300, so you pay that first.
If the co-insurance value for your plan is 20%, that means you would be responsible for 20% of the remainder or $3740 which is based on the $18,700 left after you paid the deductible.
This ends up being a total cost to you of $5040. But let’s say that you have a $4000 out-of-pocket maximum. That means $4000 is all you will pay and the insurance company picks up the difference of $1040.
Also, once you have met your maximum for that plan year, you will have no further costs for covered services.
What is important to note as you compare health insurance coverage is both the deductible and the out-of-pocket maximum for each plan. Health insurance with lower monthly premiums has higher deductibles and out-of-pocket maximums. You should therefore always compare these values versus what you will pay for premiums each year and find the best balance that suits your financial situation.
First Day Films can reduce the confusion around health insurance coverage, medical costs, and other human resource topics with our informative employee benefits videos. If you want your employees to be better informed about their options, call First Day Films at 833-422-7332.