Max out of Pocket

With insurance, and choosing a policy, there is a lot to know, there is the premium, the copayment, the deductible, and on and on. There are often parts of your policy that you overlook. One thing you should never overlook is the max out of pocket.

What is max out of pocket? Your maximum out of pocket is defined as the maximum amount of money you will have to come up with in a calendar year to pay your medical expenses. In other words, the most you will have to pay.

The max out of pocket is significantly different than the deductible. The deductible says how much you have to pay BEFORE your insurance will pay anything. The max out of pocket is the most you pay AFTER WHICH amount your insurance pays everything, and they will likely have already been paying a percentage up to that point.

So, for example, if your maximum out of pocket is $4000, and your deductible is $1000, and let's say you have to get surgery on your knees. You would pay the first $1000, and then 20% there after. (this is a pretty traditional amount). If that 20% exceeds $3000, $3000 is the most you would have to pay of it since $1000 has already been paid (your deductible), and over $3000 more would exceed your maximum out of pocket limit.

For most, you never reach the maximum out of pocket amount. However, there are some who say, for example, have a rough pregnancy, and spend several weeks in the hospital before and after the baby is born. During which time they have several tests done, and procedures. All of this becomes very expensive as hospital stays can often cost you $1000+ a night. In this case, having a lower max out of pocket would be very beneficial, as the expenses would be incurred rapidly.

Now that we understand what the max out of pocket means, let's take a closer look at some other commonly used health insurance terms. Knowing these can help you find the best policy and premium to meet your situation and insurance needs:

Coinsurance
Coinsurance is the set percentage you pay of the total cost of your health care expenses. So as in the above examples, you pay 20%, which means the plan pays 80 % coinsurance. Coinsurance can vary within the plan depending on the benefit or service, so know what your coinsurance is.

Copayment
A copayment is the amount you pay when you receive medical care or a prescription drug. Copayments vary depending on your plan and the services you receive. Copayments do not reduce your annual deductible or out-of-pocket maximums. (In other words, they do not count toward them).

Deductible
A deductible is a flat dollar amount you pay before your insurance starts to pay for covered expenses.

Lifetime Maximum Benefit
The Lifetime Maximum Benefit is the total dollars that will be paid under the plan, per covered member, for the lifetime of the coverage.

There are many more health insurance terms, and it is always wise to consult with a professional if you don't understand what your policy plan means.