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Understand what it means when you pay out of pocket
All health insurance plans are required to have an out-of-pocket limit that limits the amount of money customers spend out of pocket on health services in a given year. The maximum out-of-pocket limit is federally mandated. The 2019 limit is $7,900 for individual plans and $15,800 for family plans. However, your plan may have a lower out-of-pocket maximum. More expensive plans tend to have lower out-of-pocket maximums.
Three out-of-pocket expenses count towards your out-of-pocket limit: deductibles, copayments, and coinsurance. Your monthly premiums do not count towards your out-of-pocket limit. If you hit your out-of-pocket limit, you still need to pay your monthly premiums.
Let's say you have a health insurance plan with a $2,000 deductible, a 30% coinsurance for all care after the deductible, and a $5,000 out-of-pocket limit. The day after you sign up for this plan, you get into a car accident. The total cost of your medical services is $15,000.
Out of this $15,000, you would pay:
You may notice that 30% of your care after the deductible would actually be $3,900 (30% x $13,000), not $3,000. But because your out-of-pocket limit is $5000, your health insurance would cover all of the rest of your care after you hit $5,000 in out-of-pocket expenses.
The maximum out-of-pocket limit also informs the deductible of catastrophic plans. Catastrophic health insurance plans are a special type of plan only available to people under 30 or people with a hardship exemption. Catastrophic plans are designed to cover you in the event of very expensive accidents or if you are diagnosed with a medical condition that requires a lot of care. Therefore, catastrophic plans have a deductible that matches the federal maximum out-of-pocket limit.
Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.