When something is not covered by insurance, you’ll have to pay for it out of pocket, or with your own money
Insurance will help pay for covered medical expenses only after you’ve paid enough out of pocket. The amount that you need to spend on your own is the deductible
Not all out-of-pocket expenses count towards the deductible
The government and your health plan limit how much you can spend out of pocket during the year
Out-of-pocket expenses are the costs of medical care that are not covered by insurance and that you need to pay for on your own, or "out of pocket." In health insurance, your out-of-pocket expenses include deductibles, coinsurance, copays, and any services that are not covered by your health plan. The insurance company also sets a maximum amount that you’ll have for medical expenses on your own, called an out-of-pocket maximum.
What are out-of-pocket expenses?
When you are shopping for a health insurance plan, you will hear the term “out-of-pocket expenses” quite frequently. These are costs that you’ll have to pay on your own — from your own personal funds — without the help of insurance. Read on to learn how to get affordable health insurance.
The amount of cost-sharing you're responsible for is determined by the type of metal tier category your plan falls under. However, every plan must cover part of each of the 10 essential health benefits.
If you pay enough in out-of-pocket expenses, you can reach your deductible or out-of-pocket maximum, at which point the insurance company will start to pay for medical expenses partially or in full. We’ll discuss these two important parts of a health plan later.
Common out-of-pocket expenses include:
If you have health insurance, every month you will pay a premium to keep your plan active. The monthly premium is typically the first cost you pay to maintain health insurance coverage. If you are a low-income earner, you may qualify for a subsidy (like the premium tax credit) to help reduce your monthly premium — however the reduced premium is still an expense you have to pay out of pocket.
Learn more about health insurance premiums.
Copayments are fixed amounts for a covered medical service. For example, you might pay a small copay for a preventive care visit to your primary care doctor or a visit to your specialist. Copay rates and what they apply to will differ based on plans and providers.
Learn more about copays.
Prescription drugs are covered differently depending on your health plan. But most health plans won’t pay for the cost of drugs entirely. Some plans might require a copay.
Learn more about prescription drug coverage.
After you’ve paid a certain amount in out-of-pocket expenses, you will meet your deductible. This is how much money you must spend before your insurance starts to help pay for covered services. The annual deductible for a health plan can be anywhere between $500 to a few thousand dollars if you’re an individual.
If a plan has a higher deductible, you may pay more in out-of-pocket expenses.
Also, not all out-of-pocket expenses count towards the insurance deductible. For example, monthly premiums will typically not help you meet the deductible, nor will copays. But if you have a $1,000 deductible and need to get surgery that costs $500, you’ll have to cover the costs yourself. Those costs will count towards the deductible.
Learn more about deductibles in health insurance.
Once your insurance kicks in after you met your deductible and starts to pay for medical bills, it still might not cover everything entirely. If you have a medical procedure (and already met your deductible), you might have to pay a percentage of the expense — this type of cost sharing is called coinsurance. Typical coinsurance may be 80/20, meaning you may have to pay 20% while insurance covers the remaining 80%. Check your insurance policy to confirm your coinsurance amount.
Learn more about coinsurance.
Supplemental health insurance
You may need to pay extra for supplemental health insurance covers health needs that aren't always covered by your main health insurance plan. This could be coverage for dental and vision care as well as more severe medical conditions.
Types of health insurance
Your out-of-pocket expenses will vary based on the type of health insurance you get.
HMO: Lower premiums, but no out-of-network coverage. You'll also need to pay to see your primary care doctor just to get a referral to see your specialist.
PPO: Higher premiums, but some coverage available out of network. No referrals required to see your specialist.
EPO: Combines features of HMOs and PPOs by offering specialist visits without referrals but no out-of-network coverage.
Learn more about the difference between HMOs, PPOs, and EPOs.
While health insurance is intended to help you cover the cost of medical care, you can see how it is possible to end up spending quite a bit on your own. In an effort to limit this and provide more affordable care, the government has set a cap on how much people spend on their own during the calendar year if they have health insurance.
(Learn more about how health insurance works.)
As of 2019, the out-of-pocket maximum is $7,900 for individuals and $15,800 for family health plans. This means the health insurance company can’t force you to spend more than $7,900 if you’re an individual or $15,800 if you’re part of a family plan. Many health plans have limits well below these federally mandated ones.
The out-of-pocket maximum has increased to $8,200 for individual plans and $16,400 for family plans in 2020. See when open enrollment starts for you.
Learn more about the out-of-pocket maximum and how it helps you save on medical costs.
Generally, plans with lower out-of-pocket maximums have higher premiums. This is true for both plans purchased on the health insurance marketplace and group health insurance provided by your employer — but insurance coverage from your workplace will always be much cheaper than a marketplace plan.
Learn more about applying for health insurance on the marketplace.