Out-of-pocket costs in health insurance are all expenses the member personally pays (out of their own pocket) for healthcare claims. The max out-of-pocket cost that a member will pay varies by plan.
Cost | Definition | Explanation/Examples |
|---|---|---|
Deductible | Amount you pay out of pocket for covered services before your insurance pays anything. | If a deductible is $1,000, members must pay towards that amount before insurance contributes to all covered services aside from those that involve co-pays |
Aggregate Deductible | A higher dollar amount deductible applying to entire families that can kick in and cover services for individual family members who have not met their individual deductibles if met. | If an individual deductible is $1,000 and a family deductible is $3,000, a child who has not contributed any amount to their healthcare spend will be covered if their father has spent >$3,000 |
Copayments | A fixed amount paid for a subset of covered healthcare services. | You can pay a $20 co-pay for a doctor’s visit rather than pay out of pocket if the doctors visit is covered under a co-pay, even if you have not your deductible. This does not count towards your deductible. |
Coinsurance | The percentage cost of covered services for payment after a deductible is met. | Once meeting a $1,000 deductible, a $5,000 surgery with 20% coinsurance would require $1,000 of out of pocket expenses. |
Out-of-Pocket Maximum | The most you will pay in a policy period (usually a year) for covered services aside from your premium. | If your OOPM is $5,000, once your combined deductible, copays, and coinsurance hit that amount, insurance covered 100% of remaining covered costs for the rest of the year. |
Excluded Services | Healthcare services not covered by your plan at all. | If you receive an excluded service (e.g., some elective procedure), you pay the full cost yourself. These dollars do not accumulate toward you out-of-pocket maximum. |
Balance Billing | When a provider bills you for the difference between their charge and what your insurance allows. | Most common with out-of-network care. In-network providers cannot balance bill you for PPO discount amounts, but out-of-network providers can bill above the RBP allowance unless pricing was negotiated in advance. Amounts above the RBP allowance do not count toward your out-of-pocket maximum. |
How Out-of-Pocket Costs Impact Healthcare Expenses
Out-of-pocket costs can add up quickly, especially with a high deductible or frequent care. Staying within your plan’s network of preferred providers helps keep these costs down. Out-of-network care typically means higher out-of-pocket spending, and some services may not be covered at all. The out-of-pocket maximum acts as a financial safety net; one a member reaches it, they owe nothing further for covered services that year.
Example: A member has a $2,000 deductible, 20% coinsurance, and a $5,000 out-of-pocket maximum. They need a $10,000 surgery. They pay the first $2,000 (deductible), then 20% of the remaining $8,000 ($1,600) in coinsurance, for a total of $3,600. Any additional covered expense that year would continue accumulating until they hit the $5,000 maximum, after which insurance pays 100% for the rest of the policy period.