What is an Out-of-Pocket Limit?

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Annual out-of-pocket maximums are part of nearly every health plan, offering protection against high medical bills.

This limit is the most a policyholder is required to pay each year in copays or deductibles and coinsurance. The fine print will tell you the limit only applies to services defined as Essential Health Benefits while using your plan’s network. Once the maximum is reached, your health policy pays the allowed amount for all covered services. In many cases, you won’t be billed.

The government caps maximums at a certain dollar amount for individuals and families, respectively.

In 2016, the maximum for individual plans covering only one person is allowed up to $6,850 and the family limit can be up to $13,700. High deductible plans that can be used with Health Savings Accounts have lower limits, up to $6,550 and $13,100.

Until now, plans could count each family member’s medical bills until they hit the family maximum. After that, the health plan would pay everyone on the policy’s in-network care at 100% – but the family would have to wait and add up their care. This is about to change next year.

Out-of-Pocket Maximum Changes

The U.S. government ordered a health policy change effective in 2016 that may save families significant sums of money in out-of-pocket expenses. Starting next year, regardless of whether your health insurance is for you only, you and a spouse, or your spouse and children, limits apply to the amount each person has to pay.

Your health plan cannot ask one person on the policy to spend over the maximum for one person. Then the plan pays 100%.

The rule works like this: If you’re included on a family policy, and your spouse reaches the limit for one person, your plan has to cover your spouse’s bills in full for the remainder of the year. Other family members will continue to pay deductibles until they reach their personal out-of-pocket maximum, or until the family limit is hit.

Certain individual and family health insurance plans already work in this manner, yet others will need to adjust their guidelines.

Insurers can set up their family medical policies in one of the following ways:

  • The family limit is less than or equal to the limit for a self-only plan
  • The family maximum is higher, but an individual limit is included for each insured on the policy. Essentially, there is a self-only limit for each plan member. If one member reaches their limit, care will be covered in full afterward. Additional family members will keep paying their own medical bills until they also hit the self-only limit, or the whole family maximum is reached – whichever comes first.

The change applies to employer group and individual market plans. Health insurance companies must calculate what this improvement will cost them, and price plans according to their assumed expenses. Employers will need to select a plan design and determine how much workers will pay toward their plans.


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