When searching for health insurance coverage, you’ve likely seen the phrase “out-of-pocket maximum” on a benefits summary. Don’t ignore that number: this amount is an important part of your plan.
Your annual out-of-pocket maximum is the highest amount you will have to pay for covered health care services in a single year. It ensures that you do not incur huge healthcare costs if you suffer a serious illness or injury.
To choose the right plan for you, it’s important to understand how an out-of-pocket maximum works, what types of costs contribute, and what happens after you reach your limit.
How a maximum outlay works
An out-of-pocket maximum (OOP) is the most you will pay for health care services during your plan calendar year. With most plans, payments will only max out if the services you receive are covered in-network, and only specific types of payments apply. Once you reach your OOP maximum, your health plan will begin paying all costs for covered benefits in the future.
So what does this look like in practice? If you have an individual plan with an out-of-pocket limit of $9,200, that’s the highest amount you’ll pay out of pocket for care in 2025. Think of this figure as a financial possibility: If for some reason you need a lot of care, you can plan knowing that you will not have to spend more than this stated amount on covered health care services. Understanding your out-of-pocket maximum in advance can help you create a more accurate and complete financial plan for the calendar year.
What counts toward your out-of-pocket maximum
We’ve mentioned that only some types of costs apply to your annual out-of-pocket maximum, but what does that mean? It usually comes down to the set amounts you pay for covered services, such as your deductible, copays, and coinsurance.
- Deductible: The amount you pay for covered health care services each year before your plan begins to pay
- Copay: A fixed amount you pay for a covered health care service
- Coinsurance: A fixed percentage you pay for a covered health care service. Your plan pays the rest of your expenses
For example, let’s say your allergies have been getting worse lately, so you schedule a visit to your in-network primary care doctor. If your plan has assigned a $40 copay for the service, that is the amount you pay for this visit and your insurance company will cover the rest. That $40 you paid out of pocket will go toward your annual out-of-pocket maximum.
What about the premiums?
Your health insurance premium, or the amount you pay for your health insurance each month, does not contribute to your out-of-pocket limit. This is because your premium is what you pay each month for health coverage as a whole and not for specific services.
Each year there is an annual limit.
A plan’s out-of-pocket maximum can change each year, whether you have coverage through the health insurance marketplace, your employer, or a private health insurance company. However, out-of-pocket maximums cannot exceed a certain amount. There is a standard limit set each year under the Affordable Care Act (also known as ACA or Obamacare).
For calendar year 2025, the most you will pay out of pocket to reach your maximum is $9,200 for an individual and $18,400 for a family. These amounts will most likely change by 2026, and that information is typically announced in the fall.
Receiving care in and out of network: Your out-of-pocket limit
As mentioned, the money you pay for covered health insurance services, usually in-network, reaches your out-of-pocket limit. Costs paid for out-of-network care or non-covered services generally do not apply. However, if you have a plan that does If you cover some out-of-network health services, such as a PPO plan, you may have a different out-of-pocket maximum for health care services provided in-network and out-of-network.
Emergency Care and Your Out-of-Pocket Maximum
It depends on the plan, but most policies include a copayment or coinsurance for receiving emergency care services, which contributes to your out-of-pocket limit. Emergency care includes emergency room visits (both in hospitals and free-standing facilities) and hospital departments that provide post-stabilization services, which is the care you receive for your medical needs once you have been stabilized after a emergency.
Your health plan is required by law to cover emergency care. It doesn’t matter if you are on or off the network. However, some plans may have specific exclusions or limitations. And remember: long-term hospital stays, emergency care, and services provided in a hospital can be very different.
The difference in maximums: Individual and family plans
When it comes to out-of-pocket maximums, individual plans are simpler. They cover one person, and once that person reaches their out-of-pocket maximum, their insurance provider pays 100% of the costs of care.
Family plans work a little differently. Each person covered by a family plan (both the primary policyholder and his or her dependents) has an individual out-of-pocket maximum. So the family has a maximum outlay. If someone in the family reaches their individual out-of-pocket maximum before everyone else, other family members will continue to pay their individual maximums.
But how does that develop? Let’s say there are two people in a family plan: a parent and a child. If that parent reaches their individual out-of-pocket limit, they will no longer have out-of-pocket costs for the plan year for their own care. That means they will no longer have to pay deductibles, copays or coinsurance. However, the child on this plan will continue to be subject to out-of-pocket costs until he or she reaches his or her individual or family out-of-pocket maximum.
Do recipes count towards your maximum?
Yes. If your plan covers prescription drugs, the costs you pay for the drugs (whether copayments or coinsurance) will count toward your out-of-pocket maximum.
What happens when you reach your maximum outlay?
Once you reach your out-of-pocket maximum, your insurance provider will cover all costs of covered health care and prescription services for the rest of the calendar year.
Looking for the right plan
With all this in mind, you may be thinking that the best type of plan for you includes a low out-of-pocket maximum. It makes sense. The sooner you can pay a smaller amount, the better, especially if you expect to need a lot of care throughout the year.
However, it can be a little more complicated than that. Plans with lower deductibles and out-of-pocket limits generally have much higher premiums, which means that while your out-of-pocket costs may be lower, the amount you pay for your plan each month may be high. While this may be a good option for some, it may not work for everyone. The key is balance.
First, take a good look at your budget and healthcare needs. This will help you establish guidelines to determine what is financially feasible and medically necessary. Next, be sure to shop around, considering a few different plans and how they would work for you. Some companies, like HealthPartners, offer many individual and family plan options that you can choose from to find a plan that fits your needs.
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