In the context of healthcare, what does “out-of-pocket maximum” mean?

The term "out-of-pocket maximum" refers to the maximum annual amount that an individual is required to pay for covered healthcare services within a given year. Once this limit is reached, the insurance plan typically covers 100% of the costs for any additional covered services for the rest of that year. This concept is crucial as it protects individuals from excessive financial burden due to high medical expenses, ensuring that they are not responsible for paying more than a specified amount in a given time frame.

The out-of-pocket maximum includes various out-of-pocket costs such as deductibles, copayments, and coinsurance, but it does not include premiums or services that are not covered by the insurance plan. Understanding this limit helps individuals gauge their financial exposure in the event of illness or injury and emphasizes the importance of having health insurance for mitigating healthcare costs.