What Does Out-of-Pocket Limit Mean?
An out-of-pocket limit is the maximum amount that a policyholder will have to pay for covered medical expenses during a policy year before a health insurance plan pays for any further covered care. Deductibles, co-pay, and coinsurance all count toward this amount. The Affordable Care Act placed caps on out-of-pocket limits to help make health services more affordable.
It is also known as an out-of-pocket maximum.
Insuranceopedia Explains Out-of-Pocket Limit
For example, a policyholder has a health insurance policy with a deductible of $2,000, 30 percent coinsurance, and out-of-pocket limit of $4,000. They undergo a covered treatment costing $10,000. This means they would pay $2,000 as a deductible, which leaves $8,000 in remaining expenses. The coinsurance would require the policyholder to pay an additional $2,400; however, because the out-of-pocket limit is $4,000, they would only need to pay $2,000, and the insurer would cover the rest.
Nevertheless, because a policyholder may require treatments or elect to have certain health procedures that are not covered, they may still end up paying much more than the actual limit for health care costs.