What does 'Out-of-Pocket Maximum' mean in a health insurance policy?

The term 'Out-of-Pocket Maximum' refers to the highest amount that an insured individual will have to pay for covered healthcare services in a policy year. Once this limit is reached, the health insurance plan pays 100% of the costs for covered services for the remainder of that year. This provision is significant because it protects individuals from excessive healthcare expenses, providing a financial safety net. It includes costs such as deductibles, copayments, and coinsurance, but does not count premiums or services that are not covered by the insurance.

Understanding this concept is vital as it aids policyholders in budgeting for potential medical expenses and evaluating the overall value of their health insurance coverage. The designated cap on out-of-pocket spending can significantly reduce the financial burden on an individual or family during high-cost medical events.