What is “out-of-pocket maximum” in health insurance?

The term "out-of-pocket maximum" refers to the maximum amount an insured individual will pay for covered healthcare services within a specified time frame, typically a calendar year. Once this limit is reached, the insurance plan covers 100% of the costs for covered services for the remainder of the year. This provision is designed to protect insured individuals from excessive medical expenses, providing financial predictability and security.

Understanding this term is crucial as it directly impacts the financial planning of individuals and families when navigating healthcare costs. It ensures that there is a cap on the expenses that individuals need to budget for in the event of chronic illness, accidents, or major medical events.

The other options do not accurately describe the "out-of-pocket maximum." The total amount billed by healthcare providers is not limited to what the individual pays; it includes various charges that may not contribute toward the out-of-pocket maximum. The amount covered by insurance after meeting the deductible reflects the insurance's share of costs rather than an individual's contribution. Finally, premium payments are distinct from out-of-pocket expenses; premiums are fees paid to maintain health insurance coverage rather than costs incurred from actual medical services.