Typically an insurance policy will have a deductible, a coinsurance or copayment and an out of pocket maximum. Although every insurance plan is different and may not have each of these, it’s important to understand them and how they work. It’s especially useful when it comes time to choosing future health care plans.
The out of pocket maximum (OOPM) is the most you will ever have to pay during a policy period (usually a calendar year) for health care services. The total of all your deductible, coinsurance and copay payments go toward your OOPM. Once you have met this amount, the insurance company will pay 100% of all remaining covered services for that year.
- For example- Dwayne has a health insurance plan with a $2000 deductible, 20% coinsurance and $3000 out of pocket maximum and he needs a $10,000 surgery…
- First, he will pay $2000 toward his deductible, leaving $8,000 remaining in medical costs. Now that he has met his deductible for the year, he will no longer have to make deductible payments.
- Next, he will have to pay his coinsurance. His 20% coinsurance on the remaining costs ($8,000) comes to $1600.
- His deductible, $2000, plus his coinsurance, $1600, would make his total costs for his surgery $3600.
But, wait? I thought his out of pocket maximum was $3,000 and he should never have to pay more than that?
- Since his out of pocket maximum is $3000, he will only have to pay $3000 for the surgery and his insurance company will pay for the rest of the costs.
- Meeting his OOPM also means that his insurance company will pay for any covered care he gets for the rest of the plan year.
The out-of-pocket limit does not include your monthly premiums. Think of your premium like paying for a gym membership; you pay $29.99 a month to be allowed into the gym and workout. In this case, your premium is the payments you make each month to your insurance company to have healthcare coverage.
For more information regarding insurance benefits, visit www.borjapt.com/blog/health-insurance-101.