Health insurance options are confusing for those of us in the USA (those outside the USA are free of the frustrations of USA health care system). One of the features of a health insurance plan in the USA is the out-of-pocket “maximum.”

Now if you think you understand english you might think this is the maximum you have to pay out of your pocket. If you understand how horrible the USA health care system is and how nothing is easy, you probably suspect it isn’t a maximum at all. I find myself thinking that I don’t really understand what this seemingly simple value actually means, so I decided to research it and write this blog post.

First of all you have to pay the monthly premiums (assuming your employer doesn’t pay them for you), probably a few hundred or more dollars every month. Then the coverage likely has a deductible maximum for the year.

For this example, for 1 person the insurance costs $300/month with a yearly deductible maximum of $5,000. And the insurance plan says there is an out-of-pocket “maximum” of $6,500. Well 12 *$300 + $5,000 = $8,600. So, as you can probably guess, out-of-pocket “maximum” doesn’t actually mean the maximum out of your pocket. In fact the $8,600 is excluded from the out-of-pocket maximum calculation altogether.

So, you then might think ok, my actual out-of-pocket maximum (the most I will have to pay all year for health care) is $8,600 + $6,500 = $15,100. But that isn’t right either.

First, this is only for covered medical expenses, uncovered medical expenses are not included. This makes some sense, certainly, but in your planning, you can’t think your health care costs are capped at $15,100. Especially since in the USA lots of health care will be uncovered (dental care is often excluded, mental health care may well be limited, certain types of treatment may not be covered, prescription glasses, non-prescription drugs, addiction treatment…).

Remember, USA health care coverage isn’t even just limited by the type of care. For example, even if fixing your injured leg is covered, if you don’t do it using exactly the right places (where your health plan covers the cost), it may be considered to be uncovered care. In general, emergency care is more flexible for what is covered, but the horror stories of dealing with health insurers refusal to pay for provided health care adds risk to any health care someone gets in the USA.

Here is a good explanation of out-of-pocket cost questions (in this quote looking at out of network costs): “Out of Pocket Maximum” and health insurance plan terminology and calculation?

If some of the services were billed out-of-network, they may not apply to your in-network accums (deductible or OOP max). If you have out-of-network coverage, you may have separate accums that need to be met before benefits will be paid on services provided out of network. Additionally, even if you meet your deductible, you may be subject to balance billing by out-of-network providers, meaning that you’d pay any amount over what your insurer deems to be a reasonable charge for the services you received, in addition to your deductible and coinsurance, as the out-of-network services providers are not contractually obligated to write off any billed amount over the amount that your insurer deems to be reasonable. If you have no out-of-network coverage, you may be responsible for all charges.

Some of the services may not apply to the out-of-pocket-max accum at all, depending on the specifics of your plan. You will need to refer to your benefit booklet here to determine what services may or may not be included. If this is the case, you would continue to pay your coinsurance (20%, assuming they are in-network) on these services indefinitely and without limit.

Here is another good source, Out-of-pocket Maximums and ObamaCare

Before the ACA [Affordable Care Act] there was a lot more leeway for insurers to tweak how they treated out-of-pocket maximums. Even though things are a lot simpler now, depending on your plan not all services are going to be covered 100% and not all services are always going to count toward your out-of-pocket maximum.

While the ACA did improve the out-of-pocket “maximum” situation a great deal it is still far from simple. This post is just my attempt to figure out the basics of what that term actually meant. I, thankfully, have no medical expenses (other than physicals my only expenses in at least 15 years have been vaccinations for travel, vision exams and dental cleaning). So my need to understand the complex details of exactly how a plan deals with out of network care or high cost drugs is not high. But if it was I would do more research.

In looking into it as far as I did I found it fairly confusing and since the rules change frequently you have to be careful what sources you rely on. The government material seems very weak to me as does the insurer material (which seems written by lawyers to met the needs of lawyers but not the needs of most consumers to have understandable explanations).

Out of network coverage is not included in the “out-of-pocket” maximum, as far as I can tell. So for example if you have a 20% co-pay for some out of network health care and it costs $100,000 total you may be liable for $20,000 (even if you “maximum” is much less). Also I am sure, you risk having the whole $100,000 be considered uncovered and end up being liable for the entire cost.

Your coverage for health care outside the USA may well be $0. So you are responsible for everything. Basically, you are at risk if you travel and should have special health care coverage for international travel. Even the amount that is covered often has to be paid by you first and then you have to request reimbursement from your insurer. Countries with “universal” health care provide it to citizens, not to non-citizens – so you must pay health care costs you accrue while traveling yourself.

Medicare doesn’t even cover emergency health care needs outside the USA (and in some limited cases Mexico and Canada) and USA territories (Puerto Rico etc.).

And even getting health care coverage away from home in the USA is a huge hassle, if it is even possible (emergency care should be covered in the USA if you follow your health insurers procedures).

Related: The Growing Market for International Travel for Medical Care (often paying for overseas travel and the entire cost of health care yourself if cheaper, and with more customer friendly care, than using insurance within the USA, yes that is as lame as it seems) – Medical tourism (traveling overseas to get medical care) is growing – The Importance of Long Term Disability Insurance – Traveling for Health Care (2007) – Curious Cat Investing Glossary – Many Flexible Health Plans Come With A Costly Trap

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