Most health insurance sold in the United States comes with an out-of-pocket limit, also called an out-of-pocket maximum, which limits what you pay in cost-sharing expenses each year. Once the money you’ve paid toward your deductible, copayments, and coinsurance add up to the out-of-pocket limit, your health insurance pays 100% of your covered health care expenses for the rest of the year. You don’t have to pay copayments, coinsurance, or deductibles again until next year.
Although the out-of-pocket maximum is designed to protect you from catastrophic financial losses, most health plans have an out-of-pocket maximum of several thousand dollars for an individual. For families, the out-of-pocket limit is frequently more than $10,000. Because of the size of the out-of-pocket maximum, most people never pay enough out of their own pockets to reach it.
Adding to the difficulty in reaching the out-of-pocket limit, there are some health care expenses that don’t count toward your out-of-pocket limit. For the health care expenses that don’t count toward your out-of-pocket limit, there is no upper limit to what you might have to pay.
Expenses That Don’t Count Toward Your Out-Of-Pocket Limit
Services that aren’t essential health benefits
Thanks to the Affordable Care Act, most health insurance in the United States now has to cover, at a minimum, the 10 essential health benefits. In addition, some
health plans choose to cover health care services that aren’t considered one of the essential health benefits. For example, your health plan may cover acupuncture services even though acupuncture isn’t among the essential health benefits.
However, health plans don’t have to count toward your out-of-pocket maximum the money you pay in cost-sharing expenses for care that isn’t considered an essential health benefit. If you get $1,000 worth of acupuncture treatments and pay a 30% coinsurance of $300 for them, that $300 probably won’t count toward your out-of-pocket limit. The tricky part here is, since your health plan covers the benefit and pays for part of the care, you may not be aware that the care you’re getting isn’t an essential health benefit.
Even though you pay for them out of your own pocket, health insurance exclusions don’t count toward your out-of-pocket limit. For example, if liposuction is excluded from your health insurance coverage, the $2,000 you paid for liposuction doesn’t count toward your out-of-pocket limit.
Managed care health plans like HMOs, PPOs, and EPOs have provider networks they’ve negotiated discounts with. If you get your care from one of these in-network providers, your cost-sharing expenses will be credited toward your out-of-pocket maximum. If you get care from an out-of-network provider, your health plan can, but doesn’t have to, count your cost-sharing expenses toward your out-of-pocket maximum.
Even if your health plan chooses to count cost-sharing amounts you paid toward out-of-network care in your out-of-pocket limit, it still won’t count the entire amount you paid for out-of-network services toward your out-of-pocket limit. The balance-billed portion of your out-of-pocket expenses won’t be credited toward your out-of-pocket limit.
What’s balance billing? Since an out-of-network provider doesn’t have a contract with your health insurance company, it can charge whatever outrageous fee it chooses. To avoid being on the hook for excessively large bills for out-of-network care, health insurers that cover out-of-network care limit their coverage to a customary and reasonable amount. The part of the bill that exceeds this customary and reasonable amount is the balance-billed portion.
For example, if you see an out-of-network dermatologist and get a bill for $1,000, your health insurer may determine that the customary and reasonable amount for that service is only $400. It will calculate its reimbursement and your coinsurance based on the $400 customary and reasonable amount, not the $1,000 total bill. If you have a 30% coinsurance rate for out-of-network, your health plan will pay its 70% of the $400, or $280. You’ll owe 30% coinsurance on the $400 customary and reasonable amount, or $120 coinsurance. You’ll also owe the difference between the customary and reasonable amount and the billed amount, in this case, $600. This $600 is the balance-billed amount; it doesn’t count toward your out-of-pocket limit.
Health insurance premiums
Even though they may be your largest health care expense, health insurance premiums, the amount you pay every month to buy your health insurance coverage, don’t count toward the out-of-pocket maximum.
Learn more about how your out-of-pocket limit works in, “Out-Of-Pocket Maximum—How It Works & Why to Beware.”