Why is Knowing Your Health Insurance Max Out Of Pocket So Important
In the wonderful world of health insurance, we hear all sorts of weird terms. Today, we’re going to be talking about the Max Out of Pocket.
What is it? & Why is knowing this so important?
In simple terms, the max out of pocket is the “bottom line.” It is usually the most amount of money one would have to pay until the insurance company picks up the claims at 100%.
But wait a minute, I thought that’s what my deductible was for?
Well, sorta..
Most medical services that are covered in a health insurance policy will usually be subject to ..
- Copays
- Deductibles
- Coinsurance
- Max Out of Pocket
For example: Let’s say John is 27 and is a typical healthy young person. He uses his health insurance for a once a year physical and to see his primary doctor if (or when) he gets sick. In this case, John will usually only pay his doctor copay when he uses his insurance.
On the other hand, if something catastrophic happens to John, which lands him in the hospital, then his deductible, coinsurance and max out of pocket become much more important.
Lets say John has an insurance plan with (a) ..
- $7,000 Deductible
- 50/50 Coinsurance
- $8,700 Max Out Of Pocket
One day, John has a bad accident that puts him in the hospital for 2 weeks. When it ‘s all said and done, the medical bills come to $45,000.
Here is how John’s insurance will play out..
- First, John will be responsible to pay his $7,000 Deductible.
- John’s Coinsurance will then split the next $3,400 in medical bills 50/50. This means John will pay $1,700 in addition to his deductible.
- Once John pays his $7,000 deductible, plus 50% coinsurance ($1,700), he will have then hit his $8,700 Max Out of Pocket. The insurance will then pick up his covered expenses at 100%.
The key takeaway here is that your deductible may not always be the bottom line in terms of how much you could pay under your health insurance plan. So make sure you always ask what your Max Out of Pocket is when shopping for health insurance.
If you have any questions about health insurance, always speak with a licensed professional.
