Legal Glossary
Out-of-Pocket Maximum
The most you'll pay for covered healthcare in a plan year; after reaching it, your insurer pays 100% of covered costs.
Legal Definition
The out-of-pocket maximum (also called the out-of-pocket limit) is the highest amount you will be required to pay for covered healthcare services in a single plan year. Once you've paid this amount — through a combination of your deductible, co-pays, and co-insurance — your health insurance plan pays 100% of all covered services for the remainder of the year. The ACA (Affordable Care Act) sets annual limits on out-of-pocket maximums for qualifying health plans. For 2024, the federal limits are $9,450 for individual coverage and $18,900 for family coverage.
In Plain English
Your out-of-pocket maximum is the worst-case annual cost cap on your healthcare spending. No matter how much medical care you need in a year, once you've paid your out-of-pocket maximum in covered costs, insurance covers everything else at 100% for the rest of that year. This protects you from catastrophic medical bills. The key is understanding what counts toward the maximum: your deductible, co-pays, and co-insurance for covered in-network services usually count. Premiums, out-of-network costs, and non-covered services typically don't count — meaning you might spend more than the out-of-pocket maximum in a year of serious illness.
Real-World Example
Andrea has health insurance with a $2,000 deductible and a $7,000 out-of-pocket maximum. She's diagnosed with a condition requiring $80,000 in treatment. She pays the first $2,000 (her deductible). After that, she pays 20% co-insurance. At some point in the year, her cumulative payments — deductible plus co-insurance — reach $7,000 (her out-of-pocket max). From that point forward, every covered medical expense for the rest of the year is paid at 100% by insurance. Without the out-of-pocket maximum, 20% co-insurance on an $80,000 bill would have been $16,000 — far more than the $7,000 cap.