What is the Out-of-Pocket Maximum On My Health Insurance Policy?

The Out-of-Pocket Maximum(OOP) or stop loss, on a health insurance policy confuses almost everyone. Since I like to simplify things for folks so they understand how things really work, I thought I would do that here for everyone at one time.

The OOP is one of the most important numbers you will see on a health insurance quote or policy.
So don’t think that the OOP is a bad thing. Anytime someone hears the word “maximum” associated with insurance, it is usually in association with “the maximum we will pay”. In this context you can reverse the phrase and use it in this way “the maximum you will pay”. Hopefully, after you read this, you will have a much better understanding of the OOP and look at it a little more favorably.

I will explain this by example:

Let’s say you have a $1,000 deductible health plan that pays 80% of the covered cost of claims. You are responsible for the other 20%. You have a $2,000 OOP on your policy. If you had a claim that caused you to end up in the hospital. Let’s say your claim is $20,000. You know you are responsible for the first $1,000. You write the hospital a check for the deductible before you leave. Over the course of the next couple of weeks you are getting billing statements and statements from your insurance carrier all telling you you owe different amounts and you are really confused by the whole thing. Since you have already paid your deductible you understand that you only have to pay 20% of the rest of the bill. Well, 20% of 19,000 is almost $4,000 and that is a pretty good chunk to pay at one time. Lucky for you, there is a measure in place to keep you from paying the entire $4,000, it is called the Out-of-Pocket Maximum. Remember that $2,000 OOP you read over when you bought the policy? That is your get out of jail semi-free card. Whatever your OOP max is on your policy, you will only pay up to that amount, after you have paid your deductible. The 20% you are responsible for is only up to the OOP max listed on your policy. What happens after you have paid the OOP max? Everything is covered at 100% from that point until the end of the year. When you start a new year, you start over from the beginning on everything.

So that’s the way it works.

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Remember, the time to buy insurance is not when you need it the most.