When it comes to health insurance coverage, the monthly premium is rarely the only bill that families have to contend with. Even a simple visit to the doctor may mean a deductible payment, or at the very least a co-payment in order to have the insurance company cover any portion of the expense. Drugs are almost never entirely covered, and there will be times when the family has to seek treatment outside of the provider network, thus incurring another cost. These out of pocket (OOP) expenses can stack up over the course of the year, adding hundreds if not thousands of dollars to what is already a substantial premium. Fortunately, many companies now offer plans which have yearly out of pocket maximums and these help to protect individuals and families that find themselves in a position of needing to spend a great deal on health care.

Every health insurance company is going to do business a little bit differently, but all of them should provide their clients with an explanation of benefits (EOB) at least every quarter, if not every month. This will detail exactly how much the customer has paid out of pocket and how much the insurance company has paid. It should also list, if any, the annual out of pocket maximums for the plan. In many cases, this maximum is several thousand dollars, up to approximately $5,000. Typically, out of pocket expenses include everything related to health care that has been paid for by the client, from drugs to paperwork to referrals. There are some companies that do not count things like drug co-payments or the annual deductible in their annual OOP maximum, so if the EOB is in any way unclear, call the company.

A plan which does have a maximum helps to limit the amount paid by consumers in three ways. First, if the maximum is met, all other funding will come directly from the insurance company, up to the health insurance coverage limit. Second, the limit encourages only essential spending, as the OOP maximum can be quite high, and it is in the best interest of the client to minimize the amount paid in total. Third, physicians can, in consultations with patients, make sure that the best and most cost-effective treatments are being used.

While the maximum limit is often quite high, if it exists at all, it is of benefit to have in a policy in case a time arises when massive medical spending is necessary. As well, knowing that the maximum is a hard number to reach can encourage clients to make smarter health choices, which will ultimately benefit not only themselves, but will help lower their total health insurance spending.