The out of pocket maximums as predetermined in your health insurance policy are possibly the most important aspect of your health care coverage. This is the number that indicates the worst case scenario; the most money you will be responsible to pay in the event of a catastrophic accident or illness. Under no circumstances and no matter what other health care costs may be generated, you are not liable for one dollar above the out of pocket limit stated in your policy. When you reach the maximum out of pocket, your insurance company pays all of your continuing essential health care expenses.

Out of pocket expenses are the health care related costs that you pay over and above the cost of your monthly premium. They can vary from plan to plan but generally these expenses include your annual deductible, coinsurance and co-payments. Some plans do not include co-pays associated with ambulatory care and some do not include your annual deductible so it is important to find out for sure.

The annual deductible is the amount of money that you pay for health related expenses each year before your health insurance policy kicks in and pays its share of the cost; it can range from zero to $10,000 per insured party. The size of your deductible is directly related to your premium; the higher the deductible the lower the premium. You can reduce the cost of your health insurance policy by choosing a high deductible but that creates the risk of a greater out of pocket if something disastrous should occur.

Co-payments are what you pay as your share of the cost for regular visits to your doctor and for prescription drugs. They are a flat fee expense that is charged per service rendered. Typically, co-payments are $20 for a doctor visit and $10 to $40 for a prescription medication depending on whether the drug is a brand name or generic. The purpose of co-payments is not only to share the cost of healthcare, but also to discourage policy holders from seeking nonessential medical services.

Coinsurance is the percentage of covered health care costs that you are required to pay after your annual deductible has been met. It is usually 20% or 30% depending on the terms of your health insurance policy. The insurance company pays the difference. Unlike co-payments which are sometimes not included in your out of pocket maximums, coinsurance is always included.

After every payment that your provider makes for a covered expense, you will receive an explanation of benefits, or EOB, that itemizes your out-of-pocket expenses year to date. Keeping track of them is a good way to manage your yearly health care costs.