How out-of-pocket maximums can impact your health insurance choices and costs

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When shopping for health insurance coverage, it’s likely you’ve seen the phrase “out-of-pocket maximum” on a summary of benefits. Don’t ignore that number – this amount is an important part of your plan.

Your annual out-of-pocket maximum is the highest amount you’ll have to pay for covered health care services in a single year. It ensures you don’t get hit with massive health care costs if you experience a major illness or injury.

To choose the right plan for you, it’s important to understand how an out-of-pocket maximum works, what kind of costs contribute and what happens after you meet your limit.

How an out-of-pocket maximum works

An out-of-pocket (OOP) maximum is the most you’ll pay for health care services during your plan’s calendar year. With most plans, payments will only go toward your maximum if the services you receive are covered in network – and only specific types of payments apply. Once you reach your OOP maximum, your health plan will begin paying for all the costs of covered benefits moving forward.

So, how does this look in practice? If you have an individual plan with an OOP limit of $9,200, that’s the highest amount you’ll pay out of pocket for care in 2025. Think of this number as a financial possibility – if for some reason you need a lot of care, you can plan knowing you won’t have to spend more than this set amount for covered health care services. Understanding your out-of-pocket maximum in advance can help you create a more accurate, comprehensive financial plan for the calendar year.

What counts toward your out-of-pocket maximum

We’ve mentioned that only some types of costs apply toward your annual out-of-pocket maximum – but what does that mean? Usually, it comes down to the set amounts that you pay for covered services, such as your deductible, copays and coinsurance.

Deductible: The amount you pay for covered health care services each year before your plan starts to pay
Copay: A fixed amount that you pay for a covered health care service
Coinsurance: A fixed percentage you pay for a covered health care service. Your plan pays the rest of your expenses

For example, let’s say that your allergies have been acting up lately, so you schedule a visit to your in-network primary care doctor. If your plan has assigned a $40 copay for service, that’s the amount you pay for this visit, with your insurance company providing the rest. That $40 you’ve paid out of pocket will go toward your yearly out-of-pocket maximum.

What about premiums?

Your health insurance premium, or the amount you pay toward your health insurance every month, does not contribute to your out-of-pocket limit. This is because your premium is what you pay each month for health coverage as a whole and not specific services.

Each year there’s an annual limit

A plan’s out-of-pocket maximum can change each year, whether you’ve got coverage through the health insurance marketplace, your employer or a private health insurance company. However, OOP maximums can’t exceed a certain amount. There’s a standard limit set each year as per the Affordable Care Act (also known as the ACA or Obamacare).

For the 2025 calendar year, the most you will pay out of pocket toward your maximum is $9,200 for an individual and $18,400 for a family. These amounts will most likely change for 2026, and that information is typically announced in the fall.

Getting care in network and out of network: Your out-of-pocket limit

As mentioned, the money you pay for covered health insurance services, typically in network, goes to your OOP limit. Costs paid for out-of-network care or non-covered services usually do not apply. However, if you’ve got a plan that does cover some out-of-network health services, like a PPO plan, you may have a different out-of-pocket maximum for health care services provided in and out of network.

Emergency care and your out-of-pocket maximum

It depends on the plan, but most policies include a copay or coinsurance amount for receiving emergency care services – those contribute toward your OOP limit. Emergency care includes emergency room visits (in both hospitals and independent facilities) and hospital departments that provide post-stabilization services, which is the care you receive in relation to your medical needs once you’ve been stabilized after an emergency.

Your health plan is legally required to cover emergency care. It doesn’t matter if it is in or out of network. However, some plans may have specific exclusions or limitations. And remember – extended hospital stays, emergency care and services provided in a hospital can be very different.

The difference in maximums: Individual and family plans

When it comes to out-of-pocket maximums, individual plans are simpler. They cover one person, and once that person reaches their out-of-pocket maximum, their insurance provider pays 100% for costs of care.

Family plans work a little differently. Every person covered under one family plan – both the primary policy holder and any dependents – has an individual out-of-pocket maximum. Then the family has one out-of-pocket maximum. If someone in the family reaches their individual out-of-pocket maximum before everyone else, other family members will keep paying toward their individual maximums.

But how does that play out? Let’s say there are two people on a family plan – a parent and a child. If that parent reaches their individual OOP limit, they’ll no longer have out-of-pocket costs for the plan year regarding their own care. That means no more paying for their deductibles, copays or coinsurance. However, the child on this plan will still be subject to out-of-pocket costs until either their individual or the family out-of-pocket maximum is met.

Do prescriptions count toward your maximum?

Yes. If prescription drugs are covered by your plan, the costs you pay toward medicines (whether copays or coinsurance amounts) will count toward your out-of-pocket maximum.

What happens when you meet your out-of-pocket maximum

After you reach your out-of-pocket maximum, your insurance provider will cover all costs of covered health care services and prescriptions for the rest of the calendar year.

Shopping for the right plan

With all this in mind, you may be thinking that the best kind of plan for you features a low out-of-pocket maximum. It makes sense. The faster you can pay toward a smaller amount the better – especially if you expect to need a lot of care during the year.

However, it can be a bit more complicated than that. Plans with lower deductibles and OOP limits typically have much higher premiums, meaning that while your out-of-pocket costs may be lower, the amount you pay for your plan each month might be high. While that can be a good fit for some, it may not work for all. The key is balance.

First, take a good look at your budget and your health care needs. This will help you set guidelines for determining what’s financially feasible and medically necessary. Then, make sure to shop around, considering a few different plans and how they’d work for you. Some companies, like HealthPartners, offer many individual and family plan options you can choose from to find a plan that fits your needs.