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Max out of Pocket and Health Plan Comparisons

When reviewing health insurance plans, there are a few key points to focus on when actually looking at benefits.  We’ve discussed the deductible, premiums, and RX but in today’s medical world, there really is one concern that stands above the rest and that’s the annual out of pocket maximum (or Max OOP).  Medical inflation and the resulting health insurance rates have increased so fast over the past decade that the OOP has gone from a side concern to the concern in getting the best health insurance at the lowest possible rate.  Let’s understand what it is and why it’s so important.

The Max out of Pocket and Health Plan Reviews

So what is the Max out of pocket?  This is the part of a health insurance plan that addresses the really big bills or catastrophic health care as it’s commonly called.  This aspect of a health plan basically lets you know how much you can expect to pay in a calendar year for very large bills (think $100K hospital stays etc).  If you really think about it, this is what health insurance (and any kind of insurance for that matter) is really for…protecting you from the big bill that you might otherwise not be able to absorb.  The Max out of pocket is generally calendar year (Jan 1st through Dec 31st) and assumed in-network (whether PPO or HMO) for covered benefits.  Some carriers will show the Out of Pocket Max a separate amount from the deductible (which must be met first) while others will show the max as including the deductible. A careful look at the brochure should spell out which is which for a given plan and you can access the brochures for plans in your area through our quoting engine.  So what does the OOP look like and how do you get there?

Out of Pocket and Coinsurance

Typically, the Max out of Pocket is listed as a flat amount, let’s say $3,000.  The OOP is usually per person up to two people but there can be variations to this.  How you get to this OOP limit depends on the plan.  For most PPO plans, you will meet some deductible first and then start to pay a percentage of remaining covered expenses (this is call the co-insurance) until you hit the $3K.  Copays can also go towards the OOP as well depending on the plan.  Let’s look at an example since health insurance comparisons are better with real numbers!

An Out of Pocket Max example

Let’s say we’re comparing a plan with a $2K deductible, $3K out of pocket max, and a 30% coinsurance share.  Now, in most years, we might medical expenses way below the deductible but let’s assume we have a $20K ACL repair.  We first pay the $2K deductible.  That leaves $18K.  We then start paying 30% of this remaining amount until we pay another $3K (assumes deductible is in addition to the OOP).  So we have paid a total of $5K ($2K deductible plus $3K OOP) and the carrier would pick up the other $15K.  $5K is still a lot of money but it’s much better than $20K and really large bills can quickly get up to $100K.

Many people focus on copays when reviewing health plans but you can see that the real protection of the plan is better found in the OOP and deductible.  Health insurance was designed to cover just the big bill and you see why we’re back to that point since the monthly premiums have outweighed richer coverage of the smaller

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