2026-04-20 · health, personal

Out-of-Pocket Maximum Explained

Key Takeaways

• The out-of-pocket maximum is the most you will pay for covered in-network services in a plan year. After you reach it, your plan pays 100%.
• Deductibles, copays, and coinsurance all count toward the out-of-pocket maximum. Premiums and out-of-network costs generally do not.
• For 2025 ACA marketplace plans, the federal limit is $9,200 for an individual and $18,400 for a family.
• Plans with a lower out-of-pocket maximum typically charge higher monthly premiums.

Introduction

If you have ever worried about what a serious illness or accident could cost you, the out-of-pocket maximum is the number that answers that question. It is the absolute cap on your financial exposure for covered medical services in a single plan year.

This guide explains how the out-of-pocket maximum works, what counts toward it, what does not, and how to factor it into plan selection. It is written for anyone comparing health plans, facing large medical bills, or trying to understand their total worst-case spending.

What Is the Out-of-Pocket Maximum?

The out-of-pocket maximum (sometimes called the out-of-pocket limit) is a dollar amount set by your health plan. Once your combined spending on deductibles, copays, and coinsurance reaches that amount in a plan year, your insurer pays 100% of covered in-network services for the rest of the year.

How it works as a spending cap:

1. You pay your deductible, copays, and coinsurance as you receive care throughout the year.
2. Each of those payments accumulates toward your out-of-pocket maximum.
3. Once the total reaches your plan’s limit, you stop paying for covered services entirely.
4. Your insurer covers 100% of allowed charges for the remainder of the plan year.

The out-of-pocket maximum resets at the start of each new plan year (January 1 for most plans, or your employer plan’s renewal date).

ACA Out-of-Pocket Limits

The Affordable Care Act (ACA) sets a federal ceiling on how high an out-of-pocket maximum can be for marketplace and most employer plans. The Centers for Medicare & Medicaid Services (CMS) updates these limits annually based on premium growth.

2025 federal limits:

• Individual: $9,200
• Family: $18,400

Your plan’s actual out-of-pocket maximum may be lower than the federal limit, but it cannot exceed it. Grandfathered plans and some short-term plans are exempt from this rule.

These limits apply to in-network covered services only. If you go out of network, your spending may not count toward the limit at all (depending on your plan’s design).

What Counts Toward the Out-of-Pocket Maximum

The following payments for in-network covered services accumulate toward your annual limit:

• Deductible payments. The full amount you pay before your plan starts sharing costs.
• Copays. Flat-fee payments for doctor visits, prescriptions, urgent care, and other services.
• Coinsurance. Your percentage share of bills after meeting your deductible.

All three types of cost-sharing add up together. You do not need to track them separately; your insurer tracks your progress toward the maximum and should notify you when you are close.

What Does NOT Count

Several types of spending do not accumulate toward your out-of-pocket maximum:

• Monthly premiums. The amount you pay to keep your plan active is separate from cost-sharing.
• Out-of-network costs. Most plans exclude out-of-network spending from the in-network maximum. Some PPO plans have a separate (higher) out-of-network maximum.
• Non-covered services. If your plan does not cover a service, you pay the full cost and none of it counts.
• Balance-billed amounts. If a provider charges more than your plan’s allowed amount, the excess does not count.
• Costs above the allowed amount. Any charges that exceed what your plan considers reasonable and customary.

Understanding what does not count is important because these expenses can add to your total medical spending even after you reach the maximum.

How the Out-of-Pocket Maximum Works with Other Cost-Sharing

Here is a step-by-step example showing how all cost-sharing components interact through a plan year.

Your plan:

• Annual deductible: $2,000
• Coinsurance: 20% (you) / 80% (insurer) after deductible
• Out-of-pocket maximum: $7,000

Scenario: You have a $30,000 surgery plus follow-up care.

Phase 1: Deductible ($0 to $2,000 spent) You pay the first $2,000 of covered costs in full. Your out-of-pocket total is now $2,000.

Phase 2: Coinsurance ($2,000 to $7,000 spent) After your deductible, you pay 20% of remaining costs. On the next $25,000 of charges, you would owe $5,000 (20%). Your out-of-pocket total reaches $7,000 ($2,000 deductible + $5,000 coinsurance).

Phase 3: Plan pays 100% (after $7,000 spent) You have hit your out-of-pocket maximum. For the rest of the plan year, your insurer pays 100% of covered in-network services. Any additional doctor visits, prescriptions, or procedures cost you nothing beyond your monthly premium.

Total you paid: $7,000 (not $30,000+).

Out-of-Pocket Maximum vs Deductible

These two terms are often confused but serve different purposes:

The deductible is the threshold that activates cost-sharing. The out-of-pocket maximum is the ceiling that stops cost-sharing. Both reset annually.

How to Choose a Plan Based on Out-of-Pocket Maximum

The out-of-pocket maximum represents your worst-case annual spending on covered care. When choosing a plan, consider:

Lower out-of-pocket maximum (higher premiums):

• Better for people with chronic conditions requiring ongoing treatment
• Better for families expecting significant medical use (planned surgeries, pregnancies)
• Provides more predictable budgeting for healthcare costs
• Limits financial exposure if an unexpected health event occurs

Higher out-of-pocket maximum (lower premiums):

• May save money if you rarely use medical services
• Works well paired with a Health Savings Account (HSA) that can cover unexpected costs
• Good for generally healthy individuals or those with emergency funds to cover potential expenses

How to decide: Estimate your likely annual medical spending. If the savings on premiums from a high-OOPM plan exceed the extra you would pay in cost-sharing in a typical year, the higher maximum may make sense. But if you have ongoing medical needs or are risk-averse, the lower maximum provides a tighter safety net.

For help comparing total plan costs, see how to compare insurance quotes.

Frequently Asked Questions

Does the out-of-pocket maximum reset each year? Yes. Your out-of-pocket accumulation resets to $0 at the start of each new plan year. For most marketplace and employer plans, this happens on January 1. Amounts paid in the previous year do not carry over.

Does my family share one out-of-pocket maximum? Family plans have both individual and family maximums. Once one family member reaches the individual maximum (called the “embedded” individual limit), their costs are covered at 100%. The family maximum applies to combined spending across all members. Under ACA rules, no individual in a family plan can have an out-of-pocket maximum exceeding the individual limit ($9,200 in 2025).

Do prescription costs count toward the out-of-pocket maximum? Yes. Copays and coinsurance for covered prescriptions filled at in-network pharmacies count toward your maximum. However, if you use a manufacturer coupon or discount card, some plans do not count those reduced amounts toward your accumulator.

What if I switch plans mid-year? Your out-of-pocket accumulation does not transfer between plans. If you switch insurers or plans mid-year, your progress toward the maximum resets to $0 with the new plan. This is why switching mid-year can be costly if you have already spent significantly toward your limit.

Is there an out-of-pocket maximum for Medicare? Original Medicare (Parts A and B) does not have an out-of-pocket maximum, which is one reason many beneficiaries buy Medigap supplemental coverage. Medicare Advantage plans (Part C), however, are required to have an annual out-of-pocket maximum for in-network services. For more on Medicare, see our Medicare basics guide.

Next Steps

• Review your plan’s Summary of Benefits. Find your out-of-pocket maximum and check whether it applies separately to in-network and out-of-network care.
• Track your spending. Log into your insurer’s portal to see how much you have accumulated toward your maximum this year.
• Compare plans during open enrollment. Use total annual cost (premiums + likely out-of-pocket spending) rather than premium alone. See the health insurance enrollment guide for timing and steps.
• Learn related cost-sharing concepts. Read our copay vs coinsurance vs deductible comparison and deductible explainer for the full picture of how health insurance costs work.
• Estimate your costs. For average plan pricing by type and tier, see our health insurance cost guide.

Sources

• Centers for Medicare & Medicaid Services (CMS): Annual out-of-pocket maximum limits and Notice of Benefit and Payment Parameters
• HealthCare.gov: Out-of-pocket maximum/limit glossary definition and plan comparison tools
• Internal Revenue Service (IRS): High-deductible health plan definitions and HSA contribution limits
• Kaiser Family Foundation (KFF): Employer Health Benefits Survey, out-of-pocket spending data
• National Association of Insurance Commissioners (NAIC): Consumer guides to understanding health insurance cost-sharing