If you’re looking to buy health insurance through your state’s marketplace, you’ve probably heard the term used in a few different ways. You may have also heard people talking about “the exchange” or “health insurance exchanges” without knowing exactly what they were talking about. In this post, I’ll explain what health insurance exchanges are and why they’re important for getting coverage.

In this guide, we find out What Is The Out Of Pocket Maximum For Health Insurance, what counts towards out of pocket maximum, what happens after out of pocket maximum is met, and examples of out of pocket medical expenses.

What Is The Out Of Pocket Maximum For Health Insurance

The official term for health insurance sold on the exchange is the “Health Insurance Exchange.” This program is also commonly referred to as the “Marketplace” or “Exchange,” and it’s a part of President Obama’s Affordable Care Act (ACA). The Marketplace sells private health insurance plans, which are provided by private companies. It helps individuals, families, and small businesses purchase private health insurance.

The Marketplace provides you with information about your options, coverage choices and costs so that you can make an informed decision about your coverage needs. You have several options when purchasing coverage through this program:

The Patient Protection and Affordable Care Act (ACA) introduced health insurance exchanges.

The Patient Protection and Affordable Care Act (ACA) introduced health insurance exchanges.
These are online marketplaces where you can choose from private health plans that suit your needs and budget.
The ACA requires all Americans to have health insurance, but if you don’t qualify for Medicaid or Medicare coverage, you can use the exchange to buy a plan on your own or find one offered by an employer.
The first state-based exchanges opened in 2013 and today there are 13 states operating their own exchanges as well as over 30 federally run ones. Over 180 million Americans now have access to these marketplaces!

You can think of them as marketplaces you can use to purchase private health insurance coverage.

Exchanges are marketplaces that allow you to compare different health insurance plans.
Exchanges are a way for you to buy health insurance if you don’t have it through your employer.
Exchanges are also a way for people who have lost their job to continue getting health insurance.

They are also referred to as the Health Insurance Marketplace or just “the Marketplace.”

The official term for health insurance sold on the exchange is the “insurance marketplace.” It’s also referred to as the marketplace, health insurance marketplace, or just plain exchange.

However, the official title is the health insurance exchange, or exchange for short.

Although the official title is the health insurance exchange or, as it’s commonly known, “the Exchanges.”

In short: you can call it whatever you want.

You can get coverage through your state’s marketplace by entering your zip code above.

To find out if you qualify for a subsidy and compare plans and prices, enter your zip code above. You can also apply for coverage, enroll in coverage, purchase coverage or sign up for it (or all those things!) by contacting the insurance company directly.

For more information about health care reform: You can read our FAQs about health insurance on the exchange here.*

You may hear your state’s marketplace being referred to by different names but rest assured that they’re all referring to the same thing.

The exchange is a marketplace
The exchange is a directory of health insurance plans
The exchange is the place to purchase health insurance

what counts towards out of pocket maximum

An out-of-pocket maximum is a cap, or limit, on the amount of money you have to pay for covered health care services in a plan year. If you meet that limit, your health plan will pay 100% of all covered health care costs for the rest of the plan year. Some health insurance plans call this an out-of-pocket limit. A plan year is the 12 months between the date your coverage is effective and the date your coverage ends.

If you have dependents on your plan, you could have individual out-of-pocket maximums and a family out-of-pocket maximum. This depends on the terms of the plan.

How does an out-of-pocket maximum work?

Costs you pay for covered health care services count toward your out-of-pocket maximum. This may include costs that go toward your plan deductible and your coinsurance. It may also include any copays you owe when you visit doctors.

Do all health plans have an out-of-pocket maximum?

Plans that meet Affordable Care Act (ACA) standards are required to have out-of-pocket maximums. As the health insurance industry changes, there could be non-ACA plans that do not meet the same standards.

What’s the difference between an individual and family out-of-pocket maximum?

Health plans that cover more than one person on a plan often have individual out-of-pocket maximums, as well as a family out-of-pocket maximum.

what happens after out of pocket maximum is met

How can I use my benefits to make the most of out-of-pocket maximums?

The out-of-pocket maximum is a limit on what you pay out on top of your premiums during a policy period for deductibles, coinsurance and copays. Once you reach your out-of-pocket maximum, your health insurance will pay for 100% of most covered health benefits for the rest of that policy period. The next policy period (plan year), it starts all over again – note: the policy year may not coincide with the calendar year.

Thinking ahead about the health care services that you may need in the coming year and understanding how out-of-pocket maximums work can help you decide which health plan to enroll in. Learn more.

Have you met your out-of-pocket maximum (or are you close)?

If you still have time left in your policy period (plan year) and are close to reaching your out-of-pocket maximum, you may want to:

To avoid unexpected costs, remember to review your policy, certificate or plan booklet, get any referrals from your health care provider, and contact your health insurance company about preauthorization before receiving certain health care services and prescriptions. Learn more

Not all plans are the same; get to know yours It’s important to know how the out-of-pocket maximum works for your plan:

Generally, once an individual has reached their out-of-pocket maximum most care for that person is covered at 100% ― but, the other family members keep paying. For example, say Bob’s plan has an individual out-of-pocket maximum of $5,000 and family out-of-pocket maximum of $10,000. Bob is the first in his family to reach $5,000 in expenses. Bob won’t need to pay out-of-pocket for deductibles, copays or co-insurance for the rest of the policy year for his care; however, services for his covered spouse and child would be subject to cost sharing until either their individual out-of-pocket maximum is met or the family out-of-pocket maximum is met.

There are some plans, called “Catastrophic Plans that have a combined deductible for individuals and family members that all out-of-pocket costs when combined hit the maximum, then expenses are paid by the carrier at 100%,

examples of out of pocket medical expenses

Understanding Out-of-Pocket Expenses

Employees often spend their own money on business-related expenses, especially if they travel on behalf of a company. These out-of-pocket expenses are typically reimbursed by the employer, using a company-approved process. Common examples of work-related out-of-pocket expenses include airfare, car rentals, taxis or ride-sharing fares, gas, tolls, parking, lodging, and meals, as well as work-related supplies and tools.

The term is also used in health insurance policies to refer to the portion of a medical cost that the insurance company doesn’t cover. Out-of-pocket healthcare expenses include deductibles, copays, and coinsurance.

Health insurance plans have out-of-pocket maximums that are set by federal law. These are caps on the amount of money that a policyholder must spend each year on healthcare expenses. The Affordable Care Act (ACA) requires all group and individual plans to stay within annually updated guidelines for out-of-pocket maximums.

For 2022, the out-of-pocket limits are $8,700 for individual coverage and $17,400 for family coverage. For 2023, the out-of-pocket limits increase to $9,100 for an individual and $18,000 for a family. Plans can’t have out-of-pocket maximums that exceed these limits, but many offer lower maximums.

Out-of-Pocket Maximums vs. Deductibles

In health insurance, the deductible is the amount you pay each year for covered costs before the insurance coverage kicks in. When the deductible is met, the policyholder “shares” the costs with the insurance plan through coinsurance. With an 80/20 plan, for example, the policyholder pays 20% of the cost while the plan picks up the remaining 80%.

The amount you pay for coinsurance—as well as your copays and deductible—all count toward the out-of-pocket maximum for the year. When you reach your out-of-pocket maximum, the plan pays 100% of covered costs for the rest of the year.

Some plans have higher deductibles than others. Typically, the lower the premium you pay, the higher the deductible, and the higher the premium you pay, the lower the deductible.

High-Deductible Health Plans (HDHPs)

A high deductible health plan (HDHP) can save you money in the form of lower monthly premiums. You also may get a tax break on medical expenses through a health savings account (HSA).

According to Internal Revenue Service (IRS) rules, for the 2022 tax year, an HDHP is a health insurance plan with a deductible of at least $1,400 for an individual plan or at least $2,800 for a family plan. For 2023, the numbers rise to $1,500 for an individual plan and $3,000 for a family plan.

For 2022, out-of-pocket costs may not exceed $7,050 for an individual or $14,100 for a family. For 2023, the figures are $7,500 for an individual and $15,000 for a family.

An HDHP provides 100% coverage for preventive services from in-network providers before you meet your deductible.

For individuals who don’t anticipate many medical expenses for the upcoming year, it makes sense to minimize premiums and choose an HDHP, since you probably won’t need enough healthcare to get past the high deductible. If you anticipate significant medical expenses, a plan with a lower deductible but a higher premium would be preferable so that the insurance reimbursement kicks in earlier.

An HDHP allows the holder to contribute to an HSA. Policyholders in the 24% federal tax bracket who incur $3,000 in medical expenses can use an HSA to pay for them with pretax dollars.

HSAs have annual contribution limits as well:

For the 2022 tax year, the maximum allowable contribution is $3,650 for an individual plan or $7,300 for a family plan. People ages 55 and older can contribute an additional $1,000 a year.

For the 2023 tax year, the maximum allowable contribution is $3,850 for an individual plan or $7,750 for a family. The “catch-up” provision still applies.

When deciding whether to choose a plan with a high or low deductible, estimate your likely medical expenses for the year and research the premiums, deductibles, and out-of-pocket maximums for the available plans.

Examples of Out-of-Pocket Expenses

Here’s an example of work-related out-of-pocket expenses. Assume an employee has a meeting with a potential client. The employee spends $250 on airfare, $50 on Uber rides, $100 on a hotel, and $100 on meals—all charged to their own credit card. After the trip, the employee submits an expense report for $500 for their out-of-pocket expenses. The employer then issues a reimbursement check for $500 to the employee.

One example of out-of-pocket health expenses is prescription medications. Many health insurance plans cover prescriptions, but the amount you pay depends on your deductible responsibilities. If you have not met your deductible amount, you will have to pay out of pocket for any prescription medications until you have.

However, some health insurance plans allow generic drugs to be purchased at discounted rates regardless of whether the annual deductible has been met. Some medical plans have a combined medical and prescription deductible.

Lisa has a $2,500 combined deductible. She has already paid $2,350 in out-of-pocket expenses toward her deductible and now needs to purchase $150 worth of prescription medicine. Lisa’s out-of-pocket cost will be $150. However, her combined deductible will now be met for the year.

When you have met your deductible, you may still have to pay an amount for each prescription. For example, a plan might state that you must pay $10 for each refill of generic drugs or prescription medicine, meaning your out-of-pocket cost will be $10 for each prescription.

Other Types of Out-of-Pocket Expenses

In the real estate industry, out-of-pocket expenses refer to any expenses above and beyond the mortgage itself that the buyer incurs during the sale process. These costs vary depending on local property and real estate, but they typically include the cost of a home inspection, appraisal fees, and escrow account deposits as well as closing costs, which can include loan origination fees, attorney fees, and property taxes.

Out-of-Pocket Expenses and Tax Returns

Some out-of-pocket expenses can be deducted from your personal income taxes. For example, income tax deductions are still available for expenses related to charitable donations and unreimbursed medical expenses.

Since the passage of the Tax Cut and Jobs Act (TCJA) of 2017, individuals can no longer deduct unreimbursed business expenses.

Though tax deductions don’t represent a direct reimbursement, there is an ancillary benefit to them because claiming these expenses as a deduction can lower your tax burden for the year.

Moving and Relocation Expenses

Moving expenses, according to the IRS, are costs the taxpayer incurs as a result of relocating for a new job or transferring to a new location. However, the TCJA eliminated the deduction of moving expenses for tax years 2018 through 2025, except for members of the military on active duty who move as the result of a military order.

Members of the armed forces can use IRS Form 3903 to claim the cost of moving expenses as federal income tax deductions.

Active-duty members of the U.S. military can deduct moving expenses if they incurred them in response to a military order that requires a permanent change of station. The expenses that qualify include the cost of packing, crating, hauling, in-transit storage, and insurance.

If the government provides and pays for any of your moving or storage expenses, you should not claim these expenses as a deduction on your taxes.