If you’ve recently shopped for health insurance, you likely saw the term “out-of-pocket maximum” when comparing plans. Don’t dismiss this number as a figure you’re unlikely to reach. Understanding what an annual out-of-pocket maximum is can help you choose the right healthcare plan and budget effectively if you need medical care.
To make an informed decision, you must know what healthcare expenses count toward the out-of-pocket maximum and what will happen after you meet your limit.
In this blog post, you’ll learn:
- What an annual out-of-pocket maximum is and how it affects your healthcare costs.
- Which medical expenses count toward your out-of-pocket maximum.
- How a health reimbursement arrangement (HRA) can help you cover your medical expenses before reaching your out-of-pocket maximum.
An out-of-pocket maximum is the most you’ll pay for covered medical services during your health insurance policy’s plan year. The out-of-pocket maximum varies by healthcare insurer and plan type. But, the federal government sets annual maximum limits for plans sold on the Health Insurance Marketplace.
Below are the 2025 maximum out-of-pocket limits for Health Insurance Marketplace plans1:
|
Individual coverage |
Family coverage |
|
$9,200 |
$18,400 |
In 2024, almost 100% of employees enrolled in a self-only group health plan had an out-of-pocket maximum. Of those individuals, 24% had an annual out-of-pocket maximum above $6,0002.
Once you've hit your out-of-pocket maximum, your insurance company will pay 100% of your in-network covered medical expenses for the rest of the benefit year. But, the expenses must be medically necessary for your health insurer to cover them. Out-of-network care and non-covered services will still result in additional costs even after reaching your maximum.
In general, your insurance company will apply the portion you pay out-of-pocket for covered healthcare services to your out-of-pocket maximum.
These amounts include:
Other expenses that may count toward your annual out-of-pocket max vary depending on your plan. To get the most out of your coverage, check your plan’s summary of benefits carefully to ensure your medical service or item is in-network and counts toward your maximum limit.
Some costs that you’ll pay won’t count toward your out-of-pocket maximum, including:
Again, excluded expenses vary by plan. Review your plan’s details before receiving care, and always seek in-network care when possible to avoid unnecessary bills.
Knowing a plan’s out-of-pocket maximum helps you determine which plan is best for you and your budget when shopping for coverage. Understanding the maximum you may have to pay for healthcare during a plan year can also help you avoid financial distress. Suppose you have an unexpected medical situation or a chronic illness. In that case, you can effectively plan knowing you won’t spend more than a certain amount for care.
Additionally, early insight into what you can expect to pay encourages individuals to access medical care when they need it most. According to a 2024 KFF poll, one in four U.S. adults said they skipped or postponed getting necessary healthcare due to the cost3. A maximum limit means set out-of-pocket costs and predictability. This can promote better health outcomes, increase peace of mind, and reduce medical debt.
In contrast to an annual out-of-pocket maximum, an annual deductible is the amount of money you must pay out-of-pocket before your insurer begins to cover a portion of the costs of your medical care. Your deductible will vary based on your plan type and the policy’s metallic tier.
For example, if your plan has a $3,000 annual deductible, you'll pay $3,000 on your own first. Once you reach your deductible, your health insurance company will pay a percentage of your healthcare expenses for the rest of the benefit year. However, you must still pay your plan’s copayments or coinsurance until you reach your out-of-pocket max.
If your employer offers you a health reimbursement arrangement (HRA), you can use it toward healthcare costs that count toward your out-out-pocket maximum.
An HRA is an employer-provided health benefit that allows you to receive tax-free reimbursements for qualified out-of-pocket medical expenses. Depending on the type of HRA, your individual health insurance premiums are also eligible for reimbursement.
HRAs are more flexible for employees than traditional group health insurance. The way they work is simple. Your employer gives you a monthly allowance to pay for healthcare costs. Unlike a health savings account (HSA), only employers can contribute to an HRA. Once you buy an eligible expense, you submit documentation proving you paid for the service or item. Then, your employer reimburses you tax-free up to your allowance amount.
Expenses that count toward your out-of-pocket maximum that are HRA-eligible include:
Even if you receive out-of-network care, it still may be a covered expense under an HRA. IRS Publication 5024 and the CARES Act5 have the complete list of eligible costs.
The following are three types of HRAs that your employer can offer with PeopleKeep:
The annual out-of-pocket maximum is a crucial detail to understand when shopping for health coverage. Understanding this limit helps individuals choose the right health insurance plan, budget effectively, and access necessary care without financial strain.
However, health insurance shopping is even better when you have an HRA to get tax-free reimbursements on medical care while you work toward hitting your maximum limit. If your employer offers an HRA, you’ll have access to a budget-saving health benefit that’s sure to provide you and your family maximum value.
1. Out-of-pocket maximum limit
2. 2024 KFF Employer Benefits Survey - Cost-sharing
3. KFF - Americans challenges with healthcare costs
5. CARES Act