What does "out-of-pocket maximum" mean?

The term "out-of-pocket maximum" refers to the maximum amount that a policyholder is required to pay for covered healthcare services in a given policy period, after which the insurance plan pays 100% of the costs for covered services. This concept is crucial because it provides a financial safety net for insured individuals, limiting their overall expenditure on medical expenses.

When a policyholder reaches this threshold, they do not need to pay any additional out-of-pocket costs for services covered under the plan, such as copayments or deductibles. Thus, "out-of-pocket maximum" specifically pertains to the financial limit on what an individual must spend, which aligns with the understanding that the maximum amount paid out of one’s own pocket is achieved before the insurance company covers all remaining costs.

The other definitions provided do not accurately capture the essence of the term. The amount paid for premiums would not define the out-of-pocket maximum, as premiums are the regular payments made to maintain insurance coverage rather than what is spent on care. The total covered expenses refers to the sum of costs incurred for services that insurance would cover, but it does not indicate any maximum limit on out-of-pocket spending. Lastly, the amount that is paid by the insurer pertains to what the insurance company covers