An out-of-pocket maximum is a predetermined, limited amount of money that an individual must pay before an insurance company or (self-insured employer) will pay 100 percent of an individual’s health care expenses for the remainder of the year.
Health insurance plans can set their own out-of-pocket maximums, but they’re constrained by federal regulations that impose an upper limit on how high out-of-pocket costs can be. In 2020, the upper limit is $8,150 for an individual and $16,300 for family coverage; in 2021, it will be $8,550 for an individual and $17,100 for a family (these caps apply to in-network care that’s considered an essential health benefit, and only to plans that are not grandfathered or grandmothered, as those plans do not have restrictions on their out-of-pocket exposure.)
The federal government publishes new guidelines each year that include the highest out-of-pocket maximum that health plans can impose (the annual benefit and payment parameter notice). So the highest allowable out-of-pocket maximum changes annually. In 2014, it was just $6,300 for an individual, but by 2021, it will have increased by more than 35 percent. Many health plans, however, have out-of-pocket maximums that are well below the highest allowable amounts.
For perspective, here are the federally-allowed maximum out-of-pocket amounts since they debuted:
- 2014: $6,350 for an individual; $12,700 for a family
- 2015: $6,600 for an individual; $13,200 for a family.
- 2016: $6,850 for an individual; $13,700 for a family (there was also a requirement starting in 2016 that individual maximum out-of-pocket limits be embedded in family plans).
- 2017: $7,150 for an individual; $14,300 for a family.
- 2018: $7,350 for an individual; $14,700 for a family.
- 2019: $7,900 for an individual; $15,800 for a family
- 2020: $8,150 for an individual; $16,300 for a family.
- 2021: 8,550 for an individual; $17,100 for a family.
- 2022 (proposed): $9,100 for an individual; $18,200 for a family.
If you have Medicare coverage, be aware that there is no out-of-pocket maximum for Original Medicare, which is why most enrollees have supplemental coverage (from an employer-sponsored plan, Medigap, or Medicaid). Medicare Advantage plans must cap out-of-pocket costs at no more than $7,550 as of 2021, but that does not include out-of-pocket costs for prescription drugs covered by the Part D coverage that’s integrated with most Advantage plans.