Deductible Vs. Out-Of-Pocket Maximum: What’s The Difference?
Summary
- A deductible is what you pay for healthcare before your insurance kicks in
- Your out-of-pocket maximum is the most you will pay during the year
- A higher premium often comes with a lower deductible and out-of-pocket max
Health insurance terms can often be confusing. You might be among the many looking for clarity on the difference between deductible vs. out-of-pocket maximum.
Your health insurance plan starts paying for some of your healthcare costs once you hit your deductible. Then, it pays 100% of your covered healthcare costs after you reach your out-of-pocket maximum.
That’s the basic difference between a deductible and an out-of-pocket maximum, but to get the most out of your health insurance coverage, you’ll want to take a more detailed look at how your deductible vs. out-of-pocket maximum can impact your policy.
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What Is a Health Insurance Deductible?
A deductible is the amount you must pay for healthcare and medical expenses within a calendar year before your health insurance starts to share the costs. The minimum individual deductible for a high-deductible health plan (HDHP) in 2024 is $1,600, up $100 from 2023. The minimum deductible for a family is $3,200, up 6.67% from 2023.
Typically, if you pay a lower premium, you may have a higher deductible. The opposite is generally true, too. A higher premium often means your deductible may be lower.
An HDHP and other plans with high deductibles can be good for someone young and healthy who doesn’t anticipate seeking a lot of medical attention throughout the year. On the other hand, a health plan with a low deductible may suit you better if you have a chronic condition or expect to receive a lot of healthcare services during the year.
What Counts Toward Your Annual Deductible?
Certain healthcare costs don’t generally count toward your annual deductible, including:
- Your premiums
- Your copays
- Your healthcare expenses not covered by your insurance
You also should consider your annual medical insurance deductible. The meaning of “annual deductible” generally applies to healthcare expenses during one calendar. Your insurer keeps a running tab on your cost until you hit your deductible and your insurance begins sharing the cost of your healthcare.
At the end of the year, the tab is wiped clean, and you start over again the next year paying toward your annual deductible for the new calendar year.
Preventive Care
Some health insurance plans pay for preventive care, such as checkups, before you reach your deductible. However, any copays that might be associated with these health services don’t usually count toward your deductible.
Multiple Deductibles
You also may have more than one deductible. For example, a health insurance plan can have an in-network deductible, where you are spending on healthcare from network providers, and an out-of-network deductible for your medical expenses outside the network. You also can have a deductible for prescription drugs, including the most expensive medication options.
A deductible can play an important role in the health insurance plan that works best for you and your family. You might be surprised at what percentage of income goes to health insurance.
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How Your Deductible Works
Once you hit the deductible of your health insurance plan, your insurance company begins to share the cost of your healthcare with you. You may have copayments, which are typically a fixed fee of around $15, possibly for prescription drugs.
You may also have coinsurance, which often is an 80/20 split with the insurance company. This means that the insurance company pays 80% of the cost of a health service, and you pay 20%.
What Does Out-of-Pocket Max Mean?
The annual out-of-pocket maximum is the most that you have to pay for your healthcare in a year. Once your healthcare spending reaches your out-of-pocket max, your health insurance plan picks up the cost of your healthcare from there.
Here are the healthcare expenses that can contribute to the annual out-of-pocket maximum:
- Copays
- Coinsurance
- Money spent toward your deductible
For instance, suppose that you have a health insurance plan with a $2,000 annual deductible and a $4,000 annual out-of-pocket maximum. As you receive healthcare throughout the year, you hit your $2,000 deductible and your insurance kicks in.
The coinsurance you pay through the rest of the year is added to your deductible until the total reaches $4,000, your annual out-of-pocket maximum. At that point, your health plan pays 100% of your healthcare expenses.
Healthcare Expenses Not Included in Your Out-of-Pocket Maximum
Similar to the annual deductible, some of your healthcare costs generally don’t count toward your out-of-pocket maximum. These costs can include:
- Your monthly premium
- Medical care not covered by your health insurance
- Most out-of-network care you receive
- Costs above the amount allowed for a service
Out-of-pocket maximums can vary by health plan. The limits for an HDHP in 2024 are $8,050 for an individual and $16,100 for a family. For health insurance plans sold on the Health Insurance Marketplace, the out-of-pocket maximums are $9,450 for individual policyholders and $18,900 for a family.
Unless a health plan is exempt from the Affordable Care Act, the out-of-pocket maximums for the Marketplace also apply to private health insurance, including group health insurance and individual health plans. In 2025, the annual out-of-pocket maximum will drop to $9,200 for an individual and $18,400 for a family.
You also may find that some catastrophic healthcare plans, which are available to people under 30 or who have a hardship or affordability exemption, have deductibles equal to their out-of-pocket maximums. With a low monthly premium and high deductible, these health plans—for those who don't stay on parents’ insurance until 30—can provide coverage if you get seriously ill or injured.
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Talk to ConsumerShield About Your Health Insurance
Understanding health insurance terms can help you choose a plan that fits your healthcare needs and your budget. At ConsumerShield, we can answer any of your questions about health and other insurance to help guide you in deciding the best insurance for you. Contact us to find out more today.
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Frequently Asked Questions
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Yes, your out-of-pocket maximum includes the money you spend toward your deductible. It also includes your copays and your coinsurance.
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Three expenses usually count toward your out-of-pocket maximum: money you spend toward your deductible, your copays and your coinsurance. However, it doesn’t include your monthly premiums, money spent on healthcare not covered by your insurance and most out-of-network healthcare expenses.
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This abbreviation on a health insurance card stands for in-network deductible. This is the amount of your deductible for in-network healthcare from health providers under contract with your insurer. This is distinguished from “OON DED,” or out-of-network deductible.