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Insurance · Health Insurance Basics

What is the function of an 'out-of-pocket maximum' in a health plan?

Reviewed by Jordan Morley, Editorial Lead at 247SimpleTests. Written by the 247SimpleTests Editorial Team from the official source material cited on every question.

Correct answer

It is the most an insured will have to pay for covered services in a plan period; after reaching it, the plan generally pays 100% of further covered, in-network costs

  1. A It is the most an insured will have to pay for covered services in a plan period; after reaching it, the plan generally pays 100% of further covered, in-network costs
  2. B It is the premium amount
  3. C It is the maximum the insurer pays
  4. D It is the deductible doubled

Why this is the answer

The out-of-pocket maximum is the most an insured will have to pay for covered, in-network services during a plan period through deductibles, copayments, and coinsurance combined. Once the insured's spending reaches this cap, the plan generally pays 100% of additional covered, in-network costs for the rest of the period (premiums do not count toward it, and out-of-network costs may not either). This limit protects the insured from catastrophic medical expenses. Understanding the out-of-pocket maximum — and how it differs from the deductible (the upfront amount before coverage begins) — is fundamental cost-sharing content on the health insurance exam.
Source: Health Insurance — Out-of-Pocket Maximum

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About this topic: Health Insurance Basics

Health insurance basics cover the types of health coverage, the risk and underwriting concepts behind them, and the terms every policy uses — premium, deductible, coinsurance, copayment, out-of-pocket maximum. This is one of 7 Health Insurance questions on health insurance basics, each with a full explanation on a single study page.

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