What does “out-of-pocket maximum” indicate in a health insurance plan?

The "out-of-pocket maximum" in a health insurance plan signifies the highest amount that an insured individual is required to pay for covered health care services within a specific plan year. Once the insured's out-of-pocket expenses reach this maximum, the insurer is responsible for covering 100% of the costs for the rest of the year for covered services. This feature is crucial because it provides a safety net for consumers, protecting them from exorbitant medical expenses and ensuring that they can receive necessary care without facing financial ruin.

In contrast, the total cost of the premium refers to the regular payments made to keep the insurance policy active but does not relate directly to the out-of-pocket costs incurred during the year. The coverage limit for annual expenses typically refers to caps on specific types of coverage rather than an individual’s total spending limit on their health care. Lastly, the amount an insurer will pay for a claim concerns the insurer’s financial responsibility for a specific event or service, but it does not encapsulate the overall expenses borne by the insured throughout the year.