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Out Of Pocket Limit Vs. Deductible: What's The Difference?


Out Of Pocket Limit Vs. Deductible: What's The Difference?

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If you don’t have a good grasp on health insurance terminology, it’s difficult to choose the right plan. One of the most common questions we get is, “What is the difference between out-of-pocket-limit versus deductible plans?” They sound similar, but there is a big difference. Always read between the lines of your plan, and know the amount you are expected to pay up.

The Details to Know in the Maximum Payment Plans

Simply put, both of these plans differ in the points at which your insurance company will pay the portion of health care. Depending on which one you choose, your payment plan will vary. You should know about the annual limits and out-of-pocket maximum payments.

Here is a quick guide on knowing how they work, so you can wisely choose the health insurance plan that is right for you and your family.

Deductible first, then out-of-pocket max

When you select a health insurance plan, your payments will initially go to deductibles, then to out-of-pocket maximums. Here’s how it works:

Deductible: This amount is how much you are expected to pay annually for any medical services your plan covers. There is a certain amount of expenses you are expected to cover before the insurance company steps in to take care of other costs. And this amount will depend on your selected plan.

You would pay towards this deductible on a regular basis, and it will then cover most procedures, tests, etc. Usually, routine health check-ups and preventative care are not covered by this.

An easy way to remember is this: A deductible represents the whole amount you are responsible for paying before the insurance company pays their percentage.

Out-of-pocket maximum: This is a post-deductible charge, but once you have spent on this amount, your insurance plan can then cover the rest. This amount is the maximum costs you are expected to cover for an entire year.

(Note: The Affordable Care Act (ACA) states that no health plan sold on the Health Insurance Marketplace for 2019 can have an out-of-pocket limit in excess of $7,900 for an individual or $15,800 for a family.)

This is an essential feature to have when looking for an insurance provider. This will ensure that you do not overspend on any health care for one calendar year—and it includes co-pays, deductibles, and co-insurance.

For example, say you choose a $2,500 out-of-pocket maximum but happen to get sick that year and rely on plenty of medical aid or healthcare services. In total, for that year, you only need to pay a maximum of $2,500. As long as you stick with your insurance plan, the provider will then cover everything else above that limit.

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So What is the Difference Between Deductible vs. out-of-pocket maximum?

This is where most people are confused: they both sound similar. Is there really a difference between your deductible and an out-of-pocket maximum? Here’s the subtle yet important difference to be aware of:

The out-of-pocket maximum will usually be higher than your deductible.

Here is the second thing to know: Not all plans have deductibles, but all plans do have out-of-pocket maximums, a government health care requirement.

Best Ways to optimize your deductible and out-of-pocket maximum

What if you rely on medical care most of the year? How about patients with chronic illnesses, who are likely to be paying high hospital fees on a regular basis?

It’s impossible to know how healthy you will be in any given year. So, if you are looking into a new health care insurance plan, here are a few guidelines that will help you get the most out of your plan of choice:

  • Don’t hop between different providers. Stay in one provider network.

  • Be fully aware of what your plan covers.

  • Always check your current policy before going for exams or check-ups, even if they are routine. This way, you can verify the need for authorization.

  • Plan and save for the future. Any medical expenses such as scheduled surgeries should be part of your monthly savings plan and budget.

  • Utilize any of the offers on your policy. Find out about free care services being issued. If your plan covers dental work, for example, don’t skip out these just because you don’t have dental problems. An ounce of prevention is worth a pound of cure.

Treating your health as the valuable treasure that it is will help you and your family make better decisions. If you still are confused about payment plans, or not sure what is best in your situation, speak with an insurance provider to see your best options


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