Understanding Out-of-Pocket Maximums: Definition & Benefits

What Is an Out-of-Pocket Maximum?

An out-of-pocket maximum sets a clear limit on what you'll spend on covered healthcare services in a year, giving you financial predictability. This cap includes your spending on deductibles, copayments, and coinsurance for in-network care. Once you reach this limit, your health insurer covers 100% of your healthcare services for the rest of your plan year.

In 2026, Affordable Care Act plans hold these maximums at a ceiling of $10,600 for individuals and $21,200 for families. Understanding your out-of-pocket maximum can protect you from overwhelming medical expenses, but it's crucial to be aware of what it does and doesn’t cover. Using in-network providers is key, and certain expenses—like premiums and out-of-network costs—do not count toward this limit. By paying attention to these details, you can prevent unwanted surprises.

How Out-of-Pocket Maximums Function in Health Insurance

In general, an out-of-pocket maximum is the most you have to pay per year for covered healthcare services. When you have spent up to this amount on your healthcare in a year, your healthcare insurer will pay for 100% of your healthcare costs. Deductibles, copayments, and coinsurance all count toward your out-of-pocket maximum under the Affordable Care Act.

In practice, however, it's a little more complicated than that.

For example, there are some costs that aren't included in your out-of-pocket maximum. These include:

• Your insurance premiums
• Anything you spend for services your plan doesn't cover
• Out-of-network care and services
• Costs above the allowed amount for a service that a provider may charge

These exceptions mean that even after reaching your out-of-pocket maximum, you must still pay premiums to maintain coverage. Use in-network providers to control costs, as out-of-network expenses don't apply to your out-of-pocket maximum.

Non-covered expenses, like a $2,000 elective surgery, don’t count toward the out-of-pocket maximum. For example, if the insured pays $2,000 for an elective surgery that isn't covered, that amount will not count toward the maximum. This means that you could end up paying more than the out-of-pocket limit in a given year.

Federal Limits on Out-of-Pocket Maximums

Federal law limits out-of-pocket maximums, setting annual caps on charges by insurers for covered services. These are:

• For the 2026 plan year: The out-of-pocket limit for a Marketplace plan can’t be more than $10,600 for an individual and $21,200 for a family.
• For the 2025 plan year: The out-of-pocket limit for a Marketplace plan can’t be more than $9.200 for an individual and $18,400 for a family.

Selecting the Right Out-of-Pocket Maximum for Your Needs

Different healthcare plans have different out-of-pocket maximum limits, so you may have a choice when it comes to your out-of-pocket maximum.

Generally, choose plans with the lowest out-of-pocket maximum to minimize yearly expenses. Insurers balance out-of-pocket maximums with premium costs.

Plans with low out-of-pocket maximums typically come with higher premiums. For example, Health Insurance Marketplace Bronze and Silver health plans generally have lower monthly premiums and higher out-of-pocket limits. The Gold and Platinum plans, which have higher monthly premiums, typically have lower out-of-pocket limits.

Exploring Cost-Sharing Reductions for Affordable Healthcare

Lower-income individuals and families may qualify for reduced out-of-pocket maximums through cost-sharing reduction discounts. To be eligible, you must meet income requirements and enroll in a Health Insurance Marketplace plan in the Silver category.

Cost-sharing reductions provide various benefits:

• You'll have a lower deductible. For example, if a particular Silver plan has a $750 deductible, and you qualify for cost-sharing reductions, your deductible for the same plan could be $300 or $500, depending on your income.
• You'll have lower copayments or coinsurance. These are the payments you make each time you get care—for example, $30 for a doctor visit.
• You'll have a lower out-of-pocket maximum. Instead of $5,000, your out-of-pocket maximum for a particular Silver plan could be $3,000.

To understand the impact of cost-sharing reductions, explore Silver plans in the Marketplace.

Special cost-sharing reduction rules apply to American Indians and Alaska Natives.

Comparing Out-of-Pocket Maximums and Deductibles

An out-of-pocket maximum is different from a plan's deductible.

The money you pay for covered services goes toward your deductible first. The deductible is the amount you must pay before your insurance kicks in. Then, when you've met the deductible, you may be responsible for a percentage of covered costs (this is called coinsurance). These payments count toward your out-of-pocket maximum. When you reach that amount, the insurance plan pays 100% of covered expenses.

Out-of-Pocket Maximum Example

Here's an example of how out-of-pocket maximums work. Suppose your out-of-pocket maximum is $6,000, your deductible is $4,500, and your coinsurance is 40%.

If you have covered surgery that costs $10,000, you'll first pay your $4,500 deductible, which then leaves a $5,500 bill. Because your coinsurance is 40%, you would owe another $2,200, and the insurance company would cover the remaining $3,300—that is, if you didn't have an out-of-pocket maximum.

However, your annual expenses are capped at $6,000. You've already paid $4,500, so you pay only $1,500 of the $5,500 balance. The insurance company picks up the remaining $4,000. Your total cost for the surgery is $6,000, and follow-up visits with your in-network doctor are paid by your insurance because you've already met your out-of-pocket maximum for the year.

The Bottom Line

An out-of-pocket maximum is, in general, the maximum you will pay for healthcare in a year. However, there are important exceptions, so make sure you understand what is and isn't covered in your out-of-pocket maximum.

Lower-income individuals and families may qualify for reduced out-of-pocket maximums through cost-sharing reduction discounts. To be eligible, you must meet income requirements and enroll in a Health Insurance Marketplace plan in the Silver category.