What does the term "out-of-pocket maximum" signify?

The term "out-of-pocket maximum" refers to the maximum amount an insured individual has to pay in a plan year for covered services. Once this limit is reached, the insurance policy typically covers 100% of additional costs for covered services for the remainder of that year. This concept is critical in health insurance as it provides financial protection by capping the total amount a policyholder has to spend on their healthcare, thereby reducing the risk of overwhelming medical expenses.

In contrast, the other definitions do not capture the essence of "out-of-pocket maximum." The maximum coverage provided by the insurance policy pertains to the insurer's responsibility rather than the insured’s obligation. The total amount an insured can pay for services before insurance coverage begins is related to a deductible, not the out-of-pocket maximum. Lastly, the out-of-pocket cost for non-covered services does not factor into the out-of-pocket maximum, as this limit applies only to covered services under the plan.