Assume you were unfortunate enough to run up a $1,000,000 claim. If your health insurance plan pays 80% of claims, your remaining 20% could be $200,000. Most people can't afford this big of loss. Consequently, good health insurance policies might pay 80% of the first $10,000 of billed charges and then pay 100% beyond that. In this example the most you would be liable for is 20% of $10,000 ($2,000) plus your deductible. In this example, if your deductible was $1,000 your "Out of Pocket Maximum" would be $3,000 ($1,000 deductible plus 20% of $10,000).

There are slight terminology differences in referring to the Out of Pocket Maximum. Some companies use the term "Stop Loss" and other companies use the term "Co-insurance Maximum". Nevertheless, it is imperative to have a maximum loss provision in any medical insurance you purchase. Keep in mind that on many Preferred Provider Organization plans, you could have an unlimited out of pocket expense if you do not go to preferred providers.

This document was last modified on July 27, 1999 by LMLeber

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