What Are Out-of-Pocket Costs?

Out-of-pocket costs are any amounts that you have to pay yourself when you go to the doctor, pick up prescription medication, or spend time in the hospital. In most cases, your insurance company will require you to pay a certain amount for your medical care before your policy kicks in, which is known as your deductible. You can talk to your insurance provider for a specific list of costs that may or may not be covered under your insurance policy.

Examples of Out-of-Pocket Costs

Some examples of such costs include any deductible that you have to pay, copayments to participate in programs to quit smoking, or the cost of seeing a medical professional outside of your provider network. It is also possible that you will have to pay for elective procedures or for procedures that are not authorized by your provider. 

How Out-of-Pocket Costs Work

Let’s say you head to the doctor for your yearly medical check up.  Under your health insurance plan, your check up will be covered, but will have a $25 copayment.  

While your health insurance provider may be footing majority of the bill for your check up, you will be required to pay the $25 on your own.  This copayment is considered an out-of-pocket cost because the health insurance company does not cover the cost. 

Are There Limits to Out-of-Pocket Costs?

It is possible that your policy will put a cap on how much you pay out of your own pocket per year. If you have a policy through the Affordable Care Act, this cap may be based on your policy level as well as your income. Once you reach this cap, your insurance company will typically cover 100% of healthcare costs for the rest of the year, with certain exceptions such as copayment costs. 

Maximum Out-of-Pocket Costs

Your policy will define the maximum amount that you are required to pay for care in a given year. It is likely that you can track your out-of-pocket expenses and how close you are to your yearly limit online through your insurance company's website or app. Most policies offer individuals a lower monthly premium in exchange for a higher out-of-pocket limit each year.

Minimum Out-of-Pocket Costs

If your policy has a minimum out-of-pocket amount, you will be required to cover the cost of your healthcare up to this limit. This amount owed may be referred to as a deductible. From there, your insurance policy will pay for an increasing percentage of your care costs until you hit your cap, assuming that you have one.