Not every insurance plan includes an out-of-pocket expense maximum. According to a study by the Agency for Health Care Research and Quality, an estimated 17 million Americans under the age of 65 were underinsured in 2003. In this study, "underinsured" refers to people who have insurance but do not have protection from high out-of-pocket expenses, and who spend more than 10 percent of their family income on out-of-pocket health care expenses.
So, which plans actually offer an out-of-pocket expense cap? Of course, there is no straightforward answer, but it usually depends on the type of plan. Fee-for-service plans, sometimes referred to as indemnity insurance, pay a portion of a covered medical expense that you or your medical provider submits. These types of policies have deductibles and coinsurance and so usually come with an out-of-pocket expense maximum. The maximum amount for a given plan can vary by the agreement your employer makes with the insurance company.
Managed care plans include health maintenance organizations (HMOs), preferred provider organizations (PPOs) and point-of-service plans (POS). These types of plans may or may not include an out-of-pocket expense maximum. Normally, if you have an HMO plan, you'll have very little out-of-pocket expenses because deductibles and coinsurance are generally not part of the plan -- as long as you stay within the HMO network. So out-of-pocket expense maximums are usually not a factor in these plans. However, if you have a POS or PPO plan, you may have this type of maximum. In these plans, if you go out of network, you'll seem to fall into the rules found in a fee-for-service plan with deductibles and coinsurance costs. Because of this, many PPO and POS plans include an out-of-pocket expense maximum only when a patient goes out of the network.
For more information on out-of-pocket expenses, see the links on the next page.