Out-of-pocket limit

What is the Out-of-pocket limit

This is the maximum amount (running total) that participants in a plan have to pay for covered services in a plan’s calendar year. It’s also referred to as the stop-loss limit.

Out-of-pocket limits will be in form of;

• Deductibles,
• Coinsurance and
• Copayments

Once you meet your annual out-of-pocket limit, the PPO Plan caters to 100% of the eligible costs for the remainder of the calendar year.

The out-of-pocket limit does not include:

• Monthly premiums
• Ineligible costs(that plan doesn’t cover)
• Out-of-network care costs(unless it’s an emergency or had prior approval)
• Charges above-set limits. i.e. Costs above limits that the insurer is allowed to charge

The out-of-pocket limits are as below;

Source: HealthCare.gov

Deductibles on insurance

What are deductibles in insurance

This is part of the covered costs that a member must pay before the insurance company or a third-party administrator starts paying the covered medical claims (the exception being preventive care).

Typically, deductibles will reset or start over every new plan year. Most plan years are aligned with the calendar year (January 1 to December 31), while some may use some other 12-month period that an employer or insurance provider chooses.

Carry-over deductible

These are deductibles that can be allowed to accumulate beyond 12 months i.e. costs that were applied to previous years’ deductibles are applied, or carried over, to the new policy when the plan year resets.

Usually, the carry-over deductible is applied for costs incurred at the end of the plan year during a certain period of time (usually three months before the plan year ends.)

How deductibles work

• The insurance plan sets the deductible, out-of-pocket maximum, and how the maximum out-of-pocket will be split up the maximum. For example, they can set the deductible at $1,500 and the maximum out-of-pocket at $3,000, split 80/20.
• On each visit to the health providers, the member will pay the costs until they cumulatively reach $1,500.
• After deductibles hit $1,500, any costs incurred will be split 80% by the insurer and 20% by the member.
• The member will cover their 20% portion of costs until they cumulate to a further $1,500.
• After total payments by the member reaches $3,000($1,500 straight out of pocket and $1,500 split payments), the insurance 100% takes over the rest of the covered costs.

Deductibles tax return| Are Copayments tax deductible

 Generally, not every health expense is tax allowable. You are only allowed to deduct qualified, unreimbursed medical costs that are beyond 7.5% of your 2021 income and if:

• If the medical costs paid are for that particular year
• Costs will not be reimbursed by the insurance
• Itemizing this deduction than taking the standard deduction
• Keeping records of all costs incurred

Please note, the below items are not deductible;

• Funeral/burial costs
• Over-the-counter drugs
• Toothpaste, toiletries, and cosmetics
• Vacations
• Majority of cosmetic surgeries
• Nicotine gum and patches (not under prescription).

Copayment and Coinsurance

Copayment insurance

Copayments, or copays, are a form of cost-sharing under any health insurance plan. It is a fixed-dollar payment (flat fee) a member makes for each doctor visit, treatment, test,

Prescription, etc. For example, a member may pay $30 for each office visit and $50 for an X-ray.

copays are usually lower for routine doctor visits as compared to specialist visits. Copays for ER services tend to be the highest

Coinsurance payment

This is the percentage of a medical expense covered for which a member pays for each visit. For example, after meeting the plan’s deductible, the member will pay 20% of any visit to the doctor until they click the out-of-pocket maximum for that pan year.

What is the difference between Coinsurance and Copay

Bottom Line

When choosing a plan, please consider;

• The total cost of medical care. You will have to decide whether to take an expensive plan with lower co-pays and a lower deductible or vice versa.
• In-network and Out-of-network care usage. Take note that some plans are keen on ensuring you only use in-network doctors or providers. Decide where most of your needs fall as this will affect your out-of-pocket costs.