I have been both out-of-pocket from the office and reached my out-of-pocket over the last few months, having had a baby in late January. Same phrase, same cause, different meanings.

Whether you are expecting to have an expensive medical procedure or not, it may be helpful to know the meaning of the second phrase, an insurance out-of-pocket maximum or OOP, and how it works.

Believe it or not, the OOP maximum is the maximum dollar amount for covered medical services that you will be subject to paying out of your own (cash/check/credit/debit) pocket within one insurance policy year. Simply stated, it’s a cap. After you’ve reached your cap or maximum, your insurance company will pick up the tab 100% for any remaining covered services for the remainder of your insurance policy year. While common, not all plans use the calendar year (January 1 – December 31), which is why it is important to know the start and end dates of your policy year. 

Picture this…your OOP maximum is $1,000. On January 1 (first day of your policy year), you have a baby. The first claim submitted to your insurance is from the hospital for $10K. Insurance approves your claim in record time, before you even name the baby, and you pay $1K bill to the hospital before leaving. Congrats, you have reached your out-of-pocket maximum for the year! For the remaining 364 days of the year, you will not pay $0.01 additional for covered medical expenses. In all likelihood, the scenario above will not be your picture-perfect use of insurance (nor was it mine), so here are some tips on how to navigate:

You may have several claims throughout the year and can quickly lose track of your total YTD spent. If your insurance company offers a portal, I encourage you to create a login to see claims that have been filed, dates and services rendered, and payment status.

Insurance companies are generally required to send an explanation of benefits, or EOB, either by mail or electronically to your portal following a health care visit. Check to ensure the information about your care is right and that you are not being billed for a service not received or mistakenly being billed twice for the same service.

Pay bills in the order which the claim is submitted to insurance, keeping a running total on your total spent compared to your OOP maximum. In my experience, making a delayed payment is easier to address than the long-intensive process of getting a refund, if your payment was made after reaching your OOP maximum.

Don’t be out-of-pocket about your medical insurance. Familiarize yourself with the policy language and keep current on your out-of-pocket maximum.  

Beth Koonce is a CFP® professional and a lead advisor at Keller Wealth Advisors.