Deductible vs. Out-of-Pocket Maximum: What’s the Difference?

Your deductible is the minimum amount of money you have to spend out of pocket on covered health care services in a year before your health insurance company will start to pay a portion of the costs for most services, while your out-of-pocket maximum is the amount you have to spend before your insurer will foot the entire bill for covered services.

You can read the rest of our deductible vs. out-of-pocket maximum overview below to get a better idea of what your share of the costs may be whenever you need medical services.

On This Page

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  What Is a Health Insurance Deductible?

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  What Is an Out-of-Pocket Maximum?

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  Deductible vs. Out-of-Pocket: What Are the Key Differences?

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  Which Is More Important, Deductible or Out-of-Pocket Maximum?

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  FAQs

What Is a Health Insurance Deductible?

A health insurance deductible is what you have to pay out of pocket for medical treatments covered by your health plan before your insurance company will start contributing toward your health care costs. For example, if you have a $2,000 deductible, you will be responsible for 100% of the costs for most medical services until you have spent $2,000. Deductibles reset every year, which means your insurance carrier may not contribute toward your medical expenses at all if you spend less than $2,000 out of pocket throughout the year.

You should note that preventive services like screenings and vaccines are fully covered by your health insurance company even if you haven’t hit your deductible as long as you have a Marketplace plan and receive the services from an in-network provider.^[1] Meanwhile, some health plans come with a $0 deductible, although these plans will generally have higher premiums.

Services that aren't covered by your health plan generally won’t count toward your deductible. For example, if your plan doesn’t include adult dental coverage, then any money you spend on dental cleanings likely won’t go toward meeting your deductible. In addition, you should pay attention to the details of your policy since some plans have separate deductibles for medical services and prescription drugs.^[2]

How Much Are Deductibles?

In 2022, the average deductible for an employer health plan was $1,992 for individual coverage and $3,811 for family coverage.^[3] Meanwhile, the average deductible for individual Marketplace health plans with combined medical and drug deductibles is expected to be $3,057 going into 2024.^[4]

If you have a family plan, your plan could come with both individual deductibles that apply separately to each family member and a family deductible that applies to the whole family collectively.^[5] For example, if your plan includes $1,000 individual deductibles and your spouse receives $1,000 worth of covered services, then your insurance company will start to contribute to your spouse’s medical expenses for the rest of the year without contributing to the rest of the family’s medical bills.

However, if your plan also includes a $4,000 family deductible, then your insurance carrier will help pay for health care services for everyone covered by the plan after you have collectively spent $4,000 out of pocket, even if the entire $4,000 went toward your spouse’s medical treatments.

High-Deductible Health Plans

A high-deductible health plan (HDHP) is any plan that has an individual deductible greater than or equal to $1,600 or a family deductible greater than or equal to $3,200. To qualify as an HDHP, a plan must also have an individual out-of-pocket limit less than or equal to $8,050 or a family out-of-pocket limit less than or equal to $16,100.^[6]

If you have an HDHP, you are eligible for a health savings account (HSA), which allows you to set aside money on a pre-tax basis that you can later spend on qualifying health care services. This combination allows you to take advantage of the low premiums that come with HDHPs while also saving cash in your HSA to cover medical expenses before you hit your deductible.

However, since it may take time for you to deposit a significant amount of money into your HSA, HDHPs are only recommended if you don’t regularly need medical services.

What Happens if You Reach Your Deductible?

Even after you reach your deductible, you will still have to pay a portion of the costs for most covered health care services. Your share of the costs will either take the form of copays, which are set fees you have to pay every time you receive a certain service, or coinsurance, which is a percentage of the bill you have to pay every time you receive a certain service.

For example, if your plan requires a $20 copay for doctor’s visits, you will only have to pay $20 out of pocket whenever you visit a doctor after hitting your deductible. Conversely, if your plan requires a 20% coinsurance payment for doctor’s visits, you will have to pay $40 out of pocket if the total bill for a doctor’s visit is $200.

Keep in mind that the amount you have to pay out of pocket will vary based on your plan’s tier. For example, when taking deductibles, copays and coinsurance into account, you can expect to be personally responsible for around 40% of your health care expenses on average if you have a bronze plan. However, if you have a platinum plan, you should only have to cover about 10% of your medical expenses out of pocket.^[7]

What Is an Out-of-Pocket Maximum?

Your out-of-pocket maximum is the highest amount of money your health plan can require you to spend out of pocket on covered health care services. Like deductibles, out-of-pocket maximums reset each year. As a result, if you have a $6,000 out-of-pocket limit, then your insurance company will start paying 100% of your bills for covered services if you spend $6,000 out of pocket on health care before the end of the year.

Money you spend on deductibles, copays and coinsurance counts toward your out-of-pocket limit. However, it doesn’t include money you spend on premiums, out-of-network care and services your plan doesn’t cover nor does it include any money a health care provider charges you above the allowed amount for the service you received.^[8]

How Much Is the Average Out-of-Pocket Maximum?

The average out-of-pocket maximum for individual coverage among employer-sponsored group health insurance plans was $4,272 in 2021.^[9] Going into 2024, average out-of-pocket maximums for individual silver-tier Marketplace plans with a combined limit for medical services and prescription drugs are projected to range from $1,388 to $8,754 depending on the policyholder’s income.^[4] In addition, Marketplace plans cannot set their out-of-pocket maximums above $9,450 for individuals or $18,900 for families in 2024.^[8]

Out-of-pocket limits for family plans are similar to deductibles in that a family plan can include both individual and family maximums.^[10] So, if your plan comes with individual out-of-pocket maximums of $5,000, then your insurance carrier will fully cover your health care services after you receive $5,000 worth of services but may continue to require you to share the costs for services your children receive.

Meanwhile, if the same plan includes a $10,000 family out-of-pocket maximum, then your insurer will fully cover medical treatments for anyone in the family after you collectively spend $10,000 out of pocket regardless of who received the covered services.

What Happens if You Reach Your Out-of-Pocket Maximum?

You will no longer have to pay copays or coinsurance once you reach your out-of-pocket maximum and your health insurance company will instead take care of all of the costs for covered health care services. If you have a catastrophic health insurance plan, then your deductible and out-of-pocket maximum may be the same: $9,450 for individuals and $18,900 for families.^[11]

This means you pay 100% of the costs for most services before hitting your deductible and your insurance provider pays 100% of the costs for covered services after you hit your deductible. However, catastrophic plans are only available to people under the age of 30 and those who qualify for an income-based exception, meaning most plans come with a gap between your deductible and out-of-pocket maximum.^[11]

Deductible vs. Out-of-Pocket: What Are the Key Differences?

See the out-of-pocket vs. deductible infographic below for an overview of some of the ways in which deductibles and out-of-pocket maximums are similar and what the major differences between them are.

Which Is More Important, Deductible or Out-of-Pocket Maximum?

Your deductible is more likely to be relevant than your out-of-pocket maximum since you will always hit your deductible before your out-of-pocket maximum unless you have a catastrophic plan. Even if you hit your deductible, you may not hit your out-of-pocket limit because it is often at least twice as high as the deductible and you will work toward it more slowly after reaching your deductible since you will only have to pay a percentage of the costs for covered services out of pocket from that point on.

As a result, if you are in good health and rarely need medical services, you may not need to worry about whether you have a high out-of-pocket maximum since the chances that you will even come close to it may be fairly low. Conversely, if you have a chronic condition that requires frequent medical treatments, you may want to shop for a health insurance plan that has a low deductible and a low out-of-pocket maximum.