Out-of-Pocket Healthcare Costs: How They Impact Patients and Providers

Patients wary of their financial responsibilities after an expensive medical procedure need to acquaint themselves with out-of-pocket costs. While they might be liable for more than they want to be, understanding concepts like out-of-pocket maximum can lead to better healthcare decisions benefiting patients and providers alike.

One of the biggest fears of any patient seeking treatment is that they’ll walk away from the experience with a big bill hanging over them. Many people are outraged to be saddled with significant medical expenses despite paying for health insurance each month. Still more are mystified when they expect a massive bill only to hear they’ve met their out-of-pocket maximum and owe only a fraction of the cost.

While it’s not necessarily the duty of healthcare providers to explain the nuances of health insurance to their patients, there’s value in educating them on out-of-pocket costs. This is particularly beneficial for those nearing their out-of-pocket maximum for the year.

What is out-of-pocket maximum?

The out-of-pocket maximum represents the highest amount a patient will personally pay for covered medical expenses during a plan year. Once you reach this cap, your health insurance plan covers all remaining eligible medical costs. For example, a $6,000 maximum means paying only that amount from a $8,000 bill, with the insurer covering the rest.

This maximum includes a combination of the following:

  • Deductibles: The deductible is the amount a patient must pay for covered healthcare services before the insurance plan starts to contribute. For instance, if your deductible is $1,000, you’ll need to pay $1,000 out of pocket before your insurance kicks in.
  • Copayments (copays): Copayments are fixed amounts patients pay for specific services, such as doctor visits, prescription medications, or specialist consultations. These are typically set amounts, like $25 for a doctor’s visit.
  • Coinsurance: Coinsurance is a percentage of the cost of care a patient is responsible for after they’ve met their deductible. For example, if you have a 20% coinsurance rate and your medical bill is $1,000, you’ll pay $200. Your insurance covers the remaining $800.

Breaking down out-of-pocket costs

In 2023, the out-of-pocket maximum for individual health insurance plans sold through the Health Insurance Marketplace is $9,100. For family plans, the out-of-pocket maximum is $18,200. Currently, the average deductible for an individual health insurance plan is $1,470. The average copay for an individual plan is $25, while the average coinsurance rate for an individual health insurance plan is 20%.

Other out-of-pocket costs to consider

Out-of-pocket costs encompass more than just deductibles, copays, and coinsurance. For instance, consider premiums. A premium is the monthly payment a patient makes for their health insurance plan. This cost is separate from out-of-pocket expenses. It’s a fixed amount the patient pays regardless of healthcare usage.

While insurance plans cover many healthcare services, they often exclude certain treatments, such as cosmetic surgery or alternative medicine. Patients are responsible for the full cost if they elect to receive these services.

Some healthcare providers may charge more than an insurance plan is willing to pay. These extra charges — known as excess charges — can result in additional out-of-pocket expenses if a patient receives care from an out-of-network provider.

Ultimately, understanding the full scope of their out-of-pocket expenses helps patients create a comprehensive healthcare budget.

Improve the patient experience

No patient is glad to see a medical bill, but they’ll be much happier when they know where it stands against their out-of-pocket maximum for the year. Better still, patients who have reached this threshold could find themselves in a position to pursue care at a limited financial liability — and they’re more apt to return to a provider who took the time to educate them on the specifics of their out-of-pocket costs.

Explore other strategies for improving the patient experience at trubridge.com.