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

Health Insurance Deductible vs. Out-of-Pocket Maximum: What They Mean for Your Wallet

Health insurance includes many terms that can feel confusing. Two of the most important are your deductible and out-of-pocket maximum. Understanding how these numbers work can help you budget for healthcare costs and avoid surprises when you need care.

What to know:

• Your deductible is the amount you pay for covered healthcare services in a plan year before your health plan starts sharing costs.
• Your out-of-pocket maximum is the most you'll pay for all of your covered in-network care during a plan year.
• AZ Blue members can find both numbers in the member portal or in their Summary of Benefits and Coverage.

What is your deductible?

Think of your deductible as the starting line. You pay this amount out of pocket before you and your health plan begin sharing the cost of covered in-network healthcare services.

For example, let's say you have:

• A $1,500 annual deductible
• A medical procedure that costs $2,000

You would:

1. Pay the first $1,500 to meet your deductible.
2. After you meet your deductible, your health plan helps cover the remaining $500 according to your plan's benefits.

Remember: 

• Higher deductibles often come with lower monthly premiums.
• Lower deductibles usually mean higher monthly premiums.
• Many preventive services, such as annual wellness exams and certain screenings, are covered before you meet your deductible.
• Deductibles typically reset at the beginning of each plan year.
• Family plans may have both individual and family deductibles. Costs paid by all covered family members count toward meeting the family deductible.

What is an out-of-pocket maximum?

Think of your out-of-pocket maximum as the finish line. It sets a cap on what you pay for covered in-network healthcare services during a plan year.

Once your deductible, copays, and coinsurance add up to that amount, AZ Blue pays 100% of covered in-network medical costs for the rest of the plan year. This financial protection can help when an unexpected illness, injury, or major medical event leads to high healthcare costs.

Think of it as a safety net for your healthcare expenses. You may never reach it, but knowing it's there can provide peace of mind.

For example, let's say your health plan has:

• $1,500 deductible
• 20% coinsurance
• $5,000 out-of-pocket maximum

You have a medical procedure that costs $20,000.

1. First, you pay the $1,500 deductible.
2. After that, your plan begins sharing costs. With 20% coinsurance, you pay 20% of covered expenses and the plan pays 80%.
3. As your share of costs adds up, you continue paying until you've spent $5,000 total out of pocket for the year.
4. Once you reach the out-of-pocket maximum, your plan pays 100% of covered in-network costs for the rest of the plan year.

In this example, even though your medical care costs $20,000, your cost is capped at $5,000 because you've reached your out-of-pocket maximum for covered in-network services.

While you can't always predict when you'll need medical care, understanding these two numbers can help you feel more prepared and confident about your health coverage when the unexpected happens.