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Carla Fried: Out-of-pocket -- the healthcare number you need to know

Carla Fried, Rate.com on

Published in Home and Consumer News

At the risk of pointing out the obvious: With many diseases and injuries, there are multiple tests required along the road to diagnosis, treatment and even in recovery, which means there are likely multiple coinsurance bills to contend with. And nearly two-thirds of people with insurance through their employer are also hit with coinsurance for hospitalization.

The somewhat silver lining is that your workplace plan puts a lid on the total costs you can be hit with in a given year: the maximum out-of-pocket.

Out-of-pocket limits

According to KFF, the average annual maximum out-of-pocket for a single person with workplace coverage in 2020 was $4,000. That’s a lot more than the typical deductible for single coverage. And nearly one in five single insureds had an OOP of at least $6,000. Out-of-pocket costs for family coverage are typically higher; some plans set the costs for the entire family, others impose a separate OOP for each family member.

The out-of-pocket limit only applies if you stay in-network. There typically is no limit if you seek out care outside your plan’s approved list of doctors and facilities.

Moreover, if your illness/injury isn’t resolved by Dec. 31, the new year will bring a reset, and you will owe the deductible and be held to a fresh OOP limit for the new year. If you have a $4,000 annual OOP maximum, and you are diagnosed with a serious illness in November and treatment continues the following year, it’s likely you would have $8,000 in bills within just three or four months.

 

A government report found that 16% of people with full-fledged health insurance through work nonetheless had medical debt in 2017. Among those who landed in a hospital, more than 30% couldn’t pay their bills and incurred medical debt.

Protecting yourself from OOP shocks

Whenever the topic of emergency savings comes up, the typical examples for why it’s so important to have savings set aside tend to run toward the mundane: Your car is off warranty and needs some work. Or the HVAC went kerflooey and needs to be repaired/replaced.

Clearly, OOP costs are an even more important reason to build up your emergency fund. Before you talk yourself out of finding a way to save a little bit more, consider these straightforward steps to building a bigger emergency fund.

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