What is meant by "out-of-pocket maximum"?

The term "out-of-pocket maximum" refers to the total amount an insured individual must pay for covered healthcare services in a plan year before their health insurance begins to pay 100% for covered services. This figure includes deductibles, copayments, and coinsurance but excludes premiums and any services that the plan doesn’t cover.

Understanding this concept is crucial for individuals as it provides a limit on their healthcare expenses, ensuring that once they reach this threshold, they won't face any more out-of-pocket costs for covered services during that plan year. It acts as a financial safeguard against exorbitant medical expenses.

The other options do not accurately capture the essence of what an out-of-pocket maximum entails. While they involve different aspects of healthcare expenses, only the explanation of the maximum amount a person has to pay for covered services in a plan year clearly defines the function and importance of the out-of-pocket maximum in health insurance plans.