What does "out-of-pocket maximum" refer to in medical insurance?

The term "out-of-pocket maximum" refers to the limit set by a health insurance plan on the total amount of money a policyholder will pay for covered healthcare services within a plan year. Once the policyholder reaches this maximum, the insurance plan covers 100% of the costs for covered services for the remainder of the year. This feature is designed to protect the insured from excessive expenses in case of significant health issues or emergencies.

Understanding this concept is crucial for individuals evaluating their health insurance plans, as it helps them gauge the financial risk they would bear in the event of high medical expenses. While other options mention various aspects of healthcare costs, they do not accurately define the specific feature of an out-of-pocket maximum, which is focused on limits to personal financial liability for covered services within a specified timeframe.