what are out of pocket expenses 
out of pocket expenses are costs that an individual is responsible for paying that may or may not be reimbursed later the term is most often used to describe an employee s work related expenses that the company later reimburses it also is used to indicate a health insurance policyholder s nonreimbursable share of medical expenses such as deductibles copays and coinsurance understanding out of pocket expensesemployees often spend their own money on business related expenses especially if they travel on behalf of a company these out of pocket expenses are typically reimbursed by the employer using a company approved process common examples of work related out of pocket expenses include airfare car rentals taxis or ride sharing fares gas tolls parking lodging and meals as well as work related supplies and tools the term is also used in health insurance policies to refer to the portion of a medical cost that the insurance company doesn t cover out of pocket healthcare expenses include deductibles copays and coinsurance 1health insurance plans have out of pocket maximums that are set by federal law these are caps on the amount of money that a policyholder must spend each year on healthcare expenses the affordable care act aca requires all group and individual plans to stay within annually updated guidelines for out of pocket maximums 3for 2022 the out of pocket limits are 8 700 for individual coverage and 17 400 for family coverage for 2023 the out of pocket limits increase to 9 100 for an individual and 18 200 for a family 1 plans can t have out of pocket maximums that exceed these limits but many offer lower maximums out of pocket maximums vs deductiblesin health insurance the deductible is the amount you pay each year for covered costs before the insurance coverage kicks in when the deductible is met the policyholder shares the costs with the insurance plan through coinsurance with an 80 20 plan for example the policyholder pays 20 of the cost while the plan picks up the remaining 80 the amount you pay for coinsurance as well as your copays and deductible all count toward the out of pocket maximum for the year when you reach your out of pocket maximum the plan pays 100 of covered costs for the rest of the year some plans have higher deductibles than others typically the lower the premium you pay the higher the deductible and the higher the premium you pay the lower the deductible a high deductible health plan hdhp can save you money in the form of lower monthly premiums you also may get a tax break on medical expenses through a health savings account hsa according to internal revenue service irs rules for the 2022 tax year an hdhp is a health insurance plan with a deductible of at least 1 400 for an individual plan or at least 2 800 for a family plan 4 for 2023 the numbers rise to 1 500 for an individual plan and 3 000 for a family plan 5for 2022 out of pocket costs may not exceed 7 050 for an individual or 14 100 for a family 6 for 2023 the figures are 7 500 for an individual and 15 000 for a family 7an hdhp provides 100 coverage for preventive services from in network providers before you meet your deductible 8for individuals who don t anticipate many medical expenses for the upcoming year it makes sense to minimize premiums and choose an hdhp since you probably won t need enough healthcare to get past the high deductible if you anticipate significant medical expenses a plan with a lower deductible but a higher premium would be preferable so that the insurance reimbursement kicks in earlier an hdhp allows the holder to contribute to an hsa policyholders in the 24 federal tax bracket who incur 3 000 in medical expenses can use an hsa to pay for them with pretax dollars hsas have annual contribution limits as well 9for the 2022 tax year the maximum allowable contribution is 3 650 for an individual plan or 7 300 for a family plan people ages 55 and older can contribute an additional 1 000 a year for the 2023 tax year the maximum allowable contribution is 3 850 for an individual plan or 7 750 for a family the catch up provision still applies 