Embedded vs. Non-embedded Deductibles
You’ve probably heard that you have to “meet your deductible” when discussing your family’s health insurance and your portion of the medical costs.
Below is an overview of the two basic types of deductibles for family coverage. By knowing which one you have and how it works, you’ll be able to plan for out-of-pocket health care expenses in the future.
A deductible is the amount you must pay out of pocket for medical care before the insurance company will begin paying. For example, if you have an $800 deductible, you will have to pay for all health care costs until you’ve reached $800. After that, your insurance will start paying, although you may owe a copay or coinsurance amount. The deductible starts over annually.
The deductible may not apply to all health care services, such as preventive care, which might be covered by your insurance regardless of whether you’ve met your deductible. In addition, not every medical expense you have counts toward your deductible. For example, if you have a service such as plastic surgery, which is not a covered benefit, those out-of-pocket expenses won’t help meet your deductible.
Deductibles with Family Coverage
Insurance plans can cover an individual or a family. If the plan is for family coverage, the deductible can be designed as either an embedded or non-embedded deductible.
Embedded deductibles have two components:
- The individual deductibles for each family member
- The family deductible
When a family member meets his or her individual deductible, the insurance company will begin paying according to the plan’s coverage for that member. If only one person meets an individual deductible, the rest of the family still has to pay their deductibles.
However, out-of-pocket expenses used to meet an individual deductible are also counted toward meeting the family deductible, which is generally two to four times larger than an individual deductible. Depending on your specific plan, once two or three family members meet their individual deductibles, you will likely have met your family deductible. Keep in mind that after an individual meets his or her deductible, coinsurance or copays typically will not count toward the family deductible.
Once the family deductible is met, all family members will have medical expenses paid according to the plan’s coverage, even if they have not met their own individual deductibles. Having an embedded deductible is most common for non-high deductible health plans (HDHP).
A non-embedded, or aggregate, deductible is simpler than an embedded deductible. With a non-embedded deductible, there is only a family deductible. All family members’ out-of-pocket expenses count toward the family deductible until it is met, and then they are all covered with the health plan’s usual copays or coinsurance. It doesn’t matter if one person incurs all the expenses that meet the deductible or if two or more family members contribute toward meeting the family deductible. The non-embedded deductible is most common in HDHPs.
Regardless of which type of deductible your plan uses, remember that you will need to pay that amount out of pocket before your insurance will start paying.