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Most health insurance plans have a deductible. That is the specified amount of money you must pay for health care services before your insurer will begin to help pay your bills. Seems simple enough, but there are important complications involving family coverage and embedded deductibles. Here’s everything you need to know.
Unlike an individual health plan, a family plan can have two types of deductibles:
- an embedded deductible (often mistakenly spelled as ‘imbedded’);
- or a non-embedded deductible.
If you need coverage for two or more family members, an embedded deductible is typically the more cost-effective way to cover their care.
What Is an Embedded Deductible?
Simply put, an embedded deductible is a separate lower deductible that an individual can set for him or herself aside from the family’s total deductible. This means a single family member doesn’t have to meet the full family plan deductible before his or her health insurance payments kick in.
Embedded Deductibles and the Affordable Care Act
Most Affordable Care Act (ACA or Obamacare) plans offer an embedded deductible, which is typically around half the amount of a plan’s total deductible. This may help limit your family’s out-of-pocket maximum — the amount the family will have to pay collectively for medical costs. That’s because a family member may reach his or her lower individual deductible and trigger the insurer to start kicking in for that person. Remember, your out-of-pocket maximums, which include your copayments, coinsurance, and deductibles, restart each year.
Embedded vs. Non-embedded Deductible
With an embedded deductible, your health plan will start paying for medical expenses for any family member in two ways:
- One family member has met their individual embedded deductible, but other family members have not.
In this case, the plan will start paying that one family member’s expenses, but not the expenses of other family members.
For example, say you have a family plan with a $4,500 individual deductible and a $7,900 family deductible. If your spouse reaches the $4,500 deductible, he or she will be covered for any additional expenses that year. You will still need to pay for your own and your children’s care until the household together reaches the total family deductible (assuming, of course, that your children’s care isn’t covered as preventive care).
By contrast, with a non-embedded deductible plan, you don’t have those benefits. The total family deductible must be met before any person’s bills will be covered.
- Two or more family members have each paid enough in individual deductibles, that when added together, they have met the family deductible.
If this occurs, then your insurer will begin paying medical bills for every family member included in the plan.
For example, once you and your child’s expenses combined have reached the $7,900 family limit, your spouse’s care will be covered.
Keep in mind, any uninsured medical expenses you have to pay will not count toward your deductible, regardless of the type. Uninsured medical expenses typically include such things as cosmetic procedures, LASIK surgery, and other care not considered medically necessary.
“The more people you have on your health insurance contract, the more attractive that plan becomes because (chances are) you will reach the deductible faster,” said Claudia Swink, Director of Individual Business for the Detroit-based Health Alliance Plan. “It’s a value proposition.”
How to Find Your Deductible Type
If you aren’t sure about which type of deductible you have, there are easy ways to find out.
If you have an ACA (Obamacare) plan, the information is included in your Summary of Benefits and Coverage (SBC). It’s listed under the “Coverage for” section and includes who the plan covers as well as any deductibles. If you have an embedded deductible, you’ll see the individual and the family deductible listed. You can also call your health insurance company if you’d rather not go through your SBC.
If you have an employer-sponsored plan, you will have a Summary of Benefits as well. You can also ask your human resources department.
If you’re comparing health plans online, you can find this information listed under “Plan Details.” An embedded deductible may be listed like this: “Annual Deductible $7,350 per person | $14,700 per group.”
Although most family plans have an embedded deductible, it’s always a good idea to check before you buy. That way, you can ensure you’ve found a plan with no deductible surprises.
