Health care policies refer to individual deductibles as embedded and non-embedded in family coverage. Your health insurance plan probably requires you to meet an annual deductible, which is the total out-of-pocket expenses you pay for covered services before the insurance company pays for covered expenses. Your insurance company bases your annual deductible on your coverage category, such as individual or family. The design of the health care plan, including whether family coverage includes embedded or non-embedded individual deductibles, determines how you meet the deductible for family coverage and when your plan begins to pay some portion of your covered medical costs.
Your plan has an embedded deductible if the family deductible amount includes individual deductibles. For instance, your family deductible is $3,000, and individual deductibles under the family contract are $1,500. If one person meets the individual deductible of $1,500, the plan begins to pay a portion of that person’s claims. Many health plans provide a co-insurance plan benefit, such as 80/20. After the deductible is met, the plan pays a percentage of the bill, and the policyholder pays the balance. The other covered individuals remain outside of the plan benefit until the family deductible is met or until an individual meets the individual deductible and qualifies singly for the plan benefit.
Under the non-embedded deductible, all family members qualify for the plan benefit if the total annual family deductible amount is met by one or any combination of covered individuals. If you have $2,000 in covered medical expenses for the year, and one child has $1,000, the annual family deductible is met for everyone covered under the policy, and all are eligible for the plan benefit. Since there is no individual deductible embedded in the family coverage, no one receives the plan benefit until the total deductible is met.
Whether you have embedded or non-embedded deductibles with your family coverage, health insurance plans pay 100 percent of the cost for preventive care services. Under the Affordable Care Act, payment of preventive care expenses is not dependent on payment of the deductible. Review your plan to determine which deductible type is offered. When choosing a plan, consider the size and medical needs of your family. For instance, embedded individual deductible can reduce your out-of-pocket expenses if the covered individual who generates the most expense, such as frequent hospital visits or a costly procedure, qualifies for the plan benefit sooner.
Health Savings Accounts and Embedded Deductibles
The high-deductible health plan, or HDHP, usually includes embedded deductibles in family coverage. The HDHP includes the health savings account, or HSA, that participants use to pay out-of-pocket costs, including expenses that count toward the deductible. Federal laws regulate the maximum amount that participants may contribute to their health savings accounts and also the amount the HDHPs may set for deductibles.
Gail Sessoms, a grant writer and nonprofit consultant, writes about nonprofit, small business and personal finance issues. She volunteers as a court-appointed child advocate, has a background in social services and writes about issues important to families. Sessoms holds a Bachelor of Arts degree in liberal studies.