Most health insurance plans have a deductible, which is a specified amount of money you must pay before your insurer will pay a claim. Yet it gets a little more complicated with family coverage and embedded deductibles.
Unlike an individual plan, a family plan can have one of 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 Are Embedded Deductibles?
Let’s start with the embedded deductible definition. Simply put: it’s an individual, lower deductible inside a family deductible. This means a single family member doesn’t have to meet the full family plan deductible before their health insurance coverage kicks in.Even if your family's plan has a high deductible, you'll only have to hit your embedded deductible. Click To Tweet
Embedded Deductibles and the Affordable Care Act
Most ACA-compliant plans have an embedded deductible. This is because all health plans are required to set an out-of-pocket maximum. This is a fixed dollar amount past which you don’t have to spend more of your own money (however, it resets each plan year). Out-of-pocket maximums include your copayments, coinsurance, and deductibles.
Some health insurance plans have deductibles that are close to the amount of your out-of-pocket maximum. Embedded deductibles are typically around half of the size of regular deductibles, meaning that they are significantly lower than your out-of-pocket maximum. When your health insurance plan has an embedded deductible, it slows down your out-of-pocket spending.
Embedded vs. Non-embedded Deductible
Now that you know a little more about embedded deductibles, you may be wondering how they compare with non-embedded deductibles. Both deductibles help you manage your healthcare spending, and count towards your yearly out-of-pocket costs. However, the way you reach them is different.
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 pay 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. Yet you still need to pay a deductible for care you or your children receive, unless it’s covered under preventive care or covered with a copay.
- Two or more family members have each paid enough in individual deductibles, and when added together, they have met the family deductible.
In this case, your insurer will pay for every family member included in the plan.
For example, you and your child combined have reached the $7,900 family limit. Your spouse will also benefit, and will no longer need to pay a deductible to receive care.
With a non-embedded deductible plan, you must pay the total family deductible out-of-pocket before your health insurer starts paying for individual family members.
Keep in mind, any uninsured medical expenses you have to pay will not help you reach your deductible, regardless of the type.
“If your child is part of your family composition and you keep them on your contract, you have to consider the family deductible,” says Claudia Swink, Director of Individual Business for the Detroit-based Health Alliance Plan. “The more people you have on a contract, the more attractive that plan becomes because you will reach the deductible faster. There’s a value proposition there.”
How to Find Your Deductible Type
Not sure which type of deductible you have? There are a few ways to find out.
If you have an Obamacare plan, this information is included in your Summary of Benefits and Coverage (also called an 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 an individual and family deductible listed. You can also call your health insurance company to ask if you’re unable to find this information in your SBC.
If you have an employer-sponsored plan, your plan 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 that fits your needs and budget.