Many health insurance policies have deductibles, which is the maximum amount of money you pay out-of-pocket when you go to the doctor. After you have paid this deductible, the insurance company will begin to pay for the medical services you receive. Deductibles exist in addition to monthly premiums, which is the amount you pay to the insurance company each month for your policy.
Seems straightforward, right? Deductibles for an individual policy work this way, but deductibles for family policies have an extra layer of complexity known as embedded vs. non-embedded deductibles.
Embedded health insurance refers to a certain way that family deductibles are handled. In a family plan, each individual member covered by the insurance policy has their own deductible. However, there's also a family deductible.
In embedded health insurance plans, this family deductible does not need to be met in order for the insurance company to pay for an individual's medical services. Only the individual's deductible is taken into consideration. Once that individual's deductible has been met, the insurance company handles all other expenses.
A non-embedded deductible requires the family deductible to be paid in full in addition to the individual's deductible before the insurance company will pick up the tab.
But how does the family deductible get met in the first place? The family deductible is higher than an individual's deductible, but all payments made to individual deductibles contribute to the family deductible.
This means in a non-embedded insurance plan that if only one family member requires medical care, his or her individual deductible gets trumped by the family deductible. Once the family deductible is paid, the insurance company will pay for that individual's medical care. This can be accomplished whether that same individual contributes to the deductible, or whether another person covered under the family plan needs to pay their own deductible.
A non-embedded deductible may also be referred to as an aggregate deductible or an aggregate health insurance plan.
An embedded deductible health insurance plan often reduces the overall cost of out-of-pocket expenses. When one individual in the family is the primary recipient of medical care, an embedded deductible allows the insurance company to assist with bills much sooner.
Business owners who offer health insurance plans should be sure to offer clear explanations of embedded vs. non-embedded deductibles to employees, as the difference in out-of-pocket costs can be significant.