Embedded vs. Non-embedded Deductibles

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Embedded vs. Non-embedded Deductibles

 

 

You’ve most likely read that you have to “meet your deductible” when making a choice on your  health insurance benefits offered by your employer or on an Explanation of Benefits (EOB). Below is a summary of the two traditional types of deductibles for family plan. By understanding which one you have, your financial responsibilities, and how they apply, you will be more prepared, if you incur out-of-pocket deductible charges in the future. Different Employer’s have varying definitions on how the deductible is ultimately treated with the program they offer. If you are part of your company’s group health policy check with your Human Resources person or advisor.

Deductibles by Definition

A deductible is the amount of money  you are responsible for paying after a claim is settled by an insurance company. For example, if you have a $1,000 deductible, you will have to pay for all health care costs until you’ve reached $1000. After that, it is your insurance company’s financial responsibility to cover additional expenses; additional co-payments and co-insurance may apply. The deductible is usually calendar based and resets annually.

Your deductible may not apply to all health care services: wellness visits, Ob/Gyn, mammograms, immunizations and most screenings.  These expenses are currently covered by your insurance regardless of whether you’ve met your deductible thanks to the ACA .  Additionally, most covered benefits of your health plan, less co-pays and co-insurance, apply to your deductible.   For example, if you have satisfied your annual deductible and visit the doctor for an illness, co-payments may apply.

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

Embedded deductibles have two components:

  1. The individual deductibles for each family member
  2. The family deductible

 

Once a family member meets their individual deductible, future claims are the financial responsibility of the insurance company according to your plan’s coverage. usually defined in the benefit summary sheet. If only one person meets an individual deductible, the rest of the family still has to pay their deductibles. Typically, there are limits on the number of family member deductibles there are. Please refer to your company’s ACA compliant Summary Plan Description sheets which are updated annually.

Most out-of-pocket expenses incurred are applied to your deductible. Family plans are usually based on 2-3 times the individual deductible.  And individual deductibles apply to the total family deductible.  Keep in mind that after an individual satisfies his or her limit, co-insurance or co-pays typically do not apply.

When 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).

Non-embedded Deductibles

A non-embedded, or aggregate, deductible is simpler than an embedded deductible. With a non-embedded deductible, there is only 1 limit for all family members collectively. However, this plan treats co-pays or co-insurance the same way; they usually do not apply. 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 consumer driven health plans.

Summary

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. Deductible charges rarely are paid at the point of service.  All claims should be submitted from the provider to the carrier so that all discounts available are applied.  Once the claim is adjudicated the insurer will pay the provider the contracted rate and send you an Explanation of Benefits (EOB) outlining your out-of-pocket.  Ultimately, it is your financial responsiblity to pay the provider.