What is the difference between an embedded and non-embedded deductible?

A deductible is the amount of money that must be paid for covered services before the health insurance company begins paying for expenses. There are two types of deductibles, but the difference matters only for plans covering more than one individual.

The difference has to do with the amount an individual or a “family” must reach before the insurance company begins paying for expenses. Note: in this case a family can apply to a member and spouse, member and children or member, spouse and children.

Embedded Deductible — Each family member has an individual deductible in addition to the overall family deductible. Meaning if an individual in the family reaches his or her deductible before the family deductible is reached, his or her services will be paid by the insurance company.

Non-Embedded Deductible — There is no individual deductible. So the overall family deductible must be reached, either by an individual or by the family, in order for the insurance company to pay for services.

In the past, non-embedded deductibles have been an issue especially for small families, such as a member and spouse because they have fewer people to reach the high deductible.

With the passage of the Affordable Care Act, there were changes to the standards regarding out of pocket maximums that affected how insurance companies structure plan deductibles. All ACA compliant plans must have embedded out of pocket maximums. As a result, most ACA compliant plans now have embedded deductibles.

Also as a part of the law, all family deductibles must be no more than double the individual deductible rate. For example, if the individual deductible is $3,000, the family deductible can be no more than $6,000. Both of these measures were an effort to alleviate the financial stress on smaller families.

However, these rules do not apply to the self-funded Medical Expense Reimbursement Plans ClaimLinx clients use for their benefits, so it is possible our members still have a non-embedded or higher family deductible. Always refer to your summary of benefits for more information regarding your own deductible.

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