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Embedded vs Non Embedded Insurance: Understanding Deductibles in Family Health Insurance

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Choosing the right family health plan sometimes feels overwhelming. There are so many terms to understand, and on top of that, different plans structure their deductibles in various ways. Here, we’ll break down two common types of deductibles in family health insurance: embedded and non-embedded (also known as aggregate). We’ll explain what they are, how they work, and which might be a better fit for your family.

What Are Deductibles?

Let’s start with the basics. A deductible is the amount of money you, the policyholder, pay out of pocket for covered medical expenses before your insurance company starts kicking in. For example, if you have a $1,000 deductible, you must pay $1,000 out-of-pocket for your medical care before your insurance kicks in.

In a family health plan, the deductible applies to the entire family (entire family deductible) or to each member (individual deductible).

Embedded vs. Non-Embedded Insurance

Embedded deductibles mean that each family member has their own individual deductible. Once a family member meets their individual deductible, the insurance company starts to cover their medical expenses, regardless of whether the overall family deductible has been met. Here’s a simple breakdown:

  • Each family member has their own deductible.
  • Once a family member meets their own deductible, insurance starts to pay for their medical expenses.
  • There is also an overall family deductible that, once met, means the insurance company pays for medical expenses for all family members.

Understanding these differences can help you manage your family’s medical expenses more effectively.

Non-Embedded Deductibles

Non-embedded deductibles work differently. In this case, the entire family must meet one large deductible before the insurance company starts to pay. Here’s how it works:

  • There is one large family deductible.
  • The entire family must contribute to meeting the deductible.
  • Insurance starts to pay only after the overall family deductible is met.
  • In a non-embedded deductible plan, the family’s total deductible payments must reach the single large deductible before insurance coverage begins.

How Do Deductibles Affect Your Medical Expenses?

Understanding how embedded and non-embedded deductibles work helps you manage your medical expenses and out-of-pocket costs more effectively. Once the family deductible is met, all family members will have their medical expenses paid according to the plan’s coverage.

Embedded Deductibles

With embedded deductibles, each family member has their own individual deductible. For example, if your family health plan has an embedded deductible of $1,000 per person and $3,000 for the entire family, each person in your family must reach their own $1,000 deductible. All family members’ out-of-pocket expenses contribute to meeting the family deductible, regardless of whether they’ve individually met their deductibles. Once they do, the insurance company will start covering their medical expenses. If the total family medical expenses reach $3,000, the insurance company will start covering all expenses for the entire family.

Pros:

  • Individual deductibles are typically smaller, so insurance coverage for individual family members starts sooner.
  • Easier to manage if one family member has high medical costs.

Cons:

  • Each family member needs to meet their own deductible before insurance kicks in for them individually.

Non-Embedded Deductibles

In a non-embedded deductible plan, there is a single, larger deductible for the entire family. For instance, if your non-embedded deductible is $5,000, the entire family must collectively pay $5,000 out-of-pocket before the insurance company begins to cover any medical expenses.

Pro:

  •  Simplicity: Non-embedded plans are easier to understand. There’s just one family deductible to track, not individual ones for each member.

Cons:

  • It may take longer to meet the single large deductible, delaying when insurance starts paying for any family member’s medical expenses.
  • Potentially higher out-of-pocket costs if the family doesn’t reach the overall deductible.

Practical Examples

To better understand the difference between embedded and non-embedded deductibles, let’s look at some real-world scenarios.

Scenario 1: Embedded Deductibles

Imagine a family of four with a health insurance plan that has an embedded deductible of $1,000 per person and $3,000 for the entire family.

  • Family Member A has medical expenses of $1,200.
  • Family Member B has medical expenses of $500.
  • Family Member C has medical expenses of $800.
  • Family Member D has no medical expenses.

In the above scenario, once Family Member A reaches their $1,000 individual deductible, the insurance company will start covering their additional $200 in medical expenses. However, Family Members B and C will continue to pay out-of-pocket until each meets their $1,000 individual deductible.

Scenario 2: Non-Embedded Deductibles

Now, consider a family with a non-embedded deductible of $5,000.

  • The entire family collectively needs to meet the $5,000 deductible.
  • Family Member A’s $1,200, Family Member B’s $500, and Family Member C’s $800 in medical expenses contribute to the $5,000 total.
  • All family members’ medical expenses count toward this single deductible.

In the scenario above, insurance won’t cover any medical expenses until the family collectively spends $5,000 out-of-pocket. That could delay when insurance starts paying and may increase out-of-pocket costs for the family.

Which is Better: Embedded or Non-Embedded Deductibles?

Choosing between embedded and non-embedded deductibles depends on your family’s medical needs and financial situation.

Embedded Deductibles

Embedded deductibles are often better for families with varying medical needs among family members. If one family member has high medical expenses, the individual deductible allows insurance to start paying for their care sooner. It may reduce financial stress and ensure timely medical care for those who need it most.

Non-Embedded Deductibles

Non-embedded deductibles may be advantageous for families with relatively few medical expenses or those who prefer the simplicity of a single deductible. That option may also be easier to understand and manage, especially if the family collectively has low medical costs.

Tips for Selecting the Right Health Plan

When choosing between embedded and non-embedded deductibles, consider the following factors:

Assess Your Family’s Medical Needs

Consider the medical needs of each family member. If some members have high medical expenses, an embedded deductible plan might provide quicker coverage and reduce individual out-of-pocket costs.

Evaluate Your Financial Situation

Assess your ability to pay out-of-pocket costs upfront. If high initial costs are a concern, an embedded deductible plan might offer quicker relief. If you prefer simplicity and have relatively few medical expenses, a non-embedded deductible plan might be more suitable.

Review Plan Details

Carefully review the details of each health plan, including deductibles, copays, and coverage limits. Understanding the specifics of each plan helps you make an informed decision that meets your family’s needs.

FAQs

Which is better, embedded or aggregate deductible?

The choice between embedded and aggregate (non-embedded) deductibles depends on your family’s medical needs. Embedded deductibles are often better for families with varying medical expenses among members, as they provide quicker coverage for individuals. Aggregate deductibles may be simpler and more cost-effective for families with low overall medical expenses.

What is the difference between true family and embedded deductible?

A true family (non-embedded) deductible requires the entire family to meet a single, large deductible before the insurance company starts paying for any member’s medical expenses. An embedded deductible gives each family member their own individual deductible, allowing insurance coverage to start for individuals sooner once their personal deductible is met.

What is a non-embedded out-of-pocket maximum?

A non-embedded out-of-pocket maximum is the total amount a family must pay out-of-pocket for medical expenses in a year before the insurance company covers all additional costs. That includes deductibles, copays, and coinsurance, applying to the entire family rather than individual members.

Disclaimer: The materials available on this site are for informational purposes only and should not be construed as advice or guarantees on any subject matter. The opinions and statements expressed through this site are the opinions of the individual author and may not reflect the opinions of JAUNTIN’. This blog contains general information which may not be current or accurate. For specific questions about insurance and any requirements, please contact your insurer directly.

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