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Definition of Health Insurance Non-Embedded Deductible

A "deductible" signifies an amount of money you must spend out-of-pocket on your health care before your health insurance benefits begin.
Deductibles are common throughout the health care insurance industry, whether in standard managed care programs or the newer "customer-driven" plans.
If you have a family and are considering enrolling in a personal health care plan, or are evaluating a potential employer's plan, take time to read this short article. As confusing as the language may be, the difference between an embedded and a non-embedded deductible plan could be important to you.

  1. Embedded

    • Many family health insurance plans contain two deductibles, a family deductible and a lower deductible that is applicable only to the first family member to reach it.
      Because the lower deductible is contained within the family deductible, insurance companies call it an "embedded deductible."
      Having an embedded deductible means that when your out-of-pocket expenses for any one family member reach that level, the health insurance plan "turns on" for that individual. To activate insurance benefits for the rest of your family, your combined expenses must equal the family deductible.

    HMOs, PPOs, POSs

    • Most standard family health care plans have embedded deductibles. Although deductibles vary by company and plan, these plans tend to have embedded deductibles around $2,000 or less with total family deductible set at two times the embedded deductible.
      If you know (or can assume) the bulk of your yearly health care expenses will involve just one family member, you often can save money by enrolling in a plan with an embedded deductible.

    Non-Embedded

    • When you have a non-embedded deductible plan, your family must meet the entire deductible before any of you receive plan benefits. Typically, these are "account-based" plans, meaning that from an administrative point of view, the plan sees only a single account rather than multiple family members.

    Consumer-Driven Plans

    • In today's health care market, plans without embedded deductibles are what the health care industry calls "consumer-driven" or "high-deductible" health care (HDHC) insurance.
      Consumer-driven plans have higher deductibles with lower premiums for major hospital or surgical care. These HDHC plans often require that you enroll in a health savings account where you can save pre-tax dollars you can use to cover your medical costs until you have reached the deductible.

    Considerations

    • The idea behind high-deductible plans assumes that many people (or companies) who cannot afford the higher monthly premiums of more conventional health insurance may find these lower premiums more affordable and so purchase health care coverage.
      If your family is generally healthy, your yearly medical expenses are moderate and you have the resources to withstand a major medical hit, you should investigate HDHC plans.
      If you have limited means or savings, you should evaluate both your financial situation and your family's health care needs carefully. Lower income families enrolled in HDHC plans quickly can use up their monthly premium savings as well as their own available resources when hit with a major health care emergency.

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