Health insurance policies include out-of-pocket expenses, or deductibles, in their terms. Deductibles represent the health care charges a policy holder must pay before the insurance carrier will assume payment of his medical expenses. A policy with a deductible for each person covered offers embedded health insurance. One with a single, combined deductible for all covered individuals is a nonembedded health insurance policy.
Embedded health insurance policies, popular with preferred provider organizations, come as either an individual or a family plan. Family plans have two annual deductible levels: individual and family. According to insurance broker HealthPlanOne, the family deductible amount often equals two or three times the individual deductible. A $1,200 individual deductible will equate to a $2,400 family deductible, for example. Benefits kick in for a family member when she meets her individual deductible and for the whole family when at least two members do so. Monthly premiums for embedded policies tend to run higher to accommodate lower deductible options.
A nonembedded policy has one deductible per family per year. In 2011, this averaged $3,666, according to the Kaiser Family Foundation. No benefits begin for any covered individual until this deductible is met either by one member or a combination of several members. The deductible may apply to prescriptions and all covered benefits such as specialist visits, surgical procedures, tests and lab work. The nonembedded policy's higher deductible level carries a lower policy premium than embedded policies.
Your insured health care costs are not limited to premiums and deductibles. Both embedded and nonembedded health insurance carriers require policy owners to pay for a percentage of covered services after meeting the deductible. This percentage, known as co-insurance, reads like a ratio: 70/30 or 80/20. With a 70/30 co-insurance arrangement, the policy holder pays 30 percent of the bill. Some embedded policies also require a co-pay: A fixed payment for each prescription, office visit or exam.
Those with a high deductible health plan can finance out-of-pocket expenses with tax-free contributions via a health savings plan. Contribution limits for 2012 total $3,050 per individual or $6,150 per family as set by the Internal Revenue Service. Other advantages include earning interest on the account and the ability to roll over any balance for future health care costs. Consumer health insurance expert Michael Mahoney notes that scheduling known procedures when the plan year begins will help you maximize benefits throughout the year. Once you meet the deductible, Mahoney advises “cramming in” as many visits, tests and exams as possible before coverage ends.
- HealthInsuranceCoverage.com: Factoring Deductibles and Co-insurance Into Your Health Insurance Expenses
- Texas Family Benefits: Embedded Versus Aggregate Insurance Deductibles
- HealthPlanOne: Annual Deductible
- Guidestone Financial Resources: PPO vs. HDHP Chart
- Kaiser Family Foundation: Employer Health Benefits 2011 Annual Survey; Section 7 Employee Cost Sharing
- “The Common Sense Guide to Health Savings Accounts;” Linda Y. Renick; 2009
- Health Insurance In-Depth: How Major Medical Insurance Works
- Insure.com: 12 Ways to Lower Your Health Insurance Premiums
- Consumer Reports.org: What's High Deductible Insurance?
- Internal Revenue Service: 26 CFR 601.602 -Tax Forms and Instructions; Rev. Proc. 2012-26
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