Health insurance policies include out-of-pocket expenses, or deductibles, in their terms. Deductibles represent the health care charges a policyholder 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.
Understanding Embedded Policies
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. Embedded policies tend to have higher premiums to accommodate lower deductible options.
Exploring Nonembedded Policies
A nonembedded policy has one deductible per family per year. PeopleKeep reports that the average annual deductible for a family was $8,352 in 2017. 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.
Going Beyond Deductibles
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 policyholder pays 30 percent of the bill.
Some embedded policies also require a copay. This means you'll pay a fixed payment for each prescription, office visit or exam.
Controlling Your Medical Costs
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 2019 total $3,500 per individual or $7,000 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.
You can maximize your benefits by having procedures done early in the year so that you meet your deductible. Then any subsequent care during the year, including visits, tests and treatments, will be covered.
- HealthPlanOne: Annual Deductible
- Guidestone Financial Resources: PPO vs. HDHP Chart
- Kaiser Family Foundation: 2018 Employer Health Benefits Survey
- Health Insurance In-Depth: How Major Medical Insurance Works
- Insure.com: 9 Ways to Lower Your Health Insurance Premiums
- Internal Revenue Service: Publication 969 (2018), Health Savings Accounts and Other Tax-Favored Health Plans
- Becker's Hospital Review: 6 Things to Know About Non-Embedded Deductibles
- PeopleKeep: Average Health Insurance Costs for 2017
- Society for Human Resource Management: 2019 HSA Limits Rise, IRS Says
Trudy Brunot began writing in 1992. Her work has appeared in "Quarterly," "Pennsylvania Health & You," "Constructor" and the "Tribune-Review" newspaper. Her domestic and international experience includes human resources, advertising, marketing, product and retail management positions. She holds a master's degree in international business administration from the University of South Carolina.