Whether you buy private health insurance, get coverage through your employer or have a government-sponsored plan, you should understand how your deductible works. The difference between having an embedded deductible and not having this type can mean hundreds or thousands of dollars in out-of-pocket health costs each year.
A deductible is an amount you must pay on claims before your insurance company begins paying benefits. Deductibles are common in all types of insurance, including health insurance. They typically renew annually, meaning that your deductible is reset at the start of each coverage year. If you have a $500 deductible, for instance, you must pay this amount toward the costs of surgery or other types of covered treatment in a plan year before benefits are paid. If your bill totals $5,000, you pay the deductible and any portion of co-insurance you have on the remaining $4,500 balance.
If your policy covers you and your family, you may have both individual and family deductibles. With an embedded deductible, you have both. You might have an individual deductible of $500 for each person and a family deductible of $1,000, for instance. This means that if any person on the plan has costs exceeding $500, his individual deductible is met and all of his future expenses are covered. If two or more people on your family policy pay deductibles that reach the $1,000 family deductible amount, any future expenses for the family are covered whether the person treated contributed to the family deductible or not. This is called an embedded policy, because your individual deductible is treated simultaneously with your family deductible.
When you have a nonembedded policy, you don’t have individual deductibles. Instead, you have one family deductible. If this amount is $2,000, that means any family member who requires treatment incurring a deductible would contribute toward the $2,000 limit. The same person could cover the entire amount or multiple people in your family can receive coverage and make payments toward the family deductible.
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