A deductible is the amount insurance policyholders must pay before they can receive benefits from a claim. A high-deductible health plan, or HDHP, usually has lower monthly premium payments than a traditional health-care plan, but it can require the policyholder to pay out higher deductibles. HDHP deductibles can be either embedded or nonembedded. An embedded-deductible policy requires a deductible payment for each individual covered under the policy. A policy with a nonembedded deductible requires a single deductible payment for all individuals covered under the policy.
Advantages of Embedded Health Insurance Policy
Embedded deductibles for family health insurance policies come in two parts: the family deductible and the individual deductibles for each family member "embedded" in the family deductible. The advantage of embedded deductibles is that after each family member meets her individual deductible payment, the insurance policy takes over all payments for that individual. This allows the family to spread out the payment of deductibles as needed rather than paying a single large deductible amount out of pocket all at once.
Drawbacks of Embedded Health Insurance Policy
The major drawback of an embedded health insurance policy is that it usually carries higher monthly premiums. Also, families with an embedded deductible policy must meet the federally required minimum deductible payment to qualify for tax savings on their health savings accounts. A health savings account, or HSA, is a savings account that permits tax-free contributions for policyholders enrolled in a high-deductible health plan. Even if one or more family members have met their individual deductible amounts, the total amount must meet the minimum annual family deductible required to be considered a high-deductible health plan.
Advantages of Nonembedded Health Insurance Policy
Families with nonembedded health plans can meet their deductible requirements when one or more family members contribute toward the entire deductible amount. When the family meets its deductible payment, it automatically qualifies for tax exemptions on its HSA proceeds. The policy will also provide coverage for the rest of the family, without the need for each family member to meet a specific deductible payment level. The single deductible payment can be an advantage for families in which at least one member has a condition that requires high-priced medical care, such as a pregnancy or heart condition.
Drawbacks of Nonembedded Health Insurance Policy
The most noticeable drawback for holders of nonembedded health plans lies in the plan's high deductible amounts. Families that do not have recurring health costs may find they pay out too little in deductibles to qualify for their insurance benefits. In this instance, if the family fails to meet the minimum deductible requirements, they also lose out on the tax benefits on their HSA proceeds.
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