Family deductibles were designed so that large families wouldn’t go broke paying individual health insurance deductibles for each family member. You need to understand how the family deductible works so you can budget for your family’s health care expenses.
First, if you’re unfamiliar with the basics of what a deductible is, read “Health Insurance Deductible—What It Is and How It Works” before you go any further.
You’ll need this basic understanding of deductibles before you’ll be able to understand how a family deductible works.
Most family health insurance policies have both individual deductibles and family deductibles. Each time an individual within the family pays toward his or her individual deductible, that amount is also credited toward the family deductible. Coverage begins for any particular individual as soon as he or she has met his or her individual deductible. Coverage begins for the entire family, even those family members who haven’t met their individual deductibles yet, as soon as the family deductible is met.
There are two ways a family health insurance policy will begin to pay benefits for a particular individual within the family.
If an individual meets his or her individual deductible, health plan benefits kick in and begin to pay health care expenses for that individual only, but not for the other family members.
If the family deductible is met, health plan benefits kick-in for every member of the family whether or not they’ve met their own individual deductibles.
This type of family deductible system is known as an embedded deductible because individual deductibles are embedded within and count toward the larger family deductible.