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California health insurance  -  Health plan basics in California  -  Embedded deductibles

The Real Deal Behind Embedded Deductibles in California Health Plans

There's a pretty big difference in how some of the health plans on market treat deductibles and max out of pocket.  These two terms are probably the most important (outside of monthly premium of course) to the true value of health insurance coverage which is to cover the big bill. Let's take a look at the Embedded deductible for multiple people on a plan.

A Simple Explanation of the Deductible and Max

First, the deductible is an amount that you must pay before getting help from the carrier (simplified but true non-the-less). The max is usually an amount you pay above the deductible as a percentage of the actual medical costs. Depending on the plan and carrier, your true out of pocket for $50K bill is usually the two of these number...per person. The "per person" part is important to our concept of Embedded deductibles. For most of the plans on the market, we usually had a "2 party max" which means that within a family, if two people met their deductible (or max), the rest of the family members would not need to meet theirs. This was to protect the family from truly catastrophic health care costs. For example, if you have a $3K deductible and five family members had really big bills, would the family have to pay $15K in deductible? No. In most cases, the deductibles would be met after $6K (2 members at $3K each). So far so good.

HSA Deductible as an Example

We started to see a very different approach, primarily with the HSA health plans in terms of how the deductible was handled. HSA's California health plans have very specific requirements in order for them to be eligible for the tax benefits. There was this strange divide between an individual and family HSA mirroring the funding caps by the federal law. Individuals could fund one amount (let's say $3K) into the account while parties of two or more could fund roughly double. The carriers then mirrored the benefits in that an individual deductible might be $3K and the family deductible might be $6K. Sounds good but there was an issue. Let's say we have a couple on an HSA plan. They have a $6K deductible. What if one person has really big bills which is probably the case in a family with in one given year. That's where the deductible can swing things significantly.
If it's a standard cumulative deductible, that one family member would need to meet the full family deductible of $6K. If it's an embedded deductible, that family member would need to meet a $3K deductible (in our example) and then get help. The other family member(s) would then meet a separate $3K deductible if need be. This is the concept behind an embedded deductible and it's definitely to your advantage to have this. Shield's HSA plans have embedded deductible now and their pricing is generally the best for HSA type plans in California so that's a pretty strong argument if your considering HSA plans because of the tax benefit.

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Explanation of California deductible
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