Embedded Versus Aggregate Deductibles: What You Need to Know and How You Can Save Money

There are many details to consider when choosing a new health insurance plan or evaluating your current plan, such as insurance carrier preference, deductible level, and even plan type. More specifically, with employer-sponsored coverage for a family plan, there are two different deductible types to consider: embedded and aggregate deductibles.

For family health insurance coverage, understanding the differences between embedded and aggregate deductibles will help you plan for out-of-pocket health care expenses.

Embedded Deductibles

There are two parts to a plan with an embedded deductible. The first is an individual deductible, which applies to each family member, and the second is an overall family deductible. When a family member meets his or her deductible, the insurance company will begin paying according to the plan’s coverage for that member. Out-of-pocket expenses used to meet any individual deductible also count towards meeting the overall family deductible with the exception of individual coinsurance or copays, which, typically, do not count. The family deductible is generally two to four times the amount of the individual deductibles. When two or three family members meet their individual deductibles, the family deductible is typically met and all family members will have medical expenses paid according to the plan’s coverage, even if they have not met their individual deductible.

Aggregate Deductibles

With an aggregate deductible, on the other hand, there is only one total family deductible that must be paid before the insurance carrier will begin paying on the insurance claims. Out-of-pocket costs for all family members are combined and applied to the family deductible. Once met, all expenses for anyone in the family will be covered by the insurance carrier according to the plan benefits.

Though embedded plans are the more popular of the two, it’s important to understand how both work and to know which type your plan uses or if a choice is offered. If your household uses its health insurance regularly, you may feel more comfortable with an embedded plan, knowing expenses will cap at a certain deductible level to satisfy your obligation. Alternately, with an aggregate plan and two or more individuals using the coverage regularly, when you total up all the medical expenses for the year, they may be higher than what you would have paid with an embedded deductible.

The table below breaks down the difference between the two plans for the Smith family. The family plan has a $5,000 deductible. Under the aggregate deductible option, the $5,000 family deductible must be met before expenses are paid by the insurance company for all family members, according to the plan’s benefits. Under an embedded deductible plan, the individual deductible is $2,500 and expenses for the individual will be covered if their individual deductible is met. Medical expenses for the year were $290 for Joe, $4,000 for Sally, and $500 for Emily. In this example, the family deductible of $5,000 was not met; however, because Sally’s met her individual embedded deductible, under the embedded plan, the family saved $1,100 in out-of-pocket expenses when compared with the aggregate deductible plan.

Deductible Type Joe’s Expenses Sally’s Expenses Emily’s Expenses TOTAL EXPENSES
Aggregate $290 $4,000 $500 $4,690
Embedded $290 Deductible = $2,500

Co-insurance (20%) =$300

Total = $2,800

$500 $3,590


Knowing how both embedded and aggregate deductible plans work can help greatly when choosing your coverage for you and your family. Though it is impossible to predict unforeseen events that could result in costly medical expenses, it is always best to sit down and budget what you think you may spend in the upcoming year with your current medical situation and any known future expenses. Current and known expenses may include maintenance prescriptions, regular doctor visits, or costs for a planned procedure in the upcoming year. By planning, you will put you and your loved ones in a better financial situation and feel at ease knowing you made the right choice.

And we can help! ARC’s trusted Client Relations Advisors are prepared with the knowledge and skills you need to determine which kind of deductible is right for you and your family. Let us simplify the process and do the heavy lifting at no cost to you. Contact us today to get started.

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