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Understanding Embedded vs. Nonembedded Deductibles

hand holding magnifying glass over the word deductible

2 minute read

When it comes to health insurance, employers are constantly searching for ways to optimize coverage and manage costs. That's where embedded and nonembedded deductibles come into play. Understanding these types of deductibles can empower employers to make the best choices for their employees' healthcare needs.


A deductible is the amount an individual must pay out of pocket for medical care before the insurance company starts paying. Deductibles reset annually and may not apply to all healthcare services. Health insurance plans can cover individuals or families, with the deductible designed as either embedded or nonembedded.


Embedded Deductibles

Embedded deductibles in health insurance plans impact cost sharing between employers and employees. In this model, each individual covered has their own deductible and a family deductible. Each member must meet their individual deductible before coverage begins. If a family member meets their deductible, the insurance company starts paying according to the plan's coverage for that individual. Out-of-pocket expenses used to meet an individual deductible count towards the larger family deductible. Once the family deductible is met, all family members have medical expenses covered, even if they haven't met their individual deductibles. Embedded deductibles are common in non-high deductible health plans. They can result in higher out-of-pocket costs for families with multiple members needing medical attention. While embedded deductibles provide a more individualized approach to coverage, they can increase administrative complexity for employers.


Nonembedded Deductibles

Nonembedded deductibles are simpler than embedded deductibles, assigning a single deductible to the entire family or group. All family members' out-of-pocket expenses count towards the family deductible until it is met. Once the total deductible is met, insurance coverage kicks in for all individuals within the group, regardless of whether they've individually met their deductibles. This promotes shared responsibility and cost savings for employers. The decision between embedded and nonembedded deductibles depends on specific needs and preferences, with nonembedded deductibles streamlining administration and promoting shared responsibility.



Understanding embedded and nonembedded deductibles is crucial for employers navigating health insurance plans. By choosing the model that aligns with their goals and workforce needs, employers can balance coverage and costs effectively, contributing to the well-being of their organization and employees. Download the bulletin for more details.

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National Insurance Services is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Readers are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the readers’ business activities.

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Steve Smith

Steve Smith

Steve Smith, Employee Benefits Consultant for National Insurance Services, has his energy level permanently set at “high.” His maxim is “work hard, play hard.” Steve’s an expert in getting groups of people working together for a higher cause. Minnesota schools, cities, and counties rely on Steve’s unique and creative ideas of engaging employees in their own health and wellness to lower utilization trends. He has 20+ years in the health insurance field doing compliance, cost mitigation, utilization, analytics, wellness plans, and strategic planning. Steve is a licensed insurance agent and holds the designations for Managed Healthcare Professional (The Health Insurance Association of America), Certified Patient Protection and Affordable Care Act Professional (National Association of Health Underwriters), and Group Benefits Disability Specialist (Hartford School of Insurance). He specializes in Employee Benefits Consulting for Minnesota schools, cities, and counties including fully insured, self-insured, and stop-loss plans.