Question: ACA Individual vs. Family deductible

[MrLoco]

My state has a healthcare exchange where you can shop for plans. One thing that is confusing is when you have met the deductible under a family plan.


As an example say a Gold plan has a $2000 (Individual)/ $4,000 (Family) deductible. Does this mean - if I have a Family plan for myself and my wife - that if I exceed $2,000 in my costs, my plan then starts to pay OR must I reach the $4,000 plateau before the plan pays? Do myself and my wife each have our own $2,000 deductible or can one person accrue $4,000 in costs before the plan pays? Hope this makes sense and I am sure the answer is obvious, but my brain isn't working today.

 

[VanWinkle]

My state has a healthcare exchange where you can shop for plans. One thing that is confusing is when you have met the deductible under a family plan.


As an example say a Gold plan has a $2000 (Individual)/ $4,000 (Family) deductible. Does this mean - if I have a Family plan for myself and my wife - that if I exceed $2,000 in my costs, my plan then starts to pay OR must I reach the $4,000 plateau before the plan pays? Do myself and my wife each have our own $2,000 deductible or can one person accrue $4,000 in costs before the plan pays? Hope this makes sense and I am sure the answer is obvious, but my brain isn't working today.

It should be a 2000 per person deductible with max of 4000 for all insureds on the policy.

 

[MichaelB]

Nothing obvious when it come to health insurance. VanW is correct, each individual has a deductible and the plan begins to pay for that individual once it's met. Look for the term "embedded deductible" in the policy.

 

[kite_rider]

This is a good question and I've heard more than one answer. One would assume an individual would only need to hit the 'individual' deduction and if enough individuals in the family spent enough on deductibles to hit the family limit then everyone in the family will have met their deductible.

In my only experience using an ACA 'high deductible' HSA compatible policy, I had to meet the family deductible before they paid benefits on a claim (for me individually). Someone told me that this is only true for the HSA compatible policies and the higher end policies were as I described above, but i don't know that as a fact.

 

[bingybear]

This is a good question and I've heard more than one answer. One would assume an individual would only need to hit the 'individual' deduction and if enough individuals in the family spent enough on deductibles to hit the family limit then everyone in the family will have met their deductible.

In my only experience using an ACA 'high deductible' HSA compatible policy, I had to meet the family deductible before they paid benefits on a claim (for me individually). Someone told me that this is only true for the HSA compatible policies and the higher end policies were as I described above, but i don't know that as a fact.

IIRC there was a time early in the ACA where this was true, but I did not think it was an HSA problem. After they discovered this I thought they changed that since you can buy 2 plans for 2 people and avoid that effect.

I will double check with my ACA insurer

 

[MichaelB]

Plan deductibles can be embedded or aggregate. Embedded means each individual has a deductible, once it is met, the policy begins to pay. Aggregate means the total plan deductible must be met before the policy begins to pay. HSA and other high deductible policies are aggregate by design, so the entire deductible needs to be met before the policy begins to pay. There is no ACA mandate for this, so insurers can do as they choose.

ACA requirements stipulate (IIRC) that plans have individual Total Out of Pocket limits, and once these are met, the policy begins to pay (for that individual) even if the total deductible has not been met.

The best thing to do is read the terms of coverage, specifically the section regarding deductible, and look for embedded or aggregate.

 

[kite_rider]

IIRC there was a time early in the ACA where this was true, but I did not think it was an HSA problem. After they discovered this I thought they changed that since you can buy 2 plans for 2 people and avoid thatr

It was a few years ago. I strongly considered buying individual policies after that experience, but it's 4 in my case and that was a tricky process on Healthcare.gov.

I also need to create a post about 'out of pocket maximum ' since I worry that it might not be what it seems either, but need to do more research first.

 

[bingybear]

Plan deductibles can be embedded or aggregate. Embedded means each individual has a deductible, once it is met, the policy begins to pay. Aggregate means the total plan deductible must be met before the policy begins to pay. HSA and other high deductible policies are aggregate by design, so the entire deductible needs to be met before the policy begins to pay. There is no ACA mandate for this, so insurers can do as they choose.

ACA requirements stipulate (IIRC) that plans have individual Total Out of Pocket limits, and once these are met, the policy begins to pay (for that individual) even if the total deductible has not been met.

The best thing to do is read the terms of coverage, specifically the section regarding deductible, and look for embedded or aggregate.

I just checked the plan I'm look at for next year. Its an HSA plan with embedded deductible. Same as this year.

 

[kite_rider]

The best thing to do is read the terms of coverage, specifically the section regarding deductible, and look for embedded or aggregate.

Michael,

Thanks for the quick and clear answers on this. I've learned some new terms about deductibles and by the way, you have been very helpful on other ACA related posts so I want to thank you for those as well!

Now for my new questions ;
1. Where do you find these terms of coverage? I'm working on a foggy memory here, but I only recall seeing a scant summary on Healthcare.gov (where I have to shop for the policies). I don't recall being able to click through and get more details. I also don't recall *ever* seeing the term 'embedded' or 'aggregate' on Healthcare.gov, did I miss it? I guess I could go the website for the company that is offering the policy to find this, or is there another way?

2. Recently it seems that most of the high deductible policies (in Oregon at least) now have deductibles that are basically the same as the 'Out of Pocket Maximum'. Note, this is a HIGH deductible so it's basically catastrophic coverage. But is 'Out of Pocket' really all I would expect to pay? I've grown cynical since it seems like policies don't really perform as the words seem to indicate. One HR person (when commenting on a company policy - not a marketplace ACA policy) was telling me that 'out of pocket max' didn't actually cover everything. There were things like expensive tests (MRI, etc.) and special types of procedures that would not be covered even from in-network providers. She had names for them and I didn't write them down, but it made me wonder... Does 'out of pocket maximum' actually mean what you would expect to pay for expensive healthcare or is it something else?

I should probably put that in a new post, but you brought the term up in a recent post..

 

[MichaelB]

Michael,

Thanks for the quick and clear answers on this. I've learned some new terms about deductibles and by the way, you have been very helpful on other ACA related posts so I want to thank you for those as well!

My pleasure. This stuff is harder than university.

Now for my new questions ;
1. Where do you find these terms of coverage? I'm working on a foggy memory here, but I only recall seeing a scant summary on Healthcare.gov (where I have to shop for the policies). I don't recall being able to click through and get more details. I also don't recall *ever* seeing the term 'embedded' or 'aggregate' on Healthcare.gov, did I miss it? I guess I could go the website for the company that is offering the policy to find this, or is there another way?

The insurer has to give you these when you take out the policy. With an ACA policy, every year. IIRC they need to give you a summary of benefits, which is a 2-4 page doc, and then the terms of coverage, which is longer and has lots of small print. The SOB should be available on their website, but the contract terms won't be easily accessible. Call and ask if the deductible is embedded.

I don't think the embedded vs aggregate thing is anywhere on Healthcare.gov. Most people learn about these the hard way ...

2. Recently it seems that most of the high deductible policies (in Oregon at least) now have deductibles that are basically the same as the 'Out of Pocket Maximum'. Note, this is a HIGH deductible so it's basically catastrophic coverage. But is 'Out of Pocket' really all I would expect to pay? I've grown cynical since it seems like policies don't really perform as the words seem to indicate. One HR person (when commenting on a company policy - not a marketplace ACA policy) was telling me that 'out of pocket max' didn't actually cover everything. There were things like expensive tests (MRI, etc.) and special types of procedures that would not be covered even from in-network providers. She had names for them and I didn't write them down, but it made me wonder... Does 'out of pocket maximum' actually mean what you would expect to pay for expensive healthcare or is it something else?

Total out of pocket max is really that. It only applies to covered services, but most things are covered, as long as you are in network and complying with the rules - like needing a referral for an HMO - once you meed the total out of pocket the insurance company picks up everything else - for covered services.

They may exclude expensive procedures by calling them experimental or not standard, but that's not a typical situation. (It's happening right now to my sister in law).

 

[gauss]

I looked into this about 10 years ago or so.

My conclusion is that for the type of insurance that I was interested in, an HSA compatible plan, the aggregate family deducible was what counted (ie no individual "embedded" deductibles).

[-]If memory serves, [/-]I believe that this was a characteristic of all HSA qualified HDHPs.

Here is a reference

HDHPs allow eligible individuals to make health savings account (“HSA") contributions, which provide the account holders with the ability to save for health expenses on a tax-preferred basis. ... Family coverage under a HDHP cannot have a deductible, embedded or not, less than the HDHP minimum amount ($2,700, for 2018).

Here is another quote from the same reference

Specifically, the IRS has said that, “a plan is an HDHP only if, under the terms of the plan and without regard to which family member or members incur expenses, no amounts are payable from the HDHP until the family has incurred annual covered medical expenses in excess of the minimum annual deductible”. (See, IRS Notice 2004-02, Q/A-3)

edit: Ooops - just saw that MichaelB has already addressed this above.
-gauss

 

[MBSC]

In my only experience using an ACA 'high deductible' HSA compatible policy, I had to meet the family deductible before they paid benefits on a claim (for me individually). Someone told me that this is only true for the HSA compatible policies and the higher end policies were as I described above, but i don't know that as a fact.

While an embedded deductible is not required, an embedded individual MOOP has been required by the ACA since 2016.

Q. When I compare health insurance plans in the exchange for our family, they all show total family deductibles and out-of-pocket maximums (OOPMs). Does that mean we’d have to meet the full family out-of-pocket limit, even for just one person?

A. Ever since 2016, no. Prior to 2016, family plans could have aggregate deductibles and OOPMs.

But this changed somewhat with the 2016 Notice of Benefit and Payment Parameters. That regulation clarified that starting in 2016 (for plans that are not grandfathered or grandmothered), no individual can be required to pay more than the individual out-of-pocket maximum set by HHS for that year, even if the individual is enrolled in a family health insurance plan.

For 2018, the individual OOPM is $7,350, and the family OOPM is $14,700. Under the rules that took effect in 2016, no single member of a family can be required to pay more than $7,350 in out-of-pocket charges in 2018, regardless of whether the rest of the family has incurred any claims. This includes people enrolled in family HDHPs, and HHS has clarified that this does not conflict with HSA and HDHP requirements.

Source: https://www.healthinsurance.org/faq...hat-full-deductible-even-for-just-one-person/

Total out of pocket max is really that. It only applies to covered services, but most things are covered, as long as you are in network and complying with the rules - like needing a referral for an HMO - once you meed the total out of pocket the insurance company picks up everything else - for covered services.

Also, keep in mind that ancillary providers (surgeon, anesthesiologists, etc.) can be out-of-network within an in-network hospital.

 

[gauss]

^ Interesting.

So, since 2016, for family, ACA, HDHP/HSA plans the deductibles must be aggregate and the out-of-pocket maximums must be individual.

Good info to know when reviewing rate structures and plan parameters.

Thanks
-gauss

 

[MBSC]

So, since 2016, for family, ACA, HDHP/HSA plans the deductibles must be aggregate and the out-of-pocket maximums must be individual.

Insurers can use embedded individual deductibles. It's just not required. My insurer uses embedded deductibles on their family plans.

 

[gauss]

Insurers can use embedded individual deductibles. It's just not required. My insurer uses embedded deductibles on their family plans.

I don't think an HSA/HDHP qualified plan can have an embedded deductible that is less than the family deductible (unless something has changed).

If it is not and HSA plan then what you say would be true.

 

[ShokWaveRider]

I cannot seem to figure out what an individual cost is (including subsidies) for an individual plan based on a family income. I am going on Medicare next year and my DW will remain on the ACA. I received my update and tentative quote, but it was still for both of us. I was wondering if the subsidy is cut in half just for one person, and all the rest (Plan info) remains the same?

 

[gauss]

I just checked the plan I'm look at for next year. Its an HSA plan with embedded deductible. Same as this year.

Is the embedded deductible at least 2700 per person? That would be allowed since the embedded deductible is not less than the minimum HSA family deductible. (Insurance Co.s may be doing this for marketing purposes).

If it is less than 2700 in 2019 then either something has changed with the IRS rules or the plan would not be a qualified HDHP for HSA purposes.

-gauss

 

[MBSC]

I don't think an HSA/HDHP qualified plan can have an embedded deductible that is less than the family deductible (unless something has changed).

If it is not and HSA plan then what you say would be true.

The family HDHP/HSA can have an embedded individual deductible of $2700 (2018) of more. For example, an HDHP/HSA with a $10,000 family deductible can have an embedded individual deductible of $5,000.

Family coverage under a HDHP cannot have a deductible, embedded or not, less than the HDHP minimum amount ($2,700, for 2018). No individual member of the family can have a lower deductible than that. (For HDHP purposes, “family” is any coverage that covers more than employee only.)

Specifically, the IRS has said that, “a plan is an HDHP only if, under the terms of the plan and without regard to which family member or members incur expenses, no amounts are payable from the HDHP until the family has incurred annual covered medical expenses in excess of the minimum annual deductible”. (See, IRS Notice 2004-02, Q/A-3)

For example, the 2018 minimum HDHP deductibles are $1,350 for self-only coverage and $2,700 for family coverage. Because of this IRS rule, a plan could not use $1,350 or even $2,000 as an embedded deductible. A plan could, however, have an overall family deductible of $4,000 and embed an individual deductible of $2,700 or more for each covered person within the family deductible.

Reference: https://www.hubinternational.com/pr...etins/2017/11/embedded-deductibles-and-oopms/

 

[MichaelB]

I cannot seem to figure out what an individual cost is (including subsidies) for an individual plan based on a family income. I am going on Medicare next year and my DW will remain on the ACA. I received my update and tentative quote, but it was still for both of us. I was wondering if the subsidy is cut in half just for one person, and all the rest (Plan info) remains the same?

Go to the Florida Blue website, get a quote for one, then input your financial info. It'll give you an estimate of the subsidy amount and the premium for the policies you're interested in.

 

[ShokWaveRider]

Go to the Florida Blue website, get a quote for one, then input your financial info. It'll give you an estimate of the subsidy amount and the premium for the policies you're interested in.

Thanks Michael, I tried that, it comes up with the subsidy, but the same plan has way higher deductibles for a single and double. If I put $xyz,000 income and select for 2 people, it shows a comparable to what I received in the mail. If I use the same numbers for 2 people in household, but only 1 person needing ACA, I get the exact same plan show up, but all the numbers and percentages are way higher. That is why I am so confused. I have an appointment with our Florida Blue Agent on Nov 1st. So I guess I will wait till then to sort it out.

 

[MichaelB]

Thanks Michael, I tried that, it comes up with the subsidy, but the same plan has way higher deductibles for a single and double. If I put $xyz,000 income and select for 2 people, it shows a comparable to what I received in the mail. If I use the same numbers for 2 people in household, but only 1 person needing ACA, I get the exact same plan show up, but all the numbers and percentages are way higher. That is why I am so confused. I have an appointment with our Florida Blue Agent on Nov 1st. So I guess I will wait till then to sort it out.

Prepare for a shock. I'm sure others here soon to be in a similar situation will be interested in how this works.

One thing I haven't seen discussed anywhere is how they will calculate the final total full year premium assistance when one spouse transitions from ACA to Medicare during the year. If that comes up during your interview it would be interesting to see the agent's response. Good luck ..

 

[sengsational]

The embedded configuration is good, logical, fair, not confusing, etc. It's the way Blue Cross blue shield policies worked before ACA. But in the early years of the exchange offered policies, BCBSNC silently removed a sentence from their brochure, allowing them to ignore the individual deductible on family policies. Before buying, I asked a CSR if one person incurred more than the individual deductible, insurance would start paying, and that was answered in the affirmative. So I bought a family policy. Then, when the individual max was exceeded and they didn't pay, I took them to court. They produced transcripts of all my calls except the one where the CSR lied or otherwise gave me a false representation.

I bought separate policies on the exchange, it's not hard, you just make groups of one. But as mentioned, it's now against the law to sell a policy that has a meaningless individual limit.

Because the deductible and OOPM are so close for the policies I buy, I never paid too much attention to if both or just OOPM was regulated. I didn't have to pay attention because even though the shady practice had been outlawed, I keep buying separate policies. Note that the cost is EXACTLY the same to buy two separate compared to one family. The down side is that if one person goes to the hospital, generating a "free ride" the rest of the year, the other person is on the hook for all their expenses, as normal, whereas with a family policy, if the one person hit the family OOPM, both would get the free ride. I kind of liked having two policies, since it wasn't jumbled together on one web report.


Anyway, I now record every telephone call. I don't catalog them, but if it's something important, I say to the CSR "are you sure... I'm also recording this on my end".

 

[Sue J]

The first year of ACA, 2014 we had a HDHP with HSA. That year I had a major surgery that used up our aggregate deductible of $6,000 each for a total of $12,000.

Soon after that they changed to the embedded deductible and my surgery would have just met one of the $6,000 deductibles. Yeah, I try not to think about that.

Since then we always sign up for 2 individual plans. It's easier to handle the paperwork and claim info and my spreadsheet. It eliminates the chance of ever having the deductible issue again.

For a married filing joint couple the way to do this is that you fill out the application for your household combined income. After you submit the application you will find your subsidy for the household. Before you look for plans there is a place to make GROUPS. Make a group for one of you then make a group for the other person. Each of you gets 1/2 of the total subsidy and you can each choose a plan. This is how you can choose different plans if you want. We usually choose the same plan (individual policies) but each person can use their half of the subsidy on their choice of plan.

 

[MBSC]

One thing I haven't seen discussed anywhere is how they will calculate the final total full year premium assistance when one spouse transitions from ACA to Medicare during the year.

When there is a change during the year, premium subsidies are reconciled month-to-month using lines 12-23 on IRS Form 8962. Line 11 (annual total) is used to reconcile premium subsidies when there is no change.

IRS Form 8962: https://www.irs.gov/pub/irs-pdf/f8962.pdf

 

[gauss]

The family HDHP/HSA can have an embedded individual deductible of $2700 (2018) of more. For example, an HDHP/HSA with a $10,000 family deductible can have an embedded individual deductible of $5,000.

Correct. I should have said 'minimum' family deductible in my post above.