Family Deductible

Most health insurance plans are written with the expectation that all plan members must share in the cost of providing healthcare coverage. A deductible is the portion of the claim that the patient will be required to pay before the insurance carrier will pay anything. The deductible starts over every year.

Most plans are written to include a family deductible along with the individual deductible. The family deductible is the maximum that will be applied on all family members during the current benefit year.

Let’s use sample ABC plan for an example of how a family deductible is applied.

John and his wife Jane have three kids named Joey, Joan and Samy. Everybody comes down with the flu so everyone has to see the doctor.

  • John incurs $300.00 in health care expenses. His deductible was already met on a previous claim and his plan pays at 80% of billed.
  • Jane incurs $300.00 in health care expenses and her full claim is applied to the plan deductible.
  • Joey incurs $100.00 in expenses and his full claim is applied to the deductible.
  • Joan incurs $100.00 in expenses and her full claim is applied to the deductible  
  • Samy incurs $200.00 in expenses and $100.00 of his claim is applied to the deductible. The other $100.00 is paid at 80%. So the family deductible is met based on the combined accumulation of all family members.

The $900.00 family deductible is met so no further deductible can be taken from any family members for the duration of the plan year. Without a family deductible maximum, the family of five would have incurred $1500.00, or a $300.00 per member individual deductible.

Let’s look at another example using slightly different billed amounts.

  • John incurs $100.00 in healthcare expenses and his full claim is applied to the plan deductible.
  • Jane incurs $100.00 in health care expenses and her full claim is applied to the plan deductible.
  • Joey incurs $100.00 in expenses and his full claim is applied to the deductible.
  • Joan incurs $100.00 in expenses and her full claim is applied to the deductible  
  • Samy incurs $100.00 in expenses and his claim is applied to the deductible.  

Using this second example, this family of five has already incurred $500.00 in health care expenses. NONE of it will be reimbursed by the health plan leaving the family to pay this $500.00 out of pocket. No one has met their individual deductible of $300.00 per person and the family did not meet the family deductible of $900.00. These two examples provide a general overview of how the family deductible may be applied. The way the deductible is applied is all about timing, so each experience may be different.   

Please note that the allowed amount is critical to understanding what amounts may be applied to the plan deductible, what will be paid or even what portion is not covered.

I discuss allowed amounts in detail in Chapter 7 - Reimbursement.


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