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I would like to know if the order of medical care matters in an embedded health insurance system. I'm trying to decide between different insurance plans for the upcoming calendar year, but something seems off. The following scenario is a simplified version of expected upcoming expenses.

Let's assume that we have an embedded family insurance plan with an individual deductible of $3,000 and a family deductible of $5,000. Once the individual deductible is met there is a 20% co-insurance up to some out of pocket maximum.

In a calendar year a family with 3 people have medical costs that sum up to the following values:

  • A: $2,000
  • B: $3,000
  • C: $5,000

For simplicity let's assume that each individual incurred costs all at once.

If the costs are ordered A then B then C. Neither A nor B would meet the deductible, but together they would meet the family deductible. So the first $5,000 would be paid out of pocket and you would only be responsible for paying 20% of the next $5,000 or $1,000. The total payment would be $6,000.

Now for comparison let's order the costs C then B then A. C would meet the individual deductible at $3,000 and you would owe 20% on the additional $2,000 or $400. The total cost after C would be $3,400, which would be contributed to the family deductible. After, B requires a payment of $3,000. The first $1,600 would be paid to reach the family deductible of $5,000. You would be responsible for 20% of the remaining $1,400 from B and $2,000 from A ($3,400 from B and A), or $680. The total payment would be $5,680.

Is something wrong with the math? Or is this how insurance companies would calculate the annual payment?

  • With CBA, I think $5000 meets both that individuals deductible and the family deductible. As a result, the out-of-pocket is $3600 + 600 + 400 = $4600. Deductibles are based on what you are charged, not on what you pay. – chepner Nov 14 '18 at 19:35
  • Your question prompted me to review bills from previous years and I found the answer (at least for my specific insurance). Thank you. – Blaine d Nov 14 '18 at 20:02
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I think your math is wrong, and once corrected, it comes to exact the same amount; so the sequence doesn not matter:

"After, B requires a payment of $3,000. The first $1,600 would be paid to reach the family deductible of $5,000." - no, the first 2000 are needed to reach the 5000 family deductable. The 400 as 20% from C's payment were above the deductible, and therefore don't count against the deductible.

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For my current insurance (Regence), I noticed that on the bills the family deductible was not updated by co-insurance payments. I am not sure if this holds for all insurance companies.

When co-insurance isn't included in the family deductible the order of payments does not matter. Both payments add up to $6,000.

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