How a Family Deductible Works

For most family health insurance plans, the whole family has a shared deductible, and each family member has an individual deductible that counts toward the family deductible.

Some plans do not have aggregate family deductibles, and instead only have separate deductibles for each family member, or in some cases, no deductibles at all. These approaches are more common among HMOs than among other types of coverage.

The family's deductible is met when any combination of family members' healthcare costs meet the maximum deductible for the whole family. At that point, everyone on the family plan will start to pay a coinsurance instead of the full cost of covered services (or nothing at all, if the plan's deductible is equal to its out-of-pocket maximum).

If, however, one individual meets their personal deductible before the rest of the family, that individual will start to pay coinsurance before the rest of the family's copay or coinsurance kicks in.

This article will help you understand how the family deductible works so you can budget for your family’s healthcare expenses.

What Is a Deductible?

A deductible is the amount of money you have to pay out of pocket each year for covered healthcare services before coinsurance kicks in.

On many plans, you'll have fixed-dollar copays for certain services—often doctor visits and prescription drugs—even before you've met your deductible. Copays generally do not count toward the deductible. Coinsurance is what you start to pay after you've met your deductible, when you receive care that would have counted toward the deductible if you hadn't yet met it.

According to the Kaiser Family Foundation, in 2023 the average deductible for employer-sponsored individual health coverage was $1,735. For employer-sponsored family coverage on plans with aggregate family deductibles, average family deductibles ranged from just under $3,000 for HMOs to just under $5,000 for HSA-qualified high-deductible health plans.

Once a family has paid total deductible costs that equal the amount of the family deductible, they will begin to pay coinsurance instead of the full cost of services, with their insurance provider covering the remaining balance.

But if they are enrolled in a health plan that only has separate deductibles for each family member, the switch to coinsurance will only happen for family members who have met their individual deductible.

How a Family Deductible Works

A family deductible is the maximum amount of money a whole family needs to pay out of pocket before they can start to pay coinsurance instead of the full cost of services. For services that are covered with a copay instead of counting toward the deductible, copays continue to apply after the deductible is met, until the plan's annual out-of-pocket maximum is met.

Most family health insurance policies have both individual deductibles and family deductibles. Each time an individual within the family pays toward their deductible, that amount is also credited toward the family deductible.

Under most family health insurance policies, post-deductible coverage begins for each individual member as soon as their individual deductible is met. Once the family deductible is met, post-deductible coverage is provided for all family members who are covered by the policy, even if their individual deductibles are not met.

There are two ways a family health insurance policy will begin to pay benefits for a particular individual within the family:

• If a family members meets their individual deductible, after-deductible benefits kick in and begin to pay healthcare expenses for that individual only, but not for the other family members.
• If the family deductible is met, after-deductible benefits kick in for every covered member of the family, whether or not they’ve met their own individual deductibles.

As noted above, some health plans do not have aggregate family deductibles, and instead only use individual deductibles.

The most common plan design is a family deductible that's equal to twice the individual deductible. Triple the individual deductible is also used, but isn't as common.

So while deductibles vary, it's rare for a family to pay more than two or three individual deductibles in one year. This doesn't apply if family members have their own separate policies, as the separate policies would not coordinate with each other in terms of out-of-pocket costs.

How an Individual Deductible Works

Individual deductibles are a little more straightforward than family deductibles. When a covered individual pays out of pocket for a qualifying healthcare service, the money they pay is credited toward their yearly deductible.

Once they reach their deductible's limit, they will only need to pay a copay or coinsurance for any qualifying healthcare services they utilize for the rest of the year.

An individual can be part of a family insurance plan, too. If the family's deductible is $6,000, and the individual's deductible is $3,000, then once the individual pays $3,000 out of pocket towards care for which the deductible applies, they will start to pay coinsurance and will no longer have to pay toward their deductible.

However, the other family members will continue to pay out of pocket until the family has met their collective $6,000 deductible.

And again, some family health insurance policies do not have family deductibles. Instead, each family member has their own individual deductible that has to be met before post-deductible coverage begins for that person.

Cost Considerations

It's possible for a health plan to have a family deductible that's more than double the individual deductible. Check your plan's summary of benefits and coverage to be sure you understand how it works.

For example, you might find that the family deductible is three times the individual deductible. Or you might find that your plan doesn't have a family deductible at all, and instead just has separate individual deductibles for each family member.

The family deductible helps to keep overall costs more manageable, especially for a larger family. For example, let’s say you have five family members, an individual deductible of $1,500, and a family deductible of $3,000.

If there were no family deductible and each family member had to meet the individual deductible before the health plan began paying post-deductible benefits, your family of five would pay $7,500 before post-deductible health coverage kicked in for the whole family.

However, since after-deductible benefits kick in for the entire family when the family deductible of $3,000 is met, the family saves up to $4,500 in deductible costs if they were to face a year in which each family member needs extensive medical treatment.

What Is Not Included in the Deductible

Things that aren’t covered by your health insurance won’t count toward your deductible even though you pay them out of your own pocket. Products and services that do not count toward your deductible include:

• Copays: If your health plan has copays for certain services (like office visits, urgent care visits, prescriptions, etc.), the money you pay in copays generally does not count toward your deductible. It does, however, count toward your out-of-pocket maximum for the year.
• Cosmetic surgery: Any procedure that does not promote the proper function of your body or that does prevent or treat illness or disease is considered medically unnecessary and is not covered by insurance.
• Health club dues: Health and sports clubs, such as the YMCA, are not covered by insurance. Even if you use the club's facilities, such as a sauna, to relieve physical or mental discomfort, it is not covered unless medically necessary.
• Household help: Even if a healthcare provider recommends it, household help is not covered by health insurance. Certain expenses paid to an in-home nurse or caretaker may be deductible.
• Natural medicines: Nutritional supplements, herbal supplements, vitamins, and other natural medicines are not covered by insurance unless a healthcare provider recommends them in writing to treat a specific medical condition.
• Non-prescription medicines: Unless a medication has been prescribed by a healthcare provider or recommended in writing, it is typically not covered by insurance.
• Out-of-network providers: If you use an out-of-network medical provider in a non-emergency situation, the costs generally won't count toward your health plan's regular deductible.

A little more detail about out-of-network costs: If the plan doesn't cover any out-of-network care (common with HMOs and EPOs), the out-of-network charges simply won't count toward your plan's cost-sharing at all.

If your plan does cover out-of-network care (common with PPOs and POS plans), the plan will likely have a separate deductible for out-of-network services. This out-of-network deductible will generally be quite a bit higher than the plan's regular in-network deductible.

Note that the No Surprises Act ensures that people don't encounter unexpected out-of-network charges when using an in-network facility or when they receive emergency care.

Copays for office visits and prescriptions generally don't count toward your deductible. When you have a copay, it means your insurer is paying part of the bill—and you get that benefit even before you've met your deductible.

As always with health insurance, the details can vary by plan. Call your insurance provider and speak with a customer representative if you are unsure what is or isn't covered.

High-Deductible Health Plans

If you have a high-deductible health plan (HDHP), your family deductible may work differently.

Some HDHPs use an aggregate deductible rather than the embedded deductible system. This is much less common than it used to be, but it's still possible, especially on HDHPs that have deductibles on the lower end of the allowable spectrum.

In other words, your HDHP probably has embedded deductibles just like any other type of health plan, but it might not, so make sure you understand the specific coverage details that apply to your family's plan.

Be aware that your plan may not be an HDHP just because your deductible seems really high. An HDHP is a special type of health plan, not just a descriptive term.

Because enrollment in an HDHP allows a person to make contributions to a tax-advantaged Health Savings Account, specific IRS rules set these plans apart from non-HDHP health plans.

Since 2016, non-grandfathered health plans must limit individual out-of-pocket maximums for each family member to no more than the maximum out-of-pocket that would apply to a person who has their own health policy. This is true even if it's an HDHP with an aggregate family deductible.

For 2024, the Department of Health and Human Services has capped individual out-of-pocket costs at $9,450. So a family HDHP that doesn't have embedded individual deductibles could have an aggregate family deductible equal to $9,000 but not an aggregate deductible equal to $10,000—because that would potentially require a single family member to pay $10,000 before receiving benefits under the plan, and that's no longer allowed.

Summary

A family deductible is the total deductible amount that a family would need to meet in order to activate post-deductible benefits for all family members who are covered under the plan. The family deductible is often double the individual deductible amount. The family deductible can be met by a combination of two or more family members' costs.

If family members are covered by more than one health policy, each one will have its own separate deductibles and out-of-pocket maximums. The combined family limits only apply to family members who are covered under the same policy.

If you're shopping for health insurance for your family, be sure you understand how much the total deductible is for the whole family, as there's a lot of variation from one plan to another.

Also, make sure you understand how much the maximum out-of-pocket is for the family. On some plans, it's considerably higher than the deductible. You would likely only need to pay that amount if your family needed significant medical care during the year. However, it's good to know ahead of time how much it might be, especially if you're comparing multiple policies and selecting the one that will best fit your needs.