New ACA Guidance Has Some Employers Re-thinking Their Health Plans

U.S. Capital Building with title - ACA Update - The Embedded Rule

The DOL’s latest FAQ No. 27 on Obamacare has handed down the word on Embedded vs. Non-Embedded family health plans and is causing a lot of employers to re-examine their 2016 health plans.

In 2016, new out-of-pocket limits will take effect for non-grandfathered health plans.

The single coverage limit rises to $6,850, and the family coverage limit climbs to $13,700.

If you currently use a high deductible plan you were probably already aware of this upcoming change. But, here’s something you may not have already known — the $6850 limit will apply to every individual under your plan. Doesn’t matter whether a person is enrolled in family coverage or not.

The “Embedded Rule”

This has been dubbed the “embedded rule” (as in individual limits are embedded in family plans), and it applies to all non-grandfathered group health plans.

Medical Plans – Embedded vs. Non-embedded for family coverage

Embedded:   Each individual has their own out-of-pocket limit plus a family deductible

Non-embedded:  Must reach the entire family deductible before plan shares in cost

Example:  Family of four with $6,500 individual/$13,000 family deductibles, then 100% paid by plan

Embedded:#1 incurs a $10,000 expense…. Individual incurs $6,500, plan pays $3,500

#2 incurs a $2,000 expense….individual pays $2,000, plan pays $0

#3 incurs a $1,000 expense…individual pays $1,000, plan pays $0

Non-embedded: (no individual deductible, only family deductible applies)

#1 incurs a $10,000 expense…individual incurs $10,000, plan pays $0

#2 incurs a $2,000 expense…individual pays $2,000, plan pays $0

#3 incurs a $1,000 expense…individual pays $1,000, plan pays $0

Total expenses = $13,000

Type of DeductibleEmployee CostPlan Cost
Embedded Cost$9,500$3,500
Non-embedded Cost$13,000$0

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