Merritt Personal Lines Manual: Family coverage with embedded deductible.
An HDHP with family coverage may have deductibles for both the family as a whole (the umbrella deductible) and for individual family members (the embedded deductible). In this situation your limit on contributions is the least of the following amounts.
- The maximum annual contribution limit for family coverage ($5,450 for 2006).
- The umbrella deductible.
- The embedded deductible multiplied by the number of family members covered by the plan.
Example 1.
For 2006, you have an HDHP with family coverage for you, your spouse, and two dependent children. The HDHP will pay benefits for any family members whose covered expenses exceed $2,100 (the embedded deductible) and will pay benefits for all family members after the family's covered expenses exceed $5,000 (the umbrella deductible). The maximum annual contribution limit is $5,000 (the least of $5,450, $5,000, or $8,400 ($2,100 x 4)).
Example 2.
Use the same facts as in Example 1, except the HDHP provides coverage only for you and your spouse. The maximum annual contribution limit is $4,200 (the least of $5,450, $5,000, or $4,200 ($2,100 x 2)).
A plan will not qualify as an HDHP if either the umbrella deductible or the embedded deductible is less than the minimum annual deductible ($2,100) for family coverage. If there is no umbrella deductible, the deductible for each family member multiplied by the number of family members cannot exceed the maximum annual deductible and other out-of-pocket expenses ($10,500) for family coverage.
