There are two ways individual and family deductibles can work:
Individual Deductible: The individual deductible is counted separately for each family member. Once an individual's covered medical spending has reached the individual deductible amount, the health insurance company starts paying its share for subsequent, covered medical expenses for that family member.
Family Deductible: Once the family's combined, covered medical spending has met the family deductible amount, the insurance company starts paying its share for subsequent, covered medical expenses for all family members. In other words, insurance starts paying its share for whichever deductible is met first¿either individual the entire family.
Here's an example of a four-person family that has a health plan with a $2,000 individual deductible and a $4,000 family deductible.
The father has a $3,000 medical bill. This means he's met the $2,000 individual deductible amount, so the insurance company will help pay for the remaining $1,000 of that bill and any other covered medical services for him during the year.
Now the mother has a $1,000 medical bill and the son has a $500 medical bill. They are still $500 short of the family deductible. They would pay their entire bills out of their pockets because they have not reached their individual deductibles.
Then, say the daughter had a $1,000 medical bill. This means that as a group, they have now met the family deductible. The first $500 would go toward the daughter's individual deductible, and the insurance company would help pay the other $500. Insurance would also cover any subsequent covered medical spending for the entire family since the $4,000 family deductible has now been met.
Here's how it broke down:
Father's $2,000: He meets his individual deductible (and $2,000 goes toward family deductible)
Mother's $1,000: Goes to mother's individual deductible (and $1,000 toward family deductible)
Son's $500: Goes to son's individual deductible (and $500 toward family deductible)
Daughter's $1,000: $500 goes to daughter's individual deductible (and $500 toward family deductible.)
= $4,000 family deductible met
The family deductible is designed to protect families from the financial risk of multiple family members having a lot of medical bills in the same year. It sets a limit to how much up-front financial risk your family is exposed to, regardless of family size.