Alyssa Lane
Having two health insurance plans can be beneficial for many reasons, and about 43 million people in the US have multiple health plans. However, it is essential to understand how your plans work together to get the most out of them. You must notify both insurance companies about the existence of separate health insurance plans and inform your doctors and other medical providers about your dual coverage. One plan will be designated as primary insurance, while the other will be secondary, and the secondary plan takes effect after the primary has paid.
| Characteristics | Values |
|---|---|
| Legality of dual coverage | Legal |
| Coordination of benefits | One plan is designated as primary insurance, the other as secondary |
| Total coverage | Cannot exceed 100% of health costs |
| Out-of-pocket costs | May still be responsible for leftover costs |
| Multiple types of secondary insurance | Vision, dental, disability, life insurance, accident insurance, hospital care, and Medicare supplement insurance |
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What You'll Learn
Understanding primary and secondary insurance
Understanding the difference between primary and secondary insurance is essential if you have access to two medical insurance plans.
Primary insurance is the health insurance plan that covers you as an employee, subscriber, or member. It is typically the first to be billed when you receive healthcare. For example, health insurance provided by your employer is usually considered your primary insurance.
Secondary insurance is a health insurance plan that covers you in addition to your primary insurance. It is billed after your primary insurance plan has been exhausted and may help cover any remaining healthcare costs. For instance, if you are already covered by your employer and decide to enrol in your spouse's health insurance plan, that coverage becomes your secondary insurance.
It is important to note that having two health insurance plans does not guarantee that all your medical expenses will be covered. Both primary and secondary insurance have limitations, such as coverage limits, exclusions, deductibles, and copayments. These vary depending on the specific policies and providers. Therefore, it is essential to understand the terms of both insurance policies to maximize coverage and minimize out-of-pocket expenses.
When you have dual health insurance, the primary payer handles the first portion of the claim, paying up to its maximum limit, and then passes the remaining balance to the secondary insurer for review. The secondary payer then pays any remaining costs up to its coverage limits. This process ensures that both health plans pay their fair share without exceeding 100% of the medical costs. This coordination of benefits (COB) can be state-regulated or internally regulated by large businesses.
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Pros and cons of dual coverage
Pros of dual medical coverage
- Dual health insurance coverage can provide more extensive benefits and reduce out-of-pocket costs for medical care.
- Dual coverage offers more comprehensive coverage and greater protection from loss of coverage. For instance, if you have coverage through your parents' or spouse's plan and a company plan, you don't have to worry about losing health insurance if you lose your job.
- Dual coverage can be beneficial if your plans complement each other, if they are low-cost, or if one is free.
- Dual coverage can help with medical bills since two plans can cover healthcare costs.
Cons of dual medical coverage
- Managing dual coverage can be complex, especially when it comes to coordinating benefits between two plans and carriers.
- Dual coverage does not mean that you will be fully covered twice. For example, if you go to the doctor twice, you won't get reimbursed twice.
- Dual coverage can lead to higher out-of-pocket costs. You will still be responsible for both plans' monthly premiums and applicable cost-sharing under plan rules.
- Paying premiums for two plans can be expensive, especially if the secondary coverage provides little extra value.
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Coordination of benefits (COB)
COB allows insurers to determine which insurance company will be the primary payer and which will be the secondary payer if you have two separate plans. The primary insurance is the main insurance policy that will cover your medical care first. The secondary insurance plan will pay up to 100% of the total cost of healthcare, as long as it is covered under the plan. Neither plan will pay more than 100% of the total healthcare costs, so you won't get double the benefits if you have multiple health insurance plans. The primary insurance is typically decided by the "birthday rule", where the primary coverage is from the parent whose birthday comes first in the calendar year.
COB can impact out-of-pocket costs by coordinating coverage between multiple insurance plans, potentially reducing the amount you need to pay. It is important to understand the difference between primary and secondary insurance before securing two health plans. After the secondary insurance has paid its share, you may be responsible for any remaining amount that wasn't covered.
There are a few different types of COB coverages:
- Carve out: The amount your primary plan paid is deducted from how much your primary plan can pay.
- Non-duplication: If the primary health insurance plan paid an amount that is equal to or more than what the secondary plan would pay, the secondary plan does not pay out at all.
- Traditional: Your health insurance plans combined can cover up to 100% of your medical expenses.
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How to manage two plans
Having two health insurance plans can be beneficial for many reasons, and it is perfectly legal. However, it is important to understand how to manage them effectively to get the most out of your coverage. Here are some key points to consider when managing two health insurance plans:
Understanding Primary and Secondary Coverage:
One of your health insurance plans will be designated as your primary coverage, while the other will be your secondary coverage. Your primary plan is your main insurance policy and will be the first to receive and pay your claim according to your policy. The secondary plan only takes effect when your primary plan has paid for your medical expenses, and it may cover some or all of the remaining costs. You don't get to choose which plan is primary and which is secondary; this is determined by coordination of benefits (COB) rules.
Coordination of Benefits (COB):
COB is a crucial factor when managing two health insurance plans. It is the process that decides which insurance pays for a claim first and helps prevent duplication of benefits. There are COB rules in place, such as the birthday rule for children covered by both parents' insurance, that determine which plan is primary and which is secondary. Understanding COB ensures that you know how your plans work together and helps you avoid confusion when filing claims.
Maximizing Benefits and Coverage:
Having two health insurance plans can provide more comprehensive coverage and benefits. Consider choosing a secondary plan that targets an area of coverage you require the most, such as vision, dental, or hospital care. This way, you can reduce coverage gaps and potentially lower your out-of-pocket expenses by having one policy cover one area while the other covers a different area.
Managing Costs:
Even with two plans, you may still have out-of-pocket expenses. It is important to consider the potential increase in costs associated with having multiple plans, such as monthly premiums and cost-sharing. Compare the costs of different plans to find the most cost-effective options that maximize your coverage without incurring excessive insurance costs.
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Common dual-coverage situations
Dual health insurance coverage is more common than many people realize, and it often happens due to life circumstances rather than planning. Here are some of the most common situations where someone might have two health insurance plans:
Married couples
Many married individuals are eligible for health insurance through their own employer and their spouse's employer. In this case, one plan is designated as primary coverage, while the other acts as secondary insurance, covering additional costs like copays or deductibles.
Divorced parents with children under 26
If you are under 26 and have divorced parents, you may be listed as a dependent on both of your parents' separate insurance plans. In this case, the "birthday rule" applies, and the parent whose birthday falls earlier in the calendar year is considered the primary insurer.
Medicare and a private health plan
Some people on Medicare also purchase a private insurance plan, such as a Medicare Supplement (Medigap) plan or Medicare Advantage plan, to help cover costs like copayments, coinsurance, or services not fully covered by Medicare. Typically, Medicare is considered primary if the worker is 65 or older and their employer has fewer than 20 employees. A private insurer is primary if the employer has 20 or more employees.
Students with coverage through college and parents' insurance plan
In this situation, the college plan is primary and would receive the claim first. Whatever is left over from the claim would then be sent to the parents' plan.
It's important to note that having two health insurance plans doesn't mean you will get twice the benefits. The most you can receive from the combined health insurance policies is 100% of your medical expenses. Additionally, dual coverage can introduce complexities, such as higher premiums, complicated filing procedures, and potential claims delays.
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Frequently asked questions
Yes, you can have two health insurance plans, and it's perfectly legal. However, you must follow coordination rules and designate one as your primary insurance and the other as secondary healthcare coverage.
You don't get to choose which plan is your primary and which is your secondary. The health insurance companies decide which are considered the primary and secondary plans. If you are a child with two parents who both cover you, the parent whose birthday comes first in the calendar year will be your primary insurance.
First, notify both insurance companies about the existence of the other plan. Inform your doctors and other medical providers about your dual coverage. After the primary claim is processed, you’ll receive an explanation of benefits (EOB). File a claim with the secondary plan and provide them with a copy of the EOB.
There are several benefits to having two health insurance plans. You may get access to more coverage and benefits if your two plans are complementary. You can reduce coverage gaps, as if one of your policies lapses, you will still have coverage. You can also reduce out-of-pocket expenses, as one policy may cover one area while another policy covers the other.
Having two health insurance plans can make processing claims more complicated and time-consuming. You will still be responsible for both plans' monthly premiums and applicable cost-sharing under plan rules. These extra out-of-pocket costs can add up over time.
