Jeffrey Wade
Having two medical insurance policies can offer several benefits, such as reducing out-of-pocket expenses and providing more comprehensive coverage. In the US, about 43 million people have multiple health plans, with common scenarios including employer-sponsored coverage and a spouse's plan or combining Medicare with a private policy. However, having dual coverage does not guarantee double benefits. Coordination of benefits (COB) rules determine how claims are paid, and the secondary plan only pays after the primary plan has reached its coverage limits. Additionally, managing dual coverage can be complex, and separate premiums and deductibles may apply. Ultimately, the decision to have two medical insurance policies depends on individual circumstances, preferences, and healthcare needs.
| Characteristics | Values |
|---|---|
| Legality | Having two medical insurance policies is perfectly legal |
| Commonness | About 43 million people in the US have more than one medical insurance plan, according to the US Census Bureau. That's about 13% of the population. |
| Primary and secondary insurance | One policy will be the primary plan, and the other will be the secondary health coverage. The primary plan covers medical expenses first, up to its coverage limits. The secondary plan kicks in after the primary insurance reaches its coverage limits. |
| Coordination of benefits (COB) | COB is the process that decides which insurance pays for a claim first. The health insurance companies, not the insured, decide which plan is primary and which is secondary. |
| Pros | More comprehensive coverage, greater protection from loss of coverage, reduced coverage gaps, more savings, broader coverage options, reduced out-of-pocket costs |
| Cons | More out-of-pocket costs, complex claim processing, reimbursement delays, higher expenses due to separate deductibles and premiums, coverage gaps can still exist |
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What You'll Learn
How primary and secondary insurance plans are decided
Having two health insurance plans is perfectly legal, but it is important to understand how they work together to get the most out of your coverage. When you have two health insurance policies, one is considered the primary payer, and the other is the secondary payer. The primary payer covers the first portion of the claim up to its coverage limits, and the secondary payer covers the rest of the cost if it is covered and necessary. However, you may still be responsible for some out-of-pocket costs, such as deductibles, copays, and coinsurance fees.
Determining which health plan is primary depends on the specifics of the situation. If you are covered under an employer-based plan, that is usually the primary plan. If you have Medicare and other health insurance, Medicare is typically the secondary payer. In the case of a child covered by both parents' insurance, the primary insurance is determined by "the birthday rule", where coverage comes from the parent whose birthday comes first in the calendar year.
It is important to understand the advantages and potential downsides of having two health insurance plans. Some benefits include more comprehensive coverage, greater protection from loss of coverage, and lower out-of-pocket costs. On the other hand, having two plans can lead to higher costs, as you may have to pay two premiums and two deductibles. Additionally, having dual coverage can make coordinating your policies correctly more challenging.
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Pros of dual coverage
Having dual medical insurance coverage can offer a range of benefits, also known as pros, to individuals and families. Here are some of the most common advantages:
More Comprehensive Coverage
Having multiple medical policies provides broader coverage and more benefits. This can be particularly useful for individuals with specific medical conditions or needs, such as fertility treatments or cancer therapies, that may be better covered by a separate, specialized insurance plan. With dual coverage, individuals can combine the strengths of two plans to access a wider range of healthcare services and providers. This ensures that they receive the best possible care for their unique circumstances.
Greater Financial Protection
Dual coverage can provide enhanced financial protection for individuals and families. By having two plans, out-of-pocket expenses can be reduced as the primary and secondary insurance plans work together to cover healthcare costs. This is especially beneficial for families facing significant medical expenses due to major illnesses, catastrophic injuries, or other large claims. Additionally, if an individual loses their job, dual coverage ensures they still have health insurance through their spouse's or parent's plan, providing uninterrupted benefits during challenging times.
Protection from Overlapping Coverage
While it is important to ensure that dual insurance plans complement each other, the Coordination of Benefits (COB) process ensures that payments do not overlap. The COB determines which plan is primary and which is secondary, preventing duplication of benefits. This means that individuals with dual coverage will not be reimbursed twice for the same medical expense, and their total coverage will not exceed 100% of their health expenses.
Spousal and Parental Coverage
Dual coverage is common among married couples, with many spouses opting for dual coverage through their respective employer-sponsored plans. This ensures that both partners have access to healthcare benefits and can provide coverage for their children as well. Young adults under the age of 26 can also benefit from dual coverage, as they can be included in both their employer's plan and their parent's policy, providing comprehensive protection during the early stages of their careers.
Supplemental Coverage for Medicare Recipients
Individuals receiving Medicare coverage from the federal government can supplement this insurance with a private plan. This is particularly relevant for retirees, as original Medicare doesn't cover eye exams or dental care. By purchasing supplemental coverage, such as Medicare Advantage, individuals can ensure that they have comprehensive health coverage that meets their specific needs.
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Cons of dual coverage
While having dual medical insurance coverage is perfectly legal, there are some disadvantages to consider before purchasing a second health insurance plan.
More Out-of-Pocket Costs
Even with dual coverage, the combined health insurance coverage cannot exceed 100% of health costs. 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.
Complex Claim Processing
Having two separate plans can make processing health insurance claims more challenging. This is especially true if you need to file an out-of-network claim with both of your insurance companies. The Coordination of Benefits (COB) model guidelines, developed by the National Association of Insurance Commissioners, determine which insurance pays for a claim first. However, the specific rules may vary depending on the state and insurance company.
Limited Benefits
If one of your plans provides comprehensive coverage, the second plan may have limited benefits that do not significantly enhance your overall healthcare coverage. In this case, having two plans may result in unnecessary premium expenses.
Reimbursement Delays
Having dual coverage does not necessarily mean you will be fully reimbursed twice for the same expense. For example, if you go to the doctor's office twice, you will not get reimbursed twice. Instead, a claim goes first to the primary insurance plan, which pays medical bills up to its coverage limits. It is only after the primary insurer covers its portion of your healthcare expenses that the secondary plan takes effect. The secondary plan may or may not cover the remaining cost depending on your coverage limits.
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Scenarios where dual coverage is beneficial
Having dual medical insurance coverage can be beneficial in a variety of scenarios, especially when an individual is covered by two medical insurance plans. Here are some common scenarios where dual coverage can be advantageous:
Scenario 1: Married couples with separate employer-sponsored health insurance plans
Many married individuals are eligible for health insurance through their employer and their spouse's employer. In this case, one plan can be designated as primary coverage, while the other serves as secondary insurance, covering additional costs like copays, deductibles, or coinsurance. This scenario ensures comprehensive coverage and can help reduce out-of-pocket expenses.
Scenario 2: Individuals with specific medical conditions or needs
If an individual has a specific medical condition or need, such as fertility treatments or cancer therapies, they may benefit from having a separate, specialized insurance plan. This specialized coverage can provide better protection for these specific situations, which may not be adequately covered by a standard health insurance plan.
Scenario 3: Individuals with Medicare or Medicaid supplementation
Americans aged 65 and older receive Medicare coverage from the federal government. They can supplement this insurance with a private plan or Medicaid if they qualify. Additionally, individuals who qualify for Medicaid can have it as their primary coverage while maintaining their own insurance plan as secondary coverage. This supplementation ensures that individuals have comprehensive coverage and can access a broader range of healthcare services.
Scenario 4: Students with university medical plans and parental coverage
Students below the age of 26 who have a university medical plan may still be covered by their parents' health policy. In this case, dual coverage can provide enhanced protection, ensuring that any gaps in one plan are covered by the other. It is also applicable in cases of divorced parents, where the child is covered by separate insurance policies from each parent.
Scenario 5: Individuals with high medical expenses
If an individual frequently incurs high medical expenses or expects significant healthcare costs, dual coverage can help reduce out-of-pocket costs. The secondary plan can cover costs that the primary plan doesn't, potentially resulting in significant savings. Additionally, having dual coverage may provide access to a wider range of doctors, hospitals, and specialists.
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How dual coverage works
Having dual medical insurance coverage is legal and can be beneficial in certain situations. However, it is important to understand how dual coverage works to take advantage of the benefits and avoid potential challenges.
When an individual has two health insurance plans, one policy is designated as the primary plan, and the other becomes the secondary health coverage. The primary plan acts as the main insurance policy and covers the individual's medical care first. This includes routine doctor visits, prescription drugs, and other medical expenses up to its coverage limits. With a primary plan, the insured may be responsible for cost-sharing fees, such as copayments or coinsurance, as well as an annual deductible and out-of-pocket maximum.
The secondary insurance plan comes into effect after the primary insurance reaches its coverage limits. It covers any remaining costs after the primary insurer has paid its portion of the healthcare expenses, depending on its coverage limits. For example, if a specialist visit costs $400 and the primary plan covers 70% ($280), the secondary plan may cover part of or the remaining $120, depending on its terms.
Having dual coverage can provide several benefits, including enhanced coverage options, reduced out-of-pocket costs, and continuous coverage. With two plans, individuals can access a broader range of healthcare services and providers, especially if one plan offers better coverage for specific treatments or medications. Additionally, dual coverage can help reduce out-of-pocket expenses, especially if the two plans cover different areas of medical needs. Furthermore, having a secondary plan ensures continuous coverage in case of job loss or other life changes that may affect the primary plan.
However, dual coverage also has its challenges. Individuals with two plans may still have leftover out-of-pocket medical costs after both insurances have paid their shares. Additionally, managing dual coverage can be complex, especially when it comes to coordinating benefits and understanding how claims are paid. It is important to carefully consider one's current and future medical needs and compare the costs and benefits of different plans to determine if dual coverage is the right choice.
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Frequently asked questions
Yes, it is legal to have two medical insurance policies, and many people do. According to the US Census Bureau, about 43 million people (13%) had multiple health plans in 2021.
Having two medical insurance policies can help to reduce out-of-pocket expenses, fill gaps in primary coverage, and provide access to a broader network of healthcare providers. It can also offer greater protection from loss of coverage.
Yes, there can be downsides to having two medical insurance policies. You may have two separate premium and deductible responsibilities, which can add up and outweigh the benefits. The coordination of benefits process can also be complicated and time-consuming, leading to reimbursement delays.
One plan is designated as the primary insurance, and the other as the secondary insurance. The primary insurance plan processes the insurance claim first and covers the bill up to its coverage limits. If the primary insurance is unable to cover the entire claim, the secondary insurance may cover all or part of the remaining costs.
Unfortunately, you cannot choose this for yourself. The insurance companies decide which plan is primary and which is secondary, following Coordination of Benefits (COB) model guidelines developed by the National Association of Insurance Commissioners. State laws and insurance policies also play a role in this determination.
