How does primary and secondary insurance work?

In a world where bigger is often better, does it make sense to supersize your medical coverage by carrying two health insurance plans?

Strange as it may sound, there are policyholders who have two health insurance plans rather than just one. For example, some seniors who are enrolled in Medicare also have a health insurance policy through an employer. Others may have coverage both through their own workplace and that of their spouse.

With dual health insurance plans, one is considered “primary” while the other is deemed “secondary.” In some situations, having two health insurance plans can reduce your out-of-pocket costs. But in other cases, the added premium payment and deductible might increase your overall health expenses and cause further complications.

David Mordo, former national legislative chair and current regional vice president for the National Association of Health Underwriters, however, says it is rare. “You don’t run across folks that have two separate health insurance policies,” he says.

However, that does not mean it never happens. Understanding your own health care needs is crucial to determining whether you can benefit from two health insurance plans, Mordo says.

“When we hear of circumstances where a couple or a person has two insurances, we really ask why,” he says. “We really ask them to dig down deep into ‘What are you paying in premium, as opposed to what you are getting in benefit?”

Can you have two health insurance plans?

Yes, you can have two health plans.

The most common example of carrying two health insurance plans is Medicare recipients, who also have a supplemental health insurance policy, Mordo says.

While that type of coverage is relatively common, other instances of dual health insurance plans are unusual, but do occur.

For example, it’s possible that a married couple could have two health insurance plans, even if each spouse is covered through a health insurance plan at their workplace.

You also might have two health insurance plans if you have health insurance through an employer, but also receive Medicaid or Medicare coverage. For example, some seniors may continue to work past the age of 65, in which case they can be covered by both Medicare and an employer-based plan.

“The reason why active employees stay on that employer plan is because of the prescription drug coverage,” Mordo says. “That’s a huge advantage.”

Or perhaps you are under the age of 26 and have group coverage both through an employer and your parents’ health insurance.

When you might have two insurance plans

• An injured worker who qualifies for worker’s compensation but also has his or her own insurance coverage.
• A military veteran who is covered by both Veterans Administration benefits and his or her own health plan.
• An active member of the military who is covered both by military coverage and his or her own health insurance.

Primary and secondary insurance rules

When you have two forms of health insurance coverage, your primary insurance pays the first portion of the claim up to your coverage limits. Your secondary insurance may pick up some or all of the remaining costs.

However, you still might be responsible for some cost-sharing. For example, it’s a mistake to think your secondary insurance will kick in and cover the deductible attached to your primary insurance. Instead, you likely will be responsible for covering the deductible.

You also may be responsible for copay and coinsurance fees.

Coordination of benefits

When you have primary and secondary health plans, the insurers use a framework to work together. That way, both health plans pay their fair share without paying more than 100% of the medical costs. This process is called coordination of benefits.

Coordination of benefits decides which plan pays first (the primary plan) and which pays second (the secondary plan).

In some cases, a state or the federal government may set up the COB regulations. Large employer group plans create their own COB rules, too.

Here’s how COB works when there’s a health insurance claim:

• It first goes to the primary plan. The insurer pays what it owes.
• If there’s money still left on the bill, it then goes to the secondary insurer, which picks up what it owes.
• After that, if there’s still money left on the bill, the member gets a bill for the remaining money.

What is the difference between primary and secondary health insurance?

When a member has double insurance, his or her individual circumstances determine which insurance is primary and which is secondary. Following are some examples of how this might work:

• A married couple — A wife has a health plan with her employer, but her husband’s health plan also covers her. In this case, the wife’s employer is the primary insurer and the spouse’s health plan is secondary.
• A child under 26 — The Affordable Care Act lets children stay on their parents’ health plan until they turn 26. That could result in a child having her own health plan through an employer while remaining on the family’s plan. In that case, the child’s health plan is primary and the parents’ plan is secondary.
• Parents have separate plans and a child is on both plans– In this situation, the so-called birthday rule applies. Whichever parent has the earlier birthday in a year is considered the primary health plan and the other spouse is secondary. It’s not which parent is older. Instead, it’s which one has the earliest birthday in a calendar year.
• Medicare and a private health plan – Typically, Medicare is considered primary if the worker is 65 or older and his or her employer has less than 20 employees. A private insurer is primary if the employer has 20 or more employees.

Primary insurance

The primary insurance payer is the insurance company responsible for paying the claim first.

How does primary insurance work?

When you receive health care services, the primary payer pays your medical bills up to the coverage limits. The secondary payer then reviews the remaining bill and picks up its portion.

Coordination of benefits rules determine which of your insurance companies is the primary payer.

Secondary insurance

The secondary health insurance payer covers bills that the primary insurance payer didn’t cover.

How does secondary insurance work?

After the primary insurer has paid its part of the insurance claim, the remainder of the claim moves on to the secondary insurer. The No. 2 insurer then pays its portion of the claim.

However, it is crucial to remember that the secondary insurance company may not pay the rest of your bills. You may be responsible for some health care costs.

Also, the primary and secondary insurance companies make sure they aren’t paying more than 100% of the overall bill. They do this through a process known as “coordination of benefits” that helps to make sure each company pays its own part of the claim without overlap.

For example, Jane is 66 and still works at a full-time job. She is enrolled in both Medicare and in her employer’s health insurance plan. Because she works for a bigger company, one with more than 20 employees, her employer-based plan is considered to be her primary insurer.

That means that if Jane has an operation, her primary insurer will get the claim first and pay out the portion that is its responsibility. After that, the claim will go to Medicare, which will pay out whatever remains up to Medicare’s responsibility.

Any portion of the bill not covered by the employer’s health insurance plan and Medicare would then be the patient’s responsibility.

Here is another example: Jim is a student who has coverage through his college and through his parents’ insurance plan. In this situation, the college plan is primary and would get the claim first. Whatever is left over from the claim then would move to his parents’ plan.

Primary insurance vs secondary insurance: Who pays first?

Coordination of benefits isn’t always standard. Plans can differ, so it’s vital to talk to your employer’s benefits department and health plan if you have two health plans.

That said, here are situations when you may have more than one health plan and which one would likely be the primary insurer and which would be secondary:

What are the pros and cons of having two health insurance plans?

There are both advantages and disadvantages to carrying two health insurance plans:

Pros:

• You may have more coverage options when you carry two plans, which means your costs could be reduced.
• Sometimes — as with having prescription drug coverage through an employer-based plan instead of more expensive drug coverage via Medicare — the savings can be significant.

Cons:

• You may have to pay premiums for two plans.
• The benefits of having two plans are usually — though not always — modest, and the cost of premiums may outweigh any benefits.
• Having two insurance plans can make the claims process more complicated, especially if you have disputes with one or both insurers.

Final thoughts

When you have both primary and secondary insurance, each plan pays a portion of your medical bills. Your primary insurer is the one who pays first – up to the coverage limits. The secondary insurer then pays any remaining costs.

It’s important to understand how your particular insurance plans work together in order to get the most coverage.

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