How Does Double Health Insurance Work?
Learn the essential process of managing two health insurance plans, understanding how they interact to optimize coverage and reduce your healthcare expenses.
Having more than one health insurance plan, or dual coverage, means an individual is covered by two distinct policies. The plans work together to cover healthcare costs, rather than simply doubling benefits. Individuals often have dual coverage through common scenarios. These include being covered by their own employer’s plan and a spouse’s plan, a child covered by both parents’ plans, or a person having Medicare alongside a supplemental private or employer-sponsored plan. Two health plans aim to reduce the financial burden of healthcare expenses, especially out-of-pocket costs.
Understanding Coordination of Benefits
Coordination of Benefits (COB) is the process health insurance plans use to determine which plan pays first when an individual has coverage under more than one policy. This process ensures total payments do not exceed 100% of allowed medical expenses. COB prevents overpayment and fraud, ensuring healthcare services are not paid for twice.
The fundamental principle of COB is that one plan is designated as the “primary payer” and pays first, while the other is the “secondary payer” and processes the claim after the primary plan. COB rules apply to common healthcare expenses such as doctor visits, hospital stays, and prescription medications. These rules are set by organizations like the National Association of Insurance Commissioners (NAIC) and adopted by states to provide consistency in handling dual coverage claims.
Determining Primary and Secondary Coverage
Insurance companies follow specific rules to determine which plan is primary and which is secondary. For children covered by both parents’ plans, the “Birthday Rule” applies. The plan of the parent whose birthday falls earlier in the calendar year (month and day) is primary. If both parents share the same birthday, the plan that has covered the parent for a longer period becomes primary.
When an individual has a plan from active employment and another from a retired status or COBRA, the active employment plan is primary. For an individual covered by their own employer-sponsored plan and a spouse’s plan, their own plan is primary for their claims. The spouse’s plan then serves as the secondary coverage.
Medicare’s role in dual coverage depends on the other insurance. If an individual has Medicare and an employer-sponsored plan, Medicare is secondary if the employer has 20 or more employees. If the employer has fewer than 20 employees, Medicare is primary. Medicaid almost always functions as the payer of last resort, meaning it pays after all other insurance plans have processed the claim.
Processing Claims with Dual Coverage
When an individual has dual health insurance, the healthcare provider initiates the claims process by submitting the claim to the primary insurance company. The primary insurer processes the claim according to its policy terms and issues an Explanation of Benefits (EOB). This EOB details covered services, the amount paid by the primary plan, and any remaining balance.
Following the primary insurer’s payment and EOB issuance, the claim and primary EOB are submitted to the secondary insurance company. The secondary insurer reviews the claim and EOB to determine its payment responsibility. The secondary plan then pays for services based on its own policy rules, often covering some or all of the balance that remained after the primary plan’s payment. Any remaining balance after both plans have processed the claim becomes the patient’s responsibility.
Financial Aspects of Dual Coverage
Dual health insurance can significantly impact a policyholder’s financial responsibility. The secondary plan may contribute towards the primary plan’s deductible, helping to meet that financial threshold more quickly. The secondary plan can reduce the amount the patient owes toward the primary’s deductible.
The secondary plan often covers some or all of the copayments and coinsurance amounts the primary plan did not cover. This reduces the patient’s out-of-pocket expenses. Two plans can also contribute to a lower overall out-of-pocket maximum, as combined benefits cover expenses that might otherwise fall entirely to the patient.
Maintaining two health insurance plans involves paying two sets of premiums. The cost of these premiums should be weighed against potential out-of-pocket savings to determine the overall financial benefit.