Is Having Two Health Insurance Plans a Bad Idea?

Having two health insurance plans means an individual is covered by more than one health policy. This situation is common for many people. Understanding how these multiple plans interact is important for managing healthcare needs effectively.

Coordination of Benefits Explained

Coordination of Benefits (COB) is the process health insurance companies use to determine which plan pays first when an individual has more than one health insurance policy. This mechanism ensures benefits from multiple plans are coordinated to prevent overpayment. The primary insurer processes the claim according to its terms and conditions as if no other coverage exists. After the primary plan pays its benefits, the remaining eligible balance may be submitted to the secondary insurer. The secondary plan may pay for services not fully covered by the primary plan, up to its allowable amount.

Rules are in place to determine which plan is primary. One common rule for children covered by both parents’ plans is the “birthday rule.” Under this rule, the plan of the parent whose birthday falls earlier in the calendar year is considered the primary plan. Other rules include an active employment plan being primary over a retiree plan, or a subscriber’s plan being primary over a dependent’s. The goal of COB rules is to establish a clear order of payment responsibilities among multiple insurers.

Financial Impact on Healthcare Costs

Multiple health insurance plans can significantly affect out-of-pocket expenses for medical care. Through the Coordination of Benefits process, the secondary plan may cover costs such as deductibles, copayments, and coinsurance not fully paid by the primary plan. This can lead to a lower financial responsibility for the individual.

While dual coverage can reduce overall spending, it does not mean all medical costs will be completely covered, nor does it allow a policyholder to profit from claims. Each plan has its own annual out-of-pocket maximum, which applies per plan rather than combining across both. Individuals remain responsible for some portion of their healthcare costs, even with two plans.

This arrangement helps manage the financial burden of healthcare services by distributing the cost across two insurers. For instance, if the primary plan covers 80% of an allowed charge, the secondary plan might apply its benefits to the remaining 20% or other patient responsibilities. This can result in the patient paying less out of pocket than they would with only one plan.

Common Scenarios for Dual Coverage

Individuals often have more than one health insurance plan due to various life circumstances. One common scenario is spousal coverage, where both partners are employed and each is covered by their employer’s health plan, while also being listed as a dependent on the other spouse’s plan. Children are often covered by both parents’ health insurance plans.

Another situation involves individuals eligible for Medicare who also maintain other health coverage, such as through a current employer or retiree benefits. Some individuals might also have both Medicare and Medicaid, with Medicaid often acting as the payer of last resort after Medicare.

During employment transition, an individual might maintain COBRA continuation coverage from a previous employer while enrolling in a new employer’s health plan. In specific circumstances, individuals may also qualify for both Medicaid and a private health insurance plan, where Medicaid can supplement the private coverage.