What Is Secondary Insurance and How Does It Work?

Having more than one health insurance policy can offer additional financial protection and broader coverage for medical expenses. While most individuals rely on a single health plan, certain situations allow or necessitate multiple coverages. When more than one plan is in effect, they work together to cover healthcare costs, providing a comprehensive safety net. This layered approach helps manage unexpected medical bills and reduce individual financial responsibility.

Defining Secondary Insurance

Secondary insurance refers to a health insurance policy that provides coverage after a primary insurance plan has paid its share of medical costs. Its main purpose is to reduce a policyholder’s out-of-pocket expenses, such as deductibles, copayments, and coinsurance, that the primary plan did not cover. Secondary insurance complements the primary policy, acting as a second layer of financial protection.

Claims are always submitted to the primary insurer first. After the primary insurer has paid its portion, any remaining eligible balance can then be submitted to the secondary insurance plan. The secondary plan then evaluates the claim based on its own policy terms and may cover part or all of the remaining costs, up to its coverage limits. This arrangement ensures that the policyholder receives the maximum possible coverage from both plans, potentially minimizing their personal financial outlay for healthcare services.

How Benefits are Coordinated

When an individual is covered by two health insurance plans, the process of determining which plan pays first and how remaining costs are handled is known as Coordination of Benefits (COB). This system is designed to prevent duplicate payments for the same medical services and to ensure that the total reimbursement does not exceed the actual cost of care. Insurance companies utilize specific rules to establish the payment order, identifying one plan as primary and the other as secondary.

For example, if a medical procedure costs $1,000 and the primary insurance covers $700, the secondary insurance would then consider the remaining $300. The secondary plan might cover a portion or all of that remaining $300, depending on its specific benefits, leaving the patient responsible for any uncovered amount.

Common Scenarios for Secondary Coverage

Several common situations lead individuals to have secondary health insurance coverage.

Employer-Sponsored Plans

One frequent scenario involves individuals covered by two employer-sponsored plans, such as when both spouses have health insurance through their respective jobs and one spouse is covered as a dependent on the other’s plan. In such cases, an individual’s own employer plan is typically primary, and their spouse’s plan acts as secondary. For children covered by both parents’ plans, the “birthday rule” often applies, where the plan of the parent whose birthday falls earlier in the calendar year is designated as primary.

Medicare Beneficiaries

Another prevalent situation involves Medicare beneficiaries who also have other forms of coverage. For instance, a person with Original Medicare might purchase a Medigap (Medicare Supplement) policy, which acts as secondary insurance to help cover costs like deductibles, copayments, and coinsurance that Original Medicare does not fully pay. If an individual has Medicare and is still working, their employer’s health plan may be primary or secondary depending on the employer’s size; for employers with 20 or more employees, the employer plan is usually primary and Medicare is secondary.

COBRA Continuation Coverage

Individuals who elect COBRA continuation coverage after leaving a job might also have secondary insurance if they enroll in a new employer’s plan or another policy. In this case, the new plan would typically be primary, and COBRA would be secondary.

Supplemental Health Plans

Lastly, many people opt for supplemental health plans, such as vision, dental, or accident insurance, in addition to their major medical plan. These supplemental plans are considered secondary and provide coverage for specific services or events that the primary medical plan may not cover, or they can offer cash benefits to help with out-of-pocket medical costs.