What Is Tertiary Insurance and How Does It Work?

Tertiary insurance refers to a third layer of coverage that becomes active after both primary and secondary insurance plans have paid their portion of a claim. This type of coverage typically applies when an individual has three or more active insurance policies. The term “tertiary” literally means “third,” indicating its position in the payment hierarchy. While often associated with health insurance, the concept can also apply to other forms of coverage, such as life insurance, where a tertiary beneficiary is designated to receive benefits if primary and secondary beneficiaries are no longer eligible. Its purpose is to help cover remaining costs not fully paid by the initial two insurers.

Understanding Multiple Insurance Coverages

When an individual has more than one insurance plan, a process called Coordination of Benefits (COB) determines the order in which each plan pays for services. The primary insurance plan is always the first to process a claim and pay its share of the expenses. This plan pays benefits as if no other coverage exists. The determination of the primary plan often depends on factors such as employment status, age, or specific rules set by the insurers.

After the primary insurer has processed the claim and paid its portion, any remaining balance may then be submitted to the secondary insurance plan. This secondary plan reviews the claim and may cover additional eligible costs, such as deductibles, co-payments, or co-insurance, up to its own policy limits.

Tertiary insurance comes into play only if a balance still remains after both the primary and secondary insurance plans have processed the claim and applied their benefits. This third plan acts as a final safety net, providing coverage for any outstanding eligible costs not covered by the first two insurers.

Scenarios Leading to Tertiary Coverage

Individuals may find themselves with tertiary insurance coverage due to various life circumstances, often involving combinations of employment, government programs, or family situations. One common scenario involves individuals eligible for Medicare or Medicaid who also maintain commercial health insurance, potentially through an employer or a spouse. For instance, a person might have commercial coverage as primary, Medicare as secondary, and a supplemental commercial plan as tertiary if the first two do not cover all costs.

Another situation arises when a person has coverage through their own employer, is also covered as a dependent under a spouse’s plan, and additionally holds retiree benefits from a former employer. In such cases, the individual’s employer plan is typically primary, the spouse’s plan secondary, and the retiree benefit plan could function as tertiary coverage.

Similarly, in divorce or separation situations, particularly concerning dependent children, COB rules can establish a tertiary layer. If a court order dictates health coverage, that parent’s plan is primary. If the custodial parent remarries, their new spouse’s plan might become secondary, making the non-custodial parent’s plan tertiary.

How Claims Are Processed with Tertiary Insurance

Claims involving tertiary insurance follow a specific sequence dictated by Coordination of Benefits (COB) rules. Healthcare providers first submit the claim to the primary insurance carrier. Once the primary insurer processes the claim and issues an Explanation of Benefits (EOB) detailing what was paid and any remaining patient responsibility, this EOB is forwarded to the secondary insurer.

The secondary insurer reviews the primary EOB and processes the claim according to its policy terms, potentially covering deductibles, co-insurance, or other remaining amounts. After the secondary insurer pays its portion and provides its EOB, any outstanding balance is submitted to the tertiary insurance plan. This claim typically requires both the primary and secondary EOBs to be attached, providing the tertiary insurer with a complete payment history.

Submitting tertiary claims can sometimes be a manual process. While electronic submission is becoming more common, some tertiary claims may still need to be filed on paper, accompanied by the EOBs from the prior two insurers. The tertiary insurer then determines its payment responsibility based on the remaining balance and its policy limits.