What Is the Difference Between Primary and Secondary Insurance?
Demystify primary and secondary health insurance. Learn how multiple plans coordinate benefits to cover your healthcare expenses effectively.
Health insurance plays an important role in managing the high costs of medical care. It provides financial support, helping individuals and families access treatments without facing out-of-pocket expenses. Understanding health coverage helps consumers make informed decisions.
Understanding Primary Coverage
Primary insurance is the health plan that covers medical expenses first. It is the first policy to be billed when healthcare services are received, paying according to its terms, including deductibles, copayments, and coinsurance. This coverage serves as primary protection against healthcare costs.
Primary insurance is determined by how coverage was obtained. For many individuals, an employer-sponsored health plan is primary coverage. Other common sources include individual health insurance plans purchased directly or through an ACA marketplace, or government programs like Medicare or Medicaid. The primary insured individual is the main policyholder responsible for premiums and coverage decisions, extending coverage to dependents.
Understanding Secondary Coverage
Secondary insurance is an additional health plan that supplements primary insurance. This coverage comes into play after the primary insurance has processed a claim and paid its share. Its purpose is to help cover remaining eligible costs, such as deductibles, copayments, or coinsurance, not fully covered by the primary plan.
Individuals obtain secondary insurance. A common scenario involves coverage under a spouse’s employer-sponsored plan, while maintaining their own primary insurance. Medicare supplemental plans, known as Medigap, are another type of secondary coverage for Medicare beneficiaries, assisting with deductibles and copayments. College students might have their own student health plan as primary, with a parent’s plan as secondary. Supplemental policies for vision, dental, or accidental injury are also secondary insurance, filling gaps not covered by primary medical plans.
How Multiple Plans Work Together
When an individual has more than one health insurance plan, the process of determining which plan pays first and how payments are handled is called Coordination of Benefits (COB). COB rules prevent overpayment by ensuring that the combined benefits from all plans do not exceed the medical service’s full cost. The primary plan always processes the claim first, paying its portion based on its coverage limits and terms.
After the primary insurer has paid, the remaining eligible balance is submitted to the secondary insurance. The secondary plan reviews the claim, accounting for primary plan payments, and pays its share according to its own policy terms. For dependent children covered by both parents’ plans, the “birthday rule” dictates primary status: the plan of the parent whose birthday falls earlier in the calendar year is primary, regardless of age. If both parents share the same birthday, the plan with longer coverage becomes primary.
Practical Examples of Dual Coverage
Dual health coverage is common, illustrating how primary and secondary plans interact. For instance, a person covered by their employer’s health plan has that plan as primary. If they are also covered as a dependent under their spouse’s employer plan, the spouse’s plan serves as secondary coverage. This arrangement can help reduce out-of-pocket expenses by having the secondary plan cover costs like deductibles or copayments not fully paid by the primary plan.
Another scenario involves individuals eligible for Medicare due to age or disability. If they are still actively working and covered by an employer’s group health plan, the employer’s plan is primary if the employer has 20 or more employees, with Medicare as secondary. Conversely, if the employer has fewer than 20 employees, Medicare becomes the primary payer. For students, their university-sponsored health plan is primary, while their parent’s plan, under which they may remain covered until age 26, would be secondary. These examples demonstrate how COB rules determine the order of payment, managing healthcare costs.