Health insurance can be complex, especially when a person has more than one insurance plan. Understanding which plan pays first and how the claims process works can help policyholders maximize their benefits and reduce out-of-pocket expenses. This article explains how to determine primary and secondary insurance, including the rules that govern coordination of benefits.
Understanding Primary and Secondary Insurance
When a person is covered by two or more health insurance policies, coordination of benefits (COB) determines the order in which the insurers pay claims. The insurance plan that pays first is called the primary insurance, while the plan that pays after the primary insurance is called the secondary insurance.
The primary insurance covers medical costs first, up to its policy limits. The secondary insurance then covers any remaining eligible expenses, depending on its coverage terms. In some cases, the secondary insurance may cover costs that the primary insurance does not, such as co-pays or deductibles.
Why Someone Might Have Two Insurance Policies
There are several reasons why a person may have two health insurance policies:
1. Employer and Spouse Coverage
A person may have health insurance through their own employer while also being covered under a spouse’s insurance plan.
2. Medicare and Private Insurance
A person who qualifies for Medicare may still have coverage through an employer, retiree plan, or Medicaid.
3. Parents’ Insurance Plans
A child under the age of 26 may be covered by both parents’ health insurance plans.
4. Workers’ Compensation and Health Insurance
If an injury occurs at work, workers’ compensation may provide coverage, while personal health insurance may serve as secondary coverage.
5. Auto Insurance and Health Insurance
Medical expenses from an auto accident may be covered by auto insurance, while health insurance may serve as secondary coverage.
Determining Which Insurance Is Primary
The rules for determining which insurance is primary depend on several factors, including federal and state regulations, insurance contracts, and employer policies. Here are the key rules that determine primary insurance:
1. The Active Employee Rule
If a person has insurance through their own employer and is also covered under a spouse’s plan, their employer’s insurance is the primary coverage. The spouse’s insurance is secondary.
Example:
John has health insurance through his employer.
His wife, Sarah, also covers him under her employer’s health insurance plan.
John’s employer-provided insurance is primary, while Sarah’s insurance is secondary.
2. The Birthday Rule (For Dependent Children)
When a child is covered by both parents’ insurance plans, the parent whose birthday falls earlier in the calendar year has the primary insurance.
Example:
A child is covered under both parents’ health insurance.
The mother’s birthday is in March, and the father’s birthday is in September.
The mother’s insurance is primary, and the father’s insurance is secondary.
If both parents have the same birthday, the plan that has been in effect longer is considered primary.
3. The Longer Coverage Rule
If a person has two employer-sponsored plans, the plan they have had for a longer time is usually considered primary.
4. Medicare Rules
Medicare follows specific rules to determine whether it is primary or secondary:
If the individual is employed by a company with 20 or more employees, employer-sponsored insurance is primary, and Medicare is secondary.
If the individual is employed by a company with fewer than 20 employees, Medicare is primary, and the employer-sponsored plan is secondary.
If the individual has retiree health benefits, Medicare is primary, and the retiree plan is secondary.
5. Medicaid Rules
Medicaid is always the payer of last resort. This means that if a person has Medicaid and any other insurance, the other insurance is primary, and Medicaid is secondary.
6. Auto and Workers’ Compensation Insurance Rules
If an injury occurs in a car accident, auto insurance medical coverage pays first, followed by health insurance.
If an injury occurs at work, workers’ compensation insurance pays first, followed by health insurance.
How Secondary Insurance Works
Once primary insurance has paid its share of a medical claim, secondary insurance can cover some or all of the remaining costs. Here’s how secondary insurance works:
1. Covers Deductibles and Co-Payments
Secondary insurance can cover out-of-pocket costs, such as co-pays, deductibles, and coinsurance.
Example:
A person has a $1,000 medical bill.
The primary insurance pays 80% ($800), leaving a $200 balance.
The secondary insurance may cover the remaining $200, depending on the policy.
2. Covers Services Not Paid by Primary Insurance
If the primary insurance does not cover a certain service, the secondary insurance may pay for it. However, it depends on whether the secondary insurance policy includes that service.
Example:
A person needs physical therapy.
The primary insurance does not cover the therapy.
The secondary insurance does cover it, so it pays for the service.
3. No Duplicate Payments
Secondary insurance only covers what the primary insurance does not. It does not pay twice for the same medical service.
How to File Claims with Two Insurance Plans
To ensure smooth claims processing, follow these steps when filing insurance claims:
1. Inform Both Insurers
Notify both insurance companies about dual coverage. Provide them with each other’s information so they can coordinate payments.
2. Show Both Insurance Cards at Medical Visits
When receiving medical care, present both primary and secondary insurance cards. The healthcare provider will bill the primary insurance first.
3. Wait for the Primary Insurance Payment
Before the secondary insurance pays, the primary insurance must process the claim. The secondary insurance will then receive an Explanation of Benefits (EOB) to determine how much it needs to cover.
4. Submit a Claim to Secondary Insurance
If the medical provider does not automatically bill the secondary insurance, the policyholder may need to submit the claim manually. This requires sending the primary insurance’s EOB along with the medical bill to the secondary insurer.
Common Challenges and How to Solve Them
1. Denied Secondary Claims
If a secondary insurance claim is denied, check the following:
Ensure that the claim was first processed by the primary insurance.
Verify that the service is covered by the secondary insurance.
Contact the insurance provider for clarification.
2. Coordination of Benefits Delays
Some insurers may take time to process claims due to coordination of benefits issues. To speed up the process:
Make sure both insurers have up-to-date coordination of benefits information.
Follow up with the insurance providers regularly.
3. Unexpected Out-of-Pocket Costs
Even with secondary insurance, some medical costs may still be out-of-pocket. This can happen if:
The secondary insurance has a deductible that has not been met.
The secondary insurance does not cover a specific service.
The combined payments from both insurers do not cover 100% of the bill.
Conclusion
Determining primary and secondary insurance is essential for managing healthcare costs effectively. By understanding coordination of benefits rules, policyholders can ensure that their medical expenses are covered efficiently. Reviewing insurance policies, informing insurers of dual coverage, and following proper claims procedures can help avoid billing complications. With the right approach, individuals can maximize their benefits and reduce financial burdens.
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