Coordination of Benefits in Health Insurance
Is It Legal to Have Two Health Insurance Plans?
Having two health insurance plans is legal and, in some cases, very beneficial. While most people have only one health insurance plan, some have multiple plans that provide coverage under certain conditions.
There are several scenarios in which you may have two health insurance plans. For example, if you are aged 26 or under and you have health insurance through your parents and they each have their own policy, you may be able to file under both when you obtain medical services. If you and your spouse both have employer-based health insurance, you may be covered by your plan and listed as a dependent on theirs. If you meet income requirements, you may be eligible to supplement your employer plan with Medicaid.
How Do Two Health Insurance Plans Work Together?
While it would be nice if you got double reimbursements for all your medical bills, that is not what happens when you have more than one health insurance policy. Instead, one plan is considered your primary health insurance, and the other is considered secondary coverage. Your primary health insurance covers services first up to the policy limits. After your primary health insurance has paid, your secondary insurance may cover some or all the remaining bills. Depending on your policy limits and the ability of the provider to “coordinate benefits”, you may still be responsible for some costs.
Does Carrying Two Health Insurance Plans Protect You from Out-of-Pocket Medical Expenses?
If you have two health insurance plans, you may still have to pay some medical costs. First of all, you may have to pay premiums and deductibles for both plans. You may also still owe money for co-pays and coinsurance. It is also important to remember that rules related to in-network and out-of-network health care providers still apply. Additionally, your plans may have different exclusions, meaning that even if a given service is covered by one of your plans, the other plan may not pay for it.
The Benefits and Drawbacks of Carrying Two Health Insurance Plans
The benefits of carrying two health insurance plans include:
- You do not have to worry about being uninsured or underinsured
- A way to maximize your benefits and potentially reduce out-of-pocket costs
- If plans are structured very differently from one another, you may be able to save a significant amount of money
The drawbacks of having two health insurance plans include:
- You may still have some out-of-pocket medical expenses
- Two plans can mean two sets of premiums and deductibles
- You may have to deal with two health insurance providers, which can be confusing and lead to costly mistakes
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What Is Coordination of Benefits in Health Insurance?
While many people have only one health insurance policy, some people have two. In these cases, coordination of benefits is the process the two health insurance companies use to determine which one covers services first.
What Is the Purpose of Coordination on Benefits?
Coordination of benefits ensures that a service is not covered twice, which could cause reimbursement amounts to be more than the cost of the actual service. This process helps to keep prescription drug costs and health insurance premiums affordable.
Examples of Coordination of Benefits
There are several scenarios in which someone may have more than one health insurance policy that covers them.
- A child is listed as a dependent on both parents’ employer-based health insurance policies
- An individual receives Medicare, Medicaid and is covered by their employer-based health insurance plan
- The individual has health insurance through their employer, but they are also listed as a dependent under their spouse’s employer-based health insurance plan
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How Does Coordination of Benefits Work?
The National Association of Insurance Commissioners establishes guidelines regarding coordination of benefits that many companies and state legislatures follow. The following bullet points are some of the key guidelines that may affect how medical services are covered if you have more than one health insurance plan.
♦ In most cases, if you have job-based health insurance along with a second policy, the job-based health insurance is your primary coverage and pays out for medical services first.
♦ If a child is covered by both parents’ job-based health insurance, the health insurance of the parent whose birthday comes first in the calendar year is the primary coverage.
♦ If someone has two health insurance plans and one of them is a continuation of coverage plan such as COBRA, the continuation of coverage is the secondary plan.
♦ If there is no clear rule about which health insurance plan is the primary, whichever plan the individual has had longest is typically designated as the primary payor.
How to Estimate Health Care Costs
There are two methods health insurance companies may use.
1. With the full coordination of benefits method, both health insurance companies calculate the claim payment as if no other payor is involved. The primary payor pays its normal portion, and then the secondary payor pays.
2. With the non-duplication coordination of benefits method, the primary payor covers its portion. If that is more than the secondary payor would have paid, then the secondary payor pays out nothing for the claim.
To estimate health care costs, refer to the secondary health insurance company’s coordination of benefits policy.
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