You may already know this, but you are entitled to have health insurance coverage under more than one plan. In fact, you are entitled to have a healthcare plan with more than one insurance company. When you have more than one plan, you will have primary insurance and secondary or supplementary insurance.
Your various insurance plans do not work together to provide you with double the benefits. Rather, the insurance companies have a developed system called coordination of benefits. This arrangement provides a method for determining which company pays the different expenses you may incur through doctor and hospital visits. While your primary health insurance is the first to receive a medical claim, you may not have coverage for all lab work and treatments. This is when your secondary or supplemental insurance will help to pay for the rest of the costs.
It can be confusing to distinguish between each type of insurance plan and how they work in coordination with one another. This article intends to explain these differences.
Types of Insurance
Primary Health Insurance: If you have more than one healthcare plan, one plan will be designated as the primary. Usually, this is the insurance coverage that you have through your employer. Even if your spouse has more comprehensive insurance through their employer, yours will still be designated as your primary health coverage. The primary is the insurance that pays its portion of your medical claim first.
Secondary Health Insurance: Your secondary healthcare plan is the insurance that pays the rest of your medical claim. The claim is submitted first to your primary and that plan pays out the maximum amount you are allowed. Then, your secondary helps to cover the rest. For example, if you have a $6,000 surgery to remove your appendix and your primary will only cover 80% (or $4,800), your secondary insurance will help to cover the remaining $1,200.
Supplemental Health Insurance: Supplemental health insurance is slightly different than primary or secondary plans. It still works in coordination with your benefits, but is purchased on your own as extra insurance. Often, people purchase a supplemental policy to cover aspects of healthcare that were left out of your primary plan, like dental and vision care.
Generally, this type of coverage helps to pay for the deductibles, copayments, and/or coinsurance of a medical claim. Just like secondary insurance, it does not replace your primary insurance or double your benefits. Rather, it supplements those out-of-pocket costs you may incur.
One of the greatest advantages to having more than one plan is extended coverage. For example, if you submit a medical claim to your primary care insurance and only a portion of it was covered, you can then submit the claim to your secondary insurance. Your primary may not cover certain tests at the hospital or doctor’s office that your secondary might cover. This coordination of benefits will relieve you of having to pay for these treatments and tests out of pocket.
There are costs involved in adding more healthcare coverage. Supplemental plans are paid for out of pocket. A plan may be as low as $12 per month for an individual or $30 for a family. However, it is an added cost that you need to consider. In order to determine if a supplemental plan is right for your budget, think of a medical scenario and then add up all of the costs involved. Add up your deductible and any other expenses you might incur after a medical event which involves a long stay in the hospital. Then figure out how much your supplemental insurance might help with those costs and the overall costs of keeping this additional healthcare plan.
If coverage for your primary and secondary plans are nearly identical, then you are paying twice to have the same benefits. Especially if both plans have deductibles, then your out-of-pocket costs for having more than one plan may not be worth it.
Children: If you have children, the “Birthday Rule” determines which parent’s plan will be considered their primary and secondary plans. The plan covering the parent whose birthday arrives sooner in the calendar year will be the child’s primary coverage. They will then be listed as dependents under your plan.
Young Adults: The Affordable Care Act permits young adults to stay on their parents’ healthcare plan up to the age of 26. Even if you are married, you can still be on your parent’s plan. However, once you are offered insurance through your employer, then you need to choose between the two. You cannot use your employer’s plan as your primary and your parents’ plan as your secondary (or vice versa).
Medicare is the best way to explore the differences between primary, secondary, and supplemental healthcare insurance plans.
Medicare is the government assisted health care plan for those over 65 years of age, those under 65 who have certain disabilities, and those with end-stage renal disease (permanent kidney failure). It becomes your primary health insurance after you turn 65. It is designed to take care of short-term medical conditions and does not cover long term care events.
If you are 65 years of age or older, qualify for Medicare, but are still working, then there is a rule for determining which plan will be the primary and secondary. If you work for a company that has less than 20 employees, then your employer’s group healthcare insurance plan will be the secondary and Medicare will be your primary. If the company has more than 20 employees, then that coverage will be the primary.
Once you qualify for Medicare and are retired, you may still have coverage through your former employer. If you do, this is called retiree coverage. Retiree coverage serves a similar purpose as a Medigap plan. It fills in holes in your Medicare coverage, such as deductibles and coinsurance. In addition, your retiree insurance may include added benefits, like longer hospital stays after surgery.
If you have a health concern, most likely you will run across certain instances in which your Medicare, retiree, or other insurance plan fails to cover your medical visits and procedures completely. Medigap can be a helpful supplement. It is a plan offered by private insurance companies to help pay for these extra costs. And you don’t need to cancel your original Medicare plan to have Medigap.
A variety of costs may be covered through a Medigap policy, including:
- Additional days in the hospital
- Medical care while traveling internationally
Since the federal government has standardized Medigap, different insurance companies that sell the plans offer the same exact benefits. There are a variety of options, but the most popular is Medigap Plan F. It is the most comprehensive supplemental plan available, and the beneficiary has no out-of-pocket expenses for doctor and hospital visits. As this plan covers the most deductibles, coinsurance, and copayments, it is also the most expensive.
Speak to an Agent
To find out more, speak to an independent insurance agent with an expertise in healthcare coverage. They will have the knowledge and experience to recommend the best coverage to suit your needs.
It’s up to you to determine much healthcare coverage you want. As stated by Mark Colwell of GoHealth.com, “Insurance is a risk management product. You have to figure out your comfort level from a risk management perspective.”