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—Jacques Chambers, CLU
http://www.hcvadvocate.org/news/newsLetter/2010/advocate0810.html#2
The major problem today regarding payment for health care is that too many people don’t have access to good health insurance. However, another problem experienced by many is that they have access to more than one health insurance policy.
Should a person accept and pay for more than one health insurance plan? Should all insurance carriers be informed of each other? How are medical bills handled? Can someone make a profit off of health insurance?
First, it is surprisingly easy to end up covered under more than one health plan:
- You may be covered as an employee where you work and covered as a dependent under your spouse or domestic partner’s employer provided health plan.
- You may have individual health insurance and continued it after enrolling in your employer’s plan.
- You may be on Medicare and your employer’s plan is continuing to cover you because you are 65 or older and still working, or they may have a policy of continuing health insurance for disabled employees.
- You may be covered under a guild or union plan as well as under an employer’s plan or Medicare.
Back in the 1950s, duplicate coverage starting creating a problem for insurance companies, and it was increasing in significance as more and more families had both spouses in the workforce. While they realized that two premiums were being paid for coverage, the insurance companies did not want to nor did they believe it was right to pay full benefits under both, which would permit the insured person to actually make a profit from medical charges and insurance reimbursement.
They worked with the National Association of Insurance Commissioners to resolve the problem in a manner they hoped would be fair to all, and the result was the industry-wide Coordination of Benefits Provision. While the Coordination of Benefits prevents a person from making a profit from two or more health insurance policies, the program did provide the incentive: by working together the two plans would pay up to 100% of the medical bills, wiping out any deductibles or co-insurance for the claimant to pay.
Coordination of Benefits
The insurance industry adopted this uniform provision, which was added to virtually all group health policies, including those health policies purchased by employers and unions for their employees and members. This provision determines how duplicate coverage is handled in all instances where there are two or more insurance policies, not counting when Medicare or Medicaid is involved. They are addressed later in this article.
The general concept was simple: One plan will pay its full, normal benefits. The other plan will pay what is remaining of the total medical bill, up to the maximum amount it would have paid if it were the only insurance company involved. By this method, the insured can have his medical bills paid 100% by the two companies, but will not receive more.
The provision says that the Primary Plan will pay its full benefits, and the Secondary Plan will pay the remainder of the entire bill. Clean, simple; the insurance company doesn’t pay double, and the insured person gets their claim paid at 100% of the total bill, leaving him/her to pay nothing out of pocket.
The difficulty lay in determining which plan would pay its full benefit, or be Primary. A complete chart of determining the order of payment is at the end of this article, but here is a summary of the rules used to determine which plan pays first:
- Group plans that do not bother to add the Coordination of Benefits provision to their policy will always pay first or be Primary. There are still a few union plans that have not added the provision.
- The group health plan covering the insured as an employee pays first.
- To determine who pays first on dependent children’s claims, the endorsement originally had the male “breadwinner’s” plan pay first, but times change. Now the plan covering the parent whose birthday is earlier in the calendar year is Primary.
Note that these rules only apply to GROUP policies. Individual health insurance policies as well as Medicare and Medi-Cal do not come under these rules.
Health Maintenance Organization (HMO)
The rational order of payment gets more complicated when one of the plans is an HMO. For example, HMOs pay nothing if the insured goes outside their network, so there is nothing to coordinate. Inside the network, usually the only expense is the copay which is paid directly to the treating provider, and it is usually low enough that neither the patient nor the doctor’s office is willing to invest the time and paperwork necessary to get reimbursed for that by the Secondary payer.
Medicaid
Medicaid plans for the medically needy do not often become involved in duplicate coverage issues, however when they do, Medicaid, by law, is always the payer of last resort and so would always be “Secondary” to any other insurance plan including Medicare. Reimbursement rates by Medicaid plans is frequently so low that anything paid by the insurance company will usually exceed what Medicaid would have paid anyway.
Medicare
Medicare has its own set of rules about which plan becomes Primary. For a complete explanation of the rules, they publish a booklet, Medicare and Other Health Benefits: Your Guide to Who Pays First (Publication No. CMS-02179). It covers types of insurance more than just group health policies. It also covers Workers’ Compensation, Veterans’ benefits, special government programs like Black Lung, coverage under no-fault or liability insurance, or Medicare due to End Stage Renal Disease or ALS (Lou Gehrig’s Disease). Table 2 below shows how Medicare works with group health plans.
Individual Health Insurance
The Coordination of Benefits endorsement on group health policies does not apply to individual health insurance policies so they generally pay their full benefits regardless of other group health policies in force.
It is important that you review the provisions of an individual health insurance policy because it will sometimes include its own provisions about other insurance.
Medicare’s Coordination of Benefits does not apply to individual health insurance policies either. Many individual health plans do include a coordination provision in their contracts regarding Medicare, however.
Claims Processing
When there is more than one health insurance plan, the processing of claims can get complicated, however, that is an issue for the people doing the medical billing rather than the claimant. It is important that you notify all medical providers of the two plans so the person sending out medical bills can determine the primary and secondary carriers.
The paperwork is first sent to the Primary insurance company. Once they process the claim, the billing office will then send the claim, along with the Primary carrier’s processing information, to the Secondary carrier, who will then determine their payment.
On pages 8 and 9 are two tables that show the order of payment for group health policies with Medicare – Table 1, and with other group and individual health insurance policies – Table 2.
Table 1: Medicare and Group Health Plans
| If you... |
Condition |
Pays first |
Pays second |
| Are age 65 or older and covered by a group health plan because you are working or are covered by a group health plan of a working spouse of any age |
The employer has 20 or more employees |
Group Health Plan |
Medicare |
| The employer has less than 20 employees or is part of a multi-employer plan |
Medicare |
Group Health Plan |
| Have an employer group health plan after you retire and are age 65 or older |
Entitled to Medicare |
Medicare |
Retiree Coverage |
| Are disabled and covered by a large group health plan from your active work, or from a family member who is working |
The employer has 100 or more employees |
Large Group Health Plan |
Medicare |
| The employer has less than 100 employees and isn’t part of a multi-employer trust |
Medicare |
Group Health Plan |
| Are disabled and covered by a group health plan either on COBRA or covered because employer continues coverage due to disability |
Entitled to Medicare |
Medicare |
Group Health Plan |
Table 2: Coordination of Benefits Endorsement
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