What to Do If You Have More Than One Health Insurance Policy

It’s not unusual for a person to have medical coverage under several health insurance policies.

Spouses, for example, may have coverage for themselves and each other from their employers. Older employees may have Medicare and employer-sponsored coverage and retired employees may have employer-sponsored retiree insurance and Medicare coverage.

Understanding what policy pays which claim, however, can get a little tricky.

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Multiple health insurance policies can set off a logistical and paperwork nightmare for both the insurers and the insured. But multiple policies may provide benefits that are worth the hassle.

Here’s a basic rundown of how multiple health insurance policies work together.

Coordination of multiple health insurance claims

Say, for example, you end up in the hospital for a broken arm. You are covered by two health insurance policies. Which one pays? When it comes to group health insurance plans, that call gets made by using an industry standard called “Coordination of Benefits” (COB).

The basic intent of COB guidelines is to ensure that people don’t gain a financial windfall from duplicate health coverage, while also making sure that all medical and out-of-pocket expenses are covered whenever possible.

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Generally, one health insurance policy is identified as the primary plan and the other as the secondary plan.

The primary plan pays out all its benefits, while any secondary plans pay for additional eligible benefits after the primary plan’s benefits are exhausted. A patient can receive benefits for up 100 percent of medical bills, but no more.

Which insurance policy pays out first?

Which plan acts as the primary plan varies by the type of coverage and the situation. Group insurance, individual insurance, Medicare and Medicaid all play by different rules. Generally, insurance providers operate under the following rules:

Group health plans: Group health insurance plans that do not include a COB provision almost always will be the primary plan.

Non-dependent vs. dependent: A group plan that covers you as an employee or member normally pays before a plan that covers you as a dependent.

Active vs. inactive: Any group health insurance policy that covers you as an active employee pays before one that covers you as a former employee.

Dependent children: If two parents list a child as a dependent on their group insurance policies, some companies use what’s called the “birthday rule.” The plan of the parent whose birthday falls the earliest in the calendar year is the plan that pays. If both parents have the same birthday, the plan that’s been in effect the longest becomes the primary plan.

Individual health plans: The above rules apply to group coverage. When it comes to individual health insurance plans, COB does not apply. Individual health plans generally pay their full benefits regardless of other group health policies. However, many of these policies include their own provisions regarding multiple insurance plans, so it’s critical for policyholders to read their policies.

Medicare/Medicaid: Medicaid always is the insurer of last resort. So, if you have other plans, they’ll almost always pay before Medicaid kicks in.

When it comes to Medicare, however, things get complicated. Which plan pays first can be influenced by employment status, employer size and the nature of the other insurance coverage. There even are separate rules governing coverage of end-stage kidney disease.

Medicare publishes guides that outlines all these complexities.

Editor’s note: This is an updated version of an article originally published on Dec. 31, 2013.