We’ve all heard the expressions, “It takes two to tango” and “Two heads are better than one.” The world has made it pretty clear that when given the choice of one or two, it’s best to go with two. However, in the world of health insurance, this logic doesn’t quite stand up.
When your employees are signing up for your company health insurance, they may ask you if it’s okay to have two separate plans. You also might be wondering if you should enroll in two plans yourself. Confused? Don’t be. In this article, we’ll explain what happens when you have multiple health plans so you can help your employees deal with this doubly-confusing situation.
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Why would someone want more than one health insurance plan?
Allow us to explain a thing (or two). Usually people wonder about multiple health coverage because they’re insured under a spouse’s plan, a Medicare plan, a parent’s plan (if they’re under 26), or have a child who is already covered. Fifty-seven percent of American employers — both large and small — currently offer health insurance. With so many people getting coverage at work, the dual plan question is bound to come up at some point.
People also crave options. In our State of Health Benefits for Small Businesses report, we found that only a third of employers feel good about the number of plans they had to pick from. That dissatisfaction is not just relegated to employers — employees also want more choices.
Unfortunately, enrolling in two health plans doesn’t always double your options. It can actually act more like a double negative because your two insurance companies will have to duke it out over who is going to pay for your medical bills. One of them will eventually pay, but you may not have a say as to which one that is.
How do multiple health insurance plans work?
Life and, in some cases dental, are the only kinds of insurances where having more than one plan gives you greater benefits. In order to receive double benefits from two medical insurance policies, you have to create your own solar eclipse of carrier and benefits alignment.
If you have dual coverage, something called a coordination of benefits, or COB, is there to set things straight. A COB, (not to be confused with the corn variety), is a document that helps carriers and participants get on the same page when there are two types of insurance plans. It enables people to receive full coverage for their medical bills, while preventing carriers from overpaying on medical claims.
Here’s how it works
A COB assigns one plan as the main form of insurance, and the other as the secondary. The primary plan picks up the tab on most of the benefits, and the secondary one takes care of the benefits that the other plan didn’t cover. In the end, a twice-insured person can sometimes pay nearly nothing after their deductibles are met — however this happens on a case-by-case basis. Even with a good COB in place, you still have to pick the right plans, line up coverage just right, and be ready to deal with a gigantic pile of paperwork.
Pro tip: Make sure your team always keeps their COB up to date. This stuff is complicated, so any error can send not one, but two carriers into a tailspin.
What are the pros and cons of double health coverage?
- Employees will end up paying twice for health insurance.
- Most of the time, coverage is redundant — you can’t pick and choose what you want.
- It can be an administrative mess, especially when claims are involved. Employees have to handle all the claims on their own, and things can get complicated if one plan is an HMO and the other is a PPO.
- If one plan doesn’t have in-depth coverage, the other can fill in the gaps. For example, if the primary plan pays 80 percent of a procedure, the other plan could handle the difference.
- If you’re going to meet the deductible on both plans, it may help you get more out of your coverage.
Should my team get double coverage?
For most people, double coverage is double trouble. The price tag and pyramid of paperwork can make it too complicated to be truly useful. Instead, your team should aim to pick a single plan that offers the best coverage for their needs. Keep in mind that you shouldn’t weigh in on your employees’ choices. If you have a broker, they can help dispel the myth that enrolling in two medical policies is better than one.
Okay, so my employee has two plans. How do they know which one is the main one?
There are a few basic rules, depending on their situation. Here are the most common scenarios:
For your employee
- Their company-sponsored plan covers them first (if it’s a group plan with 20 or more people enrolled).
- Their spouse’s plan covers them after that.
- If both your employee and their spouse are covered twice, the spouse’s company coverage is the main one, and theirs is the secondary one.
For their kids
If both parents include their child as a dependent, the birthday rule gets celebrated (or put into effect). It might sound a bit wacky, but here goes:
- The parent who has a birthday earlier in the calendar year is the one whose plan gets chosen as the primary.
- Do both parents have the same birthday? Then the oldest plan is the main one.
If an employee’s child is under 26, employed, and covered as a dependent on their parent’s plan, then the child’s workplace plan is the primary one. With few exceptions, grown-up kids who are older than 26 can’t be covered under their parents’ plans.
For Medicare enrollees
Things get a bit more complicated when Medicare comes into the picture. Generally, if your employee has a group health plan in addition to Medicare, the group plan is the first in line. However, if that plan is designed for retirees, then Medicare will be the primary plan.
Now you won’t have to do a double take when someone asks you about double coverage. Bookmark this primer, come back when you need it, and you’ll be ready to answer any multiple of questions that pop up.