Pros and cons of having two health insurance policies

Don’t be surprised if some of your employees have access to another healthcare plan in addition to the one your company offers as an employee benefit. As of 2021, the United States Census Bureau reported that about 43.1 million people have coverage through multiple health insurance plans. The majority of these individuals are over the age of 65 and have access to a privately purchased plan or an employer plan in addition to Medicare coverage. Some of your workers may decide to supplement their healthcare coverage with a spouse’s healthcare plan, a privately purchased plan, or a government plan. 

To better understand why your employees may be choosing or not choosing to enroll in dual coverage, let’s take a look at the pros and cons of having two health insurance plans.

What is secondary insurance?

Before we dive into how having multiple health insurance plans works, it’s important to not confuse this type of dual coverage with secondary insurance. What is secondary insurance? Secondary health insurance involves having separate coverage from a primary medical plan that helps pay for services and care not covered by a primary healthcare plan. Vision, dental, disability, life, accident, and hospital care insurance are all examples of popular forms of secondary insurance. This begs the question — can you have two primary health insurances? Yes, in addition to having a primary form of insurance and secondary insurance, you can have more than one primary health insurance plan. Here are a few common rules that employees should keep in mind involving the coordination of benefits:

The Employment Rule: When you are covered under more than one plan (for instance, as an employee yourself, and also as a dependent of a family member employed by a different company), the plan provided by your employer is usually your primary insurance.. If you also have coverage as a dependent under another plan (e.g., a spouse's plan), that plan typically serves as secondary. 

The Dependent Rule: For children covered under both parents’ plans, it primarily depends on the birthday rule. The plan of the parent whose birthday (month and day, not year) falls earlier in the calendar year is considered the primary plan. There are exceptions if a court order or other legal arrangements stipulate differently, such as custody agreements. 

The Medicaid and Medicare Rule: For individuals who are eligible for Medicaid or Medicare, the determination of primary or secondary responsibility depends on variables like age, employer coverage size, and specific program details. Generally, Medicare is the primary payer if you are retired, while Medicaid typically acts as a secondary coverage option. 

The Dental and Medical Coverage Rule: If you have both medical and dental coverage and receive a service that relates to both (like oral surgery covered under medical), your medical insurance would typically be the primary payer over the dental insurance. 

Custody-Related Rule: For children from divorced or separated parents, the parent with custody usually provides the primary coverage. In the case of joint custody, the birthday rule applies unless other legal agreements specify otherwise. If the custodial parent remarries, the new spouse's plan may serve as secondary coverage, followed by the non-custodial parent's plan. 

The Length of Coverage Rule: If none of the above rules apply, the plan you have been enrolled in the longest is generally considered the primary plan. This is often referred to as the timeline rule. 

Understanding these rules can help you and your healthcare providers coordinate benefits more efficiently, ensuring that you maximize your coverage while minimizing out-of-pocket expenses. To confirm the primary and secondary status of your plans, you can contact each insurance company directly and verify the coordination of benefits.

How does having multiple health insurance plans work?

If you are responsible for procuring health insurance for your company, you are likely wondering if you can have two health insurance plans. It is possible for one of your employees to have access to more than one healthcare plan. This extra coverage can occur when an employee has access to a spouse’s employer-sponsored healthcare plan or if they qualify for a government plan like Medicare. Over 75% of those who had access to more than one healthcare plan (as of 2021) had both public and private health insurance coverage. Workers under the age of 26 may also still be enrolled on a parent’s plan while taking advantage of the plan offered by their own job at the same time. 

When one of your employees has access to two health insurance plans, they don’t receive double the coverage when it comes time to file a claim. The two plans work together to coordinate who pays out the claim by a process known as coordination of benefits (COB). When the two health insurance plans coordinate with each other using the COB rule, one plan acts as the primary plan and pays initial costs until the planholder reaches their coverage limits. The second health insurance plan will then tackle some or all of the remaining costs. Oftentimes, even with two forms of insurance on hand, patients have to pay out of pocket for some expenses like copays. The primary plan is typically the one offered by the patient’s employer and the other plan they have access to will act as that backup form of insurance. Ideally, between both plans the patient will receive full coverage for any claims they need to file, but that isn’t a guarantee. 

Pros of having two health insurance policies

Even if some of your workers have access to two health insurance plans, they typically shouldn't file a given medical claim to both. That being said, there are some unique benefits that those with two health insurance policies can take advantage of.

• Cost savings. The most appealing perk of having double insurance is having more financial coverage when faced with a big medical bill

• Different types of coverage. Not all health insurance plans are built the same. While one plan may not cover an expense like physical therapy, the second plan might offer that type of coverage

• Extra benefits. Some health insurance plans offer unique benefits in addition to helping you tackle medical bills like free 24/7 remote telehealth services or savings on gym memberships. Having two health insurance plans can mean more health and wellness perks for your employee.

Cons of having two health insurance policies

Of course, there are also some disadvantages your employees will want to keep in mind before they enroll in two health insurance plans.

• More paperwork and logistical headaches. From re-enrolling each November to dealing with claims, it can take quite a bit of work to manage one healthcare plan, let alone two. 

• Slower claims processing. Navigating the claims process can be a bit more complicated when you have two health insurance plans on hand, so your employees may experience longer wait times when it comes to claims processing.

• Extra premiums. Having to pay two health insurance premiums each month may outweigh the financial benefits of having two plans — especially if the employee is healthy and requires little medical care. Employees will need to consider health insurance pricing carefully before deciding if extra coverage is worth it. The exception to this disadvantage is if you offer your employees an Individual Coverage HRA (ICHRA), which gives your company the chance to reimburse your staff for their health insurance premiums and medical expenses

Tips for Managing Multiple Health Insurance Policies

Managing multiple health insurance policies may seem daunting, but with the right strategies, you can streamline the process and make it work in your favor. Here's how to effectively manage dual coverage: 

• Understand Coordination of Benefits (COB) Rules: State insurance departments and insurance plans have different COB rules, which determine how the plans will share the cost of your healthcare. Start by thoroughly reviewing the policy documents for both plans.

• Communicate with Insurance Providers: Reach out to both insurance companies to inform them about your dual coverage. Ask them to clearly explain how they handle COB and which steps you may need to take when filing a claim.

• Submit Claims Promptly and Accurately: Make sure to submit your claims with accurate and complete information to both your primary and secondary insurance providers. Delays and errors in paperwork can lead to processing issues.

• Keep Track of Your Medical Bills and Payments: Maintain a dedicated folder for all your medical bills, EOBs (Explanation of Benefits), and payments. Staying organized will help you quickly identify any discrepancies or issues.

• Use In-Network Providers: Whenever possible, choose healthcare providers who are in-network for both of your insurance plans. This can reduce out-of-pocket costs and minimize complications with coverage.

• Plan for Overlapping Costs: Be aware of potential overlapping deductibles and other out-of-pocket expenses. Budgeting for these costs in advance can prevent financial surprises.

• Monitor Reimbursements: Keep an eye on your reimbursements to ensure that you're receiving the correct amounts from both insurers. If you notice any discrepancies, contact your insurance companies to resolve them promptly.

These recommendations are things to consider if you plan on carrying multiple health insurance policies. Remember, effective communication and organization are crucial for making dual coverage work for you.

When to Avoid Dual Insurance Coverage 

While having two health insurance policies can offer some benefits, there are instances when maintaining dual coverage might not be the best choice. Understanding these scenarios can save you both time and money. 

1. Overlapping Deductibles and Out-of-Pocket Costs: One significant drawback of dual coverage is the potential overlap in deductibles and out-of-pocket expenses. Managing two sets of deductibles can be cumbersome and might nullify any perceived financial benefit from having extra coverage. This often results in inefficiencies wherein you’re paying more out-of-pocket before either policy kicks in fully. 

2. Complexity in Managing Policies: Coordinating two insurance policies can become labor-intensive, involving meticulous tracking of which insurer has paid what and closely monitoring policy benefits. For some, this complexity can lead to confusion and frustration, negating the advantages of dual coverage.

3. Risk of Claims Delays: With two insurance policies, the administration and processing of claims can get delayed as insurers determine their respective payment responsibilities. This could delay reimbursements, leading to potential financial stress.

4. Minimal Added Value: In many cases, secondary insurance might offer minimal additional benefits compared to primary insurance, especially if both plans have similar coverage limits and networks. Redundancy in coverage could result in paying premiums for benefits you hardly use. 

5. Coordination of Benefits Issues: The coordination of benefits (COB) between two insurance providers is designed to prevent duplicate payment of claims. However, challenges can arise when COB rules are complex, causing delays and difficulties in claim settlements. This can be more trouble than it's worth if the secondary policy barely extends the primary policy's coverage. 

6. High Premiums: When considering dual insurance, factor in the cost of paying premiums for both policies. The combined expense might outweigh the additional benefits, making it an economically unwise decision. You must ensure that the perceived value justifies the cost. 

In summary, avoiding dual insurance coverage might be advisable in situations where the financial and administrative burdens surpass the benefits. Carefully evaluate your specific needs and circumstances to make an informed decision.

How does secondary insurance work with an ICHRA?

An Individual Coverage Health Reimbursement Arrangement (ICHRA) allows employers to reimburse employees for their health insurance premiums and potentially other qualifying medical expenses. When you have secondary insurance alongside an ICHRA, it's essential to understand the interplay between these two sources of coverage. 

With an ICHRA, the primary insurance plan is generally the one you purchase yourself on the marketplace or through a private insurer. Secondary insurance, if you have it, may kick in to cover costs not paid by the primary plan. This layered approach can maximize your healthcare benefits, but it also introduces complexities in billing and reimbursement processes. 

Here is how the coordination process typically happens: 

• Primary Insurance Payment: Your primary insurance will first process and pay out claims according to its policy terms.

• Submission to Secondary Insurance: Any remaining eligible costs, not covered by the primary insurance, are then submitted to your secondary insurance for payment.

It’s important to manage documentation meticulously and understand the specific terms of both your ICHRA and secondary insurance policies to ensure that you maximize your benefits without unnecessary delays. Proactive communication with both insurers can smooth out any potential hiccups in the claims process.  If your company works with a benefits broker, they may be able to offer expert advice to help you manage.

The Takeaway — Can you have more than one health insurance plan?

To recap - Yes, some of your employees may choose to enroll in your health insurance plan in addition to another one. Doing so can result in major cost savings when it comes time to file a claim, but can cost more upfront due to paying double insurance premiums. It can be helpful to educate yourself on both the advantages and disadvantages of having two plans so you can help inform employees on how to choose the right path forward for them and their families. 

With Thatch, it’s easy to give your team access to great healthcare. Learn more about how you can set a budget and allow your employees to spend it as they need with a free demo.