Secondary Insurance is a type of health insurance policy designed to provide additional coverage for medical expenses that are not fully covered by a primary insurance policy. Once the primary insurance processes and pays a claim, the secondary insurance can cover some or all of the remaining eligible costs. This ensures that the policyholder has reduced out-of-pocket expenses for medical care.
How Secondary Insurance Works
Coordination of Benefits (COB)
Coordination of Benefits (COB) is a key term when discussing secondary insurance. COB dictates the order in which multiple insurance policies will pay out. Typically, the primary insurance policy pays first, and the secondary insurance covers remaining eligible costs, including copayments, coinsurance, and deductibles.
Steps Involved
- Primary Insurance Filing: The policyholder first files a claim with their primary insurance provider.
- Receiving the Explanation of Benefits (EOB): After the claim is processed, the policyholder receives an Explanation of Benefits (EOB) that outlines what the primary insurance has paid and what is left unpaid.
- Filing with Secondary Insurance: The policyholder then files a claim with their secondary insurance provider, attaching the EOB from the primary insurer.
- Payment by Secondary Insurance: The secondary insurance evaluates the claim and pays for eligible remaining costs.
Special Considerations
Dual Coverage and Non-Duplication Clauses
When a policyholder has both primary and secondary insurance, it’s vital to understand some common terms:
- Dual Coverage: Being covered by more than one insurance policy.
- Non-Duplication Clause: Sometimes, secondary insurance applies a clause that it will cover costs only if they are not paid by another insurance.
Limitations and Exclusions
Secondary insurance policies might have limitations and exclusions similar to primary insurance. For instance, certain types of treatments or services might not be covered under either policy.
Example Scenario
- Procedure Cost: The total cost of a medical procedure is $1000.
- Primary Insurance Payout: The primary insurance covers 80%, or $800.
- Remaining Amount: After primary insurance payout, the remaining amount is $200.
- Secondary Insurance Payout: The secondary insurance could cover the $200, bringing the policyholder’s out-of-pocket cost down to $0, depending on the terms of the secondary insurance policy.
Historical Context
The concept of secondary insurance originated with the advent of structured health insurance systems, where multiple providers could cooperatively cover a policyholder’s medical expenses. Over time, this system has evolved to maintain financial protections for individuals, addressing gaps in coverage.
Applicability and Usage
Secondary insurance is particularly relevant for:
- Medicare Beneficiaries: Those covered by Medicare often opt for secondary insurance to cover costs that Medicare does not.
- Employees: Employees may receive secondary insurance through a spouse’s employer.
- Costly Medical Conditions: Individuals with high medical expenses may benefit significantly from additional coverage.
Comparisons and Related Terms
Primary Insurance
Primary insurance is the first payer for any medical claim, covering a significant portion of the expenses. Secondary insurance steps in for the remaining eligible costs after primary insurance has made payments.
Supplemental Insurance
Supplemental insurance policies, like Medigap, specifically exist to fill gaps in primary insurance coverage but are not always considered a form of secondary insurance.
FAQs
Q: Do I need secondary insurance? A: Secondary insurance can reduce out-of-pocket costs significantly, especially if your primary insurance has high deductibles or copays.
Q: How do I know if my secondary insurance will cover a specific cost? A: Review the terms of your secondary insurance policy and consult with your insurer to understand what is covered.
Q: Can secondary insurance cover all remaining costs? A: This depends on the specific terms and conditions of the secondary insurance policy.
References
- American Medical Association. (2021). Understanding Health Insurance.
- Centers for Medicare & Medicaid Services. (2022). Coordination of Benefits & Recovery Overview.
- Jones, L. (2019). The Role of Secondary Insurance in Health Care. Health Policy Journal.
Summary
In conclusion, secondary insurance plays a critical role in reducing the financial burden of medical expenses by covering costs not paid by primary insurance. It is essential for policyholders to understand the terms of their secondary insurance, including benefits and limitations, to maximize their coverage and minimize out-of-pocket expenses.
