Coordination of Benefits: Using Two Health Plans to Your Advantage

How does having more than one health insurance plan work?

This illustration shows when someone might be covered by two health plans including adult children who are under age 26 and may have coverage through their parents and their employer or school, married couples or domestic partners who each have access to a health insurance plan through their employer, and children who have two parents that each have access to a health insurance plan.

The Balance / Bailey Mariner

Having access to two health insurance plans can be a real benefit when making health insurance claims, it can increase how much coverage you get and can save money on your health insurance costs by using a coordination of benefits provision. Here's everything you need to know about coordination of benefits for health insurance and how it works.

What Is Coordination of Benefits?

When a person is eligible for benefits under two health insurance plans, coordination of benefits is the process when a person covered under two health insurance plans may receive health claims payouts and payment under both plans. A common example of this is when your spouse or domestic partner has family health insurance coverage, and you also have access to a health insurance plan at work. You can sign up for your plan and your spouse's and use the coordination of benefits provision to maximize your health care coverage. In some cases one plan may provide better benefits in one area, like mental health coverage, for example. Then in other areas the other plan may be stronger. You can get the best of two plans with coordination of benefits.

How Coordination of Benefits for Health Insurance Plans Works

The way coordination of benefits works is that one health insurance plan becomes identified as the primary health insurance plan. Then, the second one is the secondary plan. In the event of a health insurance claim, the primary health insurance plan will pay out first, then the second one will kick in to pay towards the remaining cost that the first plan didn't cover completely.

Should You Keep Two Health Insurance Plans? 

If you have access to two health insurance plans, it is a great way to maximize benefits instead of using only one plan. If you are thinking you will save money on health insurance by only having one plan, consider how the coordination of benefits works and what medical expenses you have before signing a health insurance waiver and giving up a second plan.

In What Circumstances Might a Person Be Covered Under Two Plans?

Here are a few examples in which a person may have access to being covered under two plans:

  • Children who have two parents that each have access to a health insurance plan may be covered under both plans if the parents decide to include them in family benefits on both plans
  • Adult children (under age 26) who have coverage through their employer or school and also through their parents
  • Married couples or domestic partners who each have access to a health insurance plan through their employer

Does Coordination of Benefits Give Double Health Insurance?

Having a good health insurance plan is great, but what if a person had two or more health insurance plans? Does that mean they would get double the benefits? Not exactly, but having two or more health insurance plans does help cover any health insurance expenses better through the coordination of benefits provision.

First, many are probably thinking why would someone buy two health insurance plans when one health insurance plan is expensive enough in this market. That is true, but many people are covered by two health insurance plans without extra expense. The most common example is when two spouses or domestic partners have health insurance and both of their employers provide a health insurance plan. This would mean that someone who is a covered person under their employer's provided health insurance plan may also have coverage under their spouse or domestic partner's health insurance plan.

Understanding the Coordination of Benefits System

The health insurance plan providers have a coordination of benefits system that finds a way for both health insurance plans to pay their fair share. The coordination of benefits by both health insurance plan providers assists the providers in using both health insurance plans in a way where they avoid a duplication of benefits while still offering the coverage to which the patient is entitled.

The first way that health insurance providers coordinate benefits is to determine which health insurance plan of the patient would be considered the primary plan and which health care plan of the patient would be considered the secondary plan. There are guidelines set forth by the state and insurance providers that help the patient's insurance companies determine which health care plan will be considered the primary plan and which the secondary plan.

Once the covered person's primary plan is determined, the benefits that the patient is eligible for under the primary plan must be given without assuming there is a secondary plan. In other words, once a primary plan is established, that primary plan will pay what it is supposed to pay regardless of the existence of any other secondary plan that may be available, just as if the primary plan was the only plan. Once the primary plan has paid what expenses it should pay as determined by the coordination of benefits provision, then the secondary plan may be used.

The secondary health insurance plan, unlike the primary health insurance plan under the coordination of benefits, can take into consideration what health insurance benefits were provided to the patient in the primary health insurance plan. The remaining allowable health care costs due will then be considered for payment under the secondary health insurance plan.

Coordination of Benefits and Reasonable and Customary Costs

There are some guidelines that health insurance providers follow that could cause a person covered under the coordination of benefits process to still have to pay for some medical costs. One such area is the "reasonable and customary" amount.

Even if a patient has more than one health insurance plan, the health insurance companies still follow the same rules in how they pay for services. Most health insurance will only cover the amount that is reasonable or customary, which would mean the health insurance provider will not pay for any services or supplies that are being billed at a cost that is more than what is the usual charge for the immediate area.

Therefore, once the primary plan pays the reasonable and customary amount, there may still be a balance due on a particular health care service if the health care provider was charging more than what the primary health insurance plan felt was reasonable and customary. The secondary plan is not required to pay the remaining amount that the primary plan did not pay, so the patient could still end up having to pay out-of-pocket even if there are two health insurance plans. In addition, neither health care plan will cover the cost of a service that is excluded under their health care plans.

Anyone with more than one health care plan should discuss with their health insurance providers how the coordination of benefits provision will work with their plans to gain a better understanding of what health insurance coverage is available.