Coordination of Benefits, primary insurer, and secondary payer - these are terms that many people with multiple insurers are familiar with.
While some may think that Medicare is a one-and-done deal, and think that they have to give up their current insurance plan – it isn’t true. In fact, with the right knowledge and know-how, Medicare can expand your coverage and ease your financial burdens.
But that all depends on your insurance, medical situation, and more. In this article, we’ll be exploring how Medicare works with other insurance plans.
Explanation of Coordination of Benefits: Medicare as Primary or Secondary
A Coordination of Benefits (COD) is a way that insurance determines who pays first. This happens when you have multiple insurance plans offering health coverage. Once your insurer determines a Coordination of Benefits, insurance companies will begin to pay.
The insurance that pays first, also known as the primary coverage, pays up to its maximum on whatever service you received. The one that pays second (also known as a secondary payer) only pays if there are costs left over.
Medicare can be either a primary coverage or a secondary coverage in a Coordination of Benefits. For example, if your employer coverage or retiree coverage is a secondary payer, you may need to enroll in Medicare Part B before you pay.
If you have Medicare as a secondary payer, your primary coverage has 120 days to pay for your healthcare services. If they fail to do so, the doctor or facility will mail the full bill to Medicare regardless of the Coordination of Benefits. In this instance, Medicare will make a conditional payment. Later, they will correspond with your primary insurer to receive the funds back. While you’ll receive notices about this conditional payment, you are not responsible for paying it back. These notices are simply for your personal record and knowledge.
How Medicare Works With Other Health Insurance
According to a 2020 report from the U.S. Census Bureau, 68 percent of Americans have some form of private health insurance. Only 34.1 percent have public health insurance, including 18.1 percent who are enrolled in Medicare.
Even with private insurance, you are still eligible for Medicare. Below are ways that Medicare works with different kinds of insurance plans, and how having both can impact your health coverage.
Retiree Insurance
Your employer may offer you coverage under a group plan after you retire, called retiree coverage. If you have this, Medicare pays first as your primary coverage and your retiree coverage pays second.
Medicare also helps with out-of-network costs. For example, your retiree coverage could be an HMO or PPO. These are plans that only cover in-network services.
If this is how your retiree coverage works, Medicare may be able to help with your out-of-network costs and expenses.
Job-Based Insurance
Some jobs offer employer coverage to their workers. If you have employer coverage, you’re still eligible for Medicare benefits. How Medicare chooses to cover your healthcare services depends on the size of your employer.
For example, if your employer has more than 20 employees, Medicare will be a secondary insurer rather than primary coverage.
However, if you have End-Stage Renal Disease (ESRD), then your employer coverage will pay first for the first 30 months before Medicare starts to pay. This applies regardless of employer size.
COBRA
COBRA is for an employee who has been fired from their job. It allows them to keep their employer coverage for a temporary period. If you have COBRA, your primary coverage will depend on your specific situation.
If you’re 65 and have a disability, Medicare will pay first. However, if you have a disability or ALS, Medicare will also pay first for your healthcare services.
The only situation in which COBRA is required to pay first for your healthcare services is if you have end-stage renal disease. If you have end-stage renal disease, don’t worry if you missed the open enrollment period for Medicare. With end-stage renal disease, you can apply during a specific window outside of open enrollment without a late enrollment penalty.
Depending on the overlap between your COBRA coverage and your first 30 months of Medicare ESRD eligibility, Medicare may pay second.
TRICARE
TRICARE is for active duty service members, the National Guard and Reserve, veterans, survivors, and their families. If you have TRICARE, the insurer that pays for your healthcare services will depend on your situation.
If you’re on active duty, TRICARE pays first for any services that Medicare covers. Additionally, TRICARE will also cover your Medicare deductibles and coinsurance costs, and any other services covered by TRICARE but not Medicare. However, if you aren’t on active duty, Medicare will pay first for your health coverage. TRICARE may still pay second if you have TRICARE for Life coverage
When Does Medicare Act as Secondary Insurance?
Thanks to the Medicare Secondary Payer Act, Medicare is not a primary payer for health coverage if there is another insurer responsible for paying first.
The following situations are examples of when Medicare may be the secondary payer.
A person has employer insurance or is insured through their spouse’s employer insurance, and the employer has more than 20 employees.
A person is disabled but is covered by employer insurance, and the employer has more than 100 employees.
An individual has end-stage renal disease, but is protected by COBRA and is within the first 30 months of their Medicare eligibility.
A person has Medicare and has an accident involving no-fault or liability insurance.
A person is covered by workers’ compensation.
To know if Medicare would be your primary or secondary insurance, it’s best to speak with a licensed agent about your eligibility and coverage options.
Understanding the Advantage of Having Two Insurance Plans
Health insurance helps you pay for many types of medical expenses. According to 2016 research, Medicare is associated with lower spending on healthcare services compared with private insurance.
The benefit of having two insurers is the broader health coverage. If one insurer doesn’t cover a medical service or has prescription drug coverage, for example, the other may cover that in their plan.
If a primary insurer offers prescription drug coverage, a person with Original Medicare won’t need additional Medicare supplements or parts to help cover their prescriptions. This could significantly lower the person’s healthcare costs.
However, if a primary insurer does not offer prescription drug coverage, then the person may need Medicare Part D. This is exclusively used for prescription drug coverage. Or, they may need a Medicare Advantage Plan.
This could raise the costs of their premiums and other expenses. However, it’s typically a fair trade if prescription drug coverage is crucial to you or your family's needs.
Frequently Asked Questions
What is the best secondary insurance to Medicare?
Medigap is typically what people use as secondary insurance to their Original Medicare. This kind of supplement will help cover what Original Medicare doesn’t.
Depending on your situation, you may also use your retiree coverage and employee insurance as a secondary insurer to Medicare.
What happens if secondary insurance pays more than primary?
Typically, primary insurances have 120 days to pay for your medical services. If they don’t, your Medicare plan will receive a bill. In this case, they will pay what’s called a “conditional payment.”
If this happens, do not be alarmed. While you will receive notices of the conditional payment, you are not held responsible for paying it back. Instead, these notices are for your records and knowledge as Medicare communicates with your primary insurance.
What happens if a patient is covered by two different policies?
A patient being covered by two insurers is ideal. If the primary insurer pays the max but there is still a portion of the bill left, Medicare Part A can pay the rest.
Can I cancel Medicare if I have other insurance?
While you’re eligible, you’ll never be forced to have Medicare if you don’t want it. However, enrolling after the open enrollment window closes could mean a late enrollment penalty unless you qualify for an extension.
Keep in mind that a late enrollment penalty may look different depending on the part of Medicare you’re applying for. For example, Part A does not have exceptions for a delayed application. In this case, you will incur a late enrollment penalty regardless of your situation. Part B, however, has SEP which gives you an additional window to apply without incurring a late enrollment penalty.
Need Help?
Understand that Medicare can be flexible with your current insurance plans. However, whether Medicare becomes your primary insurer or not is determined by your individual situation and current insurer.
To learn more and fully understand how your Medicare benefits can help you with coverage and medical expenses, speak with a licensed health insurance agent. They can offer a comprehensive guide that suits your personal needs.