My wife recently went back to work, and now we both have health insurance coverage. Can you explain how "coordination of benefits" works? We have been told that since her birthday is earlier in the year, her plan is primary for our children and that my HMO is secondary. Does the primary plan pay first, then the secondary plan kick in for anything not covered by the primary, and operate as though the primary didn't exist? For example, since my wife's plan has a deductible and my plan a co-pay, does that mean that an office visit for her is charged first to her plan and counts toward the deductible, but (if the deductible has not yet been met) is then charged my co-pay amount by the doctor's office? Do I always need HMO referrals even if the HMO plan is secondary for my wife and children?

Phil

This question brings up two important issues: the complexity of "coordination of benefits" between two disparate types of health plans, and the cost of double coverage. These are issues faced by working couples with children every day.
The coordination of benefits between two health plans is by nature complex and often difficult to sort through. As a rule of thumb, in the case of double coverage, the insurance plan of the person with the earlier birthday is primary and the other plan is secondary. Generally speaking, the secondary plan pays only after the primary plan has settled a claim. Some out-of-pocket expenses may be reimbursed by the secondary plan. When the two plans are similar, the mechanism is less complex. In other words, if both plans are traditional indemnity coverage with a deductible and co-insurance, it is easier to sort out the relative financial responsibility of both plans.

If, however, one plan is indemnity and the other is an HMO, things are more complicated. HMO coverage differs from that of a traditional health insurance plan both in terms of financing (paying for medical services) and delivery (physician availability, referrals for specialists, etc.). The best way to sort this out is to consult the plan administrator for the HMO for a full explanation of how double coverage is treated.

At the same time, it is important to determine whether double coverage is necessary or cost-effective. In an employment setting where health insurance is a benefit, there is often a cost involved for the employee and almost always a cost for covering the employee's dependents. A couple with children may want to answer one or two questions regarding coverage before deciding to have double coverage for children, or even separate coverage for the adults.

First, does it make financial sense to cover children under both the husband's and the wife's employer plan? Unless the dependent coverage is included at no cost to the employee, which is rare, you may be paying more for the extra dependent coverage than you will ever realize in benefits. In this case, the cost is not justified. Consider which spouse's plan provides better coverage for the children, and participate in that plan only. Why pay extra if there is no real extra benefit? Even if the coverage comes at no cost to the employee, your participation may mean that the less valuable of the two plans is forced into primary status.

For example, if one plan has a deductible and the other plan has only a co-pay, the co-pay plan might be much cheaper. If the per-person deductible under one plan is $1,000 and the co-pay under the other is $25, there is an obvious difference in out-of-pocket liability. Go on to compare coverage for prescription drugs, emergency room care, and hospitalization, and the differences might be enormous. So weigh carefully the cost -- both in terms of payments and coverage value -- of the two employer plans.

Second, if there is a cost involved for the employee to participate in the employer's health plan, how does that compare with the cost of coverage under the spouse's employer plan? Is it more or less expensive to be added to the spouse's plan, and refuse coverage under the person's employer plan? Even if it is more expensive, are the benefits under the spouse's plan better? Would the spouse's plan involve a lower out-of-pocket cost?

Having access to two employer plans complicates the coverage decisions a couple faces. The best way to cut through the complexity is to consider the cost and the benefits of choosing one plan, the other plan, or both. In many cases, double coverage may be too expensive for the value.