How Does Secondary Health Insurance Work?

Many health insurance plans are great for covering day-to-day medical expenses, but if you wind up in the hospital or face other long-term care, their deductibles can quickly eat up a large chunk of your budget. In these cases, supplemental health insurance can step up to help control out-of-plan costs from your primary health care provider.

Supplemental or secondary health insurance is merely another policy that serves to “wrap around” your primary health care policy. When you’re sick, your primary insurer picks up the brunt of your medical expenses and is usually billed by your care provider. Your doctor then bills you for any additional charges, such as copays or coverage limits, your primary insurer won’t spring for.

If you have secondary insurance, you may then submit these charges to that insurer for reimbursement. While your secondary insurance may not cover all of your out-of-pocket costs, it can help defray large expenses in many cases.

If you’re covered by two health policies, one will act as your primary insurer and the other works as a secondary policy. For example, if you and your spouse’s employers both provide you with health benefits, you may opt to use your spouse’s plan to cover your trip to the hospital, then turn to your employer’s plan to cover your copay. Other times, government programs such as Medicaid may act as secondary insurers to help absorb costs of your child’s health care. Some insurers provide secondary, wrap-around policies to supplement existing coverage.

Steve and Liz both receive health insurance from their employers that covers their spouses. When Steve spends 10 days in the hospital, they decided to have Steve’s insurer act as primary insurer. It provides full coverage after a $1,000 copay.

Liz’s employer’s insurance covers 80 percent of hospital stays. They submit a claim to Liz's insurance for the $1,000 out-of-pocket expenses incurred through the stay, and receive 80 percent coverage of that bill. Liz’s insurance provides the couple with an $800 check to cover its obligation toward hospital expenses.

Some insurers offer policies that specifically cover costs other insurers don’t provide – Medigap insurance is an example of a plan that covers uninsured expenses from Medicare plans – and shoppers interested in such coverage should be careful to find a secondary insurer that works with their existing plan. Many secondary insurance plans provide higher levels of coverage than standard plans, with insurers understanding that a primary plan will absorb much of the expense of claims.