This article is for educational purposes only and does not constitute medical, legal, or financial advice. Every family situation is different, and you should consult with appropriate professionals about your specific circumstances.

Coordination of Benefits: When Medicare Isn't the Only Insurance

Your mother turned 65 and became eligible for Medicare. But she's still employed and still covered under her employer's health plan. Now she has Medicare and employer coverage. Which one pays first? Does she need both? Will having both create more problems than it solves? She's getting conflicting advice: one person says she should drop the employer coverage and save money. Another person says she needs to keep employer coverage because Medicare doesn't cover everything. A third person says she'll get confused and make a mistake if she tries to coordinate the two plans.

The confusion is real, but the answer is actually straightforward once you understand how coordination of benefits works. When your parent has more than one insurance policy, the policies coordinate so that claims get paid correctly without overpaying. One policy pays first as the primary insurance. The second policy pays second as the secondary insurance, covering costs the primary insurance didn't cover. The coordination isn't automatic, but it's designed to be smooth once both insurers know about each other.

Understanding how coordination works takes the stress out of having multiple insurance policies. Your parent can keep coverage that makes sense without worrying that the two policies will fight with each other.

How Coordination Works: The Primary and Secondary System

When your parent has two insurance policies, one is primary and one is secondary. The primary insurance is the one that pays first. The secondary insurance pays second, picking up costs the primary insurance didn't cover. This prevents overpaying and makes the claims process faster.

Here's how it works in practice. Your parent sees a doctor. The doctor submits a claim to the primary insurance. The primary insurance reviews the claim, determines what it will pay, and sends an explanation of benefits to your parent and the doctor. The doctor's office then submits the same claim to the secondary insurance, attaching the explanation of benefits from the primary insurance. The secondary insurance reviews that EOB, sees what the primary paid, and determines whether it will cover any of the remaining cost. The secondary insurance sends its own explanation of benefits showing what it paid.

Your parent ends up with two EOBs, one from each insurer. The EOBs should tell a clear story: primary insurance paid this much, secondary insurance paid this much, you owe this much. When coordination works correctly, your parent's out-of-pocket cost is the lower of the two deductibles and copays, not double.

Without coordination, what would happen is that both insurers would pay based on their own calculations, resulting in overpayment. Medicare would pay 80 percent of the approved amount. The employer plan would also pay 80 percent of the approved amount. Your parent would have received more money from the insurers than the service cost. The system catches this eventually, but it creates confusion and delays.

Employer Coverage and Medicare: When Employer Covers First

The rule is that employer group health plans are primary when the employer has 20 or more employees. If your mother's employer has 100 employees, the employer plan is primary and Medicare is secondary. The employer plan pays first, and Medicare pays second.

This matters because the coordination between an employer plan and Medicare works slightly differently than coordination between Medicare and Medigap. The employer plan is designed to coordinate with Medicare. But the employer plan doesn't know about Medicare's rules, so there's room for confusion.

Your parent needs to enroll in Medicare even if their employer coverage is primary. If your parent doesn't enroll in Medicare when they become eligible at 65, they'll face a late enrollment penalty when they eventually sign up. The penalty is about 10 percent of the standard Medicare Part B premium for every year they delayed enrollment. If your parent delays five years, the penalty is 50 percent, and it's permanent. Even if employer coverage is primary, Medicare enrollment is important.

Your parent should tell both the employer plan and Medicare about the other coverage. The employer plan needs to know that Medicare exists so it can coordinate correctly. Medicare needs to know that employer coverage is primary so it doesn't pay more than it should.

Spouse's Coverage: Family Scenarios

If your parent's spouse has employer health coverage, your parent might be covered under that spouse's plan. The coordination between spouses works the same way as any other coordination of benefits. One plan is primary, one is secondary. The primary plan pays first, the secondary plan pays second.

Each person's Medicare is a separate benefit. Your parent's Medicare isn't connected to your parent's spouse's Medicare, even though they're married. Each person has their own Medicare card, their own Part B premium, their own enrollment decision. But when your parent is covered under your spouse's employer plan, that coverage is primary for your parent even though it's secondary for your parent's spouse.

This creates complexity in some family scenarios. Your parent might be in your spouse's employer plan as a dependent. The employer plan primary for your parent's claims. But if your parent's spouse also has to coordinate between employer coverage and Medicare, the rules might be different for the spouse. The employer plan might be primary for the spouse but secondary for your parent. Both need to be in Medicare, and both need to make their own Medicare enrollment decisions.

Medicaid and Medicare: How They Work Together

When your parent qualifies for both Medicare and Medicaid, the two programs coordinate differently than employer coverage and Medicare coordinate. Medicaid covers costs Medicare doesn't cover. Medicaid is secondary, but in a different way than supplemental Medigap coverage works.

Your parent is eligible for Medicaid if their income and assets are below your state's limits. A person can qualify for Medicaid while receiving Medicare if their income is low enough. When both apply, your parent receives Medicare benefits first. Medicaid then covers certain costs Medicare doesn't cover, such as some of the copays and coinsurance that come with Original Medicare.

The process is similar in structure: primary insurance pays, secondary insurance pays after the primary. But Medicaid's role is specifically to reduce out-of-pocket costs for people who can't afford the costs Medicare doesn't cover.

Your parent needs to be enrolled in both programs for the coordination to work. If your parent has Medicaid but doesn't enroll in Medicare, Medicaid might require your parent to enroll in Medicare as a condition of receiving Medicaid benefits. The two programs work together more efficiently when both are active.

Medigap and Medicare: Coordination That's Seamless

Medigap, which is supplemental insurance that covers copays and coinsurance Medicare doesn't, coordinates with Medicare automatically. When your parent has Medicare and a Medigap plan, the coordination is seamless because Medigap is designed specifically to fill Medicare gaps. The doctor submits the claim to Medicare. Medicare pays its share. The doctor's office automatically submits what Medicare didn't cover to the Medigap carrier. The Medigap carrier pays its share. Your parent's out-of-pocket cost is minimized.

There's no confusion here because Medigap isn't really a separate insurance system. It's supplemental coverage designed to work with Medicare. The coordination is built into both programs.

If your parent has both Medigap and employer coverage, which is uncommon, coordination becomes more complex. Typically, a person would have either employer coverage or Medigap, not both. But if this situation exists, you need to clarify with both insurers which is primary. Usually, employer coverage is primary and Medigap is secondary, but the specifics depend on the plans involved.

Making Sure Your Information Is Correct Everywhere

For coordination of benefits to work smoothly, both systems need to know about the other coverage. When your parent enrolls in a new health plan, your parent should tell that plan about existing coverage. When your parent enrolls in Medicare, your parent should tell Medicare about employer coverage or other insurance. When your parent switches employers or loses employer coverage, your parent needs to tell both the new employer plan and Medicare.

Duplicate coverage in the records is one source of billing problems. If Medicare thinks your parent only has Medicare, and the employer plan thinks your parent has both employer coverage and Medicare, the claims might get processed incorrectly. Each system might pay as if it's the only insurance, resulting in overpayment or billing confusion.

If your parent has coverage through an employer, and that employer offers retiree coverage or continuation coverage, the rules about when to enroll in Medicare might be different. If the coverage is from a current employer with 20 or more employees, you might be able to delay Medicare enrollment without penalty. If the coverage is retiree coverage from a former employer, the rules are different. You need to understand your specific situation to know whether you can delay Medicare enrollment or must enroll at 65.

The Practical Reality

In practice, most people have Medicare and nothing else, or Medicare and a Medigap plan, or Medicare and Medicaid. Coordination between these combinations is straightforward. Employer coverage coordinating with Medicare is less common but still manageable. The key is making sure both systems know about each other.

When coordination is set up correctly, your parent doesn't need to think about it. The systems communicate with each other automatically. Your parent receives EOBs from both systems and can see clearly what each paid. Your parent's out-of-pocket cost is reasonable because the plans are working together rather than against each other.

If your parent has multiple insurance policies and something about a bill seems wrong, the first question is whether the policies are coordinating correctly. Call both insurers and confirm that they both know about the other coverage. Ask each insurer which policy is primary. This information clarifies a lot of confusion.

When Multiple Policies Create Confusion

Even when coordination is set up correctly, questions come up. Your parent might receive a bill that seems inconsistent with what the EOB says. The provider might bill for something Medicare says should have been free. The employer plan might deny a claim that Medicare approved. These situations don't mean coordination is broken. They usually mean there's a specific issue that needs clarification.

Start by gathering all the paperwork. Collect the explanation of benefits from Medicare, the explanation of benefits or letter from the secondary insurer, and the bill from the provider. Lay them out and see if you can trace through what happened. Medicare paid this amount. The employer plan was billed this amount. The employer plan paid this amount. Your parent owes this amount. Does the math add up?

If the math doesn't add up, there's a discrepancy worth investigating. Sometimes the issue is that the claims haven't been fully processed yet. The employer plan might not have received the Medicare EOB yet, so they haven't made their coverage determination. Wait a few more days and see if a second EOB arrives.

Sometimes the issue is that the provider submitted the claim with incorrect information. If the provider coded the visit as sick care instead of preventive care, Medicare and the employer plan might have treated it differently than you expected. Call the provider and ask what was billed and see if it matches what happened during your parent's visit.

Sometimes the issue is that one of the insurers made an error. If the employer plan has a rule about what it covers, and the employer plan didn't follow its own rule, the employer plan made an error that needs correction.

Keeping Records for Coordination

Because coordination can get complicated, keep detailed records. After each doctor visit, write down the date, the provider, what was done, and what the provider said the cost would be. Keep this record in one place.

When you receive an EOB, compare it to your record. Does the date of service match? Does the provider match? Does the type of service match? If everything matches, file the EOB with your record for that visit. If something doesn't match, contact either the provider or the insurer to figure out the discrepancy.

Keep all EOBs for at least three years. If a question comes up about whether something was covered or what was paid, you'll have documentation. Medicare keeps records, the insurers keep records, but you need to keep your own copies too because sometimes you need to reference information quickly.

Understanding Out-of-Pocket Limits

One complex aspect of coordination is how out-of-pocket limits work. Your parent might have an out-of-pocket limit with Medicare and a separate out-of-pocket limit with an employer plan. Understanding how both limits work helps your parent know when they've paid their maximum.

Most employer plans have an out-of-pocket maximum. Once your parent's copays and coinsurance add up to that maximum, the employer plan covers everything else at 100 percent. Medicare has a different concept. Medicare Part A has a deductible and daily copays for hospitalization, but not a traditional out-of-pocket maximum like employer plans do. Medicare Part B has a deductible and then your parent pays 20 percent coinsurance.

When the two plans are coordinating, your parent's total out-of-pocket cost is typically limited by whichever plan has the lower out-of-pocket maximum. If your parent reaches the employer plan's out-of-pocket maximum, the employer plan covers everything after that point, and the secondary Medicare coverage kicks in only if there's still cost left over.

This is why understanding which plan is primary matters. The primary plan's rules govern how much your parent pays first. The secondary plan's rules govern what gets paid second.

Moving Forward With Confidence

Having multiple insurance policies doesn't have to be stressful. The coordination system is designed to handle it. Your parent doesn't need to do anything special to make coordination work except tell each insurer about the other coverage and stay enrolled in all the plans.

When a bill or EOB seems confusing, it's usually just a matter of getting clarification. You can always call the insurer or the provider and ask questions. There's no penalty for asking. The staff at insurers and provider offices answer these questions every day.

What matters is that your parent is covered. Having both employer coverage and Medicare might mean your parent pays lower out-of-pocket costs than having Medicare alone. Having Medicare and Medicaid together might mean your parent's copays are covered. Your parent doesn't need to choose between plans or worry that having multiple plans will cause problems. The plans are designed to work together.

How To Help Your Elders is an educational resource. We do not provide medical, legal, or financial advice. The information in this article is general in nature and may not apply to your specific situation. If you have questions about how multiple insurance policies coordinate for your parent, consult with a SHIP counselor, your employer's benefits administrator, or contact Medicare directly for guidance and support.