Understanding Which Insurance Plan Pays First

Why would someone want to have more than one insurance plan? It depends on who you ask. You may want additional coverage to make sure you get all the healthcare services you need. Medicare and other insurers, on the other hand, have another vested interest. If you have more than one health plan, they may be able to shift the burden of payment onto the other party.

A man paying his bills on a laptop
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Don't worry. Someone is going to foot the bill, and as long as everyone goes according to plan, it shouldn't be you. You need to understand who is going to pay first and who, if anyone, is going to pay any costs that are left over. This is where Medicare Secondary Payer comes into play.

Why You May Want More Than What Medicare Offers

Medicare provides health care for more than 59.8 million Americans, but that does not mean it necessarily covers everything they need. Consider these common items that Medicare leaves you to pay for out of pocket:

  • Acupuncture
  • Care during foreign travel with rare exceptions
  • Chiropractor services except to correct subluxation of the spine
  • Corrective eye lenses (contact lenses or eyeglasses)
  • Custodial care (bathing, dressing, toileting)
  • Dentures
  • Foot care
  • Hearing aids
  • Long-term nursing home care
  • Non-emergency transportation with rare exceptions
  • Over-the-counter medications, vitamins, and supplements
  • Prescription medications in certain categories
  • Walking canes for the blind

This is not an exhaustive list, of course, but it is no wonder some people pursue other health coverage to fill the gap. While there is the option of Medicare Supplement Plans, also known as Medigap plans, to help cover Medicare's out of pocket costs (copayments, coinsurance, and deductibles), these plans do not actually add additional health benefits to your coverage. Instead, many people turn to other insurance like employer-sponsored health plans, military benefits, and retiree benefits to get the coverage they need.

Medicare and Employer-Sponsored Health Plans

The retirement age for Social Security benefits used to be 65 years old, the same age that you become eligible for Medicare. That all changed in 1983 when Congress passed legislation to increase the retirement age based on your birthday. For people born between 1943 and 1954, the retirement age is now 66 years old. The retirement age gradually increases to a maximum of 67 years of age for those born after 1960. Retiring earlier than this designated age will result in your getting lesser payments from Social Security.

The end result is that many people are working longer to maximize their retirement funds. Working gives them access to health care through their employers that they may choose to continue alone, continue while also signing up for Medicare, or cancel and replace with Medicare.

Your employer-sponsored health plan can cover your spouse and dependents, whereas Medicare covers you alone. These plans may also cover services that Medicare does not. If you are eligible for a Special Enrollment Period, you may be able to defer enrolling in Medicare without facing late penalties when you finally do sign up. This could save you considerable dollars since you would not have to pay the premium for two different plans.

When you have both Medicare and an employer-sponsored health plan, Medicare will pay first only in certain circumstances. The decision is based on your age, whether you have end-stage renal disease (ESRD) or another disability, and how many people work for your employer.

If you do not meet the criteria for Medicare to pay first, your employer-sponsored health plan will be billed instead. What they do not pay for will then be billed to Medicare. Medicare will pay for healthcare services that it would normally cover as long as it sees them as medically necessary.

Medicare will pay first

Medicare will pay second

If you are 65 years or older -AND- your employer has less than 20 full-time employees

If you have a disability that is not ESRD - AND- your employer has less than 100 full-time employees

If you have ESRD -AND- your 30-month coordination period for ESRD has ended

If you are 65 years or older -AND- your employer has more than 20 full-time employees

If you are 65 years or older -AND- you are both self-employed and covered by another employer that has more than 20 full-time employees

If you have a disability that is not ESRD - AND- your employer has more than 100 full-time employees

If you have ESRD -AND- you are in the 30-month coordination period for ESRD

Medicare and COBRA

Thanks to the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 you can continue your employer-sponsored health plan after you leave your job. The law requires employers of 20 or more full-time employees to offer continued access to their health plan for a period of time, usually 18 months, after your job ends by way of termination or a layoff. The duration of COBRA coverage may be extended up to 36 months if certain conditions are met.

Medicare and COBRA have a tricky relationship. If you already have COBRA when you enroll in Medicare, your COBRA coverage will likely end on the date you enroll in Medicare. If you already have Medicare when you become eligible for COBRA, you are allowed to enroll in COBRA.

If you have COBRA and become Medicare-eligible during that time, you have an important decision to make. Enrolling in Medicare means you will lose your COBRA benefits for yourself, though you may be able to continue that coverage for your spouse and dependents. If you choose to delay enrollment in Medicare, take note that you will be faced with late penalties when you finally do sign up. COBRA benefits do not qualify you for a Special Enrollment Period with Medicare.

Medicare will pay first Medicare will pay second

You are 65 years or older.

You have a disability that is not ESRD

Your 30-month coordination period for ESRD has ended

You are in the 30-month coordination period for ESRD

Medicare and Worker's Compensation

Worker's compensation works a bit differently than does your employer-sponsored health plan. It is a state-mandated agreement between you and your employer that states you will not sue them as long as they cover your medical expenses for any on-the-job injuries. When you accept worker's compensation benefits, you cannot seek punitive damages for that injury. If you decline those benefits, you can sue for damages like pain and suffering.

Whereas you pay premiums for your employer-sponsored health plan, worker's compensation premiums are paid for by your employer. There are no costs to you. After an injury, you place a claim and an evaluation takes place to determine whether or not your injury was a consequence of your workplace environment.

It could be the case that worker's compensation denies your claim or only partially covers it based on a pre-existing condition. For example, if you have chronic back pain but your back pain gets worse after an injury, it may become difficult to determine how responsible your employer was for your symptoms. Medicare steps in at this stage to make first payments.

Worker's compensation may reimburse your medical expenses at the time they occur or may provide a one-time settlement. Some of these funds can be placed in a Workers’ Compensation Medicare Set Aside Arrangement (WCMSA), an arrangement intended to reserve funds for future treatment of any injuries that result in long-term complications. Medicare will not pay until funds in the WCMSAA are exhausted.

Medicare will pay first Medicare will pay second

Your claim is denied by worker's compensation.

Your claim is only partially covered by worker's compensation due to a pre-existing condition.

Your claim is covered by worker's compensation.

Medicare and Military Health Benefits

If you are a veteran, an active-duty service member, or a retired member of the uniformed services you may be entitled to health benefits from the Veteran's Administration (VA) or a program called TRICARE. These benefits coordinate with Medicare in a unique way.

First and foremost, VA benefits will only cover care received in a VA-authorized facility.

Second, Medicare will not pay for care paid for by VA benefits and vice versa. There is not an issue of primary versus secondary payer here.

Third, TRICARE and Medicare work in concert. Medicare acts as the primary payer for Medicare-covered services and TRICARE covers any Medicare deductibles or coinsurance amount that relates to those services. When a service is not covered by Medicare, TRICARE will act as the primary payer.

Depending on the care you receive, it is possible to have both Medicare and TRICARE acting as primary payer at the same time.

Verywell Health uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.

By Tanya Feke, MD
Tanya Feke, MD, is a board-certified family physician, patient advocate and best-selling author of "Medicare Essentials: A Physician Insider Explains the Fine Print."