Group Insurance: What Happens if I’m Double Covered?

Posted on June 16, 2009 and updated December 4, 2018 in Group Benefits, Life Insurance Canada News 3 min read
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When both spouses work outside the home it’s almost certain that the couple is over-insured.

This happens when each spouse is insured through an employee group benefit plan at work, but they are also named as dependents on each other’s respective plans. There’s nothing to fear though, this problem is typically remedied by each insurance company coordinating the insured’s benefits.

Coordination of Benefits gives insured individuals as much coverage as possible, while at the same time eliminating over-insurance. They do this by determining which insurance company will pay as the Primary Insurer and which will pay as the Secondary Insurer, with the provision stating that the insurer covering the employee who actually has the claim, automatically becomes the Primary Insurer. The primary company must pay as much of the claim as its payout limits allow.

Coordination of Benefits gives insured individuals as much coverage as possible, while at the same time eliminating over-insurance.

Confused? Let’s clear it up with the following example:

Husband and wife Fred and Lilly work at separate companies, but have double coverage since they are each covered by their individual company’s group plans and have named each other as dependents. If we assume that Fred incurs $1,000 in covered medical expenses resulting from an illness, by the Coordination of Benefits provision, his insurance policy becomes the primary. Fred’s healthcare plan includes Major Medical Coverage and a $100 deductable, so the primary insurer (Fred’s insurance company) deducts the amount (which Fred must pay) leaving $900. The primary insurer will then pay their portion of co-insurance. Assuming his insurance company calls for an 80%/20% split, the insurer with pay 80% of the $900 ($720), which leaves $280 unpaid (the $100 deductible and the leftover $180).

Fear not, this is where Lily’s employee coverage kicks in. Her insurance covers Fred as a dependent, making it Fred’s Secondary Insurer. The Secondary Insurer will pay everything the Primary Insurer does not, within their own policy limits. Therefore, (assuming Fred’s remaining $280 is within those limits) Lily’s insurance provider will pay the rest in full. Meaning, thanks to double coverage, Fred’s expenses are fully reimbursed. However, he’s still prevented from receiving more than his actual out-of-pocket costs.

Coordination of Benefits helps insurance companies keep their premiums in line, by insuring that no single individual is reimbursed more than 100% of the cost(s) of the services rendered, or benefits received.

If you need further help with your group benefits needs, please don’t hesitate to contact us at 1.866.899.4849.

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