Beware false security in duplicate health benefit plans

A reminder for health benefits enrollment season:

Enrolling in two overlapping health plans will increase total premium cost but may not increase the amount of coverage.

Current trends seem to indicate that more individuals are enrolling in duplicate health plans. This can happen when two spouses enroll for family coverage under two different employer plans, when one person has two jobs that offer health benefits (seemingly more common now), or sometimes in divorce cases where an ex-spouse is ordered to provide health coverage. While there is nothing wrong with this duplicate overage, it creates a false impression of coverage and may, in fact, be a rip-off of employer and employee’s premium expense.

Under both federal ERISA and states’ laws, an insurer who learns that a covered group member has overlapping primary coverage is eligible to take corrective action. In some policies that action might include the right to exercise retroactive termination of coverage and denial of all claims. But a more common response in modern health plans is to reduce benefits by the amount allowable under the other policy. This is called “coordination of benefits”. There is, however, no adjustment in premiums for the reduced amount of coverage. In this case the employer/employee is paying a full premium for a higher amount of coverage but receiving only a small benefit. This is a common provision of a group insurance policy.

Stated another way, from a consumer’s perspective, the practice of holding overlapping group insurance policies with coordination of benefits provisions could be viewed as a form of insurance scam against unwitting policyholder employers and their employees. It provides the illusion of a benefit that, in reality, does not exist.