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  • Writer's pictureNicholas Fogelson, MD

Secondary Insurance is Broken about how it makes no sense to buy secondary insurance coverage. The reason for this is because the secondary policy costs a full premium amount, but the secondary insurer is exposed to dramatically less underwriting risk than they would be if they were the primary insurer. They are basically getting a mostly free ride on the primary insurer yet they collect 100% of the premium.

Well today I found an extreme example of this, and it takes the cake.

A patient consults with me who has Medicare coverage as her primary coverage, because of longterm disability issue unrelated to her primary reason for seeing me. She also has secondary coverage with Federal BC/BS. I do not take Medicare, and and also out of network for Federal BC/BS. That said, Federal BC/BS is usually an outstanding payer of out of network claims and if that were her primary insurance I'm sure I could care for her at minimal out of pocket cost to her.

But because of the total BS of the primary / secondary system, her Federal BC/BS is basically playing at no risk. They get to let Medicare pay any claim first, and then set the rates at ridiculously low Medicare rates. Then they will come in behind and pay what Medicare didn't pay.

If they were primary, they would be exposed to an entire out of network surgical claim likely priced at usual and customary rates. As a secondary payer, they are exposed to the leavings of Medicare. And since I do not take Medicare, those leavings are exactly nothing since Medicare would allow nothing.

How does this make any sense? Her husband's employer is paying full freight for a very good federal BC/BS plan that typically would pay claims very well, but as it has the advantaged position of being behind federal Medicare, it basically has no underwriting risk as all, and furthermore basically provides no benefit to the insured.

Something is very wrong with this. Not sure how to fix it, but something is very wrong with it.

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