Primary- and secondary-payer policies

Travel insurance policies come in two flavors: those with primary payers and those with secondary payers. The “payer” is the insurance company. Secondary payers cover claims for overseas medical expenses only after any other insurance company has paid whatever it will pay. Primary medical coverage pays first regardless of any other insurance you may have. 

And here is the question I will be answering in this article: ‘In addition to what’s stated above, what are the differences between primary- and secondary-payer policies?’ 

It turns out that, except for the cost of the insurance and the hassles involved in submitting a claim, there is almost no difference in the assistance you can expect from either of these types of policies following a medical emergency on an overseas trip.

I sent a few questions regarding primary- and secondary-payer policies to the travel insurance broker who fact-checks my articles before publication: Dan Drennen of Travel Insurance Center. 

I’m reproducing our question-and-answer correspondence here, with some minor editing.

Q: Dan, I need to get to the bottom-line differences between primary- and secondary-payer travel insurance policies. The more I’ve discussed the topic with you in the past, the more the differences have blurred. Let’s say I’m a policyholder who ends up having medical expenses while traveling outside of the US. If the amounts are small or modest, would both types of policies require that I pay the bills up front, with the insurance company reimbursing me later? 

A: Yes, with outpatient services, eligible expenses are reimbursed whether you have primary- or secondary-payer coverage. You pay the doctor, clinic or hospital and then submit your claim for reimbursement. (Be aware that insurance companies usually require these records and receipts to be in English.)

Q: What if I incurred major medical expenses overseas? Would my bills be paid up front for me with either primary- or secondary-payer coverage?

A: I don’t know if I can unequivocally state that both secondary and primary providers will react in the very same way, simply because of people’s varying definitions of what they feel qualifies as a “major expense.” For example, for a college kid, that could be $200. But I do believe it is safe to say that the emergency-assistance providers for the travel insurance companies act in pretty much the same way. 

For example, Travel Insured International’s policies provide secondary coverage, but you will find the following policy language within its certificates: “Advance payment will be made to a hospital, up to the Maximum Benefit Amount, if needed to secure your admission to a hospital because of a covered sickness or covered accidental injury.” 

The plans of Travelex Insurance Services are primary coverage, and this language is found within its certificates: “We will assist you in advancement of funds or guarantee payments (up to the Policy limits) to a hospital or other medical provider, if required, to secure your admissions, treatment or discharge.”

Both types of policies would advance the monies to hospitals for treatment, if needed, work with the hospital administrators to confirm benefits, provide direct payment up to that policy’s maximum benefit, if needed, and make arrangements for emergency transportation or medical repatriation all with no expense to the insured, regardless of the policy’s primary or secondary status.

Q: Would both of them require the insurer’s looking into whether or not I have some other coverage for those medical expenses?

A: Yes. With a secondary-payer plan, the travel insurance company will look for any other carriers to pay their share prior to making a reimbursement payment. When examining and paying a claim, an insurance company likes to have each of the other insurance companies’ EOB (Explanation of Benefits) form showing exactly what they paid for and what the insured person is responsible for. 

That’s why it takes longer to get reimbursed with a secondary-payer travel insurance policy. After contacting the secondary payer, you have to get completed EOBs back from any health insurance companies that you have at home.

With a primary-payer policy, the primary carrier will pay you first, but you are asked on the claim form for information about any other health insurance carriers you may have. The primary carrier will then try to collect from the health insurance carriers on the back end if they can. 

Q: Primary coverage generally costs a few dollars more than secondary coverage. What’s the advantage?

A: With the extra paperwork required with a secondary-payer policy, filing and collecting on a claim takes more time and hassle. The secondary-payer travel insurance company will provide you with the necessary blank EOB forms, but the policyholder (you) is responsible for submitting the completed EOBs back to the travel insurance company.

Q: Recently, one of the major insurers switched from secondary-payer coverage to primary-payer, probably for competitive reasons. Why would they bother?

A: Simply for the convenience factor for the customer. 

Q: In summary, how would you compare the services that one could expect to receive with a primary-payer policy versus a secondary-payer policy in the case of a major medical emergency overseas such as the one experienced by ITN subscriber Betty James of Fort Meyers, Florida? [More details below, or see Sept. ’10, pg. 54 — Editor.] Betty was wonderfully well taken care of, to the tune of some $80,000 in medical expenses and evacuation services, per her economical “zero trip cost” policy. She never was sent any bills!

A: In regard to emergency-assistance services, my research has revealed that the companies’ reaction times, coordination of emergency transfers and communications with emergency-evacuation providers, doctors and hospitals will be similar. In summary, the emergency medical services are pretty much the same, whether your policy was with a primary or secondary payer. They all will make sure that you are getting the best care available.

Q: If I am covered by Medicare and incur medical expenses overseas, do I have to obtain and submit an EOB form from Medicare? 

A: Yes, with a secondary-payer policy you will have to do so, but if you have a primary-payer policy the answer is ‘No.’ 

Q: For primary and secondary payers, what is the average amount of time it takes for each to complete a policyholder’s claim?

A: It takes, for example, Travelex Insurance Services, which sells only primary-payer policies, an average of 14 days to complete a claim. That’s with everything being submitted in perfect condition and with every shred of documentation and information requested having been received.

If you have a secondary-payer plan, after initiating a claim, here’s the schedule that you’ll be facing: 

1. Most likely, it will take a week or so to receive copies of the blank EOB form(s) from your secondary-payer travel insurance company.

2. After submitting the form(s) to any health insurance companies that you have at home, it will then take three weeks to a month to get the completed EOB form(s) back.

3. Once you receive the completed EOB form(s) from your at-home health insurance company/companies, you then submit it/them, along with your claim, to the secondary-payer travel insurance company. If everything is in perfect order, you’ll then wait another two to three weeks for your claim to be paid.

So the total amount of time it takes someone with a secondary-payer policy to be paid for a claim is six to eight weeks. If you have access to the Internet, electronic submittals may reduce these times.

Of course, if you didn’t get a waiver of the preexisting-condition clause when you purchased the policy, a medical claim may require an attending physician’s statement or other medical records to determine whether or not the claim is related to a preexisting condition. If so, you are then at the mercy of the doctors’/hospitals’ offices and, depending on their sense of urgency, there could be a significant extension of the processing time. 

To avoid this avenue of delay, get a waiver of the preexisting-condition clause whenever possible when purchasing any travel insurance policy. 

How to purchase a “zero trip cost” policy 

The Betty James Travel Insurance Strategy is named after an ITN subscriber from Fort Meyers, Florida, who experienced an overseas medical emergency. It has three components: (1) buy a “zero trip cost” policy, (2) get a primary-payer policy, and (3) look for high upper limits for medical care and emergency-medical-evacuation services. 

Whether you are applying for travel insurance on the phone, on a written form or online, if you want a “zero trip cost” policy you must specifically request it.

A policy application will have a space where you will insert the cost of the trip. Enter “zero.” This does eliminate the coverage for trip cancellation and trip interruption, but it leaves intact all of the other policy provisions, such as reimbursement for baggage loss, etc. This policy will then provide coverage for medical expenses and emergency medical evacuation at a modest cost for you on your insured trip. 

To assist you in making this choice, see the article “When Is It a Good Idea to Buy a Full-feature Travel Insurance Package?” (June ’10, pg. 53) and the article “Alternatives to Full-feature Travel Insurance Policies” (July ’10, pg. 55). 

Cost comparisons

Prices charged by insurance companies and the coverage provided will vary, of course, but, as I said, primary-payer policies generally will cost a little more than secondary-payer policies.

To demonstrate this, I sifted through a number of primary- and secondary-payer policies for examples of each that covered medical expenses and emergency medical evacuation. It just happened that I found two policies with exactly the same coverage, so I could compare apples to apples.

The following two policies have identical benefits for 30 days for a 75-year-old man buying a “zero trip cost” policy. As you can see in this particular case, the primary-payer policy costs only $12 more than the secondary-payer policy.

Travelex Insurance Services (800/228-9792) has a primary-payer “zero trip cost” policy with an upper-limit cap of $50,000 on medical benefits and providing up to $500,000 in emergency-medical-evacuation coverage. It costs $69.

Travel Insured International (800/243-3174) has a secondary-payer “zero trip cost” policy with medical and evacuation caps identical to the Travelex policy noted above. Cost, $57.

Other “zero trip cost” policies are available with higher limits. For example, at a cost of $65, a CSA Travel Protection (800/711-1197) secondary-payer insurance policy has upper limits of $250,000 for medical expenses and $1,000,000 for emergency medical evacuation (same 75-year-old man, etc.).

What to do? 

Now you know the differences between a primary-payer policy and a secondary-payer policy: modest difference in cost, and great differences in the ease of filing a claim. When inquiring about a policy purchase, be sure to flaunt your newly acquired knowledge by asking, “Is this a primary- or secondary-payer policy?”

Take the advice that I think I remember Al Capp giving in one of the Li’l Abner comic strips some years ago: “You takes your money and you makes your choice.” It’s my recommendation to choose a primary-payer policy.

Prices and features can change. For further information or to purchase travel insurance, consider calling Dan Drennen (402/343-3621) of Travel Insurance Center in Omaha, Nebraska. He’s a Betty James Strategy specialist.

If you can’t find the articles I referenced, see the page that lists my columns.

By the way, all of this that I’ve just pointed out to you — the minor but important distinctions between primary- and secondary-payer policies — I have never seen discussed in this detail in any other travel publication.

I thank ITN subscriber Ron Evans of Corte Madera, California, for his question regarding primary/secondary payers, which prompted this article.

Happy trails!