The birthday rule is a method Created by the National Association of Insurance Commissioners (NAIC that many insurance companies use to determine when a plan is primary or secondary for a dependent child covered by both parents’ insurance plans.  The birthday rule is a widely-accepted insurance claims practice that is endorsed by many states. It is not a law.

Key Takeaways:

• Birthday rule is used by insurance companies to coordinate benefits for dependent children’s healthcare services.
• According to this rule, the parent whose birthday comes first in a calendar year has the primary coverage for the child.
• It falls under coordination of benefits (COB) rules, which resolve coverage order when individuals have multiple insurance plans.
• COB and birthday rule ensure insurers pay their share without overpaying for services.
• The birthday rule is applicable to dependent children only and doesn’t apply to adults.

How does the birthday rule work?

The birthday rule determines the order that the insurance companies will pay benefits when a dependent child is covered by two health insurance plans. The health insurance plan of the parent whose birthday month and day occurs earlier in the calendar year is primary. The health insurance plan of the parent whose birthday month and day occurs later in the calendar year is secondary. The date of birth is the determining factor — not the year — so it doesn’t matter which spouse is older.

Like most rules, the birthday rule has exceptions, which include:

• If both parents share the same birthday, the parent who has been covered by his or her plan longer provides the primary coverage for the children.
• If one parent is currently employed and has health insurance through a current employer, and the other parent has coverage through a former employer (e.g., through COBRA), the plan belonging to the currently employed parent would be primary for the children.
• In the case of divorce or separation, the plan of the parent with custody generally provides primary coverage. This order of payment can be altered by a court-issued divorce decree or by agreement, but the parents have to notify the insurance companies of the decree or written agreement.

What are the consequences of the birthday rule?

Following the birthday rule, the primary insurance plan pays first, acting as if it is the sole insurer of the dependent child. The secondary insurance company then pays toward the balance of the bill that the primary insurer did not pay, reducing or sometimes even eliminating out-of-pocket costs for covered services.

It is important to understand, however, that neither insurance plan will pay for medical care it does not cover. Each plan will apply its benefits and benefit restrictions. Parents need to be aware of one common restriction:  most health plans will not cover the deductible or copayment of another plan any more than they would pay their own plan’s deductible or copayment.

The birthday rule simply establishes the order of insurers’ benefit payments on behalf of a dependent child who is dually insured. But the order in which insurance companies will pay benefits can have far-reaching consequences on out-of-pocket costs to the insured.

Examples of the birthday rule

The following examples show how the birthday rule can affect the benefits a child receives and the parents’ out-of-pocket costs.

Scenario: Child incurs $50,000 in medical expenses related to a serious illness. The child is dually insured by Mom’s employer group health plan and Dad’s employer group health plan. Mom’s birthday is in April and Dad’s birthday is in October. Mom’s health plan is considered primary and Dad’s plan is secondary for Child.

Example #1

• Mom’s plan has a $500 deductible that must be paid before the plan pays 80% of covered expenses.
• Dad’s plan has a $1,000 deductible that must be paid before the plan pays 90% of covered expenses.  Dad has met the $1,000 deductible with medical expenses earlier in the year.
• Dad’s plan will not pay the $500 that represents Mom’s plan deductible. Dad’s plan pays $9,000 (90% of the remaining $10,000 amount).
• Mom and Dad owe $1,500 out-of-pocket for Child’s $50,000 medical expense.

Example #2

• Mom’s plan has a $15,000 annual deductible that must be paid before the plan pays 80% of covered expenses.
• Mom’s plan applies the $15,000 deductible, which has not be paid, and pays $25,000, (80% of the expense less the $15,000 deductible).
• Dad’s plan will not pay the $15,000 that represents Mom’s plan deductible. Dad’s plan pays $9,000 (90% of the remaining $10,000 amount).
• Mom and Dad owe $16,000 out-of-pocket for Child’s $50,000 medical expense.

Example #3

• Mom’s plan has a $500 annual deductible that must be paid before the plan pays 80% of covered expenses.
• Mom’s plan pays $39,500 (80% of the bill less the $500 deductible), leaving a balance of $10,500 in unpaid medical claims.
• Dad’s plan has a $500 annual deductible that must be paid before the plan pays 100% of covered expenses delivered by its HMO network of physicians and hospitals. The plan only covers emergency care received from health providers who are outside its network.
• Dad’s plan pays $0 because Child’s care was not emergency care and was received from health providers who did not participate in the plan’s HMO network.
• Mom and Dad owe $10,500 out-of-pocket for Child’s $50,000 medical expense.

While insurance plan benefits vary, these examples illustrate how the birthday rule’s order of payors can significantly impact out-of-pocket costs.  If the primary insurance plan has a high deductible or if the two plans use provider networks with different health providers, parents may face unexpected medical expenses. The monthly premium costs to have both plans may also simply not be worth the level of protection dual coverage provides. In this case, it may be practical to drop the plan with the lower benefits, or at least remove dependents from the plan coverage.

Tips for expectant parents and newborn coverage

1. Most insurance companies automatically provide newborn coverage for the first 30 days after birth.
2. The birthday rule is applied when coordinating benefits if a newborn experiences medical complications.
3. This can lead to higher out-of-pocket costs if the primary insurer offers lower benefits than the secondary one.
4. Legislation, H.R.4636 – Empowering Parents’ Healthcare Choices Act of 2021, aims to address this issue by providing a 60-day period for parents to choose primary coverage and limiting the birthday rule’s application.
5. The bill has not become law, so expectant parents should proactively contact their insurance carriers to determine if the birthday rule applies and make informed decisions about their insurance plans.
6. eHealth’s licensed agents can provide assistance and information about the birthday rule and health insurance needs. Check out and compare Individual and Family Health Insurance plans today.
7. Individuals seeking health insurance can use eHealth’s tools to compare plans and get advice from licensed agents, all free of charge and without any obligation to purchase insurance.

This article is for general information and may not be updated after publication. Consult your own tax, accounting, or legal advisor instead of relying on this article as tax, accounting, or legal advice.