What is Coordination of Benefits (COB)?

When a person is covered by two health plans, coordination of benefits is the process the insurance companies use to decide which plan will pay first for covered medical services or prescription drugs and what the second plan will pay after the first plan has paid.

 Why is Coordination of Benefits important?

 Insurance companies coordinate benefits for a few reasons:

• To avoid paying twice for the same covered service. Duplicate payments could result in paying more than the service cost!
• To determine which plan is primary, which means the insurer pays for covered services first according to the benefits provided by the plan. The other insurer pays secondary, which means it pays the remaining unpaid balance according to the benefits provided by its plan.
• To help keep the cost of health and prescription drug costs affordable.

 How Coordination of Benefits works

Coordination of benefits allows two insurance carriers to determine their fair share of the cost for covered services. Your out-of-pocket cost for services is limited to the amount, if any, that remains unpaid by the insurers. Covered services refers to the medical care, equipment, services, or prescription drugs the insurers include in their plan benefits.

Primary and secondary payers

In today’s world of dual-income, working couples, working Medicare beneficiaries, and the ability to extend dependent coverage to children up to age 26, dual health coverage occurs frequently. Understandably, most health plans have rules to determine which plan will pay primary and which plan will pay secondary. These rules are typically outlined in the “coordination of benefit” provisions in your summary plan description, the document that explains your benefits and how they are determined.

Order of benefit determination

The National Association of Insurance Commissioners (NAIC) released its first set of model coordination of benefits guidelines in 1971. This model was to serve as an example for employers and state legislatures to adopt as a consistent set of coordination of benefits rules. Many plans use the model coordination provisions. Highlights of the model coordination of benefits guidelines follow.

• Most coordination of benefit provisions include the following general rules for employees and spouses covered by two group health plans:  The plan that covers the individual as an employee will generally pay primary and the plan that covers the individual as a dependent will generally be the secondary payor.
• The “birthday rule” is common for children covered by two employer group health plans. In this situation, the plan covering the parent whose birthday falls first in the year will pay primary on the children; the other parent’s plan becomes the secondary payor.
• If a person has COBRA continuation coverage or any state-mandated continuation of coverage, the continuation coverage is secondary.
• If neither plan spells out coordination of benefit rules, the plan that covered the person for the longer time is usually primary.

 Scenarios requiring Coordination of Benefits

Dual health insurance coverage

Dual health insurance coverage occurs when an individual is covered under both their own insurance plan and their spouse or partner’s plan. In this scenario, the individual’s own insurance plan is considered the primary payor, while the insurance plan of their spouse or partner serves as the secondary payor. This arrangement helps ensure that the individual’s primary plan covers the majority of the expenses, with the secondary plan potentially covering additional costs that may remain after the primary plan’s benefits have been exhausted.

You (or your healthcare provider on your behalf) submit a medical or prescription drug claim to your own insurance plan first. Your insurance plan pays its portion of the claim. If your insurance plan doesn’t cover the full claim amount, you can submit the claim to your spouse or partner’s insurance plan, with the explanation of benefits statement from your insurance plan, requesting payment for the remainder of the expense.

When submitting a claim to your partner’s insurance, you may not be reimbursed for the entire remaining balance. This will depend on the amount of coverage offered by your partner’s insurance plan.

Health coverage for dependents

When it comes to health coverage for dependents, it’s important to understand the dynamics of dual insurance coverage. In many cases, your children may be covered by both your health insurance plan and the plan held by your spouse or partner. In most cases, the health plans will perform coordination of benefits using the “birthday rule.” This means if your birthday month occurs earlier in a calendar year than your spouse or partner’s, your plan will be primary and the other plan will be the secondary payor. If you share the same birthday month as your spouse or partner, the plans will usually assign the order of payors so that the plan that has provided coverage the longest time is the primary payor and the other plan is secondary payor. If you and your spouse are divorced, the custodial parent’s health plan is usually primary, unless a court decree specifies the parent who is responsible for the children’s health insurance.

Medicare and other health insurance

Navigating Medicare and other health insurance options can be complex, especially when multiple sources of coverage are involved. If you’re eligible for Medicare and also have an employer-sponsored group health plan, it’s important to understand how these plans coordinate benefits.

Your employer’s group health plan is the primary payor if the company employs 20 or more people. It receives your claim first, determines benefits, and pays according to the plan’s benefits. Medicare is the secondary payor, and determines what portion of the balance of the bill, if any, Medicare will pay. In this hypothetical situation, you have Medicare Part A, which provides coverage for hospital services. If you submitted a claim for a physician office visit, Medicare Part A would deny the claim and pay nothing because it does not cover physician office exams. (Medicare Part B does.) If you submit a claim for a hospital stay, Medicare Part A will determine what portion of the balance of the bill, if any, is payable according to the Medicare Part A benefits, which typically includes a daily copayment for hospital stays.

COBRA and employer coverage

COBRA insurance and employer coverage play a significant role in maintaining health insurance continuity during transitional periods. Let’s delve into a scenario that highlights how COBRA and employer coverage interact:

Imagine you’re an employee at a company with a robust group health insurance plan, covering you and your family. Unfortunately, circumstances change, and you find yourself facing a job loss. Losing your employer-based health coverage is a concern, especially when it comes to protecting your family’s health needs. This is where COBRA (Consolidated Omnibus Budget Reconciliation Act) comes into play.

COBRA allows you and your eligible family members to continue the same group health coverage you had while employed, albeit at your expense. In this scenario, you decide to elect COBRA coverage to ensure uninterrupted access to healthcare services for your family.

 Steps to navigate Coordination of Benefits

Coordinating benefits across multiple insurance plans can seem daunting, but following these steps can help streamline the process and ensure you receive the maximum coverage available:

1. Review Policy Documents: Begin by thoroughly reviewing the policy documents of all the insurance plans you’re covered under. Understand the coverage details, limitations, and any coordination of benefits guidelines outlined in each policy. Some policies may not be bought or sold if another overlapping policy is in effect.
2. Notify Insurance Providers: Inform all your insurance providers about the existence of other insurance coverage. This helps initiate the coordination process and ensures that each provider is aware of potential secondary coverage.
3. Submit Claims and Documentation: When you receive medical services, ensure you follow the standard procedure for submitting claims to your primary insurance provider. Once the primary claim is processed, you’ll receive an Explanation of Benefits (EOB) detailing what was covered and what remains. Keep a copy of the EOB for reference.
4. Notify Secondary Insurance: If you have secondary insurance, inform them about the primary insurance’s coverage determination. Provide them with a copy of the EOB from the primary provider, along with any necessary claim forms or documentation they require.
5. Submit Secondary Claim: Fill out any required forms and submit a claim to your secondary insurance provider. Include all relevant documentation, such as the primary EOB, itemized bills, and receipts. Make sure to adhere to the secondary insurance’s submission guidelines.
6. Coordination with Healthcare Providers: Keep your healthcare providers informed about your dual coverage. They may need to submit claims to both insurance providers directly, following the coordination guidelines.
7. Monitor Reimbursements: Keep track of reimbursements from both insurance plans. Compare the reimbursement amounts to ensure they align with the policy terms and the coordination of benefits process.
8. Address Any Discrepancies: If you encounter any discrepancies or issues during the coordination process, reach out to both insurance providers for clarification. They can help resolve any questions or concerns you may have.

Remember, effective communication and organization are key when navigating coordination of benefits. Being proactive in providing information and documentation to both insurance providers will help ensure a smoother process and optimize your coverage across all plans. When buying insurance, be aware that often you are not permitted to have more than one policy in effect to insure the same risks.

 Potential challenges and solutions

Navigating coordination of benefits can present various challenges, but being aware of these issues and implementing solutions can help you overcome them effectively:

• Delayed Claims Processing:
  • Challenge: Claims processing can sometimes be delayed due to the coordination process between primary and secondary insurers.
  • Solution: Stay proactive by submitting all required documentation promptly. Follow up with both insurance providers to ensure claims are being processed, and address any delays promptly.
• Discrepancies in Benefit Payments:
  • Challenge: There might be discrepancies in how benefits are calculated and paid between primary and secondary insurers.
  • Solution: Review Explanation of Benefits (EOB) from both insurers carefully. If there are inconsistencies, contact each provider to resolve the discrepancies and ensure accurate payment.
• Resolving COB Disputes:
  • Challenge: Disputes may arise between primary and secondary insurers about who should pay first or how much should be covered.
  • Solution: Communicate openly with both insurers to understand their policies and resolve any disputes. If necessary, involve your healthcare provider to provide documentation and clarification.
• Complex Coordination Guidelines:
  • Challenge: Understanding and following the coordination guidelines of multiple insurance plans can be complex.
  • Solution: Educate yourself about the coordination of benefits rules outlined in each policy. Contact the insurers for clarification if needed. Consider seeking assistance from a healthcare advocate or insurance specialist.
• Overlapping Deductibles and Out-of-Pocket Costs:
  • Challenge: Coordinating benefits may result in overlapping deductibles or out-of-pocket costs.
  • Solution: Plan ahead and budget for potential overlapping costs. Understand each plan’s deductible and out-of-pocket limits to make informed decisions about your healthcare expenses.
• Limited Provider Networks:
  • Challenge: Different insurance plans may have varying networks of healthcare providers, leading to potential restrictions.
  • Solution: Whenever possible, choose healthcare providers who are in-network for both insurance plans to minimize complications and maximize coverage.
• Communication and Record-Keeping:
  • Challenge: Ensuring consistent communication between insurers and keeping track of claims and payments can be challenging.
  • Solution: Maintain organized records of all communications, claims, EOBs, and payments. Use digital tools or apps to track and manage your insurance information.

 COB and health insurance: Frequently asked questions

What is the purpose of COB?

COB (Coordination of Benefits) ensures that multiple insurance plans work together to avoid overpayment and ensure accurate coverage for a policyholder’s medical expenses.

How do I determine which insurance is primary?

The “birthday rule” is often used: The primary insurance is the one held by the person whose birthday falls earlier in the year. In cases where a person has coverage as a dependent, their own coverage is typically primary.

Can COB impact out-of-pocket costs?

Yes, COB can impact out-of-pocket costs by coordinating coverage between multiple insurance plans, potentially reducing the amount you need to pay.

What happens if claims are overpaid?

If claims are overpaid due to COB, the excess amount may need to be reimbursed to the insurance company that made the overpayment.

How does COB apply to different types of insurance?

COB applies to various types of insurance, including employer-sponsored plans, individual health insurance, Medicare, Medicaid, and more. The coordination process ensures that benefits are optimized across all relevant plans.