What is the Coordination of Benefits in Health Insurance?
Coordination of healthcare benefits refers to determining how multiple health insurance plans work together to cover a person’s medical expenses, ensuring that total payments do not exceed the actual cost of care.
Coordination of benefits (COB) must occur when a person holds multiple health insurance policies. If you have two plans, your insurers coordinate to determine which policy is the primary and which is the secondary. Coordination of benefits helps avoid duplicate expenses and keeps healthcare and prescription costs affordable for all policyholders.
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How Common Is Double Coverage?
Healthcare can be complex, and some people may need to enroll in multiple healthcare plans to cover all of their medical needs. It also may come as a matter of convince if both your and spouse have employer-provided care.
Dual coverage through Medicare and a private or group insurer is especially common. More than half of seniors age 65 or older in the U.S. in 2021 held more than one health insurance policy, compared to only 6% of adults aged 19-64 that same year.
Dual benefits are common among the following groups:
- Working couples who each have employer-sponsored health insurance
- People who are still working but are eligible for Medicare
- Someone who holds private insurance and is eligible for Medicaid
- A young adult who is on their parent’s insurance and an employer-provided plan
How Does the Coordination of Benefits Work?
The coordination of benefits still largely follows the guidelines set by the National Association of Insurance Commissioners (NAIC) in 1971 including identifying a primary and secondary plan and using the “birthday rule” to cover dependents with double coverage. The birthday rule is for dependents who have coverage from both parents: the parent with the earlier birthday is the primary coverage, and the other parent is the secondary.
You will experience coordination of benefits if you hold two different insurance plans. Eligibility for COB requires you to keep up on premiums for both plans. Additionally, you must adhere to each policy’s individual deductible, copay, and coinsurance terms. Always confirm your eligibility for each of the respective plans with an insurance agent.
How Is the Primary Payer Determined?
The process of coordination of benefits follows certain universal guidelines to determine a primary and secondary plan.
For example, Medicare typically acts as the primary payer if combined with another type of insurance, and the birthday rule applies to two employer-funded plans. Your healthcare provider can bill your secondary plan to pay the remainder of medical costs only after the primary plan pays its share.
The rules on which insurer becomes the primary payer vary by situation, so it’s good practice to carefully review your policy terms and seek help if you need clarification. Understanding your coordination of benefits will ensure your healthcare costs are covered.
When Is the Coordination of Benefits Necessary?
The following are among the most common scenarios requiring coordination of benefits:
- You have employer-sponsored health insurance and are also covered by your spouse’s employer-sponsored plan
- You have health insurance through a private insurer and are also covered by your spouse’s group health insurance plan
- You and your spouse’s plans both cover your dependent child or children
- You receive Medicare and are also insured through your current employer
Each scenario will have different ways of establishing the primary and secondary plans. It often looks like the examples below.
Private plan and Medicare
Medicare if employer has fewer than 100 employees or private plan if employer has 100+ employees
Medicare if employer has 100+ employees; private insurer if fewer than 100 employees
Private plan and Medicaid
Group plan and COBRA
Private plan and worker’s comp
Private plan and VA insurance
Private plan and military insurance
Military insurance (unless other coverage is through Medicaid)
Employer plan and spouse’s employer plan
Your spouse’s plan
Child covered on your plan and your spouse’s plan
Parent with earlier birthday
Parent with later birthday
Child covered by divorced parents’ plans
Parent with custody
Adult child (until age 26) on private plan and parent’s plan
Child’s own plan
Adult child (until age 26) on their spouse’s plan and their parent’s plan
Their spouse’s plan
Their parent’s plan
The Methods of COB
A COB “method” is used to determine how your primary and secondary plans will share the costs of your medical coverage.
Under the full method, the primary payer covers the claim as if you have no other insurance and applies the costs toward your deductible. After the primary payer has paid its part, the secondary payer determines its share of other out-of-pocket expenses, such as copays or coinsurance. Together, the two plans pay most or all of what your medical care costs.
Non Duplication Method
The non duplication method requires the secondary payer to review claims paid by the primary payer. If the amount paid by the primary payer is equal to or more than the amount owed by the secondary payer, the secondary plan does not pay. However, the secondary plan will pay for applicable costs that the primary payer did not cover.
The traditional method of COB combines the coverage of multiple insurance policies to cover 100% of expenses. This process may require your insurers to work together to decide which will cover certain benefits on a case-by-case basis while still relying on select guidelines like the birthday rule.
The Rules Around the Coordination of Benefits
Several ground rules exist to help govern coordination of benefits, explained below. If neither plan includes coordination of benefit rules, the plan providing coverage for a longer period pays first.
- Employer-sponsored plans: Generally, your employer is the primary payer of your healthcare expenses, and your spouse’s plan is secondary if you both are enrolled in an employer health plan.
- Medicare and Medicaid: Medicare acts as the primary payer if the other insurer is a business employing less than 100 people but is the secondary payer to the insurer of a large company. Medicaid typically only pays after the other insurer covers most of the costs.
- Private health insurance plan and Veterans Administration (VA) benefits: The VA charges health insurance providers for care and services instead of offering traditional health insurance coverage and does not offer secondary benefits. Your private health insurance would be the sole primary payer in this case.
- Workers’ compensation: If you receive both worker’s comp and traditional health insurance coverage, worker’s comp benefits always pay first, followed by your health insurance plan.
- Military coverage (TRICARE): You may only have TRICARE coverage and no other health insurance benefits if you are on active duty; however, TRICARE is considered secondary to all other health plans, except Medicaid, for non-active-duty military service members.
Determining Out-of-Pocket Costs
Insurers must determine how out-of-pocket costs are paid through COB. This process depends on whether your plans use the full COB method or the non duplication COB method. One of your insurers may cover out-of-pocket costs such as copays or coinsurance that remain after paying for services rendered.
Out-of-pocket costs include copays, or a set fee for doctor visits or prescriptions. Your secondary plan may pay copay costs after your primary plan applies its payment toward the deductible. Coordination of benefits must also be applied to other out-of-pocket expenses such as coinsurance or out-of-network providers, facilities, or prescription drugs.
COB In Action
All in All
Your insurers must coordinate benefits if you have multiple health insurance plans. Common scenarios requiring COB include spouses with respective employer-sponsored plans, Medicare beneficiaries still working and receiving group healthcare benefits, and adults up to age 26 who buy their own coverage but also remain on their parent’s plan.
Insurers use various methods and rules to determine the primary and secondary plans. You should review your policies and speak with an expert to ensure you understand your coordination of benefits.