Coordination of Benefits and Claims

Which Plan Pays First?

Coordination of benefits (COB) addresses overlapping coverage, such as a group plan and a spouse's group plan.

• One plan is primary; the other is secondary.
• The governing contracts and applicable rules determine the order.
• A secondary plan does not automatically pay every unpaid balance.

How do you use the first applicable order rule?

Actual law and plan terms control.

• A specified supplemental layer may be excess coverage, designed to pay above stated base benefits.
• When the following ordered rules apply, use the first one that decides:

1. Your own coverage versus dependent coverage: Coverage as an employee, member, subscriber, policyholder, or retiree generally pays before coverage as someone else's dependent.
2. A child covered under parents' plans: The earlier birthday by month and day is generally primary. For matching birthdays, use the plan covering its parent longer. A known court decree assigning responsibility can change the result.
3. Active versus retired or laid-off coverage: If earlier rules do not decide, active coverage generally pays first.
4. Ordinary versus continuation coverage: Ordinary employee, member, subscriber, retiree, or dependent coverage generally precedes Consolidated Omnibus Budget Reconciliation Act (COBRA) or other continuation coverage.
5. Length of coverage: If still unresolved, longer continuous coverage generally comes next.

A supplemental benefit can instead be written as excess over specified base hospital or surgical coverage. That contract design is separate from the common order rules.

How Should the Claim Move Between Plans?

The member or provider sends the claim to the primary plan first.

• Under this coordination method, the primary plan calculates its benefit under its own terms as if no secondary coverage existed.
• After the primary plan explains its payment, the claim and explanation of benefits (EOB), the plan's claim-processing record, can be sent to the secondary plan.
• The secondary plan applies its own deductible, the amount that must be met before it pays certain covered costs, exclusions, which remove stated services or losses from coverage, and payment limits under its contract.

Coordination aims to avoid paying more than eligible expenses.

• It does not mean the person cannot be covered by two plans.
• It means each plan applies its rules in a defined order.

How Much Can the Secondary Plan Pay?

• Use the applicable contract's formula and definition of eligible or allowable expense, the expense considered for payment and coordination under its terms. Provider charges, plan-recognized allowed amounts, and amounts already paid are different figures.
• Under one common coordination method, the secondary plan calculates the benefit it would pay as if no other health coverage existed. It applies that amount to allowable expense left unpaid by the primary plan and can reduce payment so combined benefits do not exceed 100% of the total allowable expense for the claim.
• If the contracts cap combined reimbursement at the eligible expense, add both payments and compare the total with that limit. Ask the plans to reconcile an overpayment.
• A fixed cash benefit, such as hospital indemnity, follows its own benefit terms. It can pay a scheduled amount even when medical-expense insurance has reimbursed the treatment cost.

Example: Both plans recognize a $900 expense, all deductibles are met, and the primary pays $600. The secondary would otherwise pay 50% but its contract caps payment at the unpaid eligible expense.

1. Calculate the secondary's benefit before coordination: $900 × 50% = $450.
2. Find the unpaid eligible expense: $900 − $600 = $300.
3. Apply the stated cap: the lower of $450 and $300 is $300.

Example: The contracts cap combined reimbursement at an $800 eligible expense, but the plans paid $600 and $300.

1. Add the payments: $600 + $300 = $900.
2. Compare with the expense cap: $900 − $800 = $100 above the limit.
3. Ask the plans to reconcile that overpayment under their terms.

Exam Tip: Gotchas

• Coordinate expense reimbursements under the applicable terms. Do not assume a scheduled cash benefit uses the same expense cap.

What Should You Check on the Claim Record?

A claim includes information about the service, provider, insured, and charge.

• The plan checks whether coverage was active, the service was covered, the provider and service met plan rules, and the required documentation was submitted.
• It then applies allowed amounts and cost sharing, the member's share of covered-care costs.

An EOB reports how the insurer processed a claim.

• It may show the billed amount, allowed amount, insurer payment, and member responsibility.
• When a secondary claim asks what another insurer paid, report the primary insurer’s payment. Do not substitute the provider’s billed charge, the allowed amount, or the member’s share.
• To investigate a service mismatch, compare the provider’s itemized bill with the plan’s claim detail. A payment total or deductible balance alone may not explain which service lines were processed.
• It is not a bill.
• The member should compare it with provider billing and contact the plan if the claim seems incorrect.

How Does Subrogation Differ from Coordination?

Subrogation gives an insurer a recovery right under contract or law after paying a covered loss. A responsible third party is another person or organization that may owe compensation for the loss, such as an at-fault driver in an accident.

• For example, if a health plan pays treatment after an accident caused by another party, the insurer may seek recovery from that party or its liability insurer.

Subrogation is different from coordination of benefits.

• Coordination orders payment between plans; subrogation seeks recovery from a third party responsible for the loss.

Exam Tip: Gotchas

• Primary coverage pays first; secondary coverage considers the claim afterward.
• Subrogation concerns recovery rights after payment; coordination determines the order of plan payments.

What Should You Check on Exam Day?

• Which plan is primary and which considers the claim second?
• Does the issue involve payment order between plans or recovery from a responsible third party?