COB stands for coordination of benefits, which is the process that insurance companies use to determine how to cover your medical expenses when you have more than one health insurance plan. In this article, we will explain what COB is, why it is important, how it works, and how to navigate it.
Understanding Coordination of Benefits (COB)
Definition and Purpose
When you have more than one health insurance plan, the process by which your insurance companies decide how to fund your medical bills is called coordination of benefits. It makes it clear who is responsible for paying what by identifying the main and secondary payer plans. In addition to preventing overpayment or multiple payments, it guarantees accurate claim processing.
Why is it Important?
Insurance companies coordinate benefits for a few reasons:
- To avoid double-paying for covered services. Duplicate payments may exceed service costs!
- To decide which plan is primary, meaning the insurer pays for covered treatments first based on plan benefits. The other insurer pays secondary, according to its plan benefits, for the outstanding sum.
- For economical health and prescription drug prices.
How Does it Work?
COB regulations order insurance plans to pay for covered services when an individual has multiple plans. The primary plan processes claims first and pays its share of coverage. After reviewing the claim, the secondary plan would pay the balance within its coverage limits. Say your doctor charges $250 for an appointment. Primary health insurance may pay most of the bill. Say $200. Your secondary plan pays the remaining $50. To avoid overpaying or duplication, plans will not pay more than 100% of the medical service(s), therefore the overall benefits shouldn’t exceed the treatment cost. You may also pay deductibles, copayments, and coinsurance.
Primary and Secondary Payers
Order of Benefit Determination
In 1971, the National Association of Insurance Commissioners (NAIC) published its first model coordination of benefits guidelines. Employers and state governments could use this model to coordinate benefits rules. Model coordination is used in many plans. Model coordination of benefits guidelines highlights follow.
Most coordination of benefits provisions includes the following general rules for employees and spouses covered by two group health plans:
- Employee plans pay primary, while dependent plans pay secondary.
- Children covered by two employer group health plans often follow the “birthday rule”. The plan covering the parent whose birthday occurs first in the year pays primary on the children; the other parent’s plan pays secondary.
- If a person has COBRA or state-mandated continuing coverage, it is secondary.
Scenarios Requiring COB
There are various scenarios in which someone might have two health insurance plans. Here are some everyday situations and how to determine which plan is most likely to be the primary or secondary payer:
- You’re covered under your own employer-sponsored insurance plan and covered as a dependent on your spouse or partner’s insurance plan. Your employer is the primary payer and your partner’s plan is the secondary payer.
- Your children are covered under your insurance plan and your spouse or partner’s insurance plan. Whichever parent has the earliest birthday in the calendar year is the primary payer and the parent with the later birthday is the secondary payer.
- You’re divorced or separated and your children are covered under your insurance plan and your former spouse or partner’s insurance plan. Whichever parent has custody of the child is the primary payer; if custody is joint, follow the birthday rule. The new legal spouse of the parent with custody or the parent without custody of the child is the secondary payer.
- Your child is under age 26 and has their policy and is also dependent on your policy. The child’s plan is the primary payer and your plan is the secondary payer.
- You’re covered by your employer’s health plan and Medicare. Your employer is the primary payer if the company employs 20 or more people; Medicare is the primary payer if your employer has fewer than 20 employees.
Navigating COB
Steps to Take
If you have more than one health insurance plan, you should take the following steps to ensure proper coordination of benefits:
- Inform each insurance company of your other coverage. Provide them with the name of the other insurer, the policy number, and the effective date of the coverage.
- File your claims with both insurance companies. Provide them with the explanation of benefits (EOB) from the primary payer when you file with the secondary payer.
- Keep copies of all your bills, receipts, and EOBs for your records. You may need them to verify your payments or resolve any disputes.
- Review your EOBs carefully and check for any errors or discrepancies. Contact your insurance company if you have any questions or concerns.
Potential Challenges and Solutions
Coordination of benefits can be a complex and confusing process. You may encounter some challenges or issues along the way, such as:
- Delayed or denied claims: Sometimes, insurance companies may take longer to process your claims or reject them due to missing or incorrect information. To avoid this, make sure you provide accurate and complete information to both insurers and follow up with them regularly.
- Overpayment or underpayment: Sometimes, insurance companies may pay more or less than they should for your covered services. This can result in you owing money to the insurer or the provider or getting a refund from the insurer. To avoid this, review your EOBs carefully and report any errors or discrepancies to the insurer as soon as possible.
- Conflicting or changing rules: Sometimes, insurance companies may have different or updated rules for the coordination of benefits that may affect your coverage or payments. To avoid this, read your policy documents carefully and contact your insurer if you have any questions or concerns.
Frequently Asked Questions
What is the purpose of COB?
The purpose of COB is to ensure that you get the maximum benefits from your multiple health insurance plans without paying more than the cost of the medical service(s).
How do I determine which insurance is primary?
The primary insurance is the one that pays first for your covered services according to the COB rules. The secondary insurance is the one that pays after the primary insurance has paid its share. The order of benefit determination depends on various factors, such as your relationship with the policyholder, your birthday, your employment status, and the type of insurance.
Can COB impact out-of-pocket costs?
Yes, COB can impact your out-of-pocket costs, such as deductibles, copayments, and coinsurance. Depending on the coverage and benefits of your primary and secondary plans, you may pay more or less for your medical expenses. For example, if your primary plan has a higher deductible than your secondary plan, you may have to pay more out of your pocket before your secondary plan kicks in. On the other hand, if your secondary plan covers some services that your primary plan does not, you may save money on those services.
What happens if claims are overpaid?
If claims are overpaid, you may receive a refund from the insurance company or the provider, or you may have to repay the excess amount to the insurance company or the provider. You should review your EOBs carefully and contact the insurance company or the provider if you notice any overpayment or underpayment.
How does COB apply to different types of insurance?
COB covers employer-sponsored, individual, Medicare, Medicaid, and other insurance. Benefits are optimized across all applicable plans through coordination. Health insurance coverage for you and your dependents depends on benefit coordination.
