Coordination of benefits is the procedure used by insurance companies when an individual is insured by two plans. It determines which plan will be the primary payer for medical or pharmaceutical services and how much is to be paid by the secondary source. Insurance companies coordinate benefits for several 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
Nowadays, it is quite common to have dual health insurance due to the high rate of dual-income couples, elder people who are still employed, and the option for dependent children to remain under coverage until the age of 26.
It is understandable that most medical insurance plans have policies to decide which plan should be billed first and which should be billed later. The explanation of your benefits and the manner by which they are determined is generally included in the “coordination of benefit” sections of your summary plan description.
What is Coordination of Benefits
When expenses for services that are covered are covered by multiple insurance plans, Coordination of Benefits is in effect. Typically, one health insurance provider has main obligations and there is a minimum of one more health insurer with duty for any other patient’s financial obligation. Sometimes an auto or workers’ compensation insurance company might be involved.
No matter which insurance provider is covering the cost, the total amount that is paid out does not exceed the actual price of the service, and is normally lower than the amount specified in the primary insurance’s contract. This part of the manual provides a few suggestions to aid with COB scenarios.
Be sure to inquire if the patient has any other health insurance plans.
How does coordination of benefits work?
Two insurance policies can work together to decide what portion of expenses for covered services each should contribute. The amount due for services that you need to pay is the sum that is not paid for by the insurance companies. Benefits available under the insurance plan include the medical care, equipment, services, or medications that are covered.
Coordination of Benefits Examples
Listed below are four common situations when coordination of benefits occurs:
- You are covered under your own insurance plan with your employer, and covered as a dependent under your spouse or partner’s employer-sponsored plan;
- Your spouse or partner is covered under his or her own insurance plan and as a dependent under your insurance plan;
- Your dependent children are covered under your insurance plan and your spouse or partner’s plan;
- You are still working at age 66, and covered by your employer’s group health plan and Medicare Part A (hospital insurance).
In every one of these cases there will be a first insurer and a second insurer. Your doctor or you should submit the claim first to the primary payee.
Your own insurance is the main one that pays out and your spouse or partner’s insurance is the one that covers you secondarily.
Your healthcare provider can act on your behalf to send a medical or drug claim to your insurance coverage. Your insurance plan pays its portion of the claim.
If the amount covered by your insurance plan doesn’t make up the full claim, you can submit the remaining balance to your partner or spouse’s insurance plan by providing them with the explanation of benefits statement provided by your insurance provider and requesting payment for the remainder.
When filing a claim to the insurance of your spouse, you may not receive payment for the total remainder. The extent of benefits accessible through your partner’s insurance plan will decide this.
The health insurance plan of your spouse or partner is the first to process and pay out claims, decide what is covered, and pay out any money due. Your plan is the secondary payor.
After the claim and details of the insurance provider’s reimbursement are received, the secondary insurer will decide how much, if anything, they must pay towards the remaining balance of the bill. The rest of the amount to be paid will be taken care of by your spouse or partner, if there is any.
Your kids are covered by both your health insurance policy and the one from your partner or spouse. Most of the time, coordination of benefits will be determined by the “birthday rule,” where the health plan of the individual with the earliest birthday in the calendar year is the primary payor, and the other plan is considered the secondary payor.
If you and your significant other have the same birthday month, the plan administrator typically will select the plan that has been in action for a longer period of time as the main source of payment, with the other plan being utilized as a supplementary payor. If you and your ex-partner have separated, in general, the parent with custody is the main provider of health coverage, unless the court order specifies which parent should have health insurance for the children.
Obligations of Physician to Obtain COB Information and to Bill Primary First
Claims should be submitted to the primary carrier first. You need to assist with the paperwork that needs to be completed in order to take advantage of COB with other health insurance plans and protections (including and not limiting to, workers’ compensation, double coverage and personal liability responsibility). You must put a lot of effort into finding and collecting data related to other health insurance and protection plans when the service is provided.
You should always go directly to the other plan or coverage first when Horizon BCBSNJ is a subordinate plan or coverage, in keeping with the appropriate rules of coordination of benefits (COB).
Patient Who has Two or More Insurance Plans (other than Medicare, Motor Vehicle Accidents or Workers’ Compensation)
If you are providing care to the covered spouse of a Horizon BCBSNJ subscriber who also has his/her own health plan, the spouse’s health plan is always primary UNLESS all of the following are true:
- The spouse is retired.
- The spouse is also eligible for Medicare.
- Our subscriber is covered as an active employee and Medicare is not primary under the Medicare Secondary Payer rules. In this event, the Horizon BCBSNJ coverage is primary, Medicare is secondary and the spouse’s health plan is tertiary.
If you are providing care to a Horizon BCBSNJ subscriber who also has coverage as a subscriber with another health plan and the subscriber is:
- An active employee of one group and a retired employee of another. The plan from the group where the employee is active is primary.
- A retired employee of two groups. The plan in effect the longest is primary.
- An active employee of two groups. The plan in effect the longest is primary.
When providing care to a dependent child, whose parents are not separated or divorced and:
- The parents both have health insurance, determine from their benefit plans whether the Birthday Rule or the Gender Rule will apply. In most cases, the Birthday Rule will apply.
When providing care to a dependent child, whose parents are separated or divorced:
- The plan of the parent who has financial responsibility for health care expenses (as determined by the court) is the primary plan, regardless of who has custody of the child.
- For claims for a dependent child whose parents are separated or divorced, but a court has not stipulated financial responsibility, the unmarried parent who has custody is primary. The other parent is secondary.
- Any coverage through a stepparent married to the custodial parent would be next, and the noncustodial parent’s coverage last.
To establish the main provider, the Birthday Rule requires the month and day of the parents’ birthdays; the year is completely disregarded. The mother or father whose birthday comes earlier in the year is in charge of the dependent child’s plans. If both sets of parents share the exact same birthdate (both day and month), then the plan in place for the most extended period of time will be the primary plan. Only if both airlines observe the Birthday Rule will it take effect.
The father’s plan is most important when determining the future of a dependent child, based on the Gender Rule. If one parent has a contract that is determined by the Date-of-Birth Rule, and the other parent’s contract is determined by the Gender Rule, then the Gender Rule will be what decides which plan the father will have as the primary.
MOTOR VEHICLE ACCIDENTS
If the primary carrier is:
- The auto insurance, you must submit your claim to them. After you receive the Explanation of Payment (EOP) from the auto insurance carrier, send it to us with a completed claim form, an itemized bill and a copy of the member’s Explanation of Benefits (EOB). Electronic claims cannot be accepted because of the additional information required to process the claim.
- If the primary carrier is Horizon BCBSNJ, we will need a copy of the automobile declaration sheet with the date of accident between the policy effective date and cancellation date. Be sure to attach an itemized bill and completed claim form.
Motorcycle owner/operators are not covered by automobile insurance in the event of an accident.
Nevertheless, individuals who have been in a motorcycle mishap should send in any requests related to the crash to their vehicle insurance firm for assessment.
Any harm that occurs due to a mishap related to the job is covered by workers’ compensation. Employers purchase insurance which covers work-related illnesses or injuries.
Horizon does not pay for medical treatments related to work-related illnesses or injuries, or for services or materials that could have been paid for by workers’ compensation.
Make sure to send invoices to the workers’ compensation carrier for any illness or injuries experienced in the workplace.
How do I Know What My Cost for Medical Care or Prescription Drugs Will be After My Insurance Companies Coordinate Benefits?
No claimant is allowed to receive more than the full amount of eligible fees from both health plans combined. Additionally, strategies employ dissimilar methods when computing the coordination of benefit payments. It is normally possible to gain an understanding of how your insurance plans coordinate benefits by studying the coordination of benefits clause in the Summary Plan Description or policy.
If you have trouble locating what you’re looking for in terms of coordination of benefits between one or both plans, don’t hesitate to get clarification from the plan administrator or insurance company. Two typical approaches to managing benefits and receiving payments are utilized.
Full Coordination of Benefits Method
The initial strategy estimates the claim reimbursement assuming there is no other coverage present. The secondary insurer determines what amount would have been given out for the claim if there had been no primary insurer present. The primary plan pays the benefit as calculated. The second insurer will pay out the remainder if the calculation shows this amount would have been owed if no other protection had been set up.
Let’s imagine that you have two plans which provide coverage for physician care: one of them has a $500 deductible, while the other has a $25 copayment for office visits. You incur $100 expense at the doctor’s office. Your main source of payment applies the $100 towards fulfilling the $500 deductible and therefore pays nothing.
The secondary payor utilizes the $25 copay of the plan, processing the payment as if there is no other coverage, and provides $75 in pay. You would need to cover the $25 fee for the office appointment.
Non-Duplication Coordination of Benefits Method
The secondary plan will still only provide the same amount of reimbursement for the claim as it would have if it was the primary payor. The secondary carrier reviews the primary paid amount.
If the primary insurer pays out an amount equivalent to or higher than what the secondary insurer would have paid out on its own, then no additional benefit will be given. In this instance, if you are charged $100 for a doctor’s appointment and the primary insurance pays $80, the secondary insurer with a $25 visit fee won’t need to pay anything since the primary insurance already paid the full amount.
When you have dual insurance coverage, you will be able to understand the amount you are required to pay for medical or prescription drug services when you examine the explanation of benefits that is sent out by the secondary plan.
This document displays the sum of money you owe, how much the other payor gave, and the sum that was disallowed since it had already been given by the main payor and/or surpassed the contracted rate of the service provider.