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Health insurance: How coordination of benefits works

There's a way for you to get covered by two health insurance plans. It's called coordination of benefits (COB), which allows you to have multiple health plans.

It works this way: Health insurance companies have COB policies that allow people to have multiple health plans, but it also makes sure insurance companies don't duplicate payments or reimburse for more than the healthcare services cost.

COB policies create a framework for the two insurance companies to work together to coordinate benefits so they pay their fair share. COB decides which is the primary plan and which one is secondary. The primary plan pays its share of the costs first, and then the secondary insurer pays up to 100% of the total cost of care, as long as it's covered under the plans. The plans will not pay more than 100% of the treatment cost, so you're not going to get double the benefits if you have multiple health plans.

Here's an example of how COB works: Let's say you visit your doctor and the bill comes to $100. The primary plan picks up its coverage amount. Let's say that's $50. Then, the secondary plan picks up its part of the cost up to 100% -- as long as the services are covered by that insurer.

That sounds great, right? Well, having two health insurance plans also means that you'll likely need to pay two premiums and deal with deductibles for two health plans.

In this guide, we will review COB, when they are needed, whether you should get dual coverage, what to do if you have issues with COB and some tips from experts:

  • Situations when a COB is needed
  • Do you need dual coverage?
  • What if you have issues with claims?
  • Tips for people with multiple health plans


Situations when a COB is needed

There are various situations when a COB is needed. You might be eligible for multiple health plans because you and your spouse have two different health insurance policies. Your spouse might be on Medicare and you have your own insurance plan. You might be under 26 and have coverage by both your employer and parents.

Here is a list of situations and which plan would likely serve as primary and which ones would likely be secondary:

You're married and both you and your spouse have separate health plans - Your employer's plan is usually considered primary for you. Your spouse's plan would be secondary.

A child has dual coverage by married parents - In this case, the so-called "birthday rule" will apply. This means whichever parent has the first birthday in a calendar year is the one whose insurance plan is considered primary. Remember - it's not who is oldest. It's where the birthday (month and day) falls in the calendar year. If parents have the same birthday, the primary coverage will go to the plan that has covered a parent longer.

A child has divorced parents - The child is usually covered by the parent who has custody. If the child’s custodial parent  remarried, the  step-parent’s plan may provide secondary coverage for the child.  The plan of the parent who doesn't have custody usually pays last. If it's joint custody, the birthday rule usually applies. Note: A divorce decree may also influence which plan is primary.  If the divorce states that one parent is financially responsible for the healthcare expenses of the child, then that parent’s plan should be primary for the child and the other parent’s policy is secondary.  If the decree states that both parents are responsible, then their plans would be given the same priority, thus reverting back to the birthday rule for whose would pay first.

A child has own policy (from school or work) and still on parent's policy until 26 - The child's health plan is primary; the parent's plan is secondary.

A child is married and on spouse's policy and continues on parent's policy until 26 - Getting married doesn't change the health insurance status for a parent's policy, you can stay on it until you're 26. So, it's the same as if you're not married -- the child's or child's spouse's health plan is primary; the parent's plan is secondary.

A child under 26 is pregnant and on a parent's plan - The health insurance status would stay the same for the under 26 child; the parent's insurance serves as secondary. However, the newborn is different. Once the child is born, he/she will need to be covered by his/her parent - not his/her grandparent.  The grandchild is not a dependent to the grandparents, thus their insurance would not extend to that child.

Workers' compensation and health insurance plan - If you get injured on the job, workers' comp pays first.

COBRA and other insurance – If you have COBRA and coverage from another plan which you are enrolled in with your employer, your employer’s plan is primary and COBRA is secondary.

Medicare and a private health insurance plan - Medicare is considered primary if the private insurance is a group plan with 100 or fewer employees. Private group insurance plans with more employees will have Medicare as secondary. Medicare is primary if the private plan is an individual policy.

Medicaid and a health insurance plan - Medicaid is always the payer of last resort when there are multiple plans.

Veterans Administration (VA) and a private health insurance plan - VA is not considered a health insurance plan. Instead, the VA bills public or private health insurance providers for care, services, prescriptions, and supplies. So, if your spouse has a health insurance plan it would be your health plan. The VA is not insurance.

Military coverage (TRICARE) and other health insurance - TRICARE is considered secondary to all other health plans except Medicaid, TRICARE supplements, state crime compensation programs and other specified federal government programs.  Note: If you are on active duty you can’t use any other health insurance.  TRICARE is your only health insurance coverage.

You can locate COB information in the health insurer's certificate of coverage or call your insurance company. The certificate is often online, so you can check your insurance company's site first to see if that is provided there.


Do you need dual coverage?

Having dual coverage makes sense if you or your spouse get insurance through an employer for little or no cost.

But remember, you'll likely have to pay two premiums and might even need to deal with two deductibles. You'll need to run the numbers and make sure you are ready to coordinate handling multiple health plans.

Kentucky Insurance Commissioner Nancy Atkins said each person and family should perform a cost/benefit analysis to evaluate their specific needs and whether two plans are worth it. "Each individual needs to research on his/her own to be sure the plan guidelines are understood and followed," said Atkins.

COB can vary by plan, so Kathy Walsh, principal examiner in the consumer affairs unit of the Connecticut Insurance Department, said it's important to "do your homework to determine if it is advantageous to carry both plans before you enroll."

Walsh said before signing up for both plans, you should research which plan will be considered primary and which will be secondary. There are defined rules under each plan to determine primary and secondary.

"State insurance laws generally define the COB rules for insured plans written in their state. Large employer plans that have a self-insured arrangement are regulated only on a federal level and are outside state insurance regulation. These plans are free to set their own plan rules on COB, and sometimes these may conflict with state insurance laws. There are no federal regulations on COB for large employer self-insured plans so they can vary greatly," said Walsh.

Once you determine the second payer, you'll also want to contact that insurance company to determine if the health plan will pay the entire out-of-pocket expenses after the primary insurer pays.

"Some plans will not reimburse the balance of the bill owed after the primary carrier pays, except to the extent that they would have paid a greater amount if they paid as primary," said Walsh.

If you find the secondary payer will cover the entire balance that's left after the primary plan, Walsh said it may be beneficial to carry both plans.

You'll also want to take the types of plans into account. For instance, if one plan is a PPO and another is an HMO, then that could cause problems for you. HMOs usually have more restrictive provider networks and require referrals to specialists. You'll want to keep that in mind before deciding to have two plans and make sure you abide by both plans' rules if the plans have different benefit designs.


What if you have issues with claims?

Walsh said COB issues are usually resolved easily when the problems involve insurance policies in the same state. It's more difficult to resolve issues involving large employer self-funded plans because they are under their own COB rules. In that case, you would need to contact the U.S. Department of Labor at 877-267-2323 or visit www.askebsa.dol.gov to help you with your COB problems.

Walsh said you should notify your provider if your insurance changes. It's up to you to notify your healthcare provider about your primary and secondary insurers.

If the information on file with the secondary insurer is incorrect or if the individual never notified the secondary carrier of 'other coverage, then the claims may be paid incorrectly. If this occurs, the claims will be subsequently retracted when this information comes to light. Then it is the individual's responsibility to contact their healthcare providers to resubmit the claims to the primary carrier for all affected claims," said Walsh.

Another potential mistake is if you list or give your secondary insurance coverage to your provider as the primary coverage. That's corrected easily enough, but can be a headache for the provider's office.

"If the information on file with the carriers is accurate and the claim is submitted to the secondary insurer in error, it will be kicked out pending receipt of the primary carrier's EOB. The insured can then contact the medical provider to have them rebill the claim to the primary carrier," said Walsh.


5 tips for dual health insurance coverage

Here are some tips to help you with dual health insurance coverage:

1. Make sure that your doctors are in-network for both insurance companies.

If your provider is in-network for your primary insurance but out-of-network for your secondary insurer, the secondary company may pay, but it could be at the out-of-network rate.

2. Make sure to follow the plan delivery rules for each insurer if you have multiple plans.

One example is one insurer may require prior authorization for certain services, while another may not. This is especially true if your insurance plans have different types of plan design, such as a PPO and an HMO. Don't assume that both insurers have the same rules.

3. Check what's considered a covered benefit and for any exclusions under each plan.

You don't want to get an expensive test thinking that both plans will cover it and find out later that the secondary insurance company doesn't cover that service.

4. Be proactive to avoid claims issues.

Communicate with both insurance companies before receiving care to make sure everything is covered.

5. Present both cards when you get services, so the billing is correct.

Avoid headaches and payment hang-ups by presenting both the primary and secondary cards to your provider.

Whether dual health insurance plans are right for you depends on your situation and the health plans. If you are able to get multiple health plans, research the COB for the plans and what each plan covers. Run the numbers to see whether paying premiums for two health insurance plans is worth getting the extra coverage.

Tell us your thoughts
1 Responses to "Health insurance: How coordination of benefits works"
  1. Leslie

    I think the "birthday" rule is total BS. My husband's insurance plan has a $500 deductible, my insurance has a $3,500 deductible. Had we known we don't have the freedom to select our insurance carrier for our child in the first 30 days we would have NEVER kept my insurance. We thought by having dual insurance we would be double covered but instead now we are paying two insurance premiums and hitting a $3,500 deductible for me and our child plus the $500 deductible for my husband's since she's "allowed" to be on his insurance after 30 days. How is this fair?


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