What Is COB Medical Billing and How Does It Work?

Medical billing is the administrative process within the healthcare system that translates medical services into requests for payment. It involves reviewing patient records, applying standardized codes for diagnoses and procedures, and then submitting these requests, known as claims, to insurance companies or directly to patients. When an individual has more than one health insurance plan, Coordination of Benefits (COB) manages how multiple plans work together to cover medical expenses without duplicating payments.

Understanding Coordination of Benefits

Coordination of Benefits (COB) is a process insurance companies use to determine their payment responsibilities when an individual has multiple health insurance plans. Its goal is to prevent overpayment, ensuring total benefits do not exceed the actual cost of medical services. This commonly occurs when a person is insured through their own employer and also covered as a dependent under a spouse’s plan, or has Medicare in addition to another private health plan. COB rules establish an “order of benefits” to identify which plan pays first (primary payer) and which pays second (secondary payer).

Determining Primary and Secondary Payers

Establishing which insurance plan is primary and which is secondary is a fundamental aspect of Coordination of Benefits, guided by common rules. For children covered under both parents’ health insurance plans, the “Birthday Rule” is applied. This rule dictates that the plan of the parent whose birthday falls earlier in the calendar year (month and day) is the primary payer. For instance, if one parent’s birthday is in March and the other’s is in October, the March birthday parent’s plan would be primary.

A health plan obtained through current active employment is primary over a COBRA plan, a plan from a retired spouse, or individual plans. When Medicare is involved, its payment status depends on factors like employer size. For individuals aged 65 or older who are still working and have group health plan coverage, the employer’s plan is primary if the employer has 20 or more employees; otherwise, Medicare is primary.

For individuals under 65 with a disability, the employer’s plan is primary if the employer has 100 or more employees. Self-funded health plans, directly managed by the employer, have their own specific COB rules.

How COB Impacts Medical Claims

When Coordination of Benefits is in effect, medical claims follow a specific sequence. The healthcare provider submits the claim directly to the primary insurance carrier. This primary carrier processes the claim according to its benefit structure, including any deductibles, co-payments, or co-insurance. After processing, the primary insurer issues an Explanation of Benefits (EOB) to both the patient and the provider, detailing services covered, amount paid, and any remaining balance.

For any remaining balance, the claim and the EOB from the primary insurer are submitted to the secondary insurance carrier. The secondary carrier reviews the claim, considering payments made by the primary plan. The secondary plan may then cover services the primary plan did not cover or only partially covered, up to its policy limits. Combined payments from both plans will not exceed 100% of the allowed amount for the medical service.

Common COB Scenarios

Understanding Coordination of Benefits rules becomes clearer through practical examples. Consider a scenario where both spouses work and each has health insurance through their respective employers, also covering each other as dependents. Each individual’s own employer-sponsored plan is primary for them, and their spouse’s plan acts as the secondary coverage. If one spouse incurs medical expenses, their own employer’s plan pays first, then the claim is forwarded to the other spouse’s plan for potential secondary payment.

For children of divorced parents, COB rules can be determined by court orders. If a court order specifies which parent is responsible for the child’s healthcare expenses, that parent’s plan serves as the primary insurer. If no such order exists, the Birthday Rule applies.

Another situation involves individuals eligible for Medicare who also have an employer group health plan through current employment. For those with an employer of 20 or more employees, the employer’s plan pays first, with Medicare acting as the secondary payer and potentially covering remaining costs.