What Is Coordination of Benefits (COB) in Healthcare?

Coordination of Benefits (COB) is a process used by health insurance companies to manage medical expenses when an individual holds more than one health insurance plan. Its purpose is to prevent the overpayment of claims, ensuring that total benefits paid by all insurers do not exceed the actual cost of medical services. COB helps allocate costs fairly among multiple insurers, preventing duplicate payments for the same healthcare services.

Understanding Primary and Secondary Coverage

When an individual has multiple health insurance plans, COB rules establish which plan pays first and which pays second. The “primary payer” is the health plan that pays its benefits first, without considering any other coverage the individual might have. After the primary plan processes the claim and pays its share, the “secondary payer” reviews the remaining balance. This secondary plan may cover some or all of the remaining costs, up to its own limits and policy terms.

Common rules help determine which plan is primary. For dependent children covered by both parents’ health plans, the “birthday rule” often applies. Under this rule, the plan of the parent whose birthday occurs earlier in the calendar year (month and day, not year) is usually designated as primary. An employer-sponsored group health plan is typically primary over an individual health insurance policy. If an individual has Medicare and is also covered by an employer’s group health plan, the employer plan is usually primary if the employer has 20 or more employees, while Medicare is primary if the employer has fewer than 20 employees.

Common Situations Requiring COB

Many situations lead to an individual having more than one health insurance plan, necessitating COB. These include:
Spouses who both have employer-sponsored health plans, where COB determines which plan is primary for themselves and their dependents.
Dependent children covered by both parents’ health plans, applying the birthday rule.
Individuals eligible for Medicare who also have other health coverage, such as through current employment or a spouse’s employment.
COBRA continuation coverage, especially if an individual has another health plan. The plan covering an active employee is typically primary over COBRA coverage.
Students covered by both a parent’s plan and a university-sponsored health plan.

Navigating the COB Process

For patients with multiple health insurance plans, understanding the COB process is important. The initial step involves informing all insurance companies about any other existing coverage. This disclosure helps ensure accurate and timely processing of claims.

When a claim arises, it is generally submitted to the primary insurer first. Once the primary insurer processes the claim and issues an Explanation of Benefits (EOB), the patient submits the EOB and any remaining balance to the secondary insurer. The secondary plan then assesses the claim based on what the primary plan paid, potentially covering additional eligible costs. This sequential processing can significantly impact out-of-pocket costs by reducing amounts like deductibles, copayments, and coinsurance that the primary plan did not fully cover. Patients receive EOBs from both primary and secondary insurers, which detail how each plan contributed to the payment and clarify any remaining patient responsibility.