Which Type of Insurance Plan Pays Health Care Claims First?

When an individual has more than one health insurance plan, specific rules and processes determine which plan pays first for healthcare claims. Understanding these guidelines helps ensure medical expenses are covered efficiently.

Understanding Coordination of Benefits

Coordination of Benefits (COB) is the process health insurance plans use to determine which plan pays first when an individual is covered by multiple policies. COB prevents duplicate payments for the same medical services and ensures total benefits do not exceed 100% of allowed charges.

One health plan is designated as the “primary payer” and others as “secondary payers.” The primary plan processes the claim first, paying its share according to its benefits. After the primary plan pays, the secondary plan reviews the remaining balance and may cover additional costs, such as deductibles or copayments, up to its allowed amount.

Common Situations Leading to Multiple Coverage

Several common circumstances lead to multiple health insurance plans. A frequent scenario is when both spouses are employed, each with an employer-sponsored plan covering their family. This can result in children being covered under both parents’ plans.

Other situations include having Medicare or Medicaid in addition to a private plan, such as through an employer. An individual might also have COBRA coverage from a previous job while gaining new employer coverage, or a retired individual might have both retiree benefits and new employment-based insurance. Coverage from two separate employers also commonly leads to dual health insurance.

Determining the Primary Payer

Specific rules determine which health insurance plan acts as the primary payer. For dependent children covered under both parents’ plans, the “Birthday Rule” applies. This rule designates the plan of the parent whose birthday falls earlier in the calendar year (month and day only) as primary. If both parents share the same birthday, the plan providing coverage for the longer period becomes primary.

When an individual has coverage as an active employee and also through a retired or COBRA plan, the active employee’s plan is primary. An employer-sponsored group health plan also pays before an individual health insurance policy.

Medicare’s coordination rules depend on other coverage and employer size. If an individual aged 65 or older has Medicare and an employer group health plan, Medicare is secondary if the employer has 20 or more employees. If the employer has fewer than 20 employees, Medicare is the primary payer. For individuals under 65 with a disability, Medicare is secondary to a group health plan if the employer has 100 or more employees.

Medicaid functions as the “payer of last resort,” paying after all other available insurance plans have processed their claims. A court order, such as in a divorce decree, can specify which parent’s plan is primary for a child, overriding other rules like the Birthday Rule.

The Claims Process with Multiple Insurers

After primary and secondary payers are determined, a structured process is followed for submitting healthcare claims. First, submit the claim directly to the primary insurance plan. This plan processes the claim according to its benefits, applying any deductibles, copayments, or coinsurance.

After processing, the primary insurer issues an Explanation of Benefits (EOB) document. This EOB details what the primary plan paid, what was covered, and any remaining balance. Next, submit this EOB from the primary insurer, along with the original claim information, to the secondary insurance plan.

The secondary plan reviews the claim and primary EOB to determine its payment responsibility. The secondary insurer may cover some or all remaining costs, such as out-of-pocket expenses, deductibles, or copayments, up to its allowed amount. The secondary plan will not pay for services already fully covered by the primary plan, nor will combined payments exceed total allowed charges. Informing healthcare providers about all insurance coverages at the time of service ensures proper billing and efficient claim processing.