What Is Coordination of Benefits? Explanation and FAQ

Healthcare facilities sometimes provide care for patients that are on multiple insurance plans. In these instances, it’s important to figure out which entity is paying for what costs in order to avoid any hiccups in billing. This process as a whole is formally known as coordination of benefits. So, you may be wondering, What is coordination of benefits and who’s responsible for it?

In this FAQ, we explain everything you need to know. By understanding what this process entails, you can stay on the forefront of keeping your staff well-informed.

Coordination of Benefits: Definition

Individuals in the U.S. are allowed to be covered by more than one health insurance plan at a time, typically among spouses. To determine how coverage is split for these patients, insurers follow the coordination of benefits (or COB) process, which broadly refers to how these insurers decide who pays for a patient’s care first.

What Is Coordination of Benefits Like in Practice?

The exact process of coordinating benefits can vary depending on the types of insurance an individual has. At baseline, insurance providers work together to establish who the primary and secondary payer for a patient is.

• The primary payer is the first to pay for any of the patient’s covered services, according to the benefits outlined in their plan.
• The secondary payer is the next to pay for any remaining costs, according to what they should cover in their plan.

After a primary and secondary payer are established, insurance providers will usually specify these rules in their coverage plans. This helps healthcare staff understand how to start the billing process and gives patients more transparency on what costs will be shared.

Coordination of Benefits Example

To understand how benefit coordination applies in practice, we can look at a simplified example:

• A patient has a medical bill totalling $100.
• A claim is first submitted to the primary payer/insurer, who is responsible for $80, based on their coverage plan.
• Afterwards, a claim is submitted to the secondary payer/insurer, who calculates how much of the remaining $20 they should cover, based on their plan details.
• The patient then pays for any remaining, out-of-pocket expenses.

What Is Coordination of Benefits’ Importance?

Coordination of benefits in medical billing can help streamline the process of submitting claims. Lack of coordination can lead to confusion for insurers, facilities, and patients since there’s no clear system dictating how costs are split. Establishing a primary and secondary payer ensures that:

• The total coverage between plans does not exceed the total cost of care.
• Covered medical services are not paid for twice by different insurers.
• Errors are avoided throughout the administrative billing process.
• The patient does not overpay due to miscalculated out of pocket costs.
• One insurer is not bearing significantly more costs than another.

What Are the Rules Around Coordinating Benefits?

There are various scenarios in which a patient may have more than one insurance plan. In some cases, legal rules can automatically apply to determine the primary payer. Common coordination of benefits rules include:

• Private and public plans — Some people have both private and public (government-sponsored) health plans. In these instances, the private plan will generally pay first.

• Dependent children — Children can sometimes be covered by insurance plans provided by both of their parents’ employers. The parent with the earlier birthday will have their plan pay first.

• Employer-sponsored health plans — Some individuals may purchase a commercial plan on top of a plan provided by their employer. The employer-sponsored plan will generally be the primary payer.

• Dual coverage with spouses — Individuals can sometimes elect to be covered by both their own employer’s plan and their spouse’s employer plan. In this case, a person’s own employer plan would be the primary payer while their spouse’s plan would be secondary.

• Medicare and Medicaid — Some individuals over the age of 65 may have both Medicare and Medicaid. For these individuals, Medicare will serve as the primary payer.

• Consolidated Omnibus Budget Reconciliation Act (COBRA) — Individuals may have COBRA coverage from a previous employer as well as a current employer-subsidized health plan. The most current employer-health plan will serve as the primary payer.

Who Is Responsible for Coordinating Benefits?

Insurance companies are primarily responsible for coordinating their benefits, and certain aspects of this process are regulated by federal and state laws. The National Association of Insurance Commissioners (NAIC) and The Centers for Medicare and Medicaid Services (CMS) provide guidelines that insurance companies should follow.

It’s also important for healthcare facilities to stay aware of policies surrounding this process. Not only does this allow for stronger oversight of the administrative billing process, but this also enables proper education for staff and patients who are working with multiple insurers.

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