Coordination of Benefits

Also referred to as COB, coordination of benefits occurs when an individual is in possession of more than one insurance policy and when it comes to processing a claim, the two are assessed to determine which will be assigned with the primary responsibility for covering the predominant share of the claim costs.The process also involves assessing the extent that other policies held will contribute toward the claim. This article will provide you with everything that you need to know about coordination of benefits.

What is Coordination of Benefits?

The primary intention of coordination of benefits is to make sure that individuals who receive cover from two or more plans will receive their complete benefit entitlement, and to prevent the benefits that are received being duplicated when an individual has more than one policy in place. This process covers insurance appertaining to several sectors including health insurance, car insurance, retirement benefits, workers compensation, and others.

The order in which the insurance policies are coordinated is dictated by insurance law and cannot be decided by a company or an individual. This process takes place only when multiple insurance plans are involved. If only one plan is held, then all responsibility is put onto the sole plan.

Predominantly, coordination of benefits happen when an individual has two plans in place (primary and secondary), but it may also include a tertiary plan in some circumstances. The primary insurance plan is given the responsibility of being the first payer, the secondary plan is the second payer, and so on and so forth depending on how many plans the individual holds.

Why is COB Important?

There are numerous reasons why COB is an important process. These are summarized below:

  • A lack of coordination between the plans a person holds can result in the claim not being paid until the COB has been confirmed, thus potentially causing financial difficulties.
  • Either the individual or the insurance provider could be subjected to expenses that they did not need to pay if the insurance plans are not coordinated correctly.

Order of Benefit Determination

The primary plan is always considered as the predominant provider of benefits, and it must provide these as though the claim holder does not have a second or third policy in place. The COB provisions that are specified in the insurance policy outline which plan is the primary plan. Once identified, the primary plan's benefits are applied to the claim first.

It is important to note that the primary plan is always considered as the first payer, regardless of the specifics written in its clauses. This means that any plan that does not include the COB provisional clause may not incorporate the benefits offered by a claimant's other plan into their considerations when assessing what benefits are due.

Any unpaid balance due unto the patient is typically paid by the claimant's second plan, within the limits of its responsibility. This secondary insurance plan can only take the benefits of the patient's other plans into consideration when it has been confirmed as being the secondary, not primary plan.

The payments that are delivered to the patient by their combined insurance plans does not exceed 100 percent of the charges for necessary covered services. The benefits are usually coordinated between all of the plans held by the patient.

If a family is making a claim, each individual and their COB will be assessed separately, as there is a possibility that the order of plans and benefits may differ between each member.

There may be some differences to the "order of benefit determination" as laid out here if the claimant's policy is held with Medicare but otherwise, these rules should be followed as a standard process.

Understanding Various COB Rules

Common COB circumstances, and how the COB rules are then applied are outlined below.

  • Plan Type Rule
    If the individual has both a commercial insurance plan and Medicaid, then the commercial plan will always be considered as the primary policy, and Medicaid is secondary.
  • Subscriber or Dependent Rule
    If a patient subscribes to two or more policies, where one policy is as a subscriber, and another is as a dependent, then the policy under which they are classified as a subscriber is the primary policy, and that where they are a dependent will fall as the secondary policy.
  • Timeline Rule
    If the patient is the primary subscriber to two commercial plans then the plan to which they have been subscribed the longest is considered as the primary plan, and the newer plan is the secondary.
  • Employer Coverage Rule
    If the individual has coverage both through their employer, and then coverage as a dependent through another commercial plan, then the employer-operated plan will always be considered as the primary plan.
  • Dependent Child (under 18) with Separated/Divorced Parents Rule
    A copy of the parent's divorce decree is needed before the order of benefits can be confirmed. If terms within the decree specify one of the parents as being responsible for the child's health insurance coverage or health care, and the parent is aware of this, then that plan is considered as primary. If the parent that has responsibility for health insurance has no coverage for the child's health care, but their former spouse does, then the spouse's plan is deemed as primary.

    If the divorce decree does not exist, or there is no specification as to which parent is responsible for the child's healthcare coverage, then the responsible parent and thus policy is determined first by:
    • 1. The birthday rule of the parent (whomever's occurs earlier in the year) and,
    • 2. The length of policy rule of the policy holders (whichever commenced first).
  • Dependent Child (Parents Not Separated or Divorced) Rule
    If a child's parents are together, then determining the primary plan is done by using the birthday rule (i.e. whomever was born earlier is responsible).

Additional Information and Help

If you are currently processing an insurance claim, and you are unsure of the correct process to follow as per COB, then you can post your legal need on UpCounsel's marketplace. UpCounsel only accepts the top five percent of lawyers to their site, and these professionals come from schools such as Harvard Law or Yale. Our lawyers have an average of 14 years legal experience, which includes working with prestigious companies like Google and Twilio. For the latest legal news, and further information on running your business smarter, you can view the UpCounsel legal blog.