What Is Coordination of Benefits and How Does It Affect Your Bills

Coordination of benefits is the process insurers use when a patient is covered by more than one health insurance plan. The rules determine which plan pays first (primary) and which pays second (secondary), and how much each plan contributes to a claim.

Common situations involving multiple coverage

Dependent children covered by both parents' employer plans. A Medicare beneficiary who also has an employer plan or retiree plan. A veteran with VA benefits and private insurance. Spouses who have their own employer coverage and are also covered on their spouse's plan. Workers compensation or auto insurance combined with health insurance.

Primary versus secondary payer rules

The primary payer processes the claim first and pays its share. The secondary payer then receives the claim and may pay some or all of the remaining patient responsibility.

For dependent children covered by two parents' plans, the birthday rule typically applies. The parent whose birthday falls earlier in the calendar year (month and day, not year) provides primary coverage.

For Medicare beneficiaries with employer coverage, whether Medicare or the employer plan is primary depends on the employer's size and the basis for Medicare eligibility. For active employees at employers with 20 or more employees, the employer plan is generally primary. For retirees or those on Medicare due to disability, different rules may apply.

How secondary coverage works

Secondary coverage does not always pay the full remaining balance after the primary payer processes a claim. Secondary insurers calculate their payment based on their own benefit rules and may coordinate to avoid paying more than the claim's total allowed amount.

Some secondary plans cover only the patient's cost-sharing under the primary plan. Others recalculate the claim from scratch and pay the difference between their benefit and what the primary paid. The secondary plan's Coordination of Benefits policy document describes exactly how it calculates secondary payments.

Mistakes to avoid

Failing to disclose secondary coverage to providers. Providers are required to bill the correct primary payer. If they bill the wrong payer first due to missing information, claims may be processed incorrectly.

Assuming secondary coverage will cover everything the primary did not. Secondary coverage has its own exclusions and limitations.

Paying a bill before both plans have processed the claim. Wait for both EOBs before making any payment to ensure you are paying only your actual responsibility after all coverage has been applied.

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Bill Advantage is a document literacy tool. Nothing in this article constitutes legal or medical advice.