Coordination of benefits is a practice used to ensure that insurance claims are not paid multiple times when someone is insured under multiple insurance plans. The idea behind it is that someone on multiple plans might be tempted to submit claims to all of them, pocketing the excess cash. If healthcare benefits are coordinated, the insurance companies share the burden without overpaying, and the insured is fully covered, but not covered to excess.
Situations in which people are covered by multiple plans most commonly arise when two partners both receive healthcare benefits through their jobs. These benefits are typically expanded to spouses and domestic partners, so as a result, each partner is covered by two health plans. This may also extend to children in the relationship if dependents are automatically covered.
Under coordination of benefits, one insurer is designated as the primary insurer, which means that claims are sent to this company first. In the case of Sue and Bob Jones, Sue's primary insurance company would be the company that insures her through her job, while Bob's primary insurance would be provided through his work-related insurance. If the primary insurer refused to pay a claim or did not pay a claim in full, the claim would be passed to the secondary insurer.
In a hypothetical scenario where Sue Jones requires a surgical procedure that costs $5,000 US Dollars (USD), the bill would be submitted to her primary insurer. The insurance company might pay for the procedure, less a $500 USD deductible, leaving Sue with a balance of $500 USD due. She could submit a claim to her secondary insurer, and they would cover the $500 USD remainder. Her primary insurer might also refuse to pay for the procedure altogether, arguing that the specific procedure isn't covered under its plan, in which case the entire $5,000 USD claim would go to the secondary insurer.
Children can also be covered under coordination of benefits, with the “birthday rule” usually being used to determine which insurance company is the primary insurer. Under the birthday rule, the insurance company associated with the parent with a birthday earlier in the year would be the primary provider for the children. If Bob is born in January and Sue is born in March, Bob's insurance would be the primary provider for their children.
By coordinating the health benefits, claims are not overpaid. It allows people to get the medical care they need without any confusion about which insurance company will pay for it, thereby keeping insurance costs reasonably low. People who do not want to worry about this issue can choose to opt out of insurance plans that would otherwise cover them. Parents should definitely consider this, as adding children to a work-provided insurance policy usually costs extra, and it may make more sense for the children to be insured by one parent alone, rather than both.
