Coordination of Benefits, or What Happens With Coinsurance

If you have more than one medical policy, you may have heard the term "coordination of benefits" (COB). Insurance carriers have agreed among themselves how to determine which policy will be considered the main or primary policy when an individual is insured with more than one policy. The arrangement is in place to prevent the carriers from paying over 100% on any one claim. Typically, your policy will be the primary payer for any medical claims when there are two policies in place.

Here’s an example:

You are insured by your employer and your spouse’s employer. Both policies pay 80% towards physician’s visits. After your yearly physical, your physician submits his/her claim for the contracted amount of $160 to both insurance carriers.

Based on the agreement in place, your insurance carrier knows that it is primarily (also known as "prime") responsible for paying the larger share of the claim. It submits the payment of $128 (80% of the $160 claim) to your physician.

Your spouse's insurance carrier is notified that your insurance provider has paid its portion of the claim. Although your spouse’s policy pays 80% for doctors’ visits, only 20% of the claim remains unpaid. Your spouse’s (secondary) plan pays the remaining 20% ($32).

Had the insurance carriers not had this coordination of benefits agreement in place, both could have paid your physician 80% or a total of 160% of the claim!

Of course there are always exceptions to the rule. When it comes to determining which insurance policy will be "prime", Medicare is that exception! Even if you are the one insured by Medicare, your spouse’s plan will be considered the primary payer.

What if you have children who are covered by both your plan as well as your spouse’s plan? The arrangement the insurance carriers have in this case is based on the birth date rule. If your birth date comes before your spouse’s (not which one of you is older! This is based on just the date!) then your policy is prime.

For example:

Your birth date is February 14

Your spouse’s date of birth is July 4

Your policy will be primary. If the opposite had been true, your spouse's plan would have been primarily responsible for paying your children's claims.

There is one more possibility for coordination of benefits. What if you had two policies and they both belonged to you (in other words, you were the insured on both policies). How do the medical insurance carriers coordinate the benefits to determine which policy is prime?

If you were insured by two employer plans, the arrangement for determining which plan is primarily responsible for claims is based on which plan became effective first.

For example:

You have one policy which became effective January 1, 2008

Your other policy became effective March 15, 2008

The effective date of January 1, 2008 makes this policy primarily responsible for payment of your claims.

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