Coordination of Insurance Benefits

Instructor: Deborah Schell

Deborah teaches college Accounting and has a master's degree in Educational Technology.

When submitting health and dental claims, you need to know what percentage your plan and your spouse's plan covers. In this lesson, you will learn about coordination of benefits.

What Is Coordination of Benefits?

Let's meet Janet who is busy working mom. Janet and her husband both have health and dental coverage through their employers and she is wondering how to claim expenses for her and her family. Let's see if we can help Janet with this problem.

When an individual has coverage under more than one health and dental plan, insurance companies use a coordination of benefits provision to determine which plan will pay the claim first. It is not possible for insured to receive more than 100% of the claim amount but individuals that are covered under more than one plan are reimbursed for more of his/her out-of-pocket health and dental costs. Since Janet and her husband both have coverage through their employers, Janet must determine whose plan will pay claims for each of them and their children first. Let's look at how this process works.

Primary vs. Excess Carrier

A primary carrier is the insurance company that has you covered as the primary individual. In Janet's case, the insurance company used by her employer would be her primary carrier and the insurance company where he has benefits through his employer would be his primary carrier. If Janet had two jobs where she had health and dental coverage, the plan where she had been a member longest would be her primary carrier and the other plan would be the excess carrier or the second plan to which she would submit claims.

When submitting claims, Janet would also have to determine the primary carrier for her children. Generally, insurance companies determine the primary carrier for dependent children based on the birthday rule, which specifies that the children's primary carrier is the parent whose birthdate is earlier in the year. For example, if Janet's birthday is in April and her husband's birthday is in September, Janet's plan would be the primary carrier for her children and she would submit their claims to her plan first.

How Does Coordination of Benefits Work?

Let's assume that Janet's plan covers 75% of her eligible health and dental costs and her husband's plan covers 80%. Janet's expense at the dentist was $200. She would submit to her plan first since it is the primary carrier, and she would receive $150 (75% x $200) from her insurance company. Since her policy has a coordination of benefits clause, she could also submit the claim to her husband's insurance company.

When she submits the claim to her husband's insurance company, she would receive $50 ($200 - $150) which represents the difference between the cost of the expense and what her insurance company paid. In total, the two insurance companies would reimburse Janet for all of her $200 expense.

She would not receive 80% of the eligible expense or $160 (80% x $200) from her husband's plan as it isn't possible for an insurance company to reimburse Janet more than she paid for the expense in the first place.

Non-Duplication of Benefits

Sometimes plans contain a non-duplication of benefits clause or a clause stating that if the primary carrier paid the same amount or a higher amount than the secondary carrier would have paid, then the secondary carrier would not pay anything for the eligible expense.

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