What Is the Coordination of Benefits Provision?

When an individual is covered under more than one health insurance policy, laws in most states require that each policy include a Coordination of Benefits provision specifying the order in which companies will settle claims, to ensure that payments do not exceed 100 percent of expenses incurred.

Purpose of the Provision

• Having double coverage might be a temptation to profit from an illness or to file needless claims. Laws were enacted to remove the financial incentive by clearly stating the limits of coverage.

Example of Multiple Coverage

• Married couples often hold jobs where each spouse is offered employer-provided group health insurance coverage. A husband and wife will be covered as the employee on his or her own plan and as a dependent on the spouse's policy.

Primary Insurer

• If the wife is hospitalized and files a claim for her medical expenses, the group policy from her employer is considered her primary insurer. She would submit her claim with this company first. Say her total bill was $15,200, and the policy required a $200 deductible before paying 80 percent of the remainder ($12,000). She would be responsible for $3,200 total and could present a claim for that amount as a dependent under her husband's group plan, the secondary insurer.

Provision Applied to Dependent Children

• The couple's children can be covered as dependents with both policies. When they have eligible medical expenses, the group plan of the parent whose birth date comes earlier in the year becomes the primary insurer. It does not matter which parent is older, only the month and day is considered.