How Does Coordination of Benefits Work?

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Coordination of benefits (COB) is the way insurance companies decide which health plan pays first when you're covered by more than one policy.

Understanding how coordination of benefits works can help you decide if it's worthwhile to double up on health coverage. It's also important to know that your second policy often won't pay for the costs you're responsible for under your primary plan.

What is coordination of benefits?

Coordination of benefits lets insurance companies decide which plan will pay first when you have a medical issue. The process also sets what the second policy will pay for when you're covered by more than one health plan.

If you have double insurance coverage, coordination of benefits is essential to preventing confusion or mistakes during the billing process.

Coordination of benefits is more common for certain groups of people.

  • People under 26 covered by both parents' insurance through their jobs or who are covered by a parent's health plan and a second health plan through work, school or a spouse's plan.
  • Married couples where both partners are covered by each others' plans.
  • People over 65 who have Medicare and a second form of health insurance.

If you have coverage through more than one health insurance plan, the policy that pays first is designated as your primary health insurance. The policy that pays second is your secondary health insurance.

How do primary and secondary insurance work?

Your primary health insurance pays up to the coverage limits set in your policy. Afterward, your secondary health insurance will either pay up to its coverage limits or until your medical bill is paid, whichever comes first. You're responsible for any remaining costs.

You cannot receive double reimbursement or payment for anything above your medical bill with two regular health insurance plans.

Your secondary insurance may pay first if it covers a service that's not a part of your primary coverage. Having two forms of insurance can also offer flexibility. For example, your secondary health insurance may pay for you to visit an out-of-network doctor if your primary health insurance is an HMO.

Be prepared to submit paperwork for both of your insurance policies when you visit the doctor's office. Having two forms of insurance comes with a few downsides. Having your claims processed is often slower, and you should be prepared for your insurance companies to take a few extra days to determine who's responsible for what charge.

Primary and secondary insurance rules

Your secondary health insurance generally won't pay for your first policy's deductible, copay or coinsurance.

That means you'll still be responsible for a portion of your medical costs. However, your dual coverage may expand your network of doctors and give you access to services not covered by your primary health insurance.

This only applies to regular health plans, also known as major medical insurance, which are not allowed to limit the amount they spend on essential health coverage.

However, some types of coverage like supplemental health policies can help you cover your out-of-pocket costs, such as your deductible, copay and coinsurance. For example, Medicare Supplement plans are designed to pay for some or all of your Medicare Part A and B deductibles, copays and coinsurance.

The birthday rule

If you're covered by both of your parents' health insurance plans, then your primary coverage will be determined by which of your parents was born earlier in the year. Called the birthday rule, this rule doesn't take the birth year into account — only the month.

For example, if your mom was born in June 1974 and your dad was born in September 1972, then your mom's policy would become your primary plan even though your dad is older. If both of your parents have the same birthday, then your primary health policy is the plan that has been in place the longest.

Generally, your own health insurance plan will act as your primary insurance. If you're working and under the age of 26, then your workplace coverage pays first and your parent's health coverage pays second. Similarly, if you're married, then your work health plan pays first and your spouse's coverage pays second.

Medicare coordination of benefits

Whether Medicare takes the role of primary or secondary insurance depends on your other insurance policy.

  • If you're also enrolled in Medicaid, then Medicare pays first.
  • If you're retired and you have insurance through a former workplace, also called retiree insurance, then Medicare pays first.
  • If you're 65 or older, enrolled in a group health plan through your workplace or a spouse's workplace and the employer has less than 20 employees, then Medicare pays first.
  • If you're 65 or older, enrolled in a group health plan through your workplace or a spouse's workplace and the employer has at least 20 employees, then your group health plan pays first.
  • If you're under 65, disabled and you have group health insurance through a current employer that has at least 100 employees, then your group health plan pays first.
  • If you're eligible for Medicare because of kidney failure and you have a group health plan through work, then your group health plan pays for the first 30 days.

Medicaid coordination of benefits

Medicaid almost always pays out second if you have more than one form of health coverage. Because Medicaid is geared toward individuals who cannot afford private health insurance, it's designed to only pay out if there are no available alternatives.

However, there are a few exceptions to this rule. For example, Medicaid may pay first if your secondary insurance is also offered by the government to people who cannot otherwise access health insurance, such as the Indian Health Service or the Child Health Block Grant.

What are the pros and cons of having two health insurance plans?

Before committing to two different types of health insurance, it's a good idea to weigh the advantages against the disadvantages of dual health insurance.

Pros and cons of having two health insurance plans

Pros

  • Cost savings: Having a second health insurance plan can reduce or eliminate the costs you're responsible for after your primary health insurance pays out.
  • Extra coverage opportunities: Your second policy may pay for services that your primary insurance doesn't cover, such as acupuncture or wellness programs.

Cons

  • Doesn't make financial sense if you have to buy a second policy: If you already have health coverage, buying an individual health plan rarely makes sense because the extra benefits don't outweigh the additional monthly payments.
  • Extra paperwork: You may experience longer wait times before your claim gets paid out.

Consider a supplemental insurance policy if you want additional coverage at an affordable price. Supplemental plans are typically cheaper than normal health plans because they only pay out under specific circumstances, such as if you get cancer or become injured from an accident.

Supplementary health insurance plans also pay out a lump sum directly to you. You can use this money as you see fit. For example, you could use your claim to pay for rent, groceries or out-of-pocket medical costs, such as your deductible, copay and coinsurance.

Frequently asked questions

Can you have two health insurance plans?

Yes, you can have coverage from more than one health plan at one time. For example, you may have coverage from your workplace's group health plan and from a partner or family member's health insurance.

What is secondary insurance?

Your secondary insurance will pay for some or all of the leftover costs not covered by your primary health policy. Secondary insurance plans won't normally pay more than 100% of your health care costs or your out-of-pocket costs, such as your copay, coinsurance or deductible, unless you have a supplemental insurance plan.

What is an example of coordination of benefits?

If a divorced couple with a 10-year-old child has to pay for a medical procedure, then the custodial parent's insurance will pay first. The noncustodial parent's health insurance will cover any leftover costs up to the policy's limits or the bill's full cost.

Sources and methodology

ValuePenguin used information regarding Medicare and Medicaid coordination of benefits rules from Medicare.gov, Medicaid and MACPAC. Private health insurance coordination of benefits and regulatory details came from the National Association of Insurance Commissioners (NAIC).

Editorial note: The content of this article is based on the author's opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.