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A little-known regulation called the birthday rule plays a predominant role in determining which health insurance plan provides primary coverage and which furnishes secondary coverage when children are covered by both parents’ insurance policies.
The birthday rule says the primary coverage comes from the plan of the parent whose birthday (month and day) arrives first in the year. The other parent’s plan provides secondary coverage. The birth year is not taken into consideration.
For example, a parent with a birthday in March would provide the primary insurance when compared to the other parent whose birthday is in October, which would provide secondary coverage.
How does the birthday rule work?
When a dependent is covered by two health insurance policies, the birthday rule determines the order that the insurance companies will pay. This can affect the benefits the child receives and your out-of-pocket costs for copayments and deductibles.
With the birthday rule, the primary insurance provider pays first, operating as if it is the sole insurance payer. The secondary insurance carrier then pays toward what the primary carrier did not cover, mitigating or even eliminating out-of-pocket expenses for certain services.
Let’s say, for example, that a child covered under two policies has a medical bill of $1,000. If the primary carrier pays 80% of the claim — $800 — the secondary insurer could then pay the remaining $200, provided, of course, that the services are covered and the deductible has been met.
In another situation, if each policy only provided 25% coverage for the procedure, you would pay the remaining out-of-pocket costs after the two insurance companies pay their portion.
It’s important to remember that the birthday rule only pertains to dependents and children covered by both parents’ separate insurance policies. It does not apply to a child or children covered under a single insurance plan.
The birthday rule also applies to dental care, whether that care is provided as part of an overall policy or through a standalone dental plan.
Coordination of benefits
The birthday rule is a part of a set of rules called the coordination of benefits (COB) which collectively resolves questions about which health insurance policy provides coverage.
The intent of the birthday rule is to prevent the double billing and overpayment of claims while ensuring that the child with dual coverage receives coordinated and complementary care from the two payers. By working in tandem, the two insurance companies are more likely to provide coordinated, not duplicated care.
The first iteration of the birthday rule emerged in the 1970s. In 1984, the National Association of Insurance Commissioners (NAIC) developed the current version of the birthday rule as part of its coordination of benefits model, which establishes a process for determining primary and secondary payers.
The rule itself is not a law, but most insurance companies follow the birthday rule, and nearly every state has adopted the birthday rule as a common insurance practice to encourage its use.
Remember that even with dual coverage, the policies' benefits and restrictions still apply.
The primary insurance carrier may not pay for certain procedures or provide adequate coverage resulting from various complications, leaving it to the secondary payer to pick up the costs. The secondary payer may step in and provide full coverage, partial coverage or no coverage for various services depending on whether they fall under the secondary plan’s coverage requirements. But in most instances, the secondary payer will cover at least some of the costs.
Also, each plan has its own copays and deductibles, and one plan will not usually cover these costs for the other, leaving parents on the hook for copayments and deductibles for each plan.
Pros and cons: should you keep dual insurance coverage?
The birthday rule carries both advantages and disadvantages, influencing whether parents will cover a child or children with one or two policies. Under the birthday rule, the two policies are supposed to complement each other, one serving as the primary payer, the other functioning in a secondary role, picking up most, if not all, of the costs not covered by the main insurer.
Carrying two health insurance policies costs more in terms of premiums, deductibles and out-of-pocket costs. But having dual coverage may result in medical cost savings in the long term if the two insurance companies complement each other and provide comprehensive coverage, mitigating expenses for illnesses, for example, and other types of expensive care.
There are other times when the monthly cost of having dual coverage is not worth it. In these cases, parents may want to retain the child’s coverage for the more generous policy while dropping the other, less comprehensive policy.
Health insurance coverage for newborns
The birthday rule usually comes into play for newborns, when infants are covered by two separate policies provided by the mother and father.
The baby’s delivery and childbirth care will be automatically covered under the mother’s insurance policy. Insurers usually provide automatic coverage for a newborn for the first 30 days, and the parents are responsible for adding a newborn to their insurance immediately after the 30-day period. The birth will be a qualifying life event, allowing you to update your coverage.
If dual coverage exists for the newborn, both policies automatically cover the newborn for the first 30 days, and the birthday rule determines primary and secondary coverage. However, the infant’s delivery and standard newborn services are covered by the mother’s insurance.
The birthday rule is especially important when the newborn experiences medical complications, and it becomes necessary to determine primary and secondary payers.
If medical issues do not exist for the baby, parents providing dual coverage usually select the plan they want for the newborn by the end of the 30-day coverage period. They do not usually choose to cover the infant with two insurance policies, and as a result the birthday rule no longer applies.
We recommend that expectant parents with multiple insurance options review their policies and contact their insurance companies to discuss their preferences. This can help ensure the best coverage possible and avoid any unforeseen costs and lapses in care and coverage for the newborn.
What can go wrong when the birthday rule decides primary coverage?
When a child is covered by multiple health insurance policies, families could face high medical expenses if the plan with poor coverage is deemed as the primary policy by the birthday rule.
In these cases, parents may want to drop one plan and keep another more generous plan, for example, to avoid the birthday rule altogether and provide the best coverage possible.
Parents providing dual coverage should also assess the plans on a regular basis to make sure the two policies are providing coordinated and complementary care, not duplicated care, and are thus paying appropriately.
Various news stories have highlighted the high out-of-pocket costs that can result when a child's coverage is automatically determined by the birthday rule rather than selected based on the parents' preferences.
For example, in Kansas, the birthday rule designated a father’s insurance plan as the primary carrier for a couple’s infant daughter. The plan carried a high deductible of $12,000, high coinsurance payments and a network of providers focused in another state.
The mother’s more generous plan served as the secondary insurer, and the couple was initially hit with a medical bill of $270,951 for the birth of their daughter, who experienced medical complications.
The bill was eventually reduced to $20,000 and then nothing after negotiations with the insurers and the hospital. This underscores the risks of not knowing how the birthday rule can impact coverage.
Exceptions to the birthday rule
The birthday rule, like other rules, is subject to exemptions and provisions to resolve tricky situations.
If a child is covered by both parents who share the same birthday, the policy in effect the longest serves as the primary plan. For example, if the mother’s plan has covered the child longer than the father’s plan, then the mother’s plan is the primary policy.
In most divorce settlements, one parent is responsible for providing insurance coverage, and that parent’s policy provides primary coverage, superseding the birthday rule.
Divorced with joint custody
If divorced parents have joint custody, and a court has not specified which parent is supposed to provide insurance for dependent children, the birthday rule takes effect.
Custodial parent remarries and child is added to step parent’s plan
In cases where a custodial parent remarries and a child is added to the new spouse’s insurance, the custodial parent’s insurance is primary.
COBRA or state continuation coverage
In a situation where one parent has insurance through an employer or the Affordable Care Act (ACA) marketplace and the other parent has COBRA or insurance through state continuation coverage, the insurance policy furnished by the employer or the ACA is primary.
Young adult covered by parent and spouse
The ACA allows children to stay on a parent’s insurance policy until the age of 26. If a young adult is covered by both a parent’s plan and a spouse’s plan, the plan covering the young adult for the longest is primary. If coverage for both plans started on the same day, the birthday rule applies.
Young adult covered by parent and employer
If a young adult is covered by both a parent’s plan and an employer plan, the employer plan is primary. The birthday rule does not apply.
Is the birthday rule changing in 2022?
For some, the birthday rule is seen as a non-biased, random and ultimately fair way to choose primary and secondary payers when dual coverage exists for a child. It would be a fair choice if all insurance plans provided equal coverage at the same cost. But insurance policies are not created equally, often varying widely in terms of what they cover and cost.
In 2021, a bill was introduced in the House of Representatives that would give parents more control in deciding which plan provides primary coverage.
The bill, known as the Empowering Parents' Healthcare Choices Act, would give parents with dual policies 60 days from the date of an infant’s birth to choose which plan is primary and to notify the insurer of their choice. If parents fail to make a selection within 60 days, the birthday rule would then take effect.
The bill is currently in the House Subcommittee on Health.
Frequently asked questions
How does the birthday rule determine primary and secondary coverage?
The birthday rule determines primary and secondary insurance coverage when children are covered under both parents’ insurance policies. The birthday rule says primary coverage comes from the plan of the parent whose birthday falls first in the year.
Can a child be covered on both parents’ insurance?
A child can be covered by both parents’ insurance. When dual coverage exists, the birthday rule usually determines which insurance serves as the primary carrier and which provides secondary coverage.
Whose health insurance does a baby go on?
The birthday rule often determines which insurance policy is primary and which is secondary for infants covered by both parents’ policies.
What is the coordination of benefits (COB) for insurance?
The coordination of benefits establishes a process for determining primary and secondary insurance payers. The model was developed by the National Association of Insurance Commissioners with input from the insurance industry.