When a patient has more than one health insurance plan, the administrative process known as Coordination of Benefits (COB) determines the payment order. COB is the set of rules insurers use to establish which company pays a medical claim first (primary payer) and which pays second (secondary payer). Understanding COB is foundational for anyone covered by multiple policies, as proper coordination ensures claims are processed correctly, preventing billing errors for the patient and the healthcare provider.
Defining Coordination of Benefits
Coordination of Benefits is a formal provision designed to prevent patients from receiving total insurance payments that exceed 100% of the covered medical charges. This prevents an individual from profiting from a healthcare event by using multiple policies to cover the same expense. The COB process establishes one plan as the primary payer, which processes the claim first and pays its portion of the allowed amount.
Once the primary payer has fulfilled its obligation, the claim moves to the secondary payer, which reviews the remaining balance. The secondary plan may then pay some or all of the remaining costs, such as deductibles, copayments, or coinsurance, according to its policy terms. Defining this payment order distributes the financial burden appropriately among the multiple insurers, ensuring each carrier pays only its fair share.
Rules for Determining Payer Order
Establishing the correct order of payment is governed by standardized rules. For children covered as dependents under both parents’ health plans, the widely used guideline is the Birthday Rule. Under this rule, the plan of the parent whose birthday falls earliest in the calendar year is designated as the primary payer, regardless of the parent’s age. The plan of the parent with the later birthday is the secondary payer.
When an individual is covered by their own employer-sponsored plan and also covered as a dependent on a spouse’s plan, the individual’s own plan is considered the primary insurer. Complex rules apply when one plan involves a government program, such as Medicare. For example, if a patient over age 65 is actively working and covered by an Employer Group Health Plan (EGHP) from a company with 20 or more employees, the EGHP is primary and Medicare is secondary. If the employer has fewer than 20 employees, Medicare assumes the role of the primary payer.
The Sequential COB Claim Flow
The medical claim flow involving COB is a sequential process. The workflow begins when the healthcare provider submits the claim to the primary payer. The primary payer processes the claim, applies the patient’s benefits, and issues a payment along with an Explanation of Benefits (EOB) or an Electronic Remittance Advice (ERA) to the provider. The EOB details what the primary plan paid, what it adjusted, and the remaining amount the patient is responsible for.
After the primary payer responds, the provider or billing service submits the claim to the secondary payer, including the primary payer’s EOB. The secondary insurer uses the EOB to calculate its payment obligation, often applying a “non-duplication of benefits” rule to avoid paying for services already covered by the primary plan. In some instances, such as with Medicare, a process called “crossover” may occur, where the primary payer automatically forwards the claim data to the secondary payer without manual resubmission.
When COB Fails: Billing Denials and Patient Responsibility
When the Coordination of Benefits process is not set up correctly or the billing sequence is mishandled, it results in immediate claim rejections. A common denial code is CO-22, which states that the claim was denied because the wrong payer was billed first. This failure often occurs when the patient’s insurance records have outdated COB information or if the provider submits the claim to the secondary insurer before receiving the primary payer’s EOB.
The consequence of a COB failure is that the provider does not receive payment, and the entire bill may be incorrectly shifted to the patient. This error requires the patient or the provider’s billing team to spend time reprocessing the claim and clarifying the order of benefits with both insurance companies. Patients should review all Explanation of Benefits forms closely to confirm the correct primary and secondary roles were applied and to verify that all insurance information remains current.