Finance and Credit Professional

Coordination of Benefits (COB) is a process by which two or more insurers who are insuring the same person for the same or similar group health coverage limit the total benefits received by the insured. The primary health care is the health insurance that will pay first on medical claims. Secondary health insurance will pay after the primary health insurance pays their portion. At no point will the combination of primary and secondary health insurance pay more than 100% of the claim that is being paid.

An employee is always primary on his or her own coverage. A spouse who is covered under a group plan would be secondary on the spouse's plan. Dependents are covered on a primary basis by the health plan of the spouse with the earliest birthday during a calendar year also known as the birthday rule.

For example, Jim Ventrusca has health insurance for himself through his employer and he is also covered under his wife's plan. If Jim, had gall bladder surgery that cost $5,000 his plan would be primary and pay after he has met his deductible. Let's say Jim's health plan had a $500 deductible and his wife's plan had a $250 deductible. Jim's primary health care plan by definition will pay after his $500 deductible is met. Once the coinsurance maximum is met then the secondary payor will pay on the claim.

In our example above, the surgery cost was $5,000 and Jim will pay the first $500 fully out of his pocket. The remainder is $4,500 which in our example is paid at 80% up to an annual out of pocket maximum of $2,500. So Jim is responsible for 20% of the remaining $4,500 or $900.

Jim's wife has a plan that he is secondary on and this plan will pay the $250 deductible that Jim has through his wife's employer. This secondary payment allows Jim to collect back a portion of his $500 claim. There may also be coordination of benefits on the coinsurance depending upon the plans that are being coordinated by the two health insurers involved. Coordination of benefits also occurs on other claims for dental, vision and other employee benefits offerings.

The definition of primary health care or health insurance is a complex transaction. Talk to your human resources department if you want more information on how coordination of benefits will work for your specific case. Understanding which plan is primary and how the coordination of benefits process works can save you money in the long run. However, you should always evaluate what the cost of insurance is for you. How much do you pay per pay period and how much does your spouse pay as well. You may be overspending relative to the potential payout from coordination of benefits.

About The Author :

Scott is a partner in ESP Benefit Design, an employee benefits insurance firm based in Westerville, Ohio. (614-882-8535) Scott has an MBA from Franklin University. Scott has worked with over 6,000 customers. Email Scott at scott@espbd.com

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