What Is Coordination of Benefits in Health Insurance?

While many people have only one health insurance policy, some people have two. In these cases, coordination of benefits is the process the two health insurance companies use to determine which one covers services first.

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What Is the Purpose of Coordination on Benefits?

Coordination of benefits ensures that a service is not covered twice, which could cause reimbursement amounts to be more than the cost of the actual service. This process helps to keep prescription drug costs and health insurance premiums affordable.

What is Coordination of Benefits?

Examples of Coordination of Benefits

There are several scenarios in which someone may have more than one health insurance policy that covers them.

  • The individual has health insurance through their employer, but they are also listed as a dependent under their spouse’s employer-based health insurance plan
  • A child is listed as a dependent on both parents’ employer-based health insurance policies
  • An individual receives Medicare, Medicaid and is covered by their employer-based health insurance plan

How Does Coordination of Benefits Work?

The National Association of Insurance Commissioners establishes guidelines regarding coordination of benefits that many companies and state legislatures follow. The following bullet points are some of the key guidelines that may affect how medical services are covered if you have more than one health insurance plan.

  • In most cases, if you have job-based health insurance along with a second policy, the job-based health insurance is your primary coverage and pays out for medical services first.
  • If a child is covered by both parents’ job-based health insurance, the health insurance of the parent whose birthday comes first in the calendar year is the primary coverage.
  • If someone has two health insurance plans and one of them is a continuation of coverage plan such as COBRA, the continuation of coverage is the secondary plan.
  • If there is no clear rule about which health insurance plan is the primary, whichever plan the individual has had longest is typically designated as the primary payor.

How to Estimate Health Care Costs

There are two methods health insurance companies may use.

With the full coordination of benefits method, both health insurance companies calculate the claim payment as if no other payor is involved. The primary payor pays its normal portion, and then the secondary payor pays.

With the non-duplication coordination of benefits method, the primary payor covers its portion. If that is more than the secondary payor would have paid, then the secondary payor pays out nothing for the claim.

To estimate health care costs, refer to the secondary health insurance company’s coordination of benefits policy.

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Finding Health Insurance with Nevada Insurance Enrollment

Having two health insurance plans can be beneficial, but only if the plans are structured differently. A Nevada Insurance Enrollment health insurance agent can help you review different plans and explain coordination of benefits to help you get the most from your health insurance spending. We can also help you review your current policies to understand your coverage.

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