Coordination
Of Benefits (COB) With Other Plans And Medicare
Coordination of
benefits (COB) is a way of determining the order in which benefits are
paid and the
amounts which are payable when an individual is covered under more than one
health care plan or Medicare. Coordination of benefits determines which plan
pays first, which plan pays second and which plan pays third. It also ensures
that the total payments from all plans do not exceed 100 percent of the total
covered charge.
Definitions
Applicable To Coordination Of Benefits
To understand
coordination of benefits, it is important to know the meanings of the following
two
terms:
"Covered
charges” as determined by this plan, means the medically necessary and
“usual, customary and reasonable” charge for a service or supply
covered by this plan and incurred while the individual is eligible under this
plan. “Covered charges” do not include services or supplies that
fall within the exclusionary provisions of this plan even if those services or
supplies are recognized as “covered charges” under any of the other
plans
involved.
“Plan”
means all of the following, even if they do not have their own coordination
provisions:
- Group,
individual or blanket disability insurance policies and health care service
contractor and health maintenance organization agreements issued by insurers,
health care service contractors and health maintenance
organizations.
- Labor-management
trustee plans, labor organization plans, employer organization plans, or
employee benefit organization plans.
- Government
programs which provide benefits for their own civilian employees or their
dependents.
- Group
coverage required or provided by any law including Medicare. This does not
include workers’ compensation.
Coordination
Of Benefits Method
This plan uses a
method of coordinating benefits known as “carveout.” Carveout
guarantees that an individual receives the same benefit he or she would receive
in the absence of the other plan or Medicare. Carveout also means the individual
does not receive 100 percent of the total covered charge unless he or she
satisfies this plan’s annual deductible and annual coinsurance maximum.
With carveout, if this plan’s (as the secondary plan) normal benefit is
greater than the primary plan’s payment, then this plan will pay the
difference between its normal plan benefit and the primary plan’s payment.
If this plan’s normal benefit is equal to or less than the primary
plan’s payment, then no payment will be made by this
plan. If an
individual is eligible to receive benefits from a primary plan or Medicare, the
amount of benefits that would have been payable by the primary plan or Medicare
will be subtracted from this plan’s payable benefits, even if the claim
was not filed with the primary plan or Medicare.
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Examples of
Coordination of Benefits Method
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The following
examples illustrate how the Retired Plan uses the “carveout” method
to calculate benefits with other plans or Medicare. In the examples shown below,
the Retired Plan is the secondary plan. These examples use hypothetical benefit
amounts for illustration purposes only. Actual amounts paid by this plan, other
plans or Medicare may differ.
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Example
1
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Helen incurred a
$200 expense. The primary plan and the Retired Plan considered the $200 expense
to be a covered charge. The primary plan and the Retired Plan required
satisfaction of a $200 annual deductible before benefits were
payable.
Total
Charge $200
Covered
Charge $200
Primary Plan
Deductible $200
Retired Plan
Deductible $200
Primary Plan Benefit
$0
Retired Plan
Benefit
$0
No
benefit was paid under the primary plan or the Retired Plan because the $200
annual deductible was not satisfied under either plan. However, the $200 covered
expense did satisfy both plans’ annual deductibles.
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Example
2
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John incurred a
$200 expense. The primary plan and the Retired Plan considered the $200 expense
to be a covered charge payable at 80 percent. Deductibles have been satisfied
for both plans.
Total Charge $200
Covered
Charge $200
Primary Plan
Paid $160
Retired
Plan Benefit $160
Retired Plan
Payment $0 No
benefit was payable under the Retired Plan when coordinating benefits
using the “carveout” method because the primary plan’s payment
was equal to the Retired Plan’s normal benefit.
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Example
3
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Mary incurred a
$200 expense. The primary plan considered the $200 expense to be a covered
charge payable at 80 percent. The Retired Plan also considered the $200 expense
to be a covered charge payable at 90 percent. Deductibles have been satisfied
for both plans.
Total Charge $200
Covered
Charge $200
Primary Plan
Paid $160
Retired
Plan Benefit $180
Retired Plan
Payment $20 When
coordinating benefits using the “carveout” method, the Retired
Plan’s payment was the difference between what the primary plan paid and
the Retired Plan’s normal benefit.
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Example
4
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Jack incurred a
$200 expense. The $200 expense was not considered a covered charge under the
primary plan. The Retired Plan considered the $200 expense to be a covered
charge payable at 90 percent. The deductible for the Retired Plan has been
satisfied.
Total Charge $200
Covered
Charge $200
Primary Plan
Paid $0
Retired
Plan Benefit $180
Retired Plan
Payment $180 Benefits
were paid up to the Retired Plan’s normal benefit since no payment was
made by the primary plan.
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Example
5
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Tom incurred a
$200 expense. The primary plan considered the $200 expense to be a covered
charge payable at 80 percent. The Retired Plan considered the $200 expense to be
a covered charge payable at 100 percent. Deductibles have been satisfied for
both plans. The $2,300 coinsurance maximum has been satisfied for the Retired
Plan .
Total Charge $200
Covered
Charge $200
Primary Plan
Paid $160
Retired
Plan Benefit $200
Retired Plan
Payment $40 Because
Tom had satisfied the Retired Plan’s annual deductible and annual
coinsurance maximum, the Retired Plan paid the balance of covered charges in
full.
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Order of
Benefit Payment
An important
part of coordinating benefits is determining the order in which the plans
provide benefits. The National Association of Insurance Commissioners (NAIC)
Model Regulations provide guidelines to determine which plan is primary when an
individual is covered under more than one health care plan. These guidelines
include the “birthday rule” for natural children of married parents
as well as rules for children of divorced or legally separated parents, rules
for active versus inactive employees, state and federal continuation coverage
such as COBRA, and the order of benefit determination to be followed when none
of these rules are
applicable. As
determined by federal law, Medicare has guidelines which determine when Medicare
is the primary or secondary payer for an individual who has another health care
plan and under what circumstances.
Rules For
Coordination Of Benefits
When an
individual is covered by two or more plans, the rules for determining the order
of benefit payments are as follows:
- The
primary plan must pay or provide its benefits as if the secondary plan or plans
did not exist.
- A
plan that does not contain a coordination of benefits provision that is
consistent with this regulation is always primary. There is one exception:
coverage that is obtained by virtue of membership in a group and designed to
supplement a part of a basic package of benefits may provide that the
supplementary coverage shall be excess to any other parts of the plan provided
by the contract holder. Examples of these types of situations are major medical
coverages that are superimposed over base plan hospital and surgical benefits,
and insurance type coverages that are written in connection with a closed panel
plan to provide out-of-network benefits.
- A
plan may consider the benefits paid or provided by another plan only when it is
secondary to that other plan.
- Order
of Benefit
Determination
The
first of the following rules that describes which plan pays its benefits before
another plan is the rule to
use:
- Non-Dependent
or
Dependent
The
plan that covers the individual other than as a dependent, for example as an
employee, member, subscriber, or retiree, is primary and the plan that covers
the individual as a dependent is secondary. However, if the individual is a
Medicare beneficiary, and, as a result of the provisions of Title XVIII of the
Social Security Act and implementing regulations, Medicare
is:
- Secondary
to the plan covering the individual as a dependent; and
- Primary
to the plan covering the individual as other than a dependent (e.g., a retired
employee),
then
the order of benefits is reversed so that the plan covering the individual as an
employee, member, subscriber, or retiree is secondary and the other plan is
primary.
- Child
Covered Under More Than One
Plan
- The
primary plan is the plan of the parent whose birthday is the earlier in the year
if:
- The
parents are married;
- The
parents are not separated (whether or not they ever have been married);
or
- A
court decree awards joint custody without specifying that one parent has the
responsibility to provide health care coverage.
- If
both parents have the same birthday, the plan that has covered either of the
parents longer is primary.
- If
the specific terms of a court decree state that one of the parents is
responsible for the child’s health care expenses or health care coverage
and the plan of the parent has actual knowledge of those terms, that plan is
primary. If the parent with financial responsibility has no coverage for the
child’s health care services or expenses, but that parent’s spouse
does, the spouse’s plan is primary. This subparagraph shall not apply with
respect to any claim determination period or plan year during which benefits are
paid or provided before the entity has actual knowledge.
- If
the parents are not married or are separated (whether or not they ever were
married) or are divorced, and there is no court decree allocating responsibility
for the child’s health care services or expenses, the order of benefit
determination among the plans of the parents and the parents’ spouses (if
any)
is:
- The
plan of the custodial parent;
- The
plan of the spouse of the custodial parent;
- The
plan of the noncustodial parent; and then
- The
plan of the spouse of the noncustodial parent.
- Active
or Inactive
Employee
The
plan that covers an individual as an employee who is neither laid off nor
retired (or as that employee’s dependent) is primary. If the other plan
does not have this rule, and if, as a result, the plans do not agree on the
order of benefits, this rule is ignored. Coverage provided an individual as a
retired worker and as a dependent of that individual’s spouse as an active
worker will be determined under Subsection D(1).
- Continuation
Coverage
If
an individual whose coverage is provided under a right of continuation pursuant
to federal or state law also is covered under another plan, the plan covering
the individual as an employee, member, subscriber, or retiree (or as that
individual’s dependent) is primary and the continuation coverage is
secondary.
If
the other plan does not have this rule, and if, as a result, the plans do not
agree on the order of benefits, this rule is ignored.
- Longer
or Shorter Length of
Coverage
If
the preceding rules do not determine the order of benefits, the plan that
covered the individual for the longer period of time is
primary.
- To
determine the length of time an individual has been covered under a plan, two
plans shall be treated as one if the covered individual was eligible under the
second within 24 hours after the first ended.
- The
start of a new plan does not
include:
- A
change in the amount of scope of a plan’s benefits;
- A
change in the entity that pays, provides or administers the plan’s
benefits; or
- A
change from one type of plan to another (such as, from a single employer plan to
that of a multiple employer plan).
- The
individual’s length of time covered under a plan is measured from the
individual’s first date of coverage under that plan. If that date is not
readily available for a group plan, the date the individual first became a
member of the group shall be used as the date from which to determine the length
of time the individual’s coverage under the present plan has been in
force.
- If
none of the preceding rules determines the primary plan, the allowable expenses
shall be shared equally between the
plans.
These
coordination of benefits guidelines are subject to change as new rules and
regulations are adopted by Medicare, the State of Washington and the Board of
Trustees.
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