What Is Coordination of Benefits and How Does It Work?
Coordination of benefits (COB) determines which health insurance policy pays first if you have coverage through two plans.
Find Cheap Health Insurance in Your Area
It's important to note that you may still be responsible for some costs even if you have two health insurance plans. That's because secondary health plans don't usually pay for the costs you're responsible for paying with your primary policy.
What is coordination of benefits (COB)?
Coordination of benefits refers to the rules companies use to decide which plan will pay first if you have two health insurance plans. The process also sets what the second policy will cover.
Having two types of health insurance is common in a few situations.
- Children with coverage through both parents' health insurance.
- Those under 26 often have coverage through a parents' health insurance and coverage through work or a spouse.
- Married couples where both partners are covered by each others' plans.
- People over 65 who have Medicare and a second form of health insurance, such as Medicaid.
If you have coverage through more than one health insurance plan, the policy that pays first is your "primary health insurance." The policy that pays second is your "secondary health insurance".
Keep in mind, your secondary health insurance won't typically pay specific costs from your primary health insurance, including the deductible, copays and coinsurance. That means you may not benefit from having secondary insurance unless it offers a type or level of coverage you can't get through your primary coverage.
There are two exceptions to this rule, both for kinds of plans designed to fill in gaps in your coverage.
- Some types of supplemental insurance pay out a lump sum of money directly to you. You can use this cash however you want.
- Medigap plans are designed to pay costs not covered by Original Medicare (Parts A and B), including your deductibles, copays and coinsurance. Keep in mind that coverage depends on the type of Medigap plan you get. For example, Plan G pays for your Medicare Part A (hospital insurance) deductible, but not your Part B (doctor visits) deductible.
You may also need to worry about coordination of benefits with other types of insurance. For example, if you get hit by a car, typically the other driver's liability coverage will pay first and your health insurance will pay second.
This is also true if you trip and injure yourself at a friend's house. In that case, your friend's homeowners or renters policy would pay first and your health insurance would pay second.
How do primary and secondary insurance work?
Your primary health insurance works by paying up to your policy's coverage limits. Afterward, your secondary health insurance will either pay up to its coverage limits or until your medical bill is paid, whichever comes first. You're responsible for any remaining costs, and the costs you'd normally have to pay, such as your deductible, copays and coinsurance .
Your secondary insurance may pay first if it covers a service that's not a part of your primary coverage. For example, your secondary health insurance may pay for in-vitro fertilization (IVF) if your first plan doesn't offer this coverage.
With regular health insurance, you'll never get more than 100% of a procedure's cost. In other words, if your primary policy pays $10,000 to cover a surgery, your secondary plan won't give you a matching $10,000.
Primary and secondary insurance rules
The type of health insurance and how you get it will determine your primary and secondary coverage.
- You have your own coverage and a spouse's. Your coverage is primary and your spouse's is secondary.
- You have your own coverage and a parent's. Your coverage is primary and your parent's is secondary.
- You have coverage through both of your parents. The parent with the earlier birthday month's coverage is primary, and the other is secondary. If both parents have the same birthday month, the parent whose plan has covered the child the longest is primary.
- Your parents are divorced. The parent with custody's insurance is primary and the other parent's coverage is secondary. If the parents have joint custody, then the parent whose birthday month is earlier in the year has primary coverage.
- You have COBRA and another type of insurance. The other insurance is primary and COBRA pays second.
- You have Medicare and health insurance through work. Medicare pays first if the employer has 20 or fewer employees. Otherwise, the health plan through your job is the primary insurance, and Medicare is secondary.
- You have coverage through Tricare and another health plan. The other insurance is primary, unless it's Medicaid, a state victim of crime compensation program, Tricare Supplements, or another qualifying federal program such as the Indian Health Services.
- You have coverage through Medicaid and another type of insurance. The other coverage is primary and Medicaid is secondary, unless the other insurance is another type of government coverage for people who earn a low income, such as health insurance from the Indian Health Service or the Child Health Block Grant.
What are the pros and cons of having two health insurance plans?
Having two health insurance plans means you might have more coverage and flexibility when it comes to choosing your doctor. However, the extra cost means it's often not worthwhile.
Generally, there's not much downside to having extra coverage if you don't have to pay for it. However, you may find it takes a little longer to get your claims processed.
Pros and cons of having two health insurance plans
-
You may save money if your main insurance has poor coverage.
-
Your extra policy may pay for services not covered by your primary policy.
-
Buying an extra policy often won't save money.
-
It may take longer to get your claim processed.
Consider a supplemental insurance policy if you want extra coverage at an affordable price. Supplemental plans typically cost less than normal health plans because they only pay out under specific circumstances, such as if you get cancer or are injured in an accident.
Supplementary health insurance plans also pay out a lump sum directly to you. You can use this money as you see fit. For example, you could use your claim to pay for rent, groceries or the medical costs you're responsible for paying, such as your deductible, copay and coinsurance.
Frequently asked questions
How does coordination of benefits work?
Coordination of benefits works by determining which insurance plan pays first and which pays second if you're covered by more than one policy. Keep in mind, your secondary insurance will typically only pay for services not covered by your main, or primary, policy.
Can you have two health insurance plans?
Yes, you can have coverage from more than one health plan at a time. For example, you may have coverage from your workplace's group health plan and from a spouse or family member's health insurance.
How do you determine which insurance is primary and secondary?
A good rule of thumb is that your own insurance is typically primary and insurance you get through someone else such as a spouse or parent is secondary. Keep in mind that determining which insurance is primary and which is secondary can be complicated. Check a trustworthy source or call your insurance company to confirm.
Sources and methodology
ValuePenguin used information regarding Medicare and Medicaid coordination of benefits rules from Medicare.gov, Medicaid and MACPAC. Private health insurance coordination of benefits and regulatory details came from the National Association of Insurance Commissioners (NAIC).
Editorial note: The content of this article is based on the author's opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.
