Understanding Benefits of Various Health Plans
In this lesson, you will learn about coordinating benefits when submitting health and dental claims. Coordination of benefits is an important concept that helps determine which insurance plan pays first when an individual is covered by multiple health and dental plans. This process ensures proper reimbursement without duplication of benefits.
Coordination of Benefits: What Is It?
Meet Janet, a working mom who is wondering how to claim expenses for herself and her family. Janet and her husband both have health and dental coverage through their employers. In cases where one person is covered by multiple health and dental plans, insurance providers utilize a coordination of benefits clause to establish the primary plan responsible for paying the claim. This prevents individuals from receiving more than 100% of the claim amount, but it does allow those with multiple coverage to be reimbursed for a higher portion of their out-of-pocket expenses.
As both Janet and her husband have employer-provided coverage, Janet needs to determine which plan should be utilized first for their family’s claims. Let’s examine this process in further detail.
Carrier Primary vs. Excess
The primary carrier is the insurance company responsible for your coverage. In Janet’s situation, her employer’s insurance company would serve as her primary carrier, while her husband’s benefits through his employer would also be considered his primary carrier.
If Janet were to have multiple jobs with health and dental coverage, the plan she has been a part of the longest would be her primary carrier, while the other plan would act as an excess or secondary carrier for submitting claims.
When making claims, Janet would need to identify her children’s main insurance provider. Typically, carriers determine this for dependent children using the birthday rule, which states that the parent whose birthdate falls earlier in the year holds primary coverage. In Janet’s case, since her birthday is in April and her husband’s is in September, her plan would be considered the primary carrier for their children and she would initially submit their claims to that provider.
What Is the Process of Coordination of Benefits?
Let’s assume that Janet’s plan covers 75% of her eligible health and dental costs and her husband’s plan covers 80%. Janet’s expense at the dentist was $200.
She would submit the claim to her plan first since she is the primary carrier, and she would receive $150 (75% x $200) from her insurance company. Her husband’s insurance company could also be contacted if her policy has a coordination of benefits clause.
The difference between the cost of the expense and what her insurance company paid her would be $50 ($200 – $150) when she submits the claim to her husband’s insurance company. Janet will receive a total of $200 in reimbursement from both insurance companies.
The insurance company cannot reimburse Janet more than what she paid for the expense, so Janet would not receive 80% of the eligible expense or $160 (80% x $200) from her husband’s plan.
Benefits Are Not Duplicated
The secondary carrier may not cover an eligible expense if the primary carrier paid the same amount or a higher amount than the secondary carrier would have paid.
Let’s assume Janet’s husband’s plan had a non-duplication of benefits clause. She would submit her claim to her insurance company and get a reimbursement of $150 (75% x $200). The plan of Janet’s husband pays 80% of her expenses, so she would receive $10 (5% x $200) from his plan since 80% is covered by his plan.
Her eligible expenses would be $160 ($150 + $10) in this case, so she would have to pay $40 ($200 – $160) out of pocket.
Summary of the Lesson
- Whenever an insured individual has coverage under multiple health and dental plans, a coordination of benefits clause determines which plan will pay the claim first.
- A primary carrier is the insurance company that has you covered as the primary individual, whereas an excess carrier is a secondary insurance plan that you would submit an eligible claim to.
- To determine which insurance plan to submit your children’s claims to first, insurance companies use the birthday rule for health and dental plans that cover your children.
- Children’s primary carrier is the parent whose birthdate is earlier in the year, so an insured would submit claims to this plan first.
- A non-duplication of benefits clause or a clause that states that if the primary carrier pays the same or a higher amount than the secondary carrier would have paid for an eligible expense, the secondary carrier will not pay anything.
For more information, visit Coordination of Insurance Benefits.