Coordination of benefits: how two health plans decide who pays first
When an employee or a family member is covered by more than one health plan, coordination of benefits sets which plan pays first and which pays the rest. We help Michigan employers read the order-of-payment rules, keep dual-coverage claims from stalling, and decide whether to ask about other coverage at enrollment through our claims advocacy team.
How does coordination of benefits work?
Coordination of benefits is the set of rules a health plan uses when another plan also covers the same person. It prevents double payment and decides the order. Every claim goes first to the primary plan, which pays as if no other coverage existed. The leftover balance then goes to the secondary plan, which pays according to its own coordination language.
Which plan is primary?
The common rules: the plan covering the person as an employee is primary over a plan covering them as a dependent; for children, the parent whose birthday falls earlier in the year is primary; a court order for divorced parents overrides the birthday rule; and active employee coverage pays before COBRA or retiree coverage. Medicare has its own order, described below.
Where should employers act?
Three places matter most. First, ask about other coverage at enrollment and again at each open enrollment, so the carrier has current information. Second, make sure the plan document and summary plan description describe the coordination method the same way, especially on a self-funded plan where the employer sets the language. Third, give employees one place to ask when a claim stalls. Our coverage questions support handles that for clients, and the dependent eligibility verification process keeps the dependent and other-coverage records accurate.
Common questions
Which plan pays first?
The plan that covers a person as an employee pays before the plan that covers the same person as a dependent. A worker who is on both a spouse’s plan and their own has the employer plan as primary for their own claims, and the spouse’s plan as secondary. For children covered by both parents, most plans use the birthday rule: the plan of the parent whose birthday falls earlier in the calendar year pays first. Divorced or separated parents follow the court order if there is one. The plan document sets the exact order, so check it rather than assume.
What happens when Medicare is involved?
Medicare Secondary Payer rules decide it. For an employee or spouse who is 65 or older and covered by an active employer plan, the employer plan generally pays first when the employer has 20 or more employees, and Medicare pays second. For Medicare based on disability, the employer plan generally pays first when the employer has 100 or more employees. End-stage renal disease has its own coordination period. These thresholds and exceptions change the answer for a given employer, so confirm them with the carrier or counsel before telling an employee which plan is primary.
What does the secondary plan actually pay?
It depends on the plan language. Under a traditional coordination rule the secondary plan pays up to what it would have paid on its own, reduced by what the primary plan already paid, so the two plans together never pay more than the allowed amount. Some plans use a non-duplication or carve-out method that pays less. Secondary coverage often cuts out-of-pocket cost, but it rarely wipes it out.
How do COBRA and retiree coverage fit in?
Active employee coverage generally pays before COBRA continuation coverage and before retiree coverage. Someone on COBRA who then gains other group coverage or Medicare can lose the right to continue, so the order matters at both ends. Keep COBRA notices and your records of other coverage consistent.
Does having a second plan affect an HSA?
It can. A person who is covered by a spouse’s non-high-deductible health plan is generally not eligible to contribute to a health savings account, even if the employer plan is an HDHP. Ask about other coverage during enrollment so employees do not find the problem at tax time.
Why do dual-coverage claims get stuck?
The usual cause is missing information. A carrier will often pend or deny a claim until it has confirmed whether another plan exists and who is primary. Employees reply to the carrier’s other-coverage questionnaire late or not at all. A clean answer at enrollment, and a clear person to call, prevents most of these delays.
Talk to us about dual-coverage claims
Book a 30-minute call and we will review how your plan documents describe coordination of benefits and where claims are getting stuck. Visit us at 41000 Woodward Avenue, Suite 350 East, Bloomfield Hills, MI 48304, or call 248.370.8853.
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Related reading: Subrogation form · Reimbursement request form · Letter of eligibility · Explanation of benefits (EOB)
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