Coordination of benefit provisions in health insurance plans are designed to prevent overpayment and ensure that the claimant does not receive more than the eligible charges from both health plan payments combined. In other words, it prevents the claimant from receiving double reimbursement for the same expenses.
One of the key principles of coordination of benefits is that the total amount reimbursed by all health plans cannot exceed 100% of the eligible charges. This means that if a claimant has multiple health insurance plans, the combined payments from all the plans should not exceed the total cost of the covered expenses.
For example, let’s say you have two health insurance plans, Plan A and Plan B. You incur medical expenses of $1,000 that are covered under both plans. Plan A has an allowed amount of $800 for the services, while Plan B has an allowed amount of $600.
In coordination of benefits, the primary plan (usually the plan in which you are the policyholder) pays its share first. Let’s assume Plan A is the primary plan and it pays $700, leaving $100 as the primary plan’s remaining liability.
The secondary plan, Plan B, would then coordinate its benefits by considering the remaining liability of the primary plan. In this case, since Plan B has an allowed amount of $600, it would pay $100 to cover the remaining liability, resulting in a total reimbursement of $800 ($700 from Plan A and $100 from Plan B).
However, if the total allowed amount between the two plans was $1,400 (exceeding the actual expenses of $1,000), coordination of benefits would ensure that the claimant does not receive more than 100% of the eligible charges. In this scenario, the combined payments from both plans would be limited to $1,000, preventing any overpayment.
The coordination of benefits provisions are in place to avoid duplication of benefits and to ensure that claimants do not receive more than the total cost of the covered expenses. By limiting reimbursements to the eligible charges, it helps prevent fraud and abuse in the health insurance system.
Coordination of benefits provisions do not allow the claimant to receive more than 100% of the eligible charges between both health plan payments. This is done to prevent overpayment and ensure fair reimbursement for covered expenses.