When you have one health plan, knowing who pays for medical claims is fairly straightforward. If you visit the doctor or go to an urgent care facility, typically the medical office submits a claim to your coverage provider for the exam. The coverage provider then reviews the claim and determines how much of the cost is your responsibility and how much the plan will cover.
That gets more complicated, however, if you have more than one health plan. If you or a dependent (someone covered by a plan who isn’t the primary carrier, like a spouse or child) are part of two or more plans, coverage providers have to work together to determine how costs are shared. This is called coordination of benefits.
What is coordination of benefits (COB)?
Coordination of benefits is a process that lets both of your plans assess your coverage and determine how to cover your medical expenses. Together, they decide how much each plan provider pays, and how your portion of the total is applied toward the deductible and out-of-pocket maximum of each plan.
There are several reasons why health plans might coordinate benefits, including:
- Ensuring that the plan providers don’t pay more than the total claim amount by mistake
- Establishing which plan is primary and which is secondary to determine which coverage provider pays first
- Reducing your out-of-pocket costs by applying both plans to your medical expenses before you pay
Common scenarios when coordination of benefits applies
Some people choose to have coverage from multiple plans for better access to in-network providers, reduced out-of-pocket medical costs or more covered services. You may have multiple plans requiring coordination of benefits if:
- You have your own health plan, and you’re also a dependent on your spouse’s health coverage
- You have children that are dependents on both your health coverage and the other parent’s
- Your child is under 26 years old and is covered as a dependent on your plan, but also has their own plan
- You are 65 or older and eligible for Medicare, but are also covered by employer-sponsored coverage
- You lose your health plan and receive continuation coverage (COBRA), but also a dependent on your spouse’s plan
Primary vs. secondary insurance: How they work together
If you have more than one health plan and receive covered medical services, your plan providers don’t usually split the cost down the middle. Instead, one provider is designated as the primary plan, and the other is the secondary.
The primary plan would pay the claim first according to its terms, and calculate your out-of-pocket expenses based on your deductible and coinsurance or copay. Then, the secondary plan pays the claim based on its terms, which may cover some or all of what the primary plan left unpaid.
Here’s an example of how primary and secondary insurance might work together:
- A doctor submits a claim for medical services totaling $1,000.
- Your primary insurance reviews the claim and applies its terms. For example, if you reached your deductible and your coinsurance is 20%, then your plan would pay 80% of the cost: $800.
- Then, your secondary plan reviews the claim and applies its own terms. If you’ve also reached this plan’s deductible and your coinsurance is 20%, the plan will pay 80% of the remaining $200 balance, or $160.
- You would be responsible for paying the remaining $40.
The birthday rule: How your child’s primary plan is decided
If you and your partner both have insurance, determining your own primary plans is simple. Your primary plan is the one where you’re named as member (or employee, for employer-sponsored health coverage). The secondary plan names you as a dependent and has another person (in this case, your spouse) as the primary policyholder.
For children who are dependents on both parents’ plans, coverage providers usually follow the “birthday rule” to determine which plan is primary. Under this rule, the parent whose birthday falls earlier in the calendar year provides the primary coverage, and the other parent provides secondary coverage.
There are a few exceptions to the birthday rule:
- If the parents have the same birthday, the parent who’s been covered by their plan longer has primary coverage.
- If the parents are divorced or separated, the parent with primary custody usually has the primary plan. If parents have joint custody, the birthday rule applies.
- If one parent has a marketplace or employer-sponsored plan and the other has COBRA, the marketplace or employer-sponsored plan is primary.
- If a child under age 26 has their own health coveragebut is also a dependent on one or both parents’ plans, the child’s plan is the primary.
What coordination of benefits means for your out-of-pocket costs
The main benefit of having more than one health plan is extra coverage. A secondary plan can cover some or all of what the primary plan doesn’t pay, leaving you with lower medical bills. There are a few things to keep in mind if you’re considering coverage from multiple plans.
- You still have two deductibles. You pay 100% of covered costs until you reach the deductible for each plan and cost sharing kicks in. Payments that your secondary plan makes don’t count toward your primary plan’s deductible, and vice versa.
- You have an out-of-pocket maximum for each plan. Payments you make for covered health services — including deductibles, copays, coinsurance and prescriptions — apply to both plans’ out-of-pocket maximums.
- Both plans have premiums. If you have health coverage from two or more providers, your family is paying two premiums, or monthly payments.
- If the cost savings from secondary coverage don’t outweigh the cost of premiums, it might be worth consolidating into one family plan.
- Having two plans doesn’t mean free coverage. Depending on plan terms and how the plans coordinate, you may still be responsible for some medical costs after both providers have paid.
Coordination of benefits: Frequently asked questions
What is coordination of benefits (COB)?
If you are covered by more than one plan, coordination of benefits is the way your coverage providers determine how costs are split according to each plan’s terms. It determines which plan pays first (the primary coverage) and which pays second (the secondary), giving you the most accurate portion of the total you’re responsible for, and avoiding overpayment for claims.
How do I determine which plan is the primary?
Your health coverage providers determine the primary and secondary plans when coordinating benefits. Generally, the plan listing you as member (or employee, for employer-sponsored health coverage) is your primary coverage. A plan listing you as a dependent is usually secondary. For children or young adults who are dependents on both parents’ plans, the parent whose birthday falls earlier in the calendar year typically provides the primary plan.
How do I make sure both health coverage providers receive claims?
If you are covered under multiple health plans, update your information with all coverage providers to initiate coordination of benefits. You should also provide both plans’ information to doctors, hospitals, pharmacies and other health service providers so they know to submit claims to both plans.
What happens if I have Medicare health coverage and an employer-sponsored plan?
If your employer has 20 or more employees, your employer plan is primary. If it has fewer than 20 employees, your Medicare plan is primary.
What is a COB letter?
When you or your dependents have more than one coverage provider, each may send you a COB letter. This letter includes a form that you must complete with your other plan’s information so your plans can coordinate benefits. You may also be asked to provide employer information for employer-sponsored plans and dependents’ personal information.