Coordination of Benefits (COB)
COB - Coordination of Benefits or What Plan Pays First?
If you or your family members have coverage from more than one medical, vision, or dental plan, you may be familiar with the term “coordination of benefits,” or “COB.” If a person has more than one plan, “coordination of benefits” rules determine which plan pays first, second, and so on. COB rules were created to make sure that, together, the plans do not pay more than 100% of a claim for that person.
Having coverage under more than one plan does not mean that you will not have to pay a portion of a claim. Each plan’s contractual copayments, coinsurance, deductibles, exceptions, limitations, and prior authorization and in-network requirements would apply. Coordination of benefits rules do not override these contractual provisions.
In Michigan, the Coordination of Benefits Act specifies how benefits are to be coordinated by insurers issuing major medical and dental coverage in the state. These rules do not apply to hospital indemnity plans, accident only plans, disability income insurance, specified disease or accident plans, school-accident-type coverage, long-term care insurance, Medicare Supplement plans, Medicaid coverage, or governmental plans.
Who Pays First? Second?
The first question when there are two or more plans involved is which plan is primary and which plan is secondary. The primary plan is the plan that pays first, the secondary plan pays second or after the primary plan pays, and so on down the line. The Coordination of Benefits Act, MCL 550.251 to 550.254, dictates how to determine which coverage is primary and which coverage is secondary. The following are common scenarios in which the coordination of benefits is determined. These are not the only scenarios in which it is necessary to determine the order of payment by multiple plans.
Please note for these explanations, it is assumed that the plans were only issued in Michigan and that no covered person is eligible for Medicare.
- The plan that covers you as an employee, member, subscriber, policyholder, or retiree is primary over a plan that covers you as a dependent. This means that each spouse has primary coverage from his or her own employer’s plan.
- The plan that covers you as an active employee or dependent of an active employee (not as a laid-off employee or retiree) is primary over the plan that covers you as a laid-off employee or retiree or dependent of a laid-off employee or retiree.
- If you are covered as an employee, member, subscriber, policyholder, or retiree under more than one plan, and neither (1) nor (2) applies, then the plan that has covered you for the longest period of time is primary.
- If you are covered as an employee, member, subscriber, enrollee, retiree, or dependent of an employee, member, subscriber, enrollee, or retiree under more than one plan, but are covered under COBRA on one of the plans, then the COBRA plan is secondary to the other plan.
Dependents and Minor Children of Parents Not Separated or Minor Children of Divorced Parents with Joint Physical Custody:
- The plan covering the parent whose birthday falls earlier in the year is the primary plan. This is referred to as the Birthday Rule. Birthday refers only to the month and day in a calendar year, not the year in which the person was born.
- If both parents have the same birthday, then the plan that has provided coverage for the longer period of time is the primary plan.
Dependent Minor Children of Legally Separated, Divorced, or Never Married Parents Living Separately:
If a child is covered by more than one plan and the parents are legally separated or divorced from the other parent or live apart and were never married, the plans must pay in the following order:
- First the plan of the parent with custody of the child;
- Then, the plan of the spouse of the parent with custody of the child;
- Finally, the plan of the parent or spouse of the parent without custody of the child.
However, if a court decree such as a divorce, states that one parent is financially responsible for the health care expenses of the child, and the plan has actual knowledge of the terms of the decree, then that plan is the primary plan for the child and the plan of the other parent would be secondary. If a court decree states that both parents are responsible for providing coverage then the two plans would be of the same priority level and the Birthday Rule would apply.
In unique circumstances or when Medicare, out-of-state plans, or self-funded plans are involved, there may be exceptions to the preceding rules.
For specific questions about coordination of benefits, call the Department of Insurance and Financial Services (DIFS) at 877-999-6442.