Which health plan pays first? Coordination of benefits and the birthday rule

The basic order

How coordination of benefits works

Coordination of benefits is the process health plans use when the same person is covered by more than one plan. It identifies the primary plan, which processes the claim first, and the secondary plan, which considers the claim after the primary plan has acted.

The primary plan calculates its payment without using the other plan's benefits. The provider or member then sends the primary plan's Explanation of Benefits to the secondary plan. The secondary plan applies its own covered services, network, allowed amount and cost sharing rules to what remains.

Secondary coverage is not a coupon for the unpaid balance. Under the NAIC Coordination of Benefits Model Regulation, a secondary plan calculates what it would have paid if it were the only plan, then coordinates that amount with the primary payment. Combined plan payments generally cannot exceed the allowable expense. Your plan documents decide the exact method that applies to you.

Children on two plans

The birthday rule usually decides which parent's plan pays first

When a child is covered by two parents' health plans, many plans use the birthday rule. The plan of the parent whose birthday occurs earlier in the calendar year is primary for the child. Only the month and day matter. The parents' birth years do not.

Parent A's plan is primary because March 8 comes before October 20. Parent B being older does not change the order. If both parents have the same birthday, the NAIC model uses the plan that has covered a parent longer.

The rule is common, but it is not universal. It comes from an NAIC model regulation that many states have adopted in some form, and the NAIC state action chart shows that state action is not identical everywhere. Separately, under ERISA, state laws relating to employee benefit plans are generally preempted, and states may not treat an employee benefit plan as an insurance company in order to regulate it under insurance laws. The Department of Labor sets out that principle in Technical Release 2014-01. In practice, an employer plan that pays claims from its own funds can set its order in the plan documents.

That means the birthday rule is a strong starting point, not a substitute for checking both plans. Ask each plan to identify the primary plan in writing before expensive care when possible.

When parents live apart

A court order can change the usual order

Separation, divorce and custody arrangements can change which plan pays first. Under the NAIC model, a court order that assigns responsibility for a child's health care expenses or coverage can control the order when the plan has actual knowledge of it.

If a court order makes both parents responsible, or gives joint custody without assigning health care responsibility, the model returns to the birthday rule. If there is no controlling court order, the model generally uses this order:

1. 1
   The custodial parent's plan.

   It processes the child's claim first.

2. 2
   The plan of the custodial parent's spouse.

   It comes next.

3. 3
   The noncustodial parent's plan.

   It follows the first two plans.

4. 4
   The plan of the noncustodial parent's spouse.

   It is last in the model's sequence.

Do not assume every plan uses this exact sequence. Give both plans the relevant court order or custody documentation and ask them to confirm the order. Your plan documents decide when state rules or the NAIC model do not control.

A new baby

Handle enrollment and payment order as separate tasks

Newborn claims are often the first time a family discovers coordination of benefits. The mother's hospital claim and the baby's claims are not the same claim. Coverage for the mother does not, by itself, prove that the baby was properly enrolled in either parent's plan.

Federal special enrollment rules generally give an employee at least 30 days after a birth to request enrollment in an employer group health plan. When the request is timely, coverage must be effective on the child's birth date, according to the Department of Labor's Health Benefits Advisor. State law or the plan may provide additional rights, but do not rely on assumed automatic coverage.

If the newborn is enrolled in both parents' plans, the plans then determine which coverage is primary from the date both coverages apply. Many use the birthday rule. State law, self funded plan terms, or a court order can produce a different result.

Before the birth, ask both benefits departments these questions:

• What is the deadline and process for adding the baby?
• Will coverage be retroactive to the date of birth?
• If both plans cover the baby, which plan will be primary?
• Does the hospital have the correct primary and secondary policy information?

Missing the enrollment deadline can create a coverage problem that coordination rules cannot fix. If a birth or another life event changes your options, see what to do when you lose health coverage for the enrollment concepts and deadlines to review.

What you may pay

Secondary insurance does not simply cut the bill in half

The primary plan applies its negotiated rate, covered service rules and member cost sharing. That can include a copay, deductible or coinsurance. The secondary plan then calculates its responsibility under its own terms. It may pay some, all or none of the remaining patient amount.

The secondary plan may decline part of the balance because the service is not covered, the provider is outside its network, its allowed amount is lower, or its calculation says it has already met its payment obligation. A service excluded by the secondary plan does not become covered merely because the primary plan covered it.

Network overlap matters. A provider can be in network for one plan and out of network for the other. Before scheduled care, verify the provider with both plans using the steps in how to tell if a doctor is in network.

You can also have separate deductibles and out of pocket maximums under the two plans. Do not add the two limits together or assume spending credited by one plan will be credited the same way by the other. For a refresher on how the first plan calculates cost sharing, see what a deductible actually costs you.

The second premium

Double coverage is worth it only when the added value exceeds the added cost

Start with the extra annual premium for the second plan. Then estimate the claims the second plan is likely to pay after coordinating with the first plan. Include network access, prescription coverage and plan exclusions. Do not count the full remaining balance as savings unless the secondary plan confirms that is how it would process the claim.

Double coverage may help when the added premium is low, both networks include the family's providers, and a child or spouse expects regular covered care. It may be poor value when the second premium is high, the networks have little overlap, or the secondary plan's coordination method rarely produces an additional payment.

If the choice is between plan types, HDHP vs PPO: how to compare the full cost explains why premiums alone do not settle the comparison. With dual coverage, run that comparison again using the cost of both premiums and conservative estimates for secondary payments.

Your plan documents decide. Ask for the coordination of benefits section, the summary plan description for an employer plan, and written examples of how the plan processes a claim when it is secondary.

When payment stops

A stuck claim usually needs the plans to agree on the order

A claim can stall when each plan thinks the other is primary, the provider billed the secondary plan first, or one plan has not received the other plan's EOB. Old insurance information can also trigger a coordination questionnaire and hold the claim.

1. 1
   Confirm the coverage record.

   Tell each plan the other insurer's name, member ID, effective date and whose employment provides the coverage.

2. 2
   Ask both plans to state the order in writing.

   Request the plan provision or rule used to make that decision.

3. 3
   Send the claim to the primary plan first.

   After it processes, send its EOB and any required claim form to the secondary plan.

4. 4
   Ask for reprocessing, not a new estimate.

   If the provider billed in the wrong order, ask the billing office and plans to reprocess the existing claim.

5. 5
   Appeal or escalate if the order remains disputed.

   Follow the appeal deadline on the denial notice. For a fully insured plan, the state insurance department may help. For a private self funded employer plan, the Department of Labor's Employee Benefits Security Administration is the federal contact.

The NAIC model says that when plans cannot agree on the order within thirty calendar days after receiving all the information needed to pay the claim, they should immediately pay the claim in equal shares and settle their relative liabilities afterward, with no plan required to pay more than it would have paid as primary. That protection applies only where the rule governs the plans. Use it as a question for the plans or regulator, not as a promise that every claim must be handled that way.