LAC 37:XIII.323
A. Consumer Explanatory Booklet Coordination of Benefits
COORDINATION OF BENEFITS
| IMPORTANT NOTICE This is a summary of only a few of the provisions of your health plan to help you understand coordination of benefits, which can be very complicated. This is not a complete description of all of the coordination rules and procedures, and does not change or replace the language contained in your insurance contract, which determines your benefits. |
Double Coverage
It is common for family members to be covered by more than one health care plan. This happens, for example, when a husband and wife both work and choose to have family coverage through both employers.
When you are covered by more than one health plan, state law permits your insurers to follow a procedure called “coordination of benefits” to determine how much each should pay when you have a claim. The goal is to make sure that the combined payments of all plans do not add up to more than your covered health care expenses.
Coordination of benefits (COB) is complicated, and covers a wide variety of circumstances. This is only an outline of some of the most common ones. If your situation is not described, read your evidence of coverage or contact your state insurance department.
Primary or Secondary?
You will be asked to identify all the plans that cover members of your family. We need this information to determine whether we are the “primary” or “secondary” benefit payer. The primary plan always pays first when you have a claim.
Any plan that does not contain your state’s COB rules will always be primary.
When This Plan is Primary
If you or a family member are covered under another plan in addition to this one, we will be primary when:
Your Own Expenses
The claim is for your own health care expenses, unless you are covered by Medicare and both you and your spouse are retired.
Your Spouse’s Expenses
The claim is for your spouse, who is covered by Medicare, and you are not both retired.
Your Child’s Expenses
The claim is for the health care expenses of your child who is covered by this plan and
You are married and your birthday is earlier in the year than your spouse’s or you are living with another individual, regardless of whether or not you have ever been married to that individual, and your birthday is earlier than that other individual’s birthday. This is known as the “birthday rule”;
or
You are separated or divorced and you have informed us of a court decree that makes you responsible for the child’s health care expenses;
or
There is no court decree, but you have custody of the child.
Other Situations
We will be primary when any other provisions of state or federal law require us to be.
How We Pay Claims When We Are Primary
When we are the primary plan, we will pay the benefits in accordance with the terms of your contract, just as if you had no other health care coverage under any other plan.
How We Pay Claims When We Are Secondary
We will be secondary whenever the rules do not require us to be primary.
How We Pay Claims When We Are Secondary
When we are the secondary plan, we do not pay until after the primary plan has paid its benefits. We will then pay part or all of the allowable expenses left unpaid, as explained below. An “allowable expense” is a health care service or expense covered by one of the plans, including copayments, coinsurance and deductibles.
If there is a difference between the amount the plans allow, we will base our payment on the higher amount. However, if the primary plan has a contract with the provider, our combined payments will not be more than the contract calls for. Health maintenance organizations (HMOs) and preferred provider organizations (PPOs) usually have contracts with their providers.
We will determine our payment by subtracting the amount the primary plan paid from the amount we would have paid if we had been primary. We will use any savings to pay the balance of any unpaid allowable expenses covered by either plan.
If the primary plan covers similar kinds of health care expenses, but allows expenses that we do not cover, we will pay for those items as long as there is a balance in your benefit reserve, as explained below.
We will not pay an amount the primary plan did not cover because you did not follow its rules and procedures. For example, if your plan has reduced its benefit because you did not obtain precertification, as required by that plan, we will not pay the amount of the reduction, because it is not an allowable expense.
Benefit Reserve
When we are secondary we often will pay less than we would have paid if we had been primary. Each time we "save" by paying less, we will put that savings into a benefit reserve. Each family member covered by this plan has a separate benefit reserve. We use the benefit reserve to pay allowable expenses that are covered only partially by both plans. To obtain a reimbursement, you must show us what the primary plan has paid so we can calculate the savings. To make sure you receive the full benefit or coordination, you should submit all claims to each of your plans. Savings can build up in your reserve for one year. At the end of the year any balance is erased, and a fresh benefit reserve begins for each person the next year as soon as there are savings on their claims.
Questions about Coordination of Benefits?
Contact Your State Insurance Department
First, as each claim is received, the secondary plan determines how much it would have paid if it had been the primary plan.
Second, the secondary plan subtracts this amount from what it paid on the claim.
Third, the difference (or savings) between what the secondary plan paid and what it would have paid if it had been the primary plan is then placed in the benefit reserve account established for the covered person.
Lastly, as subsequent claims are submitted for the covered person, the secondary plan reviews previous claims and determines its obligation to pay for allowable expenses on those claims and pays on those claims to the extent savings are available in the covered person’s benefit reserve account. This includes claims that were previously applied to either plan’s deductible, coinsurance or copayment. For example, if the first claim incurred by the covered person was applied to both plans’ deductibles and the second claim incurred by a covered person was payable at 100% by both plans, the secondary plan must use the savings realized from the second claim to pay toward the first claim.
| Claim Number 1 Actual Charge = $100 | |
| Plan A $100 -25 Deductible $75 80 percent $60 Payable | Plan B $100 -100 Deductible $0 Payable |
| Plan A must pay $60. Plan B makes no payment because it would have no liability under the terms of the policy if it had been primary. No money is available from the benefit reserve account. | |
| Claim Number 2 Actual Charge = $5300 | |
| Plan A $5300 -0 Deductible $5300 80 percent $4240 Payable | Plan B $5300 -0 Deductible $5300 80 percent $4240 Payable |
| The deductible on both plans was calculated in Claim #1. Deductibles will not apply from this claim forward. Plan A must pay $4240. Plan B must pay the difference between the actual charge and the amount paid by Plan A ($1060). Plan B must now establish a benefit reserve account. This amount, the savings, is calculated by subtracting the amount it paid from the amount it would have paid if primary ($4240-$1060=$3180). Now Plan B must go back to Claim #1 and pay the $40 balance of that claim out of the benefit reserve account, leaving a balance in that account of $3140. | |
| Claim Number 3 Actual Charge = $110 | |
| Plan A $110 80 percent $88 Payable | Plan B $110 80 percent $88 Payable |
| Plan A pays $88. Plan B pays the difference of the actual charge and the amount paid by Plan A ($22). Plan B would have paid $88 if primary, but only paid $22, so the balance of the savings of $66 goes into the benefit reserve account, which now totals $3206. Plan B does not have to go back to any other prior claims to pay any incurred, but unpaid, allowable expenses, because there are none outstanding. So, the balance in the benefit reserve account remains unchanged at $3206. | |
| Claim Number 4 Actual Charge = $1500 | |
| Plan A $1300 RVS 80 percent $1040 Payable | Plan B $1100 RVS 80 percent $880 Payable |
| The insured is liable for the difference between the actual charge and the highest amount under the relative value schedule (RSV) reimbursement methodology ($200). Plan A pays $1040. Plan B pays the difference between the highest RSV amount and the amount paid by Plan A ($1300-$1040=$260). The benefit reserve account is increased by the difference between what Plan B would have paid if primary and the amount actually paid by Plan B ($880-$260=$620), for a new balance of $3826. | |
| Claim Number 5 Actual Charge = $2295 for 51 visits | |
| This claim involves spinal manipulation. Plan A provides up to 26 visits per year on an 80 percent/20 percent basis. Total actual charge of $45 per visit is within RSV limits. | |
| Plan A $1170 RSV for 26 visits 80 percent $936 Payable | Plan B has no coverage for spinal manipulation. However, because Plan A has coverage under its policy, the claim is considered an allowable expense for the 26 visits. Plan B must pay the 20% coinsurance ($234) amount for the 26 visits from the benefit reserve account, leaving a final balance of $3592. The remaining amount of $1125 for the additional 25 visits is not payable by either Plan A or Plan B because it is not considered an allowable expense under Plan A. Plan A pays benefits for only 26 visits per year. Again, Plan B has no coverage for spinal manipulation. |
AUTHORITY NOTE: Promulgated in accordance with R.S. 22:3.2014.
HISTORICAL NOTE: Promulgated by the Department of Insurance, Office of the Commissioner, LR 17:67 (January 1991), amended LR 20:52 (January 1994), LR 23:415 (April 1997), LR 42:1103 (July 2016), LR 44:66 (January 2018).
§325. Appendix C―Explanation for Secondary Plans on the Purpose and Use of the Benefit Reserve
A. Explanation for Secondary Plans on the Purpose and Use of the Benefit Reserve
COORDINATION OF BENEFITS
The purpose of coordination of benefits is to ensure that a covered person does not receive more than 100% of the total allowable expenses. Any plan that has been determined to be the secondary plan in accordance with this model regulation is
permitted to reduce its benefits so that the total benefits paid by all plans during a claim determination period (a period of time not less than 12 months, usually a calendar year or contract year) are not more than the total allowable expenses.
The secondary plan usually saves money on claims due to the other plan paying first. The amount saved by the secondary plan must be used to pay allowable expenses which would not otherwise have been paid. To do this, secondary plans must establish a benefit reserve account for each covered person. The secondary plan puts the money saved on claims for the covered person into the benefit reserve account. This money is to be used to pay any portion of an allowable expense incurred by the covered person during a claim determination period by using the following procedure:
The procedure outlined above is illustrated in the various claim examples that follow. For all of the examples, Plan A is the primary plan and Plan B is the secondary plan. Both plans have an 80 percent/20 percent coinsurance requirement. For illustrative purposes, Plan A has a $25 deductible and Plan B has a $100 deductible. Claims are assumed to have occurred in the same claim determination period and in consecutive order.
Examples:
AUTHORITY NOTE: Promulgated in accordance with R.S. 22:3.2014.
HISTORICAL NOTE: Promulgated by the Department of Insurance, Office of the Commissioner, LR 44:67 (January 2018).