Coordination of Benefits: When Two Health Plans Apply

Quick overview

Coordination of Benefits (COB) is the process insurers use to decide which of multiple health plans pays first, how much the second plan can pay, and when a provider may bill the patient directly. The goal is to avoid duplicate payments for the same service while minimizing out‑of‑pocket costs for the insured. Effective COB is particularly important for households with working spouses, dependents on two plans, retirees with Medicare plus a private plan, and people with dual public/private coverage.

(Authoritative guidance on coordination and Medicare rules is available from the Centers for Medicare & Medicaid Services — CMS.)

How insurers decide who pays first

Insurers use published “order of benefit determination” rules. While precise order can vary by plan language and state law, common principles include:

• Active employee coverage often pays first for a covered person who is an active employee and enrolled in an employer group health plan.
• Dependent children covered by both parents’ plans frequently follow the “birthday rule”: the parent whose birthday (month and day) comes first in the calendar year is the primary plan. If a court decree assigns financial responsibility, that order supersedes the birthday rule.
• Retiree coverage vs. Medicare: Medicare is usually the primary payer for retirees; for active employees age 65 and over covered by an employer plan, employer size and plan type can determine which pays first (see CMS guidance for specifics).
• Government programs (Medicare, Medicaid, TRICARE) and private plans have special coordination rules set by federal law; CMS tracks Medicare secondary payer rules and exceptions.

Exact ordering can be technical and depends on plan contract language and federal/state rules; if you need an exact determination for your situation, check both plan documents and the CMS guidance on Medicare coordination (CMS).

Common real‑world scenarios

1) Spouses with separate employer plans

If both spouses have employer coverage, one plan is primary and the other secondary. As the primary plan pays first, the secondary may cover remaining eligible costs subject to its own rules and limits. Make sure each insurer knows about the other to speed processing and prevent denials.

2) Child covered by both parents

The birthday rule is the common approach. If parents are divorced, the custody decree or agreement that states which parent is responsible for insurance usually sets the order of benefit.

3) Medicare plus employer coverage

Medicare coordination rules are specific: for retirees, Medicare is typically primary; for active employees age 65 or older, employer size can affect which pays first. There are also separate rules for people under 65 who qualify for Medicare because of disability or end‑stage renal disease (ESRD). Always confirm with CMS materials and your benefits administrator (CMS — Medicare Secondary Payer information).

4) Dual coverage with Medicaid

Medicaid is often the payer of last resort. It will pay only after all other available coverage has paid and only for services Medicaid covers.

How to manage COB step‑by‑step (practical checklist)

1. Tell each insurer about the other plan as soon as you have dual coverage. This helps them set the correct payer status and avoid claim delays.
2. File with the primary insurer first. Get a copy of the Explanation of Benefits (EOB) or denial. The primary insurer’s EOB documents what they paid and what balance remains.
3. Submit the primary EOB to the secondary insurer with your claim. Most secondary plans require the primary EOB to process payments.
4. Track deductibles and out‑of‑pocket (OOP) maximums separately for each plan. Even when a secondary plan pays, you may still be responsible for some cost sharing.
5. Keep detailed records: claims, EOBs, correspondence, dates of service, provider bills, and claim numbers. This expedites appeals if claims are denied.
6. If a claim is denied, review both plans’ EOBs carefully and follow the insurer’s appeals process. If you hit a roadblock, escalate to your employer benefits administrator or state insurance commissioner.

Interaction with Medicare, COBRA, HSAs, and retiree plans

• Medicare: Medicare rules for primary/secondary status are complicated and vary by employment status, employer size, reason for Medicare (age, disability, ESRD), and retiree vs. active worker status. Consult CMS for the latest rules and your benefits administrator for how your employer plan treats Medicare (CMS).

• COBRA: If you keep employer coverage under COBRA after leaving a job, COBRA generally follows the same COB rules as the employer plan; COBRA coverage is not secondary simply because it is COBRA.

• Health Savings Accounts (HSAs): Enrolling in Medicare affects HSA eligibility and contributions. If Medicare becomes primary and you enroll in Parts A or B, you can no longer make new HSA contributions. Check IRS guidance and your HSA custodian for timing to avoid tax penalties.

• Retiree plans and Medigap: Retiree employer plans, Medigap (Medicare Supplement), and Medicare Advantage plans coordinate benefits differently. Medigap generally fills Medicare cost‑sharing; it does not become the primary payer when another private plan exists. Ask your plan administrator how COB interacts with supplemental policies.

Common mistakes and how to avoid them

• Assuming two plans eliminate all costs. Secondary coverage may not cover deductibles, coinsurance, or balance billing in full. Expect coordination gaps.
• Failing to notify insurers. Delays can lead to denials or payment errors.
• Missing documentation deadlines. Timely filing limits vary by plan—missing them can forfeit coverage for a claim.
• Forgetting state law differences. Some states have unique rules to protect consumers; consult your state insurance department or the plan’s network of consumer resources.

Disputes, subrogation, and balance billing

• Subrogation: If a third party is responsible for an injury (for example, in an auto accident), an insurer may assert subrogation rights to recover payments. That can affect how COB and liability claims interact; read the subrogation clause in your policy and ask your insurer for specifics.

• Balance billing and provider contracts: If a provider is out‑of‑network for either plan, you may receive a balance bill for the difference between the provider’s charge and what insurers pay. If balance billing occurs, check whether state law or your insurer’s contract forbids the provider from billing you beyond the allowed amount.

Practical examples (illustrative)

Example 1 — Spouse plans

Jane has an employer plan that pays $6,000 on a $10,000 surgery. Her spouse’s plan is secondary and covers $2,000 of the remaining $4,000. Jane’s final out‑of‑pocket is $2,000 plus any unmet deductibles or coinsurance the secondary plan does not cover.

Example 2 — Medicare + employer (typical retiree)

A retiree with Medicare and a Medicare‑eligible retiree plan: Medicare pays first for covered services; the retiree plan pays remaining Medicare‑allowed cost‑sharing up to its limits. Always confirm payment order with the plan administrator.

These examples are illustrative. Exact outcomes depend on plan benefits, deductibles, networks, and state and federal rules.

Professional tips from a financial advisor’s practice

• Review benefits annually at open enrollment. COB situations can change when jobs change, when you retire, or when divorce/parenting arrangements change.
• Use the EOB as your primary tool for filing to secondary insurers. A clearly labeled EOB speeds processing.
• Keep a claims folder (digital and paper) with EOBs, receipts, claim IDs, provider notes, and copies of any court or custody documents that affect coverage.
• When in doubt, ask for a written determination from the insurer about payer status. A written statement can help if you need to appeal.
• If a claim is large, proactively contact both insurers and your benefits administrator before treatment to confirm how benefits will coordinate.

Frequently asked questions (short answers)

Q: Can I choose which plan pays first?

A: Not generally. Insurers use established order‑of‑benefit rules. However, plan design, court orders, and employer policies can change how those rules apply.

Q: How long does coordination take?

A: Timing varies. Once the primary insurer processes the claim and issues an EOB, the secondary plan typically acts within its normal claim processing window. Complex claims and appeals can take weeks to months.

Q: What if I don’t get the expected secondary payment?

A: Compare both EOBs, confirm the secondary insurer received the primary EOB, and submit an appeal or complaint if needed. Contact your employer benefits office or state insurance regulator for help.

Where to get more information

• Centers for Medicare & Medicaid Services (CMS) — see Medicare Secondary Payer rules and coordination materials on CMS.gov.
• National Association of Insurance Commissioners (NAIC) — consumer guides on coordination of benefits and state insurance links.
• Consumer Financial Protection Bureau (CFPB) — general consumer tips for handling medical bills and insurance disputes.

For Medicare‑age planning and timing issues, FinHelp has practical guides you may find useful, including our Medicare enrollment checklist and a deeper look at healthcare cost planning in retirement, including Medicare and Medigap.

Final notes and professional disclaimer

This article is educational and written to explain common COB concepts and steps you can take to reduce surprise bills. It does not replace personalized legal, tax, or insurance advice. COB rules can vary by policy, employer plan, state law, and federal programs (such as Medicare). For specific determinations, consult your plan documents, your employer benefits administrator, or a licensed insurance professional.

Sources: Centers for Medicare & Medicaid Services (CMS); National Association of Insurance Commissioners (NAIC); Consumer Financial Protection Bureau (CFPB).