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What does "Coordination of Benefits" Mean Anyway?


Main Points

  • Coordination of benefits (COB) allows an insurance plan to know where they fall in the reimbursement chain

  • A miscommunication in coordination of benefits can inhibit insurance companies from paying on claims

  • The way an insurance company knows the coordination of benefits can vary, and the patient is ultimately responsible for knowing their benefits

One of the most misunderstood denial reasons that providers receive is called "coordination of benefits". What does that mean? What am I supposed to do about that? If I told my patient, what would they do with that information?

The disorienting nature of this denial reason lends itself to delaying payment as long as possible from the insurance company. The problem is that the term "coordination of benefits" doesn't communicate what the patient should do, what the provider should do, or what the biller should do to resolve the issue.

In this blog we are going to flesh out the term "coordination of benefits" and what you should do if you receive a denial with this designation. It will be important that you communicate clearly to your patient that way they know exactly what they need to do and who they need to communicate with.

First, let's define the term "coordination of benefits". Coordination of benefits is the process that allows a plan to determine their respective payment responsibilities. Basically, if a patient has multiple insurance plans that are active, which one is responsible for covering the patient first, second, and third.

There can be quite a bit of confusion around which insurance company pays first.

The COB process is beneficial for several reasons:

  1. Ensures claims are paid correctly by identifying the health benefits available to a Medicare beneficiary, coordinating the payment process, and ensuring that the primary payer, whether Medicare or other insurance, pays first.

  2. Shares Medicare eligibility data with other payers and transmits Medicare-paid claims to supplemental insurers for secondary payment. Note: An agreement must be in place between the Benefits Coordination & Recovery Center (BCRC) and private insurance companies for the BCRC to automatically cross over claims. In the absence of an agreement, the person with Medicare is required to coordinate secondary or supplemental payment of benefits with any other insurers he or she may have in addition to Medicare.

  3. Ensures that the amount paid by plans in dual coverage situations does not exceed 100% of the total claim, to avoid duplicate payments.

  4. Accommodates all of the coordination needs of the Part D benefit. The COB process provides the True Out of Pocket (TrOOP) Facilitation Contractor and Part D Plans with the secondary, non-Medicare prescription drug coverage that it must have to facilitate payer determinations and the accurate calculation of the TrOOP expenses of beneficiaries; and allowing employers to easily participate in the Retire Drug Subsidy (RDS) program.

However, this process can be a bit confusing and complicated to navigate.

The way an insurance company knows the coordination of benefits can vary, and the patient is ultimately responsible for knowing their benefits. Here is a breakdown of where COB data can come from or get communicated:

COB Data Sources:

COB relies on many databases maintained by multiple stakeholders including federal and state programs, plans that offer health insurance and/or prescription coverage, pharmacy networks, and a variety of assistance programs available for special situations or conditions. Some of the methods used to obtain COB information are listed below:

  • IRS/SSA/CMS Claims Data Match - The law requires the Internal Revenue Service (IRS), the Social Security Administration (SSA), and CMS to share information about beneficiaries and their spouses. By law, employers are required to complete a questionnaire, the IRS/SSA/CMS Data Match, on the group health plan that Medicare-eligible workers and their spouses choose. The Data Match identifies situations where another payer is primary to Medicare. In addition, CMS has entered into Voluntary Data Sharing Agreements with numerous employers. These agreements allow employers and CMS to send and receive group health plan enrollment information electronically.

  • Voluntary Data Sharing Agreements (VDSAs) - CMS has entered into VDSAs with numerous large employers. These agreements allow employers and CMS to send and receive group health plan enrollment information electronically. Where discrepancies occur in the VDSAs, employers can provide enrollment/disenrollment documentation. The VDSA data exchange process has been revised to include Part D information, enabling VDSA partners to submit records with prescription drug coverage be it primary or secondary to Part D. Employers with VDSAs can use the VDSA to submit their retiree prescription drug coverage population which supports the CMS mission of a single point of contact for entities coordinating with Medicare.

  • COB Agreement (COBA) Program - CMS consolidates the Medicare paid claim crossover process through the COBA program. The COBA program established a national standard contract between the BCRC and other health insurance organizations for transmitting enrollee eligibility data and Medicare paid claims data. This means that Medigap plans, Part D plans, employer supplemental plans, self-insured plans, the Department of Defense, title XIX state Medicaid agencies, and others rely on a national repository of information with unique identifiers to receive Medicare paid claims data for the purpose of calculating their secondary payment. The COBA data exchange processes have been revised to include prescription drug coverage.

  • Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) – This law added mandatory reporting requirements for Group Health Plan (GHP) arrangements and for liability insurance, including self-insurance, no-fault insurance, and workers' compensation. Insurers are legally required to provide information.

  • Other Data Exchanges - CMS has developed data exchanges for entities that have not coordinated benefits with Medicare before, including Pharmaceutical Benefit Managers (PBMs), State Pharmaceutical Assistance Programs (SPAPs), and other prescription drug payers. CMS has worked with these new partners to educate them about coordination needs, to inform CMS about how the prescription drug benefit world works today, and to develop data exchanges that allow all parties to efficiently serve our mutual customer, the beneficiary.

A miscommunication in coordination of benefits can inhibit insurance companies from paying on claims. Obviously, there are several ways in which insurance companies can know how a patient is covered, which means there are several points where error can creep in and muddle the process.

Therefore, there are several rules of thumb when it comes to determining which insurance company pays first and which insurance company pays second.

  1. The first rule of thumb is called the birthday rule. This is a default principle that the insurance companies use to determine when a dependent is covered by two parents. Basically, whichever parent's birthday falls earlier in the year, that is the primary insurance. For example, if a child's dad's birthday is February 1st and the mom's is March 1st, the dad's insurance is primary and the mom's is secondary, even if the mom is older.

  2. The second rule of thumb comes down to whether the patient has a commercial payer or a government payer. If the patient has a commercial payer, that payer is first. Then the government payer is last. This is not always true, but it is true in most cases. If the patient has two government payers then Medicaid is ALWAYS the payer of last resort.

COB issues can be pervasive and can cause payment delays, but asking your patients and knowing where COB information comes from can lead to clear and evident reimbursement. You will want to be very clear with the patient when it comes to COB issues and denials and tell them to follow up with their insurance if you believe there is a problem.

If you find that you are still confused by COB issues or laws concerning COB, please reach out to us and we would be happy to clear up any confusion that you may have.

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