Follow COB rules to determine when care may be covered by another payer.
Coordination of benefits (COB) can be described as when two or more insurance plans work together to determine the order of coverage liability. This coordination between plans exists to avoid duplicate payment, which could result in a provider receiving payment in excess of the services provided and the total amount billed.
In circumstances where there is more than one potential payer, not submitting claims to the proper payer will lead to denial reason code CO-22, indicating this care may be covered by another payer, per COB.
The National Association of Insurance Commissioners (NAIC) posts the rules of COB and the procedures to be followed by a secondary plan.
Recognize When COB Is Needed
There are many different scenarios that require COB. For example:
- If both spouses in a married couple are each covered by their own group (through their employer) or individual coverage (through an independent insurer or Healthcare.org), each policy where the patient is the primary policyholder would be the primary payer.
- If one spouse elects to add the other spouse to their policy as a dependent, then that coverage would be secondary. (Check your plan for rules on domestic partner coverage.)
- If a married couple has children, the insurance of the parent whose birthday (month/date) falls first in the calendar year would be primary. This is called the “birthday rule.” The other parent’s coverage would be secondary. Should the parents have the same birthday (month/day), then the policy with the longest effective date would be considered primary.
With the implementation of the Affordable Care Act (ACA), parents can cover their dependents on their insurance plans until the age of 26, regardless of the dependent’s student or marital status.
When the family unit is complex or the type of insurance is not your standard group or individual plan, benefits coordination may get complicated. For example, in the scenario above:
- If one parent’s coverage is provided by Consolidated Omnibus Budget Reconciliation Act (COBRA), then the non-COBRA plan would be primary and COBRA would be the secondary payer, regardless of the birthday rule.
- If the parents are divorced, coordination is dependent on who is the custodial parent or the parent whom the child spends the most time with; their coverage would become primary and the non-custodial parent’s policy secondary. There is an exception to that advice: If the custodial parent has an individual policy or COBRA, and the non-custodial parent has a group policy, then the group policy would be considered primary.
As if that isn’t confusing enough, if the custodial parent remarries, then the stepparent’s policy would be reported secondary and the non-custodial parent’s plan would be the tertiary payer. Of course, a divorce decree (court order) can override these rules, as well as individual state laws involving minors and custodial parents.
COB in Patients With Medicare
As shown in the accompanying table, patients covered by Medicare due to retirement, disability or end-stage renal disease (ESRD) have their own detailed COB rules. When a patient retires but continues to be covered by an employer group plan, Medicare is the primary payer and the retirement group coverage is secondary.
If the retired individual is working or the patient is covered by a working spouse, and insurance benefits are provided by their employer who has more than 20 employees, then the employer’s group plan is primary and Medicare is secondary. If the employer has less than 20 employees, Medicare is considered primary.
For a patient covered by Medicare due to a disability and also covered (or eligible for coverage through a family member) by an employer plan (who employs 100 or more employees), the employer’s plan is primary and Medicare is secondary — unless there are fewer than 100 employees, which would make Medicare primary.
In cases where an employee or family member has ESRD and employer coverage, regardless of employer size, the group plan must cover the initial 30 months after coverage eligibility. Medicare then pays first after this period.
Other Circumstances for COB
Claims for work-related injuries or illnesses should be sent to the reported workers’ compensation program, which covers care directly associated with the job-related injury. If workers’ compensation does not make a decision regarding claim payment within 120 days, then the claim can be submitted to Medicare, which may make a conditional payment. However, when the workers’ compensation claim is paid or settled, Medicare or the other payer must be paid back.
Injuries acquired during an auto accident may be required to be sent to an auto personal injury protection (PIP) policy first before submitting claims to a healthcare payer, depending on state laws and options.
When a patient is covered by Medicare or a commercial payer and Medicaid, then Medicaid is the payer of last resort. Providers must first exhaust all other sources of payment — Medicare, Tricare, commercial insurance, supplemental plans, workers’ compensation, and PIP coverage. Some state Medicaid programs will pay providers who can submit documentation showing that they have attempted to bill the other sources of payment but were unsuccessful after a specified period of time. These Medicaid programs have a third-party liability department that will continue to attempt to recover the payment from the other payment sources.
The NAIC offers a wealth of knowledge on coordination of benefits. The examples given in this article and other scenarios are available at https://content.naic.org.
Written by AAPC’s Billing Advisory Committee:
Christine Hall, CHC, CPC, CPB, CPMA, CRC, CPC-I
Rebecca Poff, CPC, CPMA, CCVTC, CEMC, CEDC, CFPC, CGIC, CHONC, COSC, CPCD, AAPC Approved Instructor
Angela Wubben, CPC, CPB
Kimberly Joviette-Williams, CPC, CPB, CPMA, CPC-I, CANPC, CCC, CEMC, AAPC Fellow
Tracy Holt, MHR, CPB, COPC, AAPC Approved Instructor
Jillian Spray, CPC-A
NAIC, Coordination of Benefits Model Regulation, PC-120-14, https://content.naic.org/sites/default/files/inline-files/MDL-120.pdf
CMS product No. 11546, Revised August 2020; www.medicare.gov/Pubs/pdf/11546-coordination-of-benefits.pdf
CMS, Workers’ Compensation and Payment, www.medicare.gov/supplements-other-insurance/how-medicare-works-with-other-insurance/workers-compensation-and-payments
Medicare & Other Health Benefits: Your Guide to Who Pays First, CMS Product No. 02179, Revised August 2020, www.medicare.gov/Pubs/pdf/02179-medicare-coordination-benefits-payer.pdf