Order of Benefits (Coordination of Benefits)

[Guest Damien]

A member of one of our self-funded medical plans has apparently purchased an individual policy on his own 9first tiem I have seen this). There is now some confusion as to who will pay prime. If anyone out there knows this one off the top of their head, I would appreciate it. Also: could anyone refer me to an online source for regulation covering order of benefits in general?

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[Guest registered user]

I am sure there are sources for Coordination of Benefits (COB), but I don’t know where they are either. In any event, the best place to start is with your own benefit plan provision in one hand and the individual policy in the other. Nothing that’s out there in the way of instructional material matters.

The "standard" COB provision is one which follows the NAIC Model Group Coordination of benefits rule. All but about 6 states have adopted that model verbatim. If it were applicable, there would be no coordination, since it does not allow group policies to coordinate against individual policies. Also, since it does not specifically permit individual policies to even have COB provisions, most state insurance departments will not approve an individual policy with a COB provision. (In my opinion the NAIC model, is flawed in retaining this outdated feature adopted in the 60’s. There are a lot of hard decisions about where the payment system can make cuts; but this is an easy one. No one needs to get rich by filing claims, which can happen without COB.)

In almost all other respects, the NAIC model is a good idea. It eliminates the confusion that would arise if every plan said "we are always secondary". It acts as a traffic cop by adopting a set of rules everyone is familiar with: So most self insured plans voluntarily follow the model in large part. So does your plan say (contrary to NAIC model) that it may coordinate against non group ? If not, your analysis is done, both plans probably pay in full. If your plan rejected the model in this respect, as it can do since it is self insured, your plan is probably secondary.

One other detail, some states have sort of winked at the model by approving individual policies with "variable deductible" provisions. These say that the deductible on the individual policy is "the greater of $500 or the amount paid by any other coverage". If the individual policy in your case is one of these and your plan allows coordination, your beneficiary is in one of those catch 22’s where neither plan is primary. I don’t know what happens then. That is why it would be much better if the NAIC or the states would revise the COB reg, as four states (MD, ND, MS, and ID) have had the good sense to do.

But to reiterate, start your analysis with the plans in hand.

[Kirk Maldonado]

I agree with Tom Jenkins. As a self-funded plan, state laws such as COB are preempted. Thus, the only thing you (should) have to look at should be the plan's provisions. Unfortunately, there have been some court cases involving COB disputes among two self-funded plans where the courts have tried to develop a federal common law of COB. You should also check out those cases. (I don't have the cites handy.)