What is coordination of benefits (COB) and why is it used?

• A. A license requirement for insurers to operate.
• B. A method to tax benefits.
• C. A rule that determines which policy pays first when there are multiple policies; it prevents overpayment and duplicative coverage.
• D. A way to determine insurer profitability.

Answer: (C)

Coordination of benefits is the rule that decides which health policy pays first when you have more than one plan. The goal is to prevent paying the same claim twice and to avoid overinsurance.

In practice, one plan is designated as primary and pays up to its limits, while the other plan is secondary and may cover remaining eligible charges according to its own rules. This arrangement ensures total payments don’t exceed the actual cost and helps avoid duplicative coverage. For example, if a $1,000 bill is submitted and the primary plan covers 80%, that leaves 20% of the charge that the secondary plan may cover, subject to its own terms. The exact order can depend on factors like employment, policyholder relationships, or specific COB rules, but the core idea is to coordinate benefits so benefits aren’t paid out more than once.